Bristow Group Inc. 10-Q Summary
Business Context and Reporting Period
Bristow Group provides global vertical-flight aviation services, primarily for offshore energy companies and government entities. Services include personnel transportation, search and rescue, medevac, fixed-wing transportation, unmanned systems and ad hoc helicopter services. This filing covers the three and six months ended June 30, 2023; the comparative periods are June 30, 2022. The company changed its fiscal year-end from March 31 to December 31, so comparative information was reclassified where necessary.
Financial Performance and Key Metrics
| Metric | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 |
|---|---|---|
| Total revenue | $319.4 million | $621.4 million |
| Operating income | $5.6 million | $11.6 million |
| Operating margin | 1.7% | 1.9% |
| Net income attributable to Bristow | $(1.6) million | $(3.2) million |
| Net margin | (0.5)% | (0.5)% |
| Diluted loss per share | $(0.06) | $(0.11) |
| Cash flow from operating activities | Not separately provided | $24.8 million |
Six-month operating revenue increased 6.1% to $604.5 million, while total revenue increased 5.5%. Government services revenue rose 24.4% to $169.7 million and fixed-wing services revenue rose 22.5% to $52.4 million. Offshore energy revenue declined 2.0% to $376.8 million, primarily due to the end of a Guyana contract and lower Norway revenue, partly offset by growth in Africa.
Six-month operating expenses increased 5.7% to $467.4 million. General and administrative expense increased 11.7% to $91.3 million, while depreciation and amortization increased 6.8% to $35.7 million. Fuel expense declined 14.1% to $43.5 million. The filing does not provide an EBITDA measure.
Cash Flow, Debt and Liquidity
- Cash, cash equivalents and restricted cash totaled $216.2 million at June 30, 2023, including $212.0 million of unrestricted cash, compared with $163.7 million at December 31, 2022.
- Operating cash flow was $24.8 million, compared with $28.3 million in the prior-year period.
- Capital expenditures were $43.8 million, including $31.9 million related to the UKSAR2G contract. Asset-sale proceeds were $26.8 million, resulting in $17.0 million of net cash used in investing activities.
- Financing activities provided $28.9 million, including $169.5 million of NatWest equipment-financing proceeds and $135.6 million of debt repayments.
- Total debt was $552.8 million, consisting primarily of $393.5 million of 6.875% senior notes due 2028 and $159.4 million of NatWest debt. The Lombard debt was extinguished in January 2023.
- The NatWest facilities have approximately 13-year terms, bear interest at SONIA plus 2.75%, are secured by 10 search-and-rescue helicopters, and began quarterly principal repayments in March 2023.
- The asset-backed revolving credit facility had $85.0 million of commitments, expandable to $120.0 million, with no borrowings outstanding and $3.2 million of letters of credit issued. Management reported $73.3 million of remaining availability and total liquidity of $285.3 million.
Material Changes Versus Comparable Periods
- Six-month operating income improved to $11.6 million from $1.8 million, benefiting from higher revenue, the absence of the prior-year $5.2 million impairment charge, lower restructuring costs and improved results from unconsolidated affiliates.
- Despite the operating improvement, the company reported a $3.2 million net loss versus a $0.3 million net loss in the prior-year period. The principal factor was a shift from $29.8 million of other income to $16.5 million of other expense, driven mainly by foreign-exchange losses.
- Foreign-exchange losses totaled $17.1 million in the first six months, compared with $19.9 million of foreign-exchange gains in the prior-year period. The second quarter included a $7.6 million loss associated with the significant devaluation of the Nigerian naira.
- Second-quarter revenue increased 5.7% from the preceding quarter to $319.4 million, but operating income declined 6.9% to $5.6 million. The sequential decline reflected higher repairs and maintenance, insurance, training and travel costs, and a $3.2 million loss on asset disposals.
- Second-quarter insurance expense included a noncash, nonrecurring write-off related to legacy insurance policies.
Guidance, Outlook, Risks and Unusual Items
Management stated that operating cash flows are expected to be adequate for working-capital requirements and that the company has no near-term debt maturities. The company expects approximately $155 million to $165 million of capital expenditures to support the UKSAR2G contract. As the preferred bidder for the approximately €670 million Irish Coast Guard aviation services contract, Bristow may require additional financing if the contract is finalized and awarded.
As of June 30, 2023, unfunded aircraft capital commitments totaled $184.9 million, including orders for two AW189, six AW139 and five AW169 helicopters. Up to $66.1 million of commitments could be terminated, subject to approximately $1.1 million of liquidated damages. The company also had options for up to 10 additional AW189 helicopters.
Key risks include fluctuations in offshore energy demand, customer concentration, foreign-exchange volatility, inflation and supply-chain disruption, aircraft availability and safety, political and regulatory uncertainty, government-contract procurement and payment risks, covenant compliance, asset impairments, aircraft resale values, reliance on a limited number of manufacturers and the ability to execute diversification initiatives involving government services, offshore wind and advanced air mobility.
Management reported that litigation reserves were recorded where appropriate and that pending matters are not expected to have a material effect on consolidated results. Disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting.
Investor Verification Checklist
- Verify the final award and financing requirements for the Irish Coast Guard contract.
- Track execution of the UKSAR2G contract, including the projected $155 million to $165 million capital-expenditure program and associated cash returns.
- Monitor foreign-exchange exposure, particularly the Nigerian naira, British pound and Norwegian krone.
- Assess whether government-services growth can offset weakness or contract losses in offshore energy services.
- Reconcile total debt, NatWest repayment requirements, interest-rate exposure and ABL availability.
- Review the $184.9 million of aircraft commitments, cancellation rights and potential exercise of AW189 purchase options.
- Determine whether recurring operating margins improve after the disclosed nonrecurring insurance write-off, asset-disposal loss and elevated training, travel and maintenance costs.