Bristow Group Reports Second Quarter Fiscal Year 2019 Results

HOUSTON, Nov. 9, 2018 /PRNewswire/ -- Bristow Group Inc. (NYSE: BRS) today reported the following results for the three and six months ended September 30, 2018. All amounts shown are dollar amounts in thousands unless otherwise noted:

 

"Amidst the uneven nature of the recovery in our global oil and gas business, Bristow remained focused on serving its growing global customer base, winning new contracts and delivering excellent safety improvement from the first quarter," said Jonathan Baliff, Chief Executive Officer of Bristow Group. "Despite significant progress in strengthening service to our offshore oil and gas customers, and a solid performance from our U.K. SAR business, our financial results were affected negatively by foreign exchange volatility, the timing of certain operating costs and continued challenges in our fixed wing operations - and we have lowered our Bristow standalone adjusted EBITDA guidance accordingly.

"Today, we are announcing the signing of an agreement to acquire Columbia Helicopters. With this $560 million transaction, Bristow is taking a significant step forward today in terms of growing our diversified industrial aviation business and strengthening our consolidated financial position.

"The combination will create the world's most diverse and effective rotor-wing fleet for our clients, with a platform that is capable of serving almost any rotor-wing mission across the globe. The acquisition will diversify our revenue by geography and end-market, deepen our position with the U.S. government and enable us to pursue global government contract opportunities that would not be available to either standalone company. This transaction, upon close, will significantly expand annual long-term contracted revenue, EBITDA and operating cash flow, in addition to deleveraging our balance sheet, and is expected to be immediately accretive to earnings per share and operating cash flow in fiscal year 2019," added Jonathan Baliff.

BUSINESS AND FINANCIAL HIGHLIGHTS

• Bristow has signed a definitive agreement to acquire privately held Columbia Helicopters for $560 million, creating the world's most diverse and effective rotor-wing mission across the globe.
• Net loss was $144.2 million ($4.03 per diluted share) for the September 2018 quarter, mainly due to a loss on impairment of $117.2 million ($2.83 per diluted share) related to our H225 owned aircraft and inventory and Eastern Airways assets, compared to a net loss of $31.2 million ($0.88 per diluted share) for the September 2017 quarter.
• Adjusted net loss was $28.0 million ($0.78 per diluted share) for the September 2018 quarter compared to an adjusted net loss of $11.6 million ($0.33 per diluted share) for the September 2017 quarter; the September 2018 quarter is adjusted for $116.2 million in net unfavorable special items, including impairments of our H225 owned aircraft and inventory and Eastern Airways assets, and the September 2017 quarter is adjusted for $19.6 million in net unfavorable special items.
• Adjusted EBITDA of $21.3 million for the September 2018 quarter.
• Operating cash flows of $17.2 million and free cash flows of $9.5 million for the September 2018 quarter compared to operating cash flows of $15.8 million and free cash flows of $4.4 million for the September 2017 quarter.
• After principal and interest payments in the September 2018 quarter of $39.7 million, we had $319.5 million of total liquidity as of September 30, 2018.
• We are lowering our Bristow standalone fiscal 2019 adjusted EBITDA guidance from $90 million - $140 million to $80 million - $110 million, reflecting foreign exchange volatility, the timing of certain operating costs and continued headwinds in our fixed wing operations.

Operating revenue from external customers by line of service was as follows:

The year-over-year decrease in operating revenue was primarily driven by decreased flight activity in the September 2018 quarter in our Africa region, Canada operations within our Americas region, and our Asia Pacific region, with the largest impact coming from our operations in Africa due to a contract that expired on March 31, 2018, which was partially offset by increased activity with other customers. Also, revenue from our fixed wing services in our Asia Pacific region declined, partially offset by an increase in operating revenue from our fixed wing services in our Africa and Europe Caspian regions. Additionally, revenue decreased by $5.3 million compared to the September 2017 quarter due to changes in foreign currency exchange rates, primarily in our Asia Pacific region related to the strengthening of the U.S. dollar versus the Australian dollar.

The GAAP net loss and diluted loss per share for the September 2018 quarter were significantly impacted by the following special items:

• Loss on impairment of $117.2 million ($101.1 million net of tax), or $2.83 per share, including:
• $87.5 million impairment of H225 aircraft and $8.9 million impairment of H225 inventory, and
• $20.8 million impairment of Eastern Airways assets including $17.5 million for aircraft and equipment, $3.0 million for intangible assets and $0.3 million for inventory,
• Organizational restructuring costs of $2.7 million ($2.4 million net of tax), or $0.07 per share, included in direct cost and general and administrative expense, which resulted from separation programs across our global organization designed to increase efficiency and reduce costs,
• Transaction costs of $1.2 million ($1.0 million net of tax), or $0.03 per share, included in general and administrative expense, resulting from the announced agreement to acquire Columbia Helicopters, and
• A non-cash tax expense of $10.3 million, or $0.29 per share, from the valuation allowance on deferred tax assets.

Additionally, we realized a loss on disposal of assets of $1.3 million ($1.4 million net of tax), or $0.04 per share, during the September 2018 quarter from the sale or disposal of aircraft and other equipment.

The year-over-year change in GAAP net loss and diluted loss per share were primarily driven by loss on impairment in the September 2018 quarter discussed above, lower revenue in the September 2018 quarter discussed above, higher interest expense, foreign currency losses in the September 2018 quarter versus foreign currency gains in the September 2017 quarter and lower earnings from unconsolidated affiliates, partially offset by lower general and administrative expenses, lower losses on disposal of assets, lower rent expense and a more favorable effective tax rate.

The September 2018 quarter results benefited from the impact of $3.4 million of OEM cost recoveries resulting in a $2.4 million reduction in rent expense and a $1.0 million reduction in direct costs. The OEM cost recoveries described above are included within adjusted net income, adjusted earnings per share and adjusted EBITDA in the September 2018 quarter.

The year-over-year change in adjusted EBITDA was primarily driven by the decline in oil and gas revenue discussed above, foreign currency losses in the September 2018 quarter versus foreign currency gains in the September 2017 quarter, lower earnings from unconsolidated affiliates and lower results from our fixed wing services in our Asia Pacific region primarily due to an increase in maintenance expense and decrease in operating revenue. These unfavorable changes were partially offset by a decrease in general and administrative expense primarily from lower salaries and benefits in the September 2018 quarter and lower rent expense discussed above. The year-over-year change in adjusted net loss and adjusted diluted loss per share was impacted by the same items that impacted adjusted EBITDA as well as higher interest expense.

The September 2017 quarter was also impacted by special items as reflected in the table at the end of this release.

LIQUIDITY AND FINANCIAL FLEXIBILITY

Don Miller, Senior Vice President and Chief Financial Officer, commented, "Bristow's previous financings and capital management continue to provide us with the runway needed to take advantage of the beginning of a recovery cycle for offshore oil and gas and the ability to capitalize on market opportunities like the transaction to acquire Columbia Helicopters. Bristow's operations delivered positive operating and free cash flow in the September 2018 quarter. However, given the challenges noted we believe it is prudent to adjust our adjusted EBITDA guidance range for fiscal 2019 from $90 million to $140 million to $80 million to $110 million. Assuming a closing date of December 31, 2018 and the inclusion of Columbia for our fiscal fourth quarter 2019, our combined Bristow and Columbia fiscal 2019 adjusted EBITDA guidance range is $100 million to $140 million."

REGIONAL PERFORMANCE

Europe Caspian

Operating revenue for Europe Caspian in the September 2018 quarter was flat compared to the September 2017 quarter with an unfavorable year-over-year impact from changes in foreign currency exchange rates and a decrease in Norway driven by less short-term activity, primarily offset by an increase in fixed wing revenue from Eastern Airways and an increase in U.K. SAR revenue. Eastern Airways contributed $31.4 million and $30.5 million in operating revenue for the September 2018 quarter and September 2017 quarter, respectively.

During the September 2018 quarter, we recorded $20.8 million for impairment of Eastern Airways assets including $17.5 million for aircraft and equipment, $3.0 million for intangible assets and $0.3 million for inventory. The impairments are excluded from adjusted EBITDA and adjusted EBITDA margin.

The decrease in operating income and operating margin from the September 2017 quarter was primarily due to the impairments for Eastern Airways assets discussed above. Adjusted EBITDA and adjusted EBITDA margin decreased primarily due to foreign exchange losses from revaluation of assets and liabilities included in other income (expense), net in the September 2018 quarter compared to gains recorded in the September 2017 quarter. Eastern Airways contributed a negative $0.7 million and positive $0.2 million in adjusted EBITDA for the September 2018 quarter and September 2017 quarter, respectively.

Africa

Operating revenue for Africa decreased in the September 2018 quarter primarily due to a contract that expired on March 31, 2018, which was partially offset by an increase in activity from other oil and gas customers due to a stronger than expected recovery as utilization on existing assets has improved. Additionally, fixed wing services in Africa generated $2.8 million and $1.6 million of operating revenue for the September 2018 quarter and September 2017 quarter, respectively.

Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin decreased as a result of the decrease in operating revenue in the September 2018 quarter, which was partially offset by a decrease in direct costs and general and administrative expense.

Americas

Operating revenue decreased in the September 2018 quarter primarily due to a decrease in operating revenue in Canada resulting from reduced activity, partially offset by an increase in activity with our U.S. Gulf of Mexico oil and gas customers.

Earnings from unconsolidated affiliates, net of losses, decreased primarily due to a reduction in earnings from our investment in Líder in Brazil resulting from an unfavorable change in foreign currency exchange rates and decline in activity.

The decreases in operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin were driven by the decreases in operating revenue and earnings from unconsolidated affiliates discussed above and increase in rent expense.

Asia Pacific

Operating revenue decreased in the September 2018 quarter primarily due to an end of short-term contracts in Australia and a decrease from our fixed wing operations at Airnorth. Airnorth contributed $21.8 million and $24.6 million in operating revenue for the September 2018 quarter and September 2017 quarter, respectively.

Operating loss increased and operating margin, adjusted EBITDA and adjusted EBITDA margin decreased in the September 2018 quarter primarily due to a decrease in operating revenue discussed above and an increase in maintenance expense at Airnorth, partially offset by a decrease in salaries and benefits due to headcount reductions, a reduction to rent expense related to the return of leased aircraft and OEM cost recoveries and a decrease in general and administrative expenses. Additionally, changes in foreign exchange rates negatively impacted adjusted EBITDA results by $2.3 million compared to the September 2017 quarter primarily due to foreign exchange rate losses of $1.1 million for the September 2018 quarter compared to foreign exchange rate gains of $0.8 million in the September 2017 quarter. Airnorth contributed a negative $1.9 million and positive $5.6 million in adjusted EBITDA for the September 2018 quarter and September 2017 quarter, respectively.

Corporate and other

Operating revenue decreased in the September 2018 quarter primarily due to the sale of Bristow Academy on November 1, 2017.

Operating loss for the September 2018 quarter includes impairments of $87.5 million for the impairment of H225 aircraft and $8.9 million for the impairment of H225 inventory. The impairments are excluded from adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA improved primarily due to foreign currency transaction gains of $0.1 million in the September 2018 quarter compared to foreign currency transaction losses of $1.2 million in the September 2017 quarter, and a reduction in general and administrative expenses.

GUIDANCE

Guidance for selected financial measures is included in the tables that follow.

CONFERENCE CALL

Management will conduct a conference call starting at 7:00 a.m. CT (8:00 a.m. ET) today, Friday, November 9, 2018, to review both the announced transaction and the financial results for the fiscal year 2019 second quarter ended September 30, 2018. This release and the most recent investor slide presentation are available in the investor relations area of our web page at www.bristowgroup.com.  The conference call can be accessed as follows:

Via Webcast:

• Visit Bristow Group's investor relations Web page at www.bristowgroup.com
• Live: Click on the link for "Bristow Group Fiscal 2019 Second Quarter Earnings Conference Call"
• Replay: A replay via webcast will be available approximately one hour after the call's completion and will be accessible for approximately 90 days.

Via Telephone within the U.S.:

• Live: Dial toll free 1-877-404-9648

Via Telephone outside the U.S.:

• Live: Dial 1-412-902-0030

ABOUT BRISTOW GROUP INC.

Bristow Group Inc. is the leading global industrial aviation services provider offering helicopter transportation, search and rescue (SAR) and aircraft support services to government and civil organizations worldwide. Bristow has major transportation operations in the North Sea, Nigeria and the U.S. Gulf of Mexico, and in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, Canada, Russia and Trinidad. Bristow provides SAR services to the private sector worldwide and to the public sector for all of the U.K. on behalf of the Maritime and Coastguard Agency. For more information, visit bristowgroup.com.

FORWARD-LOOKING STATEMENTS DISCLOSURE

Statements contained in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. These forward-looking statements include statements regarding earnings guidance, expected contract revenue, the Columbia acquisition and the expected benefits thereof, capital deployment strategy, operational and capital performance, expected cost management activities, expected capital expenditure deferrals, shareholder return, liquidity and market and industry conditions. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Risks and uncertainties include without limitation: fluctuations in the demand for our services; fluctuations in worldwide prices of and supply and demand for oil and natural gas; fluctuations in levels of oil and natural gas production, exploration and development activities; the impact of competition; the risks that we may not complete the Columbia acquisition or achieve the expected benefits thereof; actions by customers and suppliers; the risk of reductions in spending on industrial aviation services by governmental agencies; changes in tax and other laws and regulations; changes in foreign exchange rates and controls; risks associated with international operations; operating risks inherent in our business, including the possibility of declining safety performance; general economic conditions including the capital and credit markets; our ability to obtain financing; the risk of grounding of segments of our fleet for extended periods of time or indefinitely; our ability to re-deploy our aircraft to regions with greater demand; our ability to acquire additional aircraft and dispose of older aircraft through sales into the aftermarket; the possibility that we do not achieve the anticipated benefit of our fleet investment program; availability of employees; and political instability, war or acts of terrorism in any of the countries where we operate. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including but not limited to the Company's annual report on Form 10-K for the fiscal year ended March 31, 2018 and quarterly report on Form 10-Q for the quarter ended June 30, 2018. Bristow Group Inc. disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

(financial tables follow)

Investor RelationsLinda McNeillDirector, Investor Relations+1 713.267.7622

Global Media RelationsAdam MorganDirector, Global Communications+1 281.253.9005

 

 

 

 

 

 

 

 

The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the three months ended September 30, 2018:

 

The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the three months ended September 30, 2017:

We determined that during the three months ended June 30, 2018, we had incorrectly allocated a foreign currency transaction gain and loss between two regions: Europe Caspian and Corporate and other with no impact to consolidated adjusted EBITDA or consolidated other income. This resulted in an overstatement of adjusted EBITDA and other income for Europe Caspian region of $6.9 million and an understatement of adjusted EBITDA and other income for Corporate and other of $6.9 million during the three months ended June 30, 2018. We have corrected the adjusted EBITDA and other income for these regions for three months ended June 30, 2018. There is no impact on the three or six months ended September 30, 2018.

The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the six months ended September 30, 2018:

The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the six months ended September 30, 2017:

 

 

 

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SOURCE Bristow Group Inc.