Bristow Group Inc. — Form 10-Q Summary
Business context and reporting period
Bristow Group provides global aviation services, including offshore energy transportation, search and rescue, government services, fixed-wing transportation, medevac and unmanned systems. The filing covers the three and nine months ended September 30, 2023, with comparisons to September 30, 2022 and, for selected quarterly analysis, June 30, 2023. The financial statements are unaudited and reflect the company’s transition to a December 31 fiscal year-end.
Key financial metrics
| Metric | Three months ended September 30, 2023 | Three months ended September 30, 2022 | Nine months ended September 30, 2023 | Nine months ended September 30, 2022 |
|---|---|---|---|---|
| Total revenues | $338.1 million | $307.3 million | $959.5 million | $896.4 million |
| Operating income | $29.6 million | $14.7 million | $41.2 million | $16.5 million |
| Operating margin | 8.8% | 4.8% | 4.3% | 1.8% |
| Net income attributable to Bristow | $4.3 million | $16.5 million | $1.2 million | $16.2 million |
| Diluted EPS | $0.15 | $0.58 | $0.04 | $0.56 |
| Net margin | 1.3% | 5.4% | 0.1% | 1.8% |
Operating revenue increased 6.0% year over year in the quarter and 7.5% for the nine-month period. Nine-month revenue growth was led by government services, which increased 23.7% to $255.2 million, and fixed-wing services, which increased 13.7% to $81.5 million. Offshore energy revenue increased 1.4% to $589.8 million.
Nine-month operating cash flow was $41.5 million, compared with $10.8 million in the prior-year period. Capital expenditures were $62.1 million, asset-disposition proceeds were $34.1 million and net cash used in investing activities was $28.0 million. Net cash provided by financing activities was $25.3 million, primarily reflecting $169.5 million of new borrowings and $138.7 million of debt repayments.
Cash, cash equivalents and restricted cash totaled $209.7 million at September 30, 2023, including unrestricted cash of $207.5 million. The company reported $66.8 million of remaining ABL availability, for total stated liquidity of $274.4 million. Total debt was $544.0 million, consisting primarily of $393.8 million of 6.875% senior notes due 2028 and $150.2 million of NatWest debt. No borrowings were outstanding under the $85.0 million ABL facility; $3.0 million of letters of credit were outstanding.
Material changes versus comparable periods
- Third-quarter operating income more than doubled year over year, benefiting from higher revenue, increased earnings from unconsolidated affiliates and the absence of the prior-year impairment charge.
- Third-quarter net income attributable to Bristow declined to $4.3 million from $16.5 million, primarily because of a $22.6 million income tax expense versus $0.1 million in the prior-year quarter.
- Nine-month net income attributable to Bristow fell 92.8% to $1.2 million. The decline primarily reflected $11.6 million of foreign exchange losses in 2023 compared with $41.1 million of other income in 2022, including significant foreign exchange gains and other favorable items.
- Nine-month operating expenses increased 5.1% to $708.1 million, driven by higher personnel, subcontractor, training, travel and contract-startup costs. Fuel expense declined $14.2 million.
- Government-services revenue increased by $48.9 million, primarily from new contracts in the Falkland Islands, Dutch Caribbean Coast Guard and Netherlands SAR operations.
- In January 2023, the company repaid the $129.1 million Lombard debt maturity and entered into $169.5 million of 13-year secured NatWest equipment financings.
- Accumulated other comprehensive loss was $87.0 million at September 30, 2023, including quarterly currency translation and cash-flow-hedge losses.
Guidance, outlook, risks and unusual items
Management expects operating cash flow to meet working-capital requirements and states that the company has no near-term debt maturities. Planned future capital expenditures are approximately $320 million to $345 million, including aircraft purchases, infrastructure and growth investments supporting UKSAR2G and the Irish Coast Guard contract. The company expects to fund these needs through cash, operating cash flow, new debt financing and aircraft leasing.
Unfunded helicopter purchase commitments totaled $201.3 million at September 30, 2023. Approximately $64.2 million of these commitments could be terminated, subject to approximately $1.1 million of liquidated damages. Future non-cancelable operating lease payments totaled $336.3 million.
Recent developments include the purchase agreement for five H135 helicopters, collaboration with Volocopter on electric vertical take-off and landing services, early delivery positions for five Elroy Air cargo aircraft, and finalization of a €670 million Irish Coast Guard aviation-services contract beginning in October 2024.
Key risks include fluctuations in offshore energy demand, dependence on major customers and helicopter manufacturers, aircraft availability and maintenance delays, supply-chain disruption, inflation, foreign-exchange volatility, interest rates, government contract changes, political instability, cyberattacks, safety events, aircraft grounding, asset impairments and compliance with financing covenants. The company also noted reasonably possible governmental tax claims in certain jurisdictions for which no liability has been recorded because the legal interpretation remains uncertain.
The quarter included unusual items such as $4.5 million of foreign-exchange gains, a $1.2 million gain on asset disposals and $3.7 million of earnings from unconsolidated affiliates. The nine-month period included $12.6 million of foreign-exchange losses, a $22.6 million quarterly tax expense and nonrecurring insurance-related costs.
Investor verification checklist
- Verify the sustainability of revenue growth from new government contracts and the related personnel, subcontractor and startup costs.
- Assess the effect of foreign-exchange movements, particularly the Nigerian naira, British pound and Norwegian krone, on earnings and cash.
- Review the company’s ability to fund $201.3 million of unfunded aircraft commitments and planned capital expenditures of $320 million to $345 million.
- Monitor debt service, floating-rate NatWest financing, ABL availability and compliance with senior-note covenants.
- Evaluate the unusually high effective tax rate of 83.9% in the third quarter and the potential for future valuation-allowance or deferred-tax adjustments.
- Confirm delivery timing, financing and contract economics for the Irish Coast Guard, UKSAR2G and other government-service programs.
- Review exposure to aircraft maintenance delays, supply-chain constraints, safety events, customer concentration and potential governmental tax claims.