Bristow Group Inc. Form 10-Q Summary
Business Context and Reporting Period
Bristow provides global helicopter, fixed-wing, offshore oil and gas transportation, search and rescue, and related aviation services. This report covers the three and nine months ended December 31, 2020, the Company’s fiscal third quarter and first nine months of fiscal 2021.
Comparisons are affected by the June 11, 2020 merger with Era Group and by Bristow’s October 31, 2019 emergence from Chapter 11 and adoption of fresh-start accounting. The 2019 comparable periods combine predecessor and successor results for analytical purposes and are not GAAP or Article 11 pro forma results.
Key Financial Metrics
| Metric | Three Months Ended December 31, 2020 | Nine Months Ended December 31, 2020 |
|---|---|---|
| Total revenue | $309.9 million | $884.7 million |
| Operating income (loss) | $(38.6) million | $(75.1) million |
| Operating margin | (12.5)% | (8.5)% |
| Net income (loss) | $(57.3) million | $(13.8) million |
| Net income (loss attributable to Bristow) | $(57.1) million | $(13.5) million |
| Net margin attributable to Bristow | (18.4)% | (1.5)% |
| Operating cash flow | Not separately provided in the filing excerpt | $60.1 million |
| Capital expenditures | $3.9 million | $11.2 million |
| Total debt, before unamortized discounts | Not separately provided for the quarter | $616.4 million |
Quarterly operating revenue increased $5.3 million, or 1.8%, versus the combined 2019 quarter, while total revenue increased 1.0%. Nine-month operating revenue declined $58.7 million, or 6.4%, and total revenue declined $73.4 million, or 7.7%.
At December 31, 2020, cash and cash equivalents were $293.5 million, restricted cash was $4.3 million, and total liquidity was approximately $345.0 million, consisting of unrestricted cash and $51.5 million of remaining ABL availability. The ABL had no outstanding borrowings, but letters of credit totaling $14.2 million were outstanding.
Total assets were $2.14 billion and total liabilities were $1.16 billion. Long-term debt was $568.4 million, excluding current maturities and short-term borrowings of $48.1 million. The Company paid $126.2 million of debt and redemption obligations during the nine-month period.
Material Changes Versus the Prior Comparable Period
- Quarterly operating loss was $38.6 million compared with a combined 2019 operating loss of $0.2 million, primarily because of $53.2 million of impairment charges, including a $51.9 million impairment of the Cougar investment.
- Quarterly net loss attributable to Bristow improved to $57.1 million from $656.7 million, largely because the prior-year period included substantial Chapter 11 reorganization charges, preferred derivative fair-value changes, and other restructuring items.
- Nine-month net loss attributable to Bristow improved to $13.5 million from $988.9 million, aided by an $81.1 million bargain-purchase gain from the Era merger, lower interest expense, and the absence of major bankruptcy-related charges.
- Oil and gas revenue increased in the Americas by $36.3 million for the quarter and $71.2 million for the nine-month period, primarily due to the Era merger. This was offset by lower utilization in Europe Caspian, Africa, and Asia Pacific.
- Quarterly operating expenses declined $10.4 million, or 4.4%, primarily from lower maintenance, lease, fuel, training, and other activity-related costs. These savings were partly offset by higher insurance and personnel costs.
- Merger-related costs were $4.5 million in the quarter and $26.4 million for the nine-month period.
- The Company sold or disposed of 46 aircraft during the nine-month period for $66.5 million of proceeds and spent $11.2 million on capital expenditures.
- The Company repurchased approximately $10.0 million of common stock during the nine-month period. Approximately $65.0 million remained under the $75.0 million authorization at December 31, 2020.
Outlook, Commentary, Risks, and Unusual Items
Management stated that it expects positive operating cash flow and believes cash flows and other liquidity sources will be sufficient to meet working capital needs and debt obligations. No quantitative revenue, earnings, or margin guidance is provided in the filing.
- COVID-19 and depressed oil and gas prices continue to pressure customer capital spending, utilization, demand for helicopter services, and aircraft values. Brent crude closed at $48.35 per barrel on December 31, 2020, versus $20.51 on March 31, 2020 and $61.14 on December 31, 2019.
- Management expects to continue monitoring liquidity, credit markets, oil and gas prices, and the pandemic. A prolonged or worsening downturn could materially affect demand, operations, and liquidity.
- The Company recorded a $51.9 million non-cash Cougar impairment and an $18.7 million non-cash impairment related to its former investment in Líder. Additional impairments remain possible if market conditions or contractual relationships deteriorate.
- The Company has $88.8 million of unfunded aircraft capital commitments, primarily for three AW189 and five AW169 helicopters, and $24.6 million of non-cancelable Power-by-the-Hour maintenance commitments. The aircraft commitments may generally be canceled subject to approximately $2.1 million of liquidated damages.
- Significant debt maturities include the 7.750% Senior Notes in December 2022, Macquarie debt in March 2023, Lombard debt in 2023 and 2024, and PK Air debt in January 2025.
- Material weaknesses in internal control over financial reporting remained unremediated at December 31, 2020, involving the control environment, risk assessment, debt-covenant monitoring, and manual journal-entry controls at Airnorth. Management targeted remediation by March 31, 2021 but stated that additional time was needed to demonstrate sustainability.
- Brexit, foreign exchange movements, customer concentration, aircraft grounding or resale risk, political instability, competition, safety performance, and dependence on a limited number of manufacturers and suppliers remain material risks.
Important Facts for Investors to Verify
- Reconcile the reported 2020 results with the successor/predecessor presentation and the Era merger accounting; historical periods are not directly comparable.
- Assess recurring operating performance excluding the Cougar and Líder impairments, merger costs, bargain-purchase gain, and other unusual items.
- Review liquidity availability, debt covenants, maturities, aircraft commitments, lease obligations, and the Company’s ability to maintain positive operating cash flow.
- Monitor whether oil and gas demand, customer utilization, and aircraft values recover or lead to further impairments.
- Confirm completion and effectiveness of the planned remediation of material weaknesses in internal controls.
- Evaluate the realization of expected merger synergies and the integration of Era and Old Bristow operations and systems.