Bristow Group Inc. Form 10-Q Summary
Reporting period: Quarterly period ended September 30, 2021, representing Bristow’s fiscal second quarter of fiscal 2022. The filing is unaudited. Bristow provides helicopter, search-and-rescue, fixed-wing and other aviation services, primarily to energy and government customers. Comparisons reflect the post-merger combined company’s accounting presentation, with Old Bristow as the accounting acquirer in the June 2020 Era merger.
Key Financial Metrics
| Metric | Three months ended September 30, 2021 | Prior-year period | Six months ended September 30, 2021 | Prior-year period |
|---|---|---|---|---|
| Total revenue | $301.6 million | $304.6 million | $602.2 million | $574.8 million |
| Operating revenue | $290.1 million | $295.7 million | $578.5 million | $557.2 million |
| Operating income (loss) | $12.5 million | $(22.7) million | $0.2 million | $(36.5) million |
| Operating margin | 4.3% | (7.7)% of operating revenue | Less than 0.1% | (6.6)% |
| Net income (loss) attributable to Bristow | $2.8 million | $(27.9) million | $(11.4) million | $43.6 million |
| Diluted EPS | $0.10 | $(0.95) | $(0.40) | $5.09 |
| Operating cash flow | Not separately provided for the quarter | Not separately provided | $73.2 million | $35.0 million |
- Quarterly operating revenue declined 1.9%, while total revenue declined 1.0%. Six-month total revenue increased 4.8%.
- Quarterly net income benefited from $15.3 million of other income, including a $9.0 million bankruptcy-related legal settlement, $2.7 million of government grants, foreign-exchange gains and insurance proceeds.
- Six-month results included $24.8 million of impairment losses, a $2.0 million loss on sale of a subsidiary, $2.4 million of merger-related costs and $1.0 million of restructuring costs.
- Cash and cash equivalents were $237.0 million at September 30, 2021, compared with $228.0 million at March 31, 2021. Including restricted cash, total cash was $239.5 million.
- Total debt was $531.8 million, including $391.6 million of 6.875% senior notes due 2028 and $140.0 million of Lombard debt. Debt declined from $543.5 million at March 31, 2021.
- The ABL Facility had $85.0 million of commitments, no borrowings and $21.6 million of outstanding letters of credit. Reported remaining availability was $50.6 million, producing total liquidity of approximately $287.6 million.
- Six-month capital expenditures were $17.3 million, while aircraft and equipment dispositions generated $13.8 million of proceeds.
Material Changes Versus Comparable Periods
- Quarterly operating income improved by $35.1 million year over year, primarily reflecting lower impairment, merger-related and restructuring charges, as well as a gain on asset disposals compared with a loss in the prior year.
- Six-month operating results improved by $36.8 million, although higher repairs and maintenance, fuel, depreciation and insurance costs offset much of the revenue growth.
- Government services revenue increased 16.6% for the six months, and fixed-wing revenue increased 51.2%. Oil and gas revenue decreased 3.3%, with lower activity in Africa and Europe partly offset by higher Americas revenue.
- Six-month operating cash flow more than doubled to $73.2 million, supported by improved operating results and working-capital movements.
- Prior-year six-month earnings included an $81.1 million bargain-purchase gain and a $15.4 million preferred-stock derivative gain. Their absence in 2021 materially reduced reported net income despite improved operating performance.
- The Company repurchased approximately 1.5 million shares for $40.0 million during the six months, leaving $25.0 million available under its $75.0 million authorization.
Outlook, Risks and Unusual Items
- Management stated that expected operating cash flows should be adequate for working capital requirements, but long-term liquidity depends on operating profitability, debt service, capital expenditures, asset sales and financing access.
- COVID-19 continues to create uncertainty for oil and gas demand, customer activity, supply chains and global operations. Demand and commodity prices had recovered but remained below pre-pandemic levels.
- The Company had $85.4 million of unfunded helicopter purchase commitments, primarily for three AW189 and five AW169 helicopters. These commitments may generally be terminated subject to approximately $2.1 million of liquidated damages.
- Key exposures include cyclical oil and gas demand, customer concentration, aircraft utilization and resale values, impairment risk, foreign-exchange volatility, political and regulatory conditions, safety and operational risks, and dependence on helicopter manufacturers and suppliers.
- The Company reported no defaults under senior securities and concluded that its disclosure controls and procedures were effective as of September 30, 2021.
- Management stated that it believed the Company could meet maintenance and other debt covenants. The filing also discusses potential effects of the LIBOR transition, although no material impact was expected.
- The effective tax rate was unusually high at 84.2% for the quarter and negative 518.7% for the six-month period, reflecting the low level of pretax income, impairment losses, foreign tax attributes and valuation allowances.
Investor Verification Items
- Verify the sustainability of quarterly profitability excluding the $9.0 million legal settlement, grants, insurance proceeds and foreign-exchange gains.
- Assess oil and gas utilization, contract renewals and customer concentration, especially in Europe and Africa.
- Reconcile reported liquidity with the geographic location of cash; approximately 78% of cash was held outside the United States and could incur additional taxes if repatriated.
- Review debt covenants, the 2028 senior notes, Lombard maturities and the ABL Facility’s availability after letters of credit.
- Evaluate the timing and financing of the $85.4 million helicopter commitments and the Company’s ability to dispose of older or impaired aircraft.
- Monitor further impairment risk for aircraft, H225 inventory and the Petroleum Air Services investment, which was valued at $17.0 million after a $16.0 million impairment.