Bristow Group Inc. annual report, FY2021

Bristow Group Inc. — Form 10-K Summary

Business context and reporting period

The filing is a Form 10-K for the fiscal year ended March 31, 2021, not a standalone 2020 fourth-quarter filing. Bristow provides global helicopter and fixed-wing aviation services, primarily for offshore oil and gas customers, and also provides commercial and U.K. public-sector search and rescue services. The company operates in one aviation-services segment across Europe Caspian, Americas, Africa and Asia Pacific.

Comparability is limited. Old Bristow emerged from Chapter 11 on October 31, 2019 and adopted fresh-start accounting. On June 11, 2020, Era Group merged with Old Bristow; the transaction was accounted for as an acquisition of Era by Old Bristow. Fiscal 2020 comparative results are presented as a non-GAAP combined period consisting of predecessor and successor periods.

Financial performance and key metrics

Metric	Fiscal 2021	Fiscal 2020 combined	Change
Operating revenue	$1.139 billion	$1.191 billion	Down 4.3%
Total revenue	$1.178 billion	$1.243 billion	Down 5.2%
Operating loss	$102.9 million	$87.3 million	Loss increased
Operating margin	(8.7%)	(7.0%)	Down 170 basis points
Net loss attributable to Bristow	$56.1 million	$697.2 million	Improved by $641.1 million
Net margin	Approximately (4.8%)	Approximately (56.1%)	Improved
Cash flow from operations	$96.8 million	$(108.4) million	Improved by $205.2 million
Capital expenditures	$14.8 million	$77.7 million	Down $62.9 million

Fiscal 2021 revenue mix was approximately 72% oil and gas services, 20% U.K. SAR and 8% fixed-wing and other services. Oil and gas revenue declined 4.5% to $825.5 million, with decreases in Europe Caspian, Africa and Asia Pacific partly offset by a 39.5% increase in the Americas, primarily reflecting the Merger. U.K. SAR revenue increased 2.9% to $225.3 million, while fixed-wing revenue decreased 30.6% to $73.8 million.

The fiscal 2021 operating loss reflected $91.3 million of impairment charges, $25.8 million of restructuring costs, $42.8 million of Merger-related costs and $8.2 million of losses on asset disposals. Significant impairments included $51.9 million for the Cougar investment, $18.7 million for Líder and $12.9 million related to inventory. The company also recorded an $81.1 million bargain-purchase gain from the Era transaction and a $15.4 million non-cash gain from the change in fair value of the preferred-stock derivative.

Cash flow, balance sheet, debt and liquidity

• Cash, cash equivalents and restricted cash totaled $231.1 million at March 31, 2021, including $228.0 million of unrestricted cash.
• Total liquidity was $284.1 million, consisting of unrestricted cash of $228.0 million and $56.1 million of remaining ABL availability. No ABL borrowings were outstanding; letters of credit totaled $19.4 million.
• Debt principal totaled $573.6 million under contractual maturity disclosures; the balance-sheet carrying amount of debt was $543.5 million, net of discounts and issuance costs.
• In February 2021, Bristow issued $400.0 million of 6.875% senior secured notes due 2028 and used the proceeds and cash on hand to repay or redeem approximately $484.7 million of existing debt. The refinancing extended maturities and reduced mandatory amortization but resulted in a $29.4 million loss on extinguishment of debt.
• Contractual cash obligations totaled approximately $1.078 billion, including debt principal and interest, aircraft and other operating leases, and other purchase obligations. Letters of credit increased total commercial commitments to approximately $1.098 billion.
• Unfunded helicopter purchase commitments totaled $85.3 million, primarily for three AW189 heavy helicopters and five AW169 light twin helicopters. These commitments may generally be terminated subject to approximately $2.1 million of liquidated damages.
• The company reported a $44.2 million net pension liability and expects fiscal 2022 pension contributions of approximately $18.0 million.

Material changes versus the prior comparable period

• Revenue declined despite inclusion of Era results following the June 2020 Merger, primarily because of lower utilization in oil and gas markets and reduced fixed-wing activity.
• Operating expenses decreased by $89.3 million, led by lower lease, fuel, personnel, maintenance and other activity-related costs. These savings did not offset impairments, restructuring and Merger costs.
• Operating cash flow turned positive, principally because the prior-year period included substantial Chapter 11-related cash costs and fiscal 2021 benefited from government relief grants and receipts on sales-type leases.
• Investing cash flow was positive at $173.3 million, including $120.2 million of cash acquired in the Merger and $67.9 million of asset-sale proceeds.
• The company sold or disposed of 54 aircraft and other equipment during fiscal 2021 for $67.9 million of proceeds and recognized an $8.2 million loss.
• The balance sheet benefited from the preferred-stock conversion and Merger-related equity issuance; total stockholders’ investment increased to $897.1 million from $426.2 million.

Guidance, outlook, risks and unusual items

The filing does not provide formal quantitative earnings or revenue guidance. Management expects operating cash flow to support working capital and debt obligations, but notes that sustained low oil and gas prices could reduce customer capital spending, demand and liquidity. Management also expects offshore oil and gas project sanctioning and final investment decisions to recover after the pandemic, while acknowledging uncertainty around timing.

• COVID-19 reduced oil and gas demand and customer spending, disrupted employee travel and affected aircraft mobility. The duration and severity of the pandemic’s financial effects remain uncertain.
• Approximately 70% of gross revenue was derived from aviation services to oil and gas customers in the North Sea and U.S. Gulf of Mexico, increasing exposure to mature, cyclical markets.
• The top ten customers represented approximately 63% of operating revenue; the U.K. Department for Transport, Equinor and ConocoPhillips represented approximately 35% combined.
• The U.K. SAR contract represented approximately 20% of fiscal 2021 revenue and runs through December 2026, but the DfT has termination, tendering and aircraft or facility transfer rights.
• Many customer contracts can be terminated or downsized with limited notice and without significant penalties, while a substantial portion of operating costs is fixed.
• The company remains exposed to aircraft accidents, fleet groundings, weather, supplier concentration, labor negotiations, foreign exchange, political instability, regulatory changes, cybersecurity and environmental or ESG pressures.
• Previously reported internal-control material weaknesses relating to the control environment, risk assessment, debt-covenant monitoring and Airnorth journal entries were reported as remediated as of March 31, 2021. Management and KPMG concluded internal control over financial reporting was effective.
• Legal and ordinary-course litigation reserves were recorded as appropriate; management does not expect uninsured losses or changes in estimates to be material. The filing notes possible government tax claims in certain jurisdictions, but states that payment is not currently probable.

Most important facts for an investor to verify

1. Reconcile fiscal 2021 results with the non-GAAP combined fiscal 2020 comparison and distinguish predecessor, successor and Merger effects.
2. Assess whether oil and gas utilization and customer spending are recovering sufficiently to offset fixed aircraft, labor, lease and maintenance costs.
3. Review debt covenants, the 2028 senior secured notes, Lombard maturities, ABL availability and refinancing or liquidity requirements.
4. Evaluate the sustainability of $96.8 million of operating cash flow, including the effect of government grants, lease receipts and working-capital movements.
5. Monitor aircraft impairment risk, disposal proceeds, fleet utilization and the $85.3 million of unfunded aircraft commitments.
6. Assess concentration risk from major customers, the U.K. SAR contract, the North Sea and U.S. Gulf of Mexico markets, and unconsolidated affiliates such as Cougar.
7. Verify the successful operation of remediated internal controls and continuing compliance with debt, lease, aviation and foreign-ownership requirements.