Bristow Group Inc. Form 10-Q Summary
Business Context and Reporting Period
Bristow provides helicopter, fixed-wing and search-and-rescue aviation services, primarily to offshore energy customers and governments. This report covers the three and six months ended September 30, 2020, the second quarter of fiscal 2021, and was filed November 4, 2020.
Comparisons are affected by fresh-start accounting following Old Bristow’s emergence from Chapter 11 on October 31, 2019 and the June 11, 2020 merger with Era Group. Historical periods are presented as “Predecessor,” while 2020 periods are “Successor” results and are not fully comparable. The merger added Era’s results beginning June 12, 2020 and changed the fiscal year-end to March 31.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Six Months Ended September 30 |
|---|---|---|
| Total revenue | $304.6 million, down 4.3% | $574.8 million, down 11.8% |
| Operating revenue | $295.7 million, down 2.9% | $557.2 million, down 10.3% |
| Operating loss | $22.7 million; margin of (7.4%) | $36.5 million; margin of (6.4%) |
| Net income (loss) attributable to Bristow | $(27.9) million | $43.6 million |
| Basic earnings (loss) per share | $(0.95) | $8.73 |
| Cash flow from operating activities | Not separately provided for the quarter | $35.0 million |
| Capital expenditures | Not separately provided for the quarter | $7.4 million |
The six-month net income includes an $81.1 million bargain purchase gain from the Era merger and a $15.4 million non-cash benefit from the change in fair value of the preferred-stock derivative. The quarter remained loss-making despite improved operating results.
At September 30, 2020, cash and cash equivalents were $301.4 million, restricted cash was $2.8 million, total debt was $644.4 million before unamortized discounts, and total liquidity was reported at $358.6 million, including $57.2 million of remaining ABL availability. Approximately 47% of cash was held outside the United States.
Material Changes Versus the Prior Comparable Period
- Quarterly revenue declined $13.6 million, primarily because of lower utilization in Africa, Europe Caspian, Asia Pacific and fixed-wing operations, partly offset by the Era merger and higher Americas revenue.
- Six-month revenue declined $76.6 million. Oil and gas revenue fell 8.2%, while fixed-wing revenue fell 48.2%; Americas oil and gas revenue increased 30.0%, primarily due to the merger.
- Operating loss improved from $62.1 million to $22.7 million for the quarter and from $83.8 million to $36.5 million for the six-month period, aided by lower impairment, lease, fuel, maintenance and restructuring costs.
- Interest expense decreased $9.3 million in the quarter and $23.5 million for the six months, primarily due to lower debt balances and the absence of certain pre-bankruptcy financing-fee amortization.
- Operating cash flow improved from an outflow of $57.2 million to an inflow of $35.0 million. Investing cash flow was $168.4 million, supported by $120.2 million of cash acquired in the merger and $52.1 million of aircraft and asset-sale proceeds. Financing cash flow was an outflow of $96.6 million, principally from $85.4 million of debt repayments and $11.2 million of share repurchases.
- The company sold or disposed of 32 aircraft during the six months and recorded a $3.0 million loss on disposal. It also recorded impairment charges totaling $36.8 million, including an $18.7 million impairment of its Lider investment, $12.4 million related to inventory, and $5.2 million related to helicopters held for sale.
Guidance, Outlook, Risks and Unusual Items
Management stated that it expected positive operating cash flow to meet working-capital requirements and believed available liquidity was sufficient to withstand the COVID-19 crisis while fulfilling debt obligations. No specific earnings or revenue guidance was provided.
- COVID-19, depressed oil and gas prices and reduced customer capital spending continue to pressure demand, utilization and aircraft values. Brent crude was $40.05 per barrel at September 30, 2020.
- The company expects continued uncertainty regarding oil prices, customer budgets, travel restrictions, workforce availability and potential additional impairments.
- Merger integration, anticipated synergies, customer retention, operational disruption and the enlarged debt and operating structure are significant execution risks.
- Material weaknesses in internal control over financial reporting remained unremediated, including weaknesses involving the control environment, risk assessment, debt and lease covenant monitoring, and manual journal-entry controls at Airnorth. Management reported remediation efforts but stated that additional time was needed to demonstrate sustainability.
- Debt maturities include promissory notes due in December 2020, 7.750% senior notes due December 2022, Macquarie debt due March 2023, Lombard debt due in 2023 and 2024, and PK Air debt due in January 2025.
- Unfunded aircraft capital commitments totaled $85.1 million, primarily for three AW189 and five AW169 helicopters, and other non-cancelable power-by-the-hour maintenance commitments totaled $9.6 million. The aircraft commitments may be canceled subject to aggregate liquidated damages of approximately $2.1 million to $2.2 million as reported in different sections of the filing.
- The board authorized a $75.0 million share-repurchase program on September 16, 2020. The company repurchased approximately $7.6 million of stock during the quarter, leaving $67.4 million available.
Most Important Facts for Investors to Verify
- Separate the recurring operating performance from merger accounting, the $81.1 million bargain purchase gain, foreign-exchange gains, asset impairments and other unusual items.
- Assess whether oil and gas demand, utilization and customer capital spending stabilize or deteriorate further under COVID-19 conditions.
- Review near-term debt maturities, covenant compliance and the availability conditions under the amended ABL facility.
- Monitor aircraft sales, impairment charges, fleet utilization and the company’s ability to reduce its cost structure.
- Track remediation of the material weaknesses and the effect of any control deficiencies on financial reporting reliability.
- Evaluate whether merger synergies are realized without additional integration costs, customer losses or operational disruption.