Bristow Group Inc. 10-Q Summary
Business context and reporting period
Bristow provides global vertical flight solutions, including oil and gas aviation, government search-and-rescue services, fixed-wing transportation and other aviation services. The filing covers the three months ended June 30, 2022, the first quarter of fiscal 2023; the company’s fiscal year then ended March 31.
The company reported one operating segment, aviation services, across Europe, the Americas, Asia Pacific and Africa. Its fleet totaled 222 aircraft, including 42 leased aircraft.
Key financial metrics
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Total revenue | $301.7 million | $300.6 million |
| Operating revenue | $294.1 million | $288.4 million |
| Operating income (loss) | $5.7 million | $(12.2) million |
| Operating margin | 1.9% | (4.1)% |
| Net income (loss) attributable to Bristow | $4.0 million | $(14.2) million |
| Net margin attributable to Bristow | 1.3% | (4.7)% |
| Diluted earnings (loss) per share | $0.14 | $(0.50) |
| Operating cash flow | $22.8 million | $36.4 million |
| Capital expenditures | $9.0 million | $3.0 million |
Operating expenses were $224.5 million, general and administrative expenses were $40.2 million, depreciation and amortization was $16.5 million, and interest expense was $10.2 million. Other income of $16.8 million, including $14.0 million of foreign-exchange gains and $2.5 million of government grants, was a significant contributor to pretax income.
At June 30, 2022, cash and cash equivalents were $255.0 million, unrestricted liquidity was approximately $318.0 million, and total debt was $514.4 million. The company had $63.0 million of remaining ABL availability, no ABL borrowings outstanding, and $20.5 million of letters of credit issued under the facility. Long-term debt primarily comprised $392.0 million of 6.875% senior notes due 2028 and $122.3 million of Lombard debt.
Material changes versus comparable periods
- Total revenue increased 0.4% year over year and 5.0% versus the preceding quarter. Operating revenue increased 6.7% sequentially.
- Oil and gas revenue rose to $195.1 million from $189.6 million year over year, while government services revenue was broadly stable at $70.1 million. Fixed-wing revenue increased to $25.9 million from $24.7 million.
- Operating income improved from a $12.2 million loss to $5.7 million of income. The prior-year quarter included a $21.9 million impairment loss, compared with $5.2 million in the current quarter.
- Current-quarter operating expenses increased from the preceding quarter by $6.8 million, primarily because fuel costs increased $9.6 million and repairs and maintenance increased $5.9 million. These increases were partly offset by lower personnel and insurance costs.
- Operating cash flow declined $13.7 million year over year, mainly because of higher income taxes paid and an increase in accounts receivable. Cash taxes paid rose to $11.1 million from $3.0 million.
- Cash, cash equivalents and restricted cash declined $7.6 million during the quarter, including a $22.3 million unfavorable foreign-exchange effect. Financing cash use was $6.5 million, including $3.1 million of share repurchases and $2.9 million of debt repayment.
- Stockholders’ equity declined to $793.4 million from $835.4 million at March 31, 2022, primarily because of a $44.4 million other comprehensive loss driven largely by currency translation adjustments.
Guidance, outlook, risks and unusual items
- Management stated that operating cash flow and existing liquidity are expected to support working capital, debt service and capital expenditures. The company planned to refinance its Lombard debt on attractive terms.
- In July 2022, Bristow was awarded a £1.6 billion, 10-year U.K. Second-Generation Search and Rescue contract. Transition is expected to begin September 30, 2024, and continue through December 31, 2026.
- In August 2022, the company completed or announced significant post-quarter developments: acquisition of British International Helicopter Services for £10.4 million, approval of a change from a March 31 fiscal year-end to December 31, and a new $40.0 million share-repurchase authorization.
- The company entered into AW139 maintenance-support agreements requiring approximately $55 million of buy-in payments from July through December 2022. It also wrote off $5.2 million of related legacy intangible assets.
- Unfunded helicopter capital commitments totaled $76.1 million, although $63.4 million could be terminated with approximately $1.9 million of aggregate liquidated damages. The company also had up to ten additional AW189 purchase options.
- Key disclosed risks include oil and gas demand and pricing, customer concentration, energy-transition effects, foreign-exchange volatility, inflation and supply-chain disruptions, aircraft grounding and safety risks, political instability, government-contract changes, covenant compliance and the ability to refinance debt.
- The quarter’s 67.2% effective tax rate was elevated by the geographic mix of earnings and limitations on using net operating losses. Management noted that the interim tax methodology may change in subsequent quarters.
- Management reported that controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting.
Important facts for investors to verify
- Whether the $55 million AW139 maintenance buy-in and the associated future amortization materially increase operating expenses and cash requirements.
- The timing and terms of any Lombard debt refinancing and the company’s ability to maintain adequate liquidity.
- Conversion of the U.K. SAR award into operating revenue, required capital spending and margins beginning in 2024.
- The sustainability of reported profitability given the significant contribution from foreign-exchange gains and government grants.
- Execution of the $76.1 million helicopter capital program, including cancellations, deliveries and potential exercise of AW189 options.
- Effects of fuel inflation, foreign-currency movements, utilization changes and customer concentration on future margins and cash flow.
- The impact of the approved fiscal-year change and the transition report expected for the period ended December 31, 2022.