Filing Context
Registrant discrepancy: The request identifies Bristow Group Inc., but the supplied Form 10-Q is for Era Group Inc. (NYSE: ERA), filed July 30, 2019, for the quarter and six months ended June 30, 2019. The financial statements are unaudited and results are seasonal, particularly in the U.S. Gulf of Mexico.
Era operates 108 helicopters serving offshore oil and gas, emergency response, utility and dry-leasing customers in the United States and internationally.
Financial Highlights
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Total revenue | $55.5 million vs. $57.7 million | $106.8 million vs. $115.1 million |
| Operating loss | $1.8 million vs. $9.5 million | $5.7 million vs. $7.9 million |
| Net income (loss) attributable to Era | $4.9 million vs. $(10.4) million | $(1.0) million vs. $(11.6) million |
| EPS, basic and diluted | $0.22 vs. $(0.49) | $(0.05) vs. $(0.55) |
| Operating cash flow | Not separately provided | $9.9 million vs. $5.1 million |
- Second-quarter revenue declined approximately 4% year over year; first-half revenue declined approximately 7%.
- Operating margin improved to approximately negative 3% in the quarter from negative 16%, and to approximately negative 5% for the first half from negative 7%.
- Second-quarter net income included $10.9 million of equity earnings, primarily the gain on sale of the Dart joint venture. The company remained slightly loss-making for the first half.
- June 30 cash and cash equivalents were $88.4 million, up from $50.8 million at December 31, 2018.
- Total debt was $160.8 million, including $1.9 million current debt, compared with $162.3 million at December 31, 2018. The company had no borrowings under its $125 million revolving credit facility and $0.7 million of letters of credit outstanding.
- Total assets were $764.9 million and total equity was $458.7 million at June 30, 2019.
Material Changes Versus Prior Comparable Period
- U.S. oil and gas revenue decreased by $4.5 million in the quarter and $8.6 million in the first half, primarily because of lower helicopter utilization. International revenue increased in the quarter but declined for the first half, including lower Suriname activity.
- Dry-leasing revenue increased $1.0 million in the quarter and $1.9 million in the first half because of new contracts. Emergency response revenue increased $0.9 million in the quarter.
- Administrative and general expense decreased $5.9 million in the quarter and $9.1 million in the first half, primarily because litigation-related professional fees incurred in the prior year had ended.
- Operating expense decreased $1.5 million in the quarter and $2.5 million in the first half, despite higher repairs and maintenance costs in the first half.
- Interest expense decreased $1.2 million in the first half because of lower debt balances and lower financing-cost amortization.
- Cash flow benefited from the April 1, 2019 sale of the Dart joint venture. The transaction generated $38.0 million of proceeds, including repayment of a note receivable, and a reported net gain of $10.9 million.
- The company repurchased approximately 800,000 shares for $6.0 million during the quarter. From July 1 through July 26, it repurchased an additional 188,553 shares for $1.6 million.
Cash Flow, Capital Commitments and Liquidity
- First-half cash flow from operations was $9.9 million. Investing activities provided $34.9 million, primarily from the Dart sale, investment sales and note repayments. Financing activities used $7.2 million, primarily for share repurchases and debt payments.
- Capital expenditures were $2.6 million, primarily for spare helicopter parts and leasehold improvements. No helicopters were placed into service during the first half.
- Unfunded capital commitments totaled $81.3 million, primarily for three AW189 heavy helicopters and five AW169 light twin helicopters, payable from 2019 through 2020. The commitments may generally be terminated subject to aggregate liquidated damages of $2.1 million.
- Management stated that expected operating cash flow should meet working-capital needs, while helicopter commitments and other liquidity needs may be funded with cash, operating cash flow, asset sales and revolver borrowings.
- Operating lease liabilities recognized under ASC 842 totaled $8.1 million at June 30, 2019. An additional office lease with $1.5 million of undiscounted payments was expected to commence in the third quarter.
Outlook, Risks and Unusual Items
- No quantitative revenue, earnings or cash-flow guidance was provided. Management expects positive operating cash flow but noted that liquidity depends on operating profitability, debt service, capital expenditures and access to asset sales or financing.
- Key business risks include dependence on cyclical offshore oil and gas activity, customer cancellations and consolidation, U.S. government appropriations, helicopter safety and grounding risks, regulation, fuel costs, foreign currency movements, manufacturer concentration and the secondary helicopter market.
- Brazilian tax and civil disputes involved approximately $14.4 million of tax claims and additional civil matters. The company had deposited and fully reserved $5.6 million in court-controlled escrow accounts; outcomes could not be determined, although management did not expect a material adverse effect.
- The company had $71.5 million of euro-denominated capital commitments. A 10% adverse currency movement would increase their U.S.-dollar equivalent by approximately $8.1 million.
- The sale of corporate securities produced a $0.6 million loss in the second quarter.
- In early July 2019, the company sold three light twin helicopters and one hangar for $7.3 million, recognizing a net gain of $0.8 million.
- The company adopted the new lease standard effective January 1, 2019; the cumulative effect on opening retained earnings was less than $0.1 million.
- Management reported effective disclosure controls, no material weaknesses and no material changes in internal control over financial reporting.
Investor Verification Checklist
- Confirm whether the intended filing is Era Group Inc. or Bristow Group Inc.; the supplied document is not identified as a Bristow filing.
- Separate recurring operating performance from the $10.9 million Dart-sale gain and other asset or investment transactions.
- Verify helicopter utilization, contract cancellations and customer concentration underlying the U.S. oil and gas revenue decline.
- Assess funding capacity and covenant compliance for the $81.3 million of helicopter commitments relative to cash flow and the unused revolver.
- Review the maturity, interest burden and covenants of the $160.8 million debt balance, including the 7.750% senior notes due December 2022.
- Monitor the Brazilian disputes, escrow recoverability, foreign-exchange exposure and any additional legal or operational liabilities.