Bristow Group Inc. — Form 10-Q Summary
Business context and reporting period
Bristow provides helicopter, search-and-rescue, fixed-wing and other aviation services to energy companies and government customers across Europe, the Americas, Asia Pacific and Africa. The filing covers the unaudited three and nine months ended December 31, 2021, which is fiscal third quarter 2022 for the company’s March 31 fiscal year. Comparisons are primarily with the three and nine months ended December 31, 2020, although management also discusses the immediately preceding quarter.
Key financial metrics
| Metric | Three months ended Dec. 31, 2021 | Three months ended Dec. 31, 2020 | Nine months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2020 |
|---|---|---|---|---|
| Total revenue | $295.6 million | $309.9 million | $897.8 million | $884.7 million |
| Operating income (loss) | $4.8 million | $(38.6) million | $5.1 million | $(75.1) million |
| Operating margin | 1.7% | (12.5)% | 0.6% | (8.8)% |
| Net income (loss) | $0.2 million | $(57.3) million | $(11.3) million | $(13.8) million |
| Net loss attributable to Bristow | $(0.1) million | $(57.1) million | $(11.5) million | $(13.5) million |
| Net cash provided by operating activities | Not separately provided for the quarter | Not separately provided for the quarter | $118.3 million | $60.1 million |
- Quarterly operating revenue declined 4.6% year over year, primarily from lower oil and gas, government and other service revenue. Nine-month revenue increased 1.5%.
- Nine-month operating revenue by service line included oil and gas services of $578.4 million, government services of $206.6 million and fixed-wing services of $68.6 million. Service-line classifications were revised in fiscal 2022, limiting direct comparability with previously reported amounts.
- Nine-month operating expenses increased $22.3 million, including $21.7 million of higher fuel costs and $16.8 million of higher repairs and maintenance. These increases were partly offset by lower personnel and leased-in equipment costs.
- Interest expense declined to $31.3 million from $39.2 million for the nine-month period, primarily due to lower debt balances.
- Cash, cash equivalents and restricted cash totaled $277.5 million at December 31, 2021, including $274.0 million of unrestricted cash. Management reported total liquidity of $326.4 million, consisting of unrestricted cash and $52.4 million of remaining ABL availability.
- Total debt was $530.8 million, consisting primarily of $391.6 million of 6.875% senior secured notes due 2028 and $139.2 million of Lombard debt. There were no ABL borrowings outstanding; letters of credit totaled $21.6 million.
- Operating lease liabilities totaled $213.5 million, consisting of $72.7 million current and $140.8 million long term.
Material changes versus comparable periods
- Operating results improved substantially year over year because impairment losses fell to $24.8 million from $90.1 million, merger-related costs declined to $2.4 million from $26.4 million, and restructuring costs declined to $1.0 million from $17.9 million.
- The prior-year nine-month period included an $81.1 million bargain-purchase gain related to the Era merger and a $15.4 million gain from remeasurement of a preferred-stock derivative. Neither item recurred in 2021.
- 2021 impairment charges included $16.0 million related to the Petroleum Air Services investment, $5.9 million related to helicopters held for sale and $2.9 million related to H225 parts inventory.
- Government-services revenue increased 11.6% for the nine-month period, while oil and gas revenue declined 4.0%, including significant declines in Africa and Europe partly offset by growth in the Americas.
- Cash flow from operations nearly doubled year over year to $118.3 million, while investing cash flow shifted from $175.5 million provided in 2020 to $9.5 million used in 2021 because the prior period included $120.2 million of cash acquired in the Era merger.
- Financing cash outflows were $59.6 million, including $40.6 million of share repurchases and $16.0 million of debt repayments. The company repurchased 1.48 million shares during the nine months, with $25.0 million remaining under the authorization.
Guidance, outlook, risks and unusual items
- No specific revenue, earnings or cash-flow guidance is provided. Management expects positive operating cash flow to support working capital and states that current liquidity is expected to meet requirements, subject to operating performance and financing conditions.
- Management reported a January 2022 award of a 10-year Netherlands government search-and-rescue helicopter contract beginning in November 2022. The filing does not provide a quantified revenue or earnings outlook for the contract.
- Remaining disclosed performance obligations totaled $890.7 million, primarily helicopter contracts, but the company cautions that customer termination rights and variable flight-service consideration mean actual future revenue may differ materially.
- Unfunded capital commitments totaled $80.4 million, primarily for three AW189 and five AW169 helicopters. The company had options for up to ten additional AW189 helicopters. Approximately $68.4 million of commitments, including deposits, may be terminated subject to approximately $1.9 million of liquidated damages.
- Principal risks include COVID-19 and related travel restrictions, oil and gas demand and pricing, customer concentration, foreign-exchange movements, aircraft utilization and disposal values, impairment risk, safety and operational risks, political and tax uncertainty, supply-chain dependence, debt covenants and the transition away from LIBOR.
- The company received a $9.0 million bankruptcy-related legal settlement during the nine months and recognized $8.7 million of government grants, $4.4 million of insurance proceeds and $2.0 million of favorable pension-related adjustments in other income.
- Management concluded that disclosure controls and procedures were effective as of December 31, 2021 and reported no material changes in internal control over financial reporting during the quarter.
Investor verification checklist
- Verify the sustainability of the improved operating results after excluding impairment reductions, merger-related savings, government grants, insurance proceeds and the legal settlement.
- Track oil and gas utilization, especially in Africa and Europe, and determine whether Americas growth offsets continued weakness in other regions.
- Assess fuel-price exposure, repairs and maintenance requirements, aircraft lease expirations and the timing of committed helicopter purchases.
- Review debt maturities, senior-note covenants, Lombard debt repayments, ABL availability and the potential effects of LIBOR replacement.
- Reconcile reported service-line growth with the fiscal 2022 reclassification of government and other revenue.
- Evaluate the recoverability of the Petroleum Air Services investment and other aircraft, inventory and assets subject to impairment risk.
- Confirm the timing, economics and execution requirements of the Netherlands SAR contract and the company’s ability to maintain adequate liquidity while repurchasing shares.