Form 8-K Bristow Group Inc For: Feb 11
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
_________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 2019
_________________________________________________
Bristow Group Inc.
(Exact name of registrant as specified in its charter)
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Delaware (State or other jurisdiction of incorporation) | 001-31617 (Commission File Number) | 72-0679819 (IRS Employer Identification No.) | ||
2103 City West Blvd., 4th Floor Houston, Texas (Address of principal executive offices) | 77042 (Zip Code) | |
Registrant’s telephone number, including area code: (713) 267-7600
Former Name or Former Address, if Changed Since Last Report: NONE
_________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
ITEM 2.02 Results of Operations and Financial Condition.
On February 11, 2019, Bristow Group Inc. (the “Company”) issued a press release that summarized its preliminary financial results for the three and nine-month periods ended December 31, 2018 (the “Financial Results”). A copy of the press release is furnished with this report as Exhibit 99.1, and is incorporated herein by reference.
The press release includes certain “non-GAAP financial measures” under Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including adjusted EBITDA, adjusted benefit (provision) for income taxes, adjusted net income (loss) and adjusted diluted earnings (loss) per share (collectively, the “Non-GAAP measures”). Adjusted EBITDA is calculated by taking our net income (loss) and adjusting for interest expense, depreciation and amortization, benefit (provision) for income taxes, gain (loss) on disposal of assets and special items, if any. Additionally, our net income (loss) and diluted earnings (loss) per share in this release have been presented in certain instances excluding gain (loss) on disposal of assets and special items detailed in the press release; these items are presented as adjusted net income (loss) and adjusted diluted earnings (loss) per share. Management believes that the Non-GAAP measures provide relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and regional performance. Adjusted EBITDA provides us with an understanding of one aspect of earnings before the impact of investing and financing transactions and income taxes. Adjusted EBITDA should not be considered a measure of discretionary cash available to us for investing in the growth of our business. Adjusted net income (loss) and adjusted diluted earnings (loss) per share present our consolidated results excluding asset dispositions and special items that do not reflect the ordinary earnings of our operations. Adjusted benefit (provision) for income taxes excludes the tax impact of these items. We believe that these measures are useful supplemental measures because net income (loss) and diluted earnings (loss) per share include asset disposition effects and special items and benefit (provision) for income taxes includes the tax impact of these items, and inclusion of these items does not reflect the ongoing operational earnings of our business. The Non-GAAP measures are not calculated or presented in accordance with GAAP and other companies in our industry may calculate these measures differently than we do. As a result, these financial measures have limitations as analytical and comparative tools and you should not consider these measures in isolation, or as a substitute for analysis of our results as reported under GAAP. In calculating these financial measures, we make certain adjustments that are based on assumptions and estimates that may prove to be inaccurate. In addition, in evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of the Non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or special items. Such non-GAAP measures should not be viewed as an alternative to our GAAP financial statements, but should be read as a supplement to, and in conjunction with, our GAAP financial statements.
ITEM 8.01. Other Events.
In connection with the preparation of annual and quarterly financial statements, the Company’s management is responsible for evaluating its disclosure controls and procedures, which are established to ensure that material information relating to the Company and its consolidated subsidiaries is made known to the officers who certify the Company’s financial reports. This evaluation includes an assessment of the Company’s internal controls over financial reporting, which are designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s financial statements. In connection with the audit of fiscal year-end financial statements, the Company’s independent registered public accounting firm, KPMG LLP (“KPMG”), is responsible for auditing both (i) the financial statements to obtain reasonable assurance about whether they are free of material misstatement, and (ii) the effectiveness of the Company’s internal control over financial reporting.
As part of management’s assessment of the Company’s internal controls over financial reporting as of December 31, 2018, a control deficiency was identified by the Company related to the Company’s processes for monitoring compliance with certain non-financial covenants in certain of the Company’s secured financing and lease agreements. Identification of control deficiencies regularly occurs in connection with the assessment or audit of internal controls over financial reporting. Control deficiencies exist when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A control deficiency may constitute a “significant deficiency” or a “material weakness” as defined in applicable Securities and Exchange Commission (“SEC”) rules. A “significant deficiency” means a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting. A “material weakness” means a deficiency or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s financial statements will not be prevented or detected on a timely basis. However, not all control deficiencies rise to the level of a significant deficiency or a material weakness.
Management has concluded that the Company did not have adequate monitoring control processes in place related to non-financial covenants within certain of its secured financing and lease agreements, and this control deficiency identified represents a “material weakness” in internal controls over financial reporting. Accordingly, the Company’s internal control over financial reporting was
ineffective at March 31, 2018 and the reporting periods thereafter. As such, both management’s assessment and the report of KPMG on internal control over financial reporting as of March 31, 2018 should no longer be relied upon. In addition, because of the material weakness described above, in February 2019, the Company’s management has determined that the Company’s disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2018 and the reporting periods thereafter.
The Company is evaluating whether this material weakness in internal controls over financial reporting resulted in a misstatement in the Company’s financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and the impact on the financial statements of the Company as of December 31, 2018, including disclosures. The Company is specifically evaluating whether certain debt balances should be reclassified from long-term to short-term in those financial statements, whether related waivers can be obtained from lenders, if necessary, and the resulting impact on the assessment of the Company’s ability to continue as a going concern.
Further discussion of the material weakness and any financial statement implications, including any related revisions to the Company’s previously issued financial statements, if required, will be included in the Quarterly Report on Form 10-Q for the three months ended December 31, 2018 and in an amendment to the Annual Report on Form 10-K for the fiscal year ended March 31, 2018.
As a result of matters disclosed above, the Company is unable to file its Quarterly Report on Form 10-Q for the three months ended December 31, 2018 within the prescribed time period without unreasonable effort or expense. The Company has filed a Form 12b-25 Notification of Late Filing with the SEC, postponing the filing of its Quarterly Report on Form 10-Q for the three months ended December 31, 2018 for up to 5 days. The Company intends to file the Form 10-Q no later than February 19, 2019, the first business day following such 5-day period.
Upon the completion of the Company’s analysis and any additional testing by KPMG, the Company expects to file amendments to any previously filed reports necessary to bring such filings into compliance with SEC rules.
The Company’s management and Audit Committee have discussed the matters described above with KPMG.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number | Description of Exhibit | ||
99.1 | |||
99.2 | |||
Limitation on Incorporation by Reference.
Information on Bristow’s website is not incorporated by reference in this Form 8-K. In accordance with General Instruction B.2 of Form 8-K, the information set forth in Item 2.02 of this Form 8-K and the attached exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act unless Bristow expressly states that such information is to be considered “filed” under the Exchange Act or incorporates it by specific reference in such a filing. The information set forth in Item 2.02 and the related exhibit furnished in Item 9.01 of this report shall not be deemed an admission as to the materiality of any information in this report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BRISTOW GROUP INC. | |||||
Date: February 11, 2019 | By: | /s/ Brian J. Allman | |||
Brian J. Allman | |||||
Vice President, Chief Accounting Officer | |||||
Exhibit 99.1
 | |
FOR IMMEDIATE RELEASE | |
Bristow Group Reports Preliminary Third Quarter Fiscal Year 2019 Results
Bristow Group Provides Preliminary Results for the Three and Nine Months ended December 31, 2018 and Files Form 12b-25 with SEC for Extension of Time to File Its Form 10-Q for Period Ending
December 31, 2018; Intends to Hold Investor Call After Form 10-Q Has Been Filed
Jonathan Baliff’s Retirement to Become Effective February 28, 2019; Vice-Chairman of the Board and Interim President Thomas Amonett to Also Serve as Interim CEO For Remainder of CEO Search Process
HOUSTON, February 11, 2019 – Bristow Group Inc. (NYSE: BRS) today announced that it filed a Form 12b-25 notification of late filing with the Securities and Exchange Commission and released preliminary results for the three and nine months ended December 31, 2018. The Company intends to hold its investor conference call to discuss its fiscal year 2019 third quarter after it has filed its Form 10-Q with the SEC, and will not be commenting until the Form 10-Q has been filed.
Management has concluded that the Company did not have adequate monitoring control processes in place related to non-financial covenants within certain of its secured financing and lease agreements, and this control deficiency identified represents a “material weakness” in internal controls over financial reporting. Accordingly, the Company’s internal control over financial reporting was ineffective at March 31, 2018 and the reporting periods thereafter. As such, both management’s assessment and the report of KPMG on internal control over financial reporting as of March 31, 2018 should no longer be relied upon. In addition, because of the material weakness described above, in February 2019, the Company’s management has determined that the Company’s disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2018 and the reporting periods thereafter.
The Company is evaluating whether this material weakness in internal controls over financial reporting resulted in a misstatement in the Company’s financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and the impact on the financial statements of the Company as of December 31, 2018, including disclosures. The Company is specifically evaluating whether certain debt balances should be reclassified from long-term to short-term in those financial statements, whether related waivers can be obtained from lenders, if necessary, and the resulting impact on the assessment of the Company’s ability to continue as a going concern.
Further discussion of the material weakness and any financial statement implications, including any related revisions to the Company’s previously issued financial statements, if required, will be included in the Quarterly Report on Form 10-Q for the three months ended December 31, 2018 and in an amendment to the Annual Report on Form 10-K for the fiscal year ended March 31, 2018.
The Company intends to file the Form 10-Q no later than February 19, 2019.
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PRELIMINARY THIRD QUARTER FISCAL YEAR 2019 RESULTS
All amounts shown are dollar amounts in thousands unless otherwise noted:
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Operating revenue | $ | 317,091 | $ | 345,528 | (8.2 | )% | $ | 1,002,789 | $ | 1,043,249 | (3.9 | )% | ||||||||||
Net loss attributable to Bristow Group | (85,944 | ) | (8,273 | ) | * | (262,242 | ) | (94,757 | ) | (176.8 | )% | |||||||||||
Diluted loss per share | (2.40 | ) | (0.23 | ) | * | (7.34 | ) | (2.69 | ) | (172.9 | )% | |||||||||||
Adjusted EBITDA (1) | 23,643 | 34,964 | (32.4 | )% | 71,722 | 82,545 | (13.1 | )% | ||||||||||||||
Adjusted net loss (1) | (20,259 | ) | (18,450 | ) | (9.8 | )% | (77,386 | ) | (59,198 | ) | (30.7 | )% | ||||||||||
Adjusted diluted loss per share (1) | (0.57 | ) | (0.52 | ) | (9.6 | )% | (2.17 | ) | (1.68 | ) | (29.2 | )% | ||||||||||
Operating cash flow | (42,000 | ) | 26,027 | * | (68,902 | ) | (9,307 | ) | * | |||||||||||||
Capital expenditures | 16,409 | 12,124 | 35.3 | % | 33,711 | 36,441 | (7.5 | )% | ||||||||||||||
Rent expense | 48,155 | 42,620 | 13.0 | % | 147,827 | 158,519 | (6.7 | )% | ||||||||||||||
December 31, 2018 | September 30, 2018 | March 31, 2018 | % Change September 30, 2018 to December 31, 2018 | % Change March 31, 2018 to September 30, 2018 | ||||||||||||||
Cash | $ | 231,326 | $ | 307,791 | $ | 380,223 | (24.8 | )% | (39.2 | )% | ||||||||
Undrawn borrowing capacity on ABL Facility (2) | 5,568 | 11,691 | — | (52.4 | )% | * | ||||||||||||
Total liquidity | $ | 236,894 | $ | 319,482 | $ | 380,223 | (25.9 | )% | (37.7 | )% | ||||||||
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* percentage change too large to be meaningful or not applicable
(1) | A full reconciliation of non-GAAP financial measures is included at the end of this news release |
(2) | The Company’s $75 million Asset-Backed Revolving Credit Facility (“ABL Facility”) closed on April 17, 2018 and, therefore, availability under such facility is not included in liquidity as of March 31, 2018. |
Bristow noted that it ended the December 2018 quarter with more than $236 million in total liquidity. The Company is focused on improving its financial performance. Accordingly, Bristow is taking specific actions related to its global asset portfolio, financing arrangements and planned expenditures with the goal of improving cash flow while maintaining its competitive positioning.
December 2018 quarter results continued to reflect an environment that remains uneven and challenging in the oil and gas footprint. Solid performance in the U.K. SAR business, Africa region and Norway operations was mostly offset by the continued losses in the Company’s Eastern and Airnorth fixed wing operations, negative impact of foreign exchange volatility, and expenses associated with the Columbia Helicopters, Inc. (“Columbia”) transaction, which had a negative impact on cash flow and overall liquidity during the December 2018 quarter. December 2018 quarter adjusted EBITDA benefited from approximately $10 million in non-recurring, non-cash items, including reversals of compensation accruals, original equipment manufacturer (“OEM”) cost recoveries and lower insurance accruals, reflecting its safety performance this fiscal year.
CEO SUCCESSION
The previously announced retirement of Chief Executive Officer Jonathan E. Baliff will become effective on February 28, 2019, when he will also resign from the Bristow Board of Directors. Bristow is in the process of selecting a new Chief Executive Officer; the Corporate Governance and Nominating Committee of the Board of Directors is leading the search process, with input from the Board and the support of an executive search firm. Effective upon Mr. Baliff’s retirement and until the appointment of a new Chief Executive Officer, the Bristow Board of Directors has named Thomas N. Amonett, currently the Vice-Chairman of the Board of Directors and interim President of Bristow, to the additional role of interim Chief Executive Officer.
The entire Bristow family is grateful for Jonathan’s leadership and service over the past nine years, and wishes him all the best. The Board has confidence in the Bristow senior leadership team, and believes Tom has the experience to take on additional responsibilities on an interim basis as the Company completes the process of identifying and transitioning its new permanent Chief Executive Officer.
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BUSINESS AND FINANCIAL HIGHLIGHTS
• | Net loss was $85.9 million ($2.40 per diluted share) for the December 2018 quarter compared to a net loss of $8.3 million ($0.23 per diluted share) for the December 2017 quarter. |
• | Adjusted net loss was $20.3 million ($0.57 per diluted share) for the December 2018 quarter compared to an adjusted net loss of $18.5 million ($0.52 per diluted share) for the December 2017 quarter; the December 2018 quarter is adjusted for $53.2 million in net unfavorable special items, including $45.2 million of non-cash tax items, and the December 2017 quarter is adjusted for $12.6 million in net favorable special items. |
• | Adjusted EBITDA of $23.6 million for the December 2018 quarter was higher than expected as a result of higher revenue primarily from increased activity levels in Norway, and its Africa and Americas regions, and an approximate $10 million benefit from non-recurring, non-cash items, including reversals of compensation accruals, OEM cost recoveries and lower insurance accruals. |
• | The Company had $236.9 million of total liquidity as of December 31, 2018 with $42 million in negative operating cash flow during the quarter driven primarily by working capital changes that included approximately $20 million of non-recurring payments including $6.7 million related to Eastern overdraft facility, $6.5 million payment for Airnorth engine overhauls accrued at September 30, $4.8 million for Columbia related professional fees and $1.75 million consent solicitation fee which will be refunded. In addition, the Company paid down debt of $19.1 million and incurred $15.8 million in net capital expenditures including $8.3 million paid for the acquisition of a leased AW139 on a customer contract. |
• | The Company also announced today that its agreement to acquire Columbia was terminated by mutual agreement of the parties. In connection with the termination, Bristow has paid $20 million to Columbia. The Company, Columbia and Columbia’s shareholders have agreed to release each other from all claims in connection with the transaction agreement and the proposed transactions. Bristow and Columbia concluded that it was not possible to combine the two companies at this time due to a number of developments that occurred following the entry into the agreement. The companies believe in the potential for collaboration and are actively considering mutually beneficial opportunities to work together. The Company noted the termination of the Columbia transaction is unrelated to Bristow’s 12b-25 extension and related accounting review. |
Operating revenue from external customers by line of service was as follows:
Three Months Ended December 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(in thousands, except percentages) | ||||||||||
Oil and gas services | $ | 216,106 | $ | 236,655 | (8.7 | )% | ||||
U.K. SAR services | 54,346 | 55,659 | (2.4 | )% | ||||||
Fixed wing services | 46,173 | 52,476 | (12.0 | )% | ||||||
Corporate and other | 466 | 738 | (36.9 | )% | ||||||
Total operating revenue | $ | 317,091 | $ | 345,528 | (8.2 | )% | ||||
The year-over-year decrease in operating revenue was primarily driven by a decrease in the Company’s oil and gas services driven by decreased flight activity in its Asia Pacific region, its Canada operations within its Americas region, and its Africa region. Revenue declines from fixed wing services in the Company’s Europe Caspian and Asia Pacific regions were partially offset by increased operating revenue from its fixed wing services in its Africa region. Additionally, revenue decreased by $7.8 million in the December 2018 quarter compared to the December 2017 quarter due to changes in foreign currency exchange rates, primarily in the Company’s Europe Caspian and Asia Pacific regions related to the strengthening of the U.S. dollar versus the British pound sterling and Australian dollar.
The GAAP net loss and diluted loss per share for the December 2018 quarter were significantly impacted by the following special items:
• | Organizational restructuring costs of $2.4 million ($2.4 million net of tax), or $0.07 per share, included in direct cost and general and administrative expense, which resulted from reduction in force programs across the global organization designed to increase efficiency and reduce costs, |
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• | Transaction costs of $7.2 million ($5.7 million net of tax), or $0.16 per share, included in general and administrative expense, resulting from the Columbia transaction and related financing transactions, and |
• | Non-cash tax expense of $45.2 million, or $1.26 per share, including $33.5 million from valuation allowances on deferred tax assets and $11.7 million from the Tax Cuts and Jobs Act. |
Additionally, the Company realized a loss on disposal of assets of $16.0 million ($12.5 million net of tax), or $0.35 per share, during the December 2018 quarter, including $14.0 million for contract termination costs for an aircraft purchase contract with Sikorsky that was terminated in December 2018 and $1.4 million for impairment of assets held for sale. The Company has filed a lawsuit against Sikorsky related to the contract termination costs, seeking to recover its approximately $12 million deposit, but cannot predict the outcome of such action or whether it will be successful in recovering any portion of this amount.
The year-over-year change in GAAP net loss and diluted loss per share were primarily driven by lower revenue in the December 2018 quarter discussed above, higher interest expense, higher loss on disposal of assets and higher rent expense due to less of a benefit from OEM cost recoveries in the December 2018 quarter discussed below, a larger negative impact from special items in the December 2018 quarter compared to in the December 2017 quarter, and higher tax expense primarily due to valuation allowances on deferred tax assets, partially offset by lower general and administrative expenses.
The December 2018 quarter results benefited from the impact of $2.0 million of OEM cost recoveries resulting in a $1.0 million reduction in rent expense (included in direct cost) and a $1.0 million reduction in direct cost. The December 2017 quarter results benefited from the impact of $13.1 million of OEM cost recoveries resulting in a reduction in rent expense (included in direct cost). The OEM cost recoveries described above are included within adjusted net income, adjusted earnings per share and adjusted EBITDA in the December 2018 quarter and December 2017 quarter.
The year-over-year change in adjusted EBITDA was primarily driven by the decline in oil and gas revenue and higher rent expense as discussed above. These unfavorable changes were partially offset by a decrease in general and administrative expense primarily from lower salaries and benefits in the December 2018 quarter. 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; however, a more favorable adjusted tax rate in the December 2018 quarter more than offset these negative changes.
The December 2017 quarter was also impacted by special items as reflected in the table at the end of this release.
LIQUIDITY AND FINANCIAL FLEXIBILITY
The Company’s December 31, 2018 liquidity of $236.9 million was down $83 million from its September 30, 2018 liquidity of $319.5 million, driven by negative operating cash flow of $42.0 million, $15.8 million in net capital expenditures, $19.1 million in debt repayments, and a $6.1 million reduction in borrowing capacity under its ABL Facility. Included in the cash use during the December 2018 quarter were debt and overdraft facility repayments for Eastern Airways of $14.1 million and payment of fees and expenses associated with the Columbia transaction of $4.8 million. The Company also continued to experience headwinds related to foreign exchange volatility and with its fixed wing operations that had a negative impact on cash.
Given the gradual recovery of the offshore oil and gas markets and the Company’s ongoing required debt service, including aircraft lease costs, the Company remains focused on eliminating and deferring capital expenditures and improving operating cash flow as it strives to maintain adequate liquidity. The Company continues to reduce its aircraft lease costs and, during the December 2018 quarter, it returned three leased oil and gas aircraft and is in the process of returning another two oil and gas aircraft over the remainder of fiscal 2019 with the ability to return another 19 oil and gas aircraft in fiscal 2020.
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REGIONAL PERFORMANCE
Europe Caspian
Three Months Ended December 31, | |||||||||||
2018 | 2017 | % Change | |||||||||
(in thousands, except percentages) | |||||||||||
Operating revenue | $ | 180,829 | $ | 189,910 | (4.8 | )% | |||||
Operating income | $ | 3,342 | $ | 5,274 | (36.6 | )% | |||||
Operating margin | 1.8 | % | 2.8 | % | (35.7 | )% | |||||
Adjusted EBITDA | $ | 14,068 | $ | 18,614 | (24.4 | )% | |||||
Adjusted EBITDA margin | 7.8 | % | 9.8 | % | (20.4 | )% | |||||
Rent expense | $ | 30,262 | $ | 29,499 | 2.6 | % | |||||
Operating revenue for the Company’s Europe Caspian region decreased in the December 2018 quarter compared to the December 2017 quarter primarily as a result of a decrease in U.K. oil and gas revenue due to a decrease in activity and unfavorable changes in foreign currency exchange rates, a decrease in fixed wing revenue from Eastern Airways due to a decrease in activity and unfavorable changes in foreign currency exchange rates and a decrease in U.K. SAR revenue primarily due to unfavorable changes in foreign currency exchange rates. These decreases were partially offset by increased operating revenue in Norway driven by an increase in activity. Additionally, revenue decreased by $5.2 million in the December 2018 quarter compared to the December 2017 quarter due to unfavorable changes in foreign currency exchange rates. Eastern Airways contributed $24.4 million and $29.5 million in operating revenue for the December 2018 quarter and December 2017 quarter, respectively.
The December 2018 quarter results benefited from OEM cost recoveries received in prior periods that resulted in a $1.2 million reduction in direct cost. The December 2017 quarter results benefited from OEM cost recoveries that resulted in a $7.1 million reduction in rent expenses (included in direct cost). Bristow will recognize an additional $0.5 million reduction in direct cost over the remainder of fiscal year 2019 related to these OEM cost recoveries in its Europe Caspian region results. These items are included in operating income and adjusted EBITDA in the December 2018 quarter and December 2017 quarter.
The decrease in operating income and operating margin from the December 2017 quarter was primarily due to lower revenue discussed above and lower OEM cost recoveries of $5.9 million, partially offset by lower salaries and benefits. In addition to the items impacting operating income and operating margin, adjusted EBITDA and adjusted EBITDA margin decreased due to foreign exchange losses of $2.1 million from revaluation of assets and liabilities included in other income (expense), net in the December 2018 quarter compared to gains of $1.3 million recorded in the December 2017 quarter. Eastern Airways contributed a negative $5.4 million and positive $4.1 million in adjusted EBITDA for the December 2018 quarter and December 2017 quarter, respectively.
Africa
Three Months Ended December 31, | |||||||||||
2018 | 2017 | % Change | |||||||||
(in thousands, except percentages) | |||||||||||
Operating revenue | $ | 41,394 | $ | 47,915 | (13.6 | )% | |||||
Operating income | $ | 5,286 | $ | 10,470 | (49.5 | )% | |||||
Operating margin | 12.8 | % | 21.9 | % | (41.6 | )% | |||||
Adjusted EBITDA | $ | 8,639 | $ | 14,206 | (39.2 | )% | |||||
Adjusted EBITDA margin | 20.9 | % | 29.6 | % | (29.4 | )% | |||||
Rent expense | $ | 2,677 | $ | 2,048 | 30.7 | % | |||||
Operating revenue for Africa decreased in the December 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 $3.4 million and $2.0 million of operating revenue for the December 2018 quarter and December 2017 quarter, respectively.
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Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin decreased as a result of the decrease in operating revenue in the December 2018 quarter, which was partially offset by a decrease in direct costs and general and administrative expense.
Americas
Three Months Ended December 31, | |||||||||||
2018 | 2017 | % Change | |||||||||
(in thousands, except percentages) | |||||||||||
Operating revenue | $ | 57,502 | $ | 60,345 | (4.7 | )% | |||||
Earnings from unconsolidated affiliates | $ | 839 | $ | 2,097 | (60.0 | )% | |||||
Operating income | $ | 4,412 | $ | 5,308 | (16.9 | )% | |||||
Operating margin | 7.7 | % | 8.8 | % | (12.5 | )% | |||||
Adjusted EBITDA | $ | 11,892 | $ | 12,689 | (6.3 | )% | |||||
Adjusted EBITDA margin | 20.7 | % | 21.0 | % | (1.4 | )% | |||||
Rent expense | $ | 5,641 | $ | 6,295 | (10.4 | )% | |||||
Operating revenue decreased in the December 2018 quarter primarily due to a decrease in operating revenue in Canada and the U.S. Gulf of Mexico resulting from reduced activity, partially offset by an increase in activity with the Company’s Trinidad oil and gas customers.
Earnings from unconsolidated affiliates, net of losses, decreased primarily due to a reduction in earnings from the Company’s investment in Líder in Brazil resulting from a decline in activity, partially offset by less of an unfavorable change in foreign currency exchange rates.
Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin were all mostly flat as the decreases in earnings from unconsolidated affiliates and operating revenue discussed above were mostly offset by a decrease in salaries and benefits due to lower headcount and a decrease in rent expense.
Asia Pacific
_____________
Three Months Ended December 31, | |||||||||||
2018 | 2017 | % Change | |||||||||
(in thousands, except percentages) | |||||||||||
Operating revenue | $ | 40,077 | $ | 50,248 | (20.2 | )% | |||||
Operating loss | $ | (6,654 | ) | $ | (941 | ) | * | ||||
Operating margin | (16.6 | )% | (1.9 | )% | * | ||||||
Adjusted EBITDA | $ | (3,411 | ) | $ | 4,797 | * | |||||
Adjusted EBITDA margin | (8.5 | )% | 9.5 | % | * | ||||||
Rent expense | $ | 7,927 | $ | 2,807 | 182.4 | % | |||||
* percentage change too large to be meaningful or not applicable
Operating revenue decreased in the December 2018 quarter primarily due to an end of short-term contracts in Australia and a decrease from the Company’s fixed wing operations at Airnorth. Airnorth contributed $18.4 million and $21.0 million in operating revenue for the December 2018 quarter and December 2017 quarter, respectively.
Operating loss increased and operating margin, adjusted EBITDA and adjusted EBITDA margin decreased in the December 2018 quarter primarily due to a decrease in operating revenue discussed above. Additionally, rent expense increased primarily due to a decrease in OEM credits. These unfavorable changes were partially offset by a decrease in salaries and benefits due to headcount reductions. Additionally, changes in foreign exchange rates negatively impacted adjusted EBITDA results by $2.1 million compared to the December 2017 quarter primarily due to foreign exchange rate losses of $2.3 million and $0.3 million for the December 2018 quarter and December 2017 quarter, respectively. Airnorth contributed a negative $1.2 million and positive $2.2 million in adjusted EBITDA for the December 2018 quarter and December 2017 quarter, respectively.
6
Corporate and other
Three Months Ended December 31, | |||||||||||
2018 | 2017 | % Change | |||||||||
(in thousands, except percentages) | |||||||||||
Operating revenue | $ | 465 | $ | 743 | (37.4 | )% | |||||
Operating loss | $ | (21,535 | ) | $ | (19,047 | ) | (13.1 | )% | |||
Adjusted EBITDA | $ | (7,545 | ) | $ | (15,342 | ) | 50.8 | % | |||
Rent expense | $ | 1,648 | $ | 1,971 | (16.4 | )% | |||||
Operating revenue decreased in the December 2018 quarter primarily due to the sale of Bristow Academy on November 1, 2017.
Operating loss increased in the December 2018 quarter primarily due to an increase in general and administrative expenses primarily due to a $6.0 million increase in professional fees primarily due to the Columbia transaction, partially offset by a decrease in compensation expense resulting from a reduction in short-term and long-term incentive compensation costs. Adjusted EBITDA improved primarily due to the reduction in general and administrative expenses excluding organizational restructuring and transaction costs, and foreign currency transaction gains of $1.7 million in the December 2018 quarter compared to foreign currency transaction losses of $0.3 million in the December 2017 quarter.
During the December 2018 quarter, the Company recorded $7.2 million of transaction costs and during the December 2017 quarter, it recorded $0.1 million of organizational restructuring costs, both of which are excluded from adjusted EBITDA and adjusted EBITDA margin.
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 the filing of the Company’s Form 10-Q, expected contract revenue, actions that may be taken to improve the Company’s liquidity, capital deployment strategy, operational and capital performance, expected cost management activities, expected capital expenditure deferrals, shareholder return, liquidity, market and industry conditions, and other statements identified by words such as “will,” “expect,” “believe,” “anticipate,” “estimate,” “should,” “intend,” “plan,” “potential,” “predict,” “project,” “aim,” “hope,” “predict,” and similar words, phrases and expressions, although not all forward-looking statements include such words, phrases or expressions. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Factors that could cause events or results to differ materially from those anticipated include but are not limited to the following: the review and finalization of the Company’s historical financial statement; 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; 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 inability to obtain financing on favorable terms, whether caused by our financial position, lower debt credit ratings, unstable markets or otherwise; our ability to pay, refinance or restructure our debt and aircraft lease commitments; 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
7
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 September 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 Relations
Linda McNeill
Director, Investor Relations
+1 713.267.7622
Global Media Relations
Adam Morgan
Director, Global Communications
+1 281.253.9005
8
BRISTOW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and percentages)
(Unaudited)
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Operating revenue from non-affiliates | $ | 303,206 | $ | 328,944 | $ | 963,252 | $ | 991,655 | |||||||
Operating revenue from affiliates | 13,885 | 16,584 | 39,537 | 51,594 | |||||||||||
Reimbursable revenue from non-affiliates | 14,238 | 15,207 | 47,091 | 43,271 | |||||||||||
331,329 | 360,735 | 1,049,880 | 1,086,520 | ||||||||||||
Operating expense: | |||||||||||||||
Direct cost | 262,039 | 271,894 | 819,307 | 842,216 | |||||||||||
Reimbursable expense | 13,862 | 14,725 | 44,960 | 42,365 | |||||||||||
Depreciation and amortization | 30,615 | 31,682 | 92,045 | 94,119 | |||||||||||
General and administrative | 40,742 | 43,366 | 119,682 | 138,695 | |||||||||||
347,258 | 361,667 | 1,075,994 | 1,117,395 | ||||||||||||
Loss on impairment | — | — | (117,220 | ) | (1,192 | ) | |||||||||
Loss on disposal of assets | (16,015 | ) | (4,591 | ) | (18,986 | ) | (12,418 | ) | |||||||
Earnings (losses) from unconsolidated affiliates, net | 780 | 1,996 | (2,333 | ) | 3,394 | ||||||||||
Operating loss | (31,164 | ) | (3,527 | ) | (164,653 | ) | (41,091 | ) | |||||||
Interest expense, net | (27,113 | ) | (19,093 | ) | (80,690 | ) | (53,677 | ) | |||||||
Other income (expense), net | (3,660 | ) | (736 | ) | (10,814 | ) | 235 | ||||||||
Loss before provision for income taxes | (61,937 | ) | (23,356 | ) | (256,157 | ) | (94,533 | ) | |||||||
Benefit (provision) for income taxes | (23,764 | ) | 13,419 | (5,258 | ) | (2,546 | ) | ||||||||
Net loss | (85,701 | ) | (9,937 | ) | (261,415 | ) | (97,079 | ) | |||||||
Net (income) loss attributable to noncontrolling interests | (243 | ) | 1,664 | (827 | ) | 2,322 | |||||||||
Net loss attributable to Bristow Group | $ | (85,944 | ) | $ | (8,273 | ) | $ | (262,242 | ) | $ | (94,757 | ) | |||
Loss per common share: | |||||||||||||||
Basic | $ | (2.40 | ) | $ | (0.23 | ) | $ | (7.34 | ) | $ | (2.69 | ) | |||
Diluted | $ | (2.40 | ) | $ | (0.23 | ) | $ | (7.34 | ) | $ | (2.69 | ) | |||
Non-GAAP measures: | |||||||||||||||
Adjusted EBITDA | $ | 23,643 | $ | 34,964 | $ | 71,722 | $ | 82,545 | |||||||
Adjusted EBITDA margin | 7.5 | % | 10.1 | % | 7.2 | % | 7.9 | % | |||||||
Adjusted net loss | $ | (20,259 | ) | $ | (18,450 | ) | $ | (77,386 | ) | $ | (59,198 | ) | |||
Adjusted diluted loss per share | $ | (0.57 | ) | $ | (0.52 | ) | $ | (2.17 | ) | $ | (1.68 | ) | |||
9
BRISTOW GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended December 31, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (261,415 | ) | $ | (97,079 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 92,045 | 94,119 | ||||||
Deferred income taxes | (5,848 | ) | (14,665 | ) | ||||
Write-off of deferred financing fees | — | 1,138 | ||||||
Discount amortization on long-term debt | 4,713 | 343 | ||||||
Loss on disposal of assets | 18,986 | 12,418 | ||||||
Loss on impairment | 117,220 | 1,192 | ||||||
Deferral of lease payment | 3,967 | 2,423 | ||||||
Stock-based compensation | 5,651 | 8,776 | ||||||
Equity in earnings from unconsolidated affiliates less than (in excess of) dividends received | 2,518 | (3,185 | ) | |||||
Increase (decrease) in cash resulting from changes in: | ||||||||
Accounts receivable | 16,063 | (3,785 | ) | |||||
Inventories | (3,065 | ) | (4,618 | ) | ||||
Prepaid expenses and other assets | (1,571 | ) | 10,250 | |||||
Accounts payable | (1,956 | ) | (14,540 | ) | ||||
Accrued liabilities | (47,390 | ) | (5,528 | ) | ||||
Other liabilities and deferred credits | (8,820 | ) | 3,434 | |||||
Net cash used in operating activities | (68,902 | ) | (9,307 | ) | ||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (33,711 | ) | (36,441 | ) | ||||
Proceeds from asset dispositions | 9,093 | 48,547 | ||||||
Proceeds from OEM cost recoveries | — | 94,463 | ||||||
Net cash provided by (used in) investing activities | (24,618 | ) | 106,569 | |||||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings | 387 | 548,768 | ||||||
Debt issuance costs | (2,599 | ) | (11,653 | ) | ||||
Repayment of debt | (49,116 | ) | (609,667 | ) | ||||
Purchase of 4½% Convertible Senior Notes call option | — | (40,393 | ) | |||||
Proceeds from issuance of warrants | — | 30,259 | ||||||
Partial prepayment of put/call obligation | (40 | ) | (36 | ) | ||||
Dividends paid to noncontrolling interest | (580 | ) | — | |||||
Common stock dividends paid | — | (2,465 | ) | |||||
Issuance of common stock | 2,830 | — | ||||||
Repurchases for tax withholdings on vesting of equity awards | (1,505 | ) | (591 | ) | ||||
Net cash used in financing activities | (50,623 | ) | (85,778 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (4,754 | ) | 9,708 | |||||
Net increase (decrease) in cash and cash equivalents | (148,897 | ) | 21,192 | |||||
Cash and cash equivalents at beginning of period | 380,223 | 96,656 | ||||||
Cash and cash equivalents at end of period | $ | 231,326 | $ | 117,848 | ||||
10
BRISTOW GROUP INC. AND SUBSIDIARIES
SELECTED OPERATING DATA
(In thousands, except flight hours and percentages)
(Unaudited)
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Flight hours (excluding Bristow Academy and unconsolidated affiliates): | ||||||||||||||||
Europe Caspian | 20,746 | 22,909 | 66,723 | 68,762 | ||||||||||||
Africa | 4,618 | 7,417 | 12,290 | 22,561 | ||||||||||||
Americas | 9,105 | 7,954 | 28,107 | 23,810 | ||||||||||||
Asia Pacific | 5,331 | 6,672 | 17,885 | 19,991 | ||||||||||||
Consolidated | 39,800 | 44,952 | 125,005 | 135,124 | ||||||||||||
Operating revenue: | ||||||||||||||||
Europe Caspian | $ | 180,829 | $ | 189,910 | $ | 587,264 | $ | 570,983 | ||||||||
Africa | 41,394 | 47,915 | 113,545 | 146,523 | ||||||||||||
Americas | 57,502 | 60,345 | 169,270 | 178,884 | ||||||||||||
Asia Pacific | 40,077 | 50,248 | 141,106 | 153,365 | ||||||||||||
Corporate and other | 465 | 743 | 1,363 | 3,912 | ||||||||||||
Intra-region eliminations | (3,176 | ) | (3,633 | ) | (9,759 | ) | (10,418 | ) | ||||||||
Consolidated | $ | 317,091 | $ | 345,528 | $ | 1,002,789 | $ | 1,043,249 | ||||||||
Consolidated operating loss: | ||||||||||||||||
Europe Caspian | $ | 3,342 | $ | 5,274 | $ | 13,856 | $ | 19,499 | ||||||||
Africa | 5,286 | 10,470 | 7,892 | 28,353 | ||||||||||||
Americas | 4,412 | 5,308 | (1,362 | ) | 11,535 | |||||||||||
Asia Pacific | (6,654 | ) | (941 | ) | (14,613 | ) | (19,374 | ) | ||||||||
Corporate and other | (21,535 | ) | (19,047 | ) | (151,440 | ) | (68,686 | ) | ||||||||
Loss on disposal of assets | (16,015 | ) | (4,591 | ) | (18,986 | ) | (12,418 | ) | ||||||||
Consolidated | $ | (31,164 | ) | $ | (3,527 | ) | $ | (164,653 | ) | $ | (41,091 | ) | ||||
Operating margin: | ||||||||||||||||
Europe Caspian | 1.8 | % | 2.8 | % | 2.4 | % | 3.4 | % | ||||||||
Africa | 12.8 | % | 21.9 | % | 7.0 | % | 19.4 | % | ||||||||
Americas | 7.7 | % | 8.8 | % | (0.8 | )% | 6.4 | % | ||||||||
Asia Pacific | (16.6 | )% | (1.9 | )% | (10.4 | )% | (12.6 | )% | ||||||||
Consolidated | (9.8 | )% | (1.0 | )% | (16.4 | )% | (3.9 | )% | ||||||||
Adjusted EBITDA: | ||||||||||||||||
Europe Caspian | $ | 14,068 | $ | 18,614 | $ | 62,727 | $ | 58,716 | ||||||||
Africa | 8,639 | 14,206 | 19,063 | 40,206 | ||||||||||||
Americas | 11,892 | 12,689 | 20,446 | 33,430 | ||||||||||||
Asia Pacific | (3,411 | ) | 4,797 | (4,325 | ) | 502 | ||||||||||
Corporate and other | (7,545 | ) | (15,342 | ) | (26,189 | ) | (50,309 | ) | ||||||||
Consolidated | $ | 23,643 | $ | 34,964 | $ | 71,722 | $ | 82,545 | ||||||||
Adjusted EBITDA margin: | ||||||||||||||||
Europe Caspian | 7.8 | % | 9.8 | % | 10.7 | % | 10.3 | % | ||||||||
Africa | 20.9 | % | 29.6 | % | 16.8 | % | 27.4 | % | ||||||||
Americas | 20.7 | % | 21.0 | % | 12.1 | % | 18.7 | % | ||||||||
Asia Pacific | (8.5 | )% | 9.5 | % | (3.1 | )% | 0.3 | % | ||||||||
Consolidated | 7.5 | % | 10.1 | % | 7.2 | % | 7.9 | % | ||||||||
11
BRISTOW GROUP INC. AND SUBSIDIARIES
AIRCRAFT COUNT
As of December 31, 2018
(Unaudited)
Percentage of Current Period Operating Revenue | Aircraft in Consolidated Fleet | |||||||||||||||||||||||
Helicopters | Fixed Wing (1) | Unconsolidated Affiliates (4) | ||||||||||||||||||||||
Small | Medium | Large | Total (2)(3) | Total | ||||||||||||||||||||
Europe Caspian | 58 | % | — | 12 | 75 | 32 | 119 | — | 119 | |||||||||||||||
Africa | 11 | % | 3 | 28 | 7 | 3 | 41 | 43 | 84 | |||||||||||||||
Americas | 17 | % | 21 | 40 | 14 | — | 75 | 65 | 140 | |||||||||||||||
Asia Pacific | 14 | % | — | 8 | 20 | 14 | 42 | — | 42 | |||||||||||||||
Total | 100 | % | 24 | 88 | 116 | 49 | 277 | 108 | 385 | |||||||||||||||
Aircraft not currently in fleet: (5) | ||||||||||||||||||||||||
On order | — | — | 26 | — | 26 | |||||||||||||||||||
Under option | — | — | 4 | — | 4 | |||||||||||||||||||
_____________
(1) | Eastern Airways operates a total of 32 fixed wing aircraft in the Europe Caspian region and provides technical support for two fixed wing aircraft in the Africa region. Additionally, Airnorth operates a total of 14 fixed wing aircraft, which are included in the Asia Pacific region. |
(2) | Includes 10 aircraft held for sale and 86 leased aircraft as follows: |
Held for Sale Aircraft in Consolidated Fleet | |||||||||||||||
Helicopters | |||||||||||||||
Small | Medium | Large | Fixed Wing | Total | |||||||||||
Europe Caspian | — | 1 | — | — | 1 | ||||||||||
Africa | 2 | 3 | — | — | 5 | ||||||||||
Americas | — | 3 | — | — | 3 | ||||||||||
Asia Pacific | — | — | — | 1 | 1 | ||||||||||
Total | 2 | 7 | — | 1 | 10 | ||||||||||
Leased Aircraft in Consolidated Fleet | |||||||||||||||
Helicopters | |||||||||||||||
Small | Medium | Large | Fixed Wing | Total | |||||||||||
Europe Caspian | — | 1 | 36 | 12 | 49 | ||||||||||
Africa | — | 1 | 3 | — | 4 | ||||||||||
Americas | 2 | 13 | 5 | — | 20 | ||||||||||
Asia Pacific | — | 3 | 6 | 4 | 13 | ||||||||||
Total | 2 | 18 | 50 | 16 | 86 | ||||||||||
(3) | The average age of Bristow’s helicopter fleet was approximately ten years as of December 31, 2018. |
(4) | The 108 aircraft operated by the Company’s unconsolidated affiliates do not include those aircraft leased from us. Includes 42 helicopters (primarily medium) and 22 fixed wing aircraft owned and managed by Líder Táxi Aéreo S.A. (“Líder”), its unconsolidated affiliate in Brazil included in the Americas region, and 36 helicopters and seven fixed wing aircraft owned by Petroleum Air Services (“PAS”), its unconsolidated affiliate in Egypt included in the Africa region, and one helicopter operated by Cougar Helicopters Inc., its unconsolidated affiliate in Canada included in the Americas region. |
(5) | This table does not reflect aircraft which its unconsolidated affiliates may have on order or under option. |
12
BRISTOW GROUP INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS
These financial measures have not been prepared in accordance with generally accepted accounting principles (“GAAP”) and have not been audited or reviewed by the Company’s independent auditor. These financial measures are therefore considered non-GAAP financial measures. A description of the adjustments to and reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures is as follows:
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands, except percentages and per share amounts) | ||||||||||||||||
Net loss | $ | (85,701 | ) | $ | (9,937 | ) | $ | (261,415 | ) | $ | (97,079 | ) | ||||
Loss on disposal of assets | 16,015 | 4,591 | 18,986 | 12,418 | ||||||||||||
Special items | 9,568 | 2,810 | 132,481 | 16,352 | ||||||||||||
Depreciation and amortization | 30,615 | 31,682 | 92,045 | 94,119 | ||||||||||||
Interest expense | 29,382 | 19,237 | 84,367 | 54,189 | ||||||||||||
Provision (benefit) for income taxes | 23,764 | (13,419 | ) | 5,258 | 2,546 | |||||||||||
Adjusted EBITDA | $ | 23,643 | $ | 34,964 | $ | 71,722 | $ | 82,545 | ||||||||
Benefit (provision) for income taxes | $ | (23,764 | ) | $ | 13,419 | $ | (5,258 | ) | $ | (2,546 | ) | |||||
Tax provision (benefit) on loss on disposal of assets | (3,540 | ) | (2,130 | ) | (3,840 | ) | 8,061 | |||||||||
Tax provision (benefit) on special items | 43,642 | (15,448 | ) | 37,229 | (1,272 | ) | ||||||||||
Adjusted benefit (provision) for income taxes | $ | 16,338 | $ | (4,159 | ) | $ | 28,131 | $ | 4,243 | |||||||
Effective tax rate (1) | (38.4 | )% | 57.5 | % | (2.1 | )% | (2.7 | )% | ||||||||
Adjusted effective tax rate (1) | 44.9 | % | (26.1 | )% | 26.9 | % | 6.5 | % | ||||||||
Net loss attributable to Bristow Group | $ | (85,944 | ) | $ | (8,273 | ) | $ | (262,242 | ) | $ | (94,757 | ) | ||||
Loss on disposal of assets | 12,475 | 2,461 | 15,146 | 20,479 | ||||||||||||
Special items | 53,210 | (12,638 | ) | 169,710 | 15,080 | |||||||||||
Adjusted net loss | $ | (20,259 | ) | $ | (18,450 | ) | $ | (77,386 | ) | $ | (59,198 | ) | ||||
Diluted loss per share | $ | (2.40 | ) | $ | (0.23 | ) | $ | (7.34 | ) | $ | (2.69 | ) | ||||
Loss on disposal of assets | 0.35 | 0.07 | 0.42 | 0.58 | ||||||||||||
Special items | 1.49 | (0.36 | ) | 4.75 | 0.43 | |||||||||||
Adjusted diluted loss per share | (0.57 | ) | (0.52 | ) | (2.17 | ) | (1.68 | ) | ||||||||
_____________
(1) | Effective tax rate is calculated by dividing benefit (provision) for income tax by pretax net loss. Adjusted effective tax rate is calculated by dividing adjusted benefit (provision) for income tax by adjusted pretax net loss. Tax provision (benefit) on loss on disposal of assets and tax provision (benefit) on special items is calculated using the statutory rate of the entity recording the loss on disposal of assets or special item. |
13
The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the three months ended December 31, 2018:
Europe Caspian | Africa | Americas | Asia Pacific | Corporate and other | Loss on disposal of assets | Total | ||||||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||||||
Operating income (loss) | $ | 3,342 | $ | 5,286 | $ | 4,412 | $ | (6,654 | ) | $ | (21,535 | ) | $ | (16,015 | ) | $ | (31,164 | ) | ||||||||||
Depreciation and amortization expense | 13,041 | 3,732 | 7,108 | 3,812 | 2,922 | 30,615 | ||||||||||||||||||||||
Interest income | 36 | 1 | — | 15 | 2,217 | 2,269 | ||||||||||||||||||||||
Other income (expense), net | (2,949 | ) | (380 | ) | 320 | (2,343 | ) | 1,692 | (3,660 | ) | ||||||||||||||||||
Special items and loss on disposal of assets | 598 | — | 52 | 1,759 | 7,159 | 16,015 | 25,583 | |||||||||||||||||||||
Adjusted EBITDA | $ | 14,068 | $ | 8,639 | $ | 11,892 | $ | (3,411 | ) | $ | (7,545 | ) | $ | — | $ | 23,643 | ||||||||||||
Adjusted EBITDA margin | 7.8 | % | 20.9 | % | 20.7 | % | (8.5 | )% | 7.5 | % | ||||||||||||||||||
Rent expense | $ | 30,262 | $ | 2,677 | $ | 5,641 | $ | 7,927 | $ | 1,648 | $ | 48,155 | ||||||||||||||||
The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the three months ended December 31, 2017:
Europe Caspian | Africa | Americas | Asia Pacific | Corporate and other | Loss on disposal of assets | Total | ||||||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||||||
Operating income (loss) | $ | 5,274 | $ | 10,470 | $ | 5,308 | $ | (941 | ) | $ | (19,047 | ) | $ | (4,591 | ) | $ | (3,527 | ) | ||||||||||
Depreciation and amortization expense | 12,771 | 3,664 | 6,909 | 4,479 | 3,859 | 31,682 | ||||||||||||||||||||||
Interest income | 3 | 5 | 26 | 28 | 82 | 144 | ||||||||||||||||||||||
Other income (expense), net | (151 | ) | (400 | ) | 358 | (276 | ) | (267 | ) | (736 | ) | |||||||||||||||||
Special items and loss on disposal of assets | 717 | 467 | 88 | 1,507 | 31 | 4,591 | 7,401 | |||||||||||||||||||||
Adjusted EBITDA | $ | 18,614 | $ | 14,206 | $ | 12,689 | $ | 4,797 | $ | (15,342 | ) | $ | — | $ | 34,964 | |||||||||||||
Adjusted EBITDA margin | 9.8 | % | 29.6 | % | 21.0 | % | 9.5 | % | 10.1 | % | ||||||||||||||||||
Rent expense | $ | 29,499 | $ | 2,048 | $ | 6,295 | $ | 2,807 | $ | 1,971 | $ | 42,620 | ||||||||||||||||
14
The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the nine months ended December 31, 2018:
Europe Caspian | Africa | Americas | Asia Pacific | Corporate and other | Loss on disposal of assets | Total | ||||||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||||||
Operating income (loss) | $ | 13,856 | $ | 7,892 | $ | (1,362 | ) | $ | (14,613 | ) | $ | (151,440 | ) | $ | (18,986 | ) | $ | (164,653 | ) | |||||||||
Depreciation and amortization expense | 37,985 | 10,811 | 21,299 | 12,221 | 9,729 | 92,045 | ||||||||||||||||||||||
Interest income | 68 | 4 | 2 | 67 | 3,536 | 3,677 | ||||||||||||||||||||||
Other income (expense), net | (11,076 | ) | 356 | 249 | (6,076 | ) | 5,733 | (10,814 | ) | |||||||||||||||||||
Special items and loss on disposal of assets | 21,894 | — | 258 | 4,076 | 106,253 | 18,986 | 151,467 | |||||||||||||||||||||
Adjusted EBITDA | $ | 62,727 | $ | 19,063 | $ | 20,446 | $ | (4,325 | ) | $ | (26,189 | ) | $ | — | $ | 71,722 | ||||||||||||
Adjusted EBITDA margin | 10.7 | % | 16.8 | % | 12.1 | % | (3.1 | )% | 7.2 | % | ||||||||||||||||||
Rent expense | $ | 93,437 | $ | 6,945 | $ | 18,573 | $ | 24,325 | $ | 4,547 | $ | 147,827 | ||||||||||||||||
The following table presents reconciliation of adjusted EBITDA by segment and adjusted EBITDA margin and rent expense by region for the nine months ended December 31, 2017:
Europe Caspian | Africa | Americas | Asia Pacific | Corporate and other | Loss on disposal of assets | Total | ||||||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||||||
Operating income (loss) | $ | 19,499 | $ | 28,353 | $ | 11,535 | $ | (19,374 | ) | $ | (68,686 | ) | $ | (12,418 | ) | $ | (41,091 | ) | ||||||||||
Depreciation and amortization expense | 36,789 | 10,330 | 20,906 | 15,347 | 10,747 | 94,119 | ||||||||||||||||||||||
Interest income | 9 | 88 | 79 | 72 | 264 | 512 | ||||||||||||||||||||||
Other income (expense), net | 1,434 | 762 | 553 | 789 | (3,303 | ) | 235 | |||||||||||||||||||||
Special items and loss on disposal of assets | 985 | 673 | 357 | 3,668 | 10,669 | 12,418 | 28,770 | |||||||||||||||||||||
Adjusted EBITDA | $ | 58,716 | $ | 40,206 | $ | 33,430 | $ | 502 | $ | (50,309 | ) | $ | — | $ | 82,545 | |||||||||||||
Adjusted EBITDA margin | 10.3 | % | 27.4 | % | 18.7 | % | 0.3 | % | 7.9 | % | ||||||||||||||||||
Rent expense | $ | 102,803 | $ | 6,424 | $ | 18,480 | $ | 24,356 | $ | 6,456 | $ | 158,519 | ||||||||||||||||
15
Three Months Ended December 31, 2018 | ||||||||||||
Adjusted EBITDA | Adjusted Net Loss | Adjusted Diluted Loss Per Share | ||||||||||
(In thousands, except per share amounts) | ||||||||||||
Organizational restructuring costs (1) | $ | (2,409 | ) | $ | (2,398 | ) | $ | (0.07 | ) | |||
Transaction costs (2) | (7,159 | ) | (5,656 | ) | (0.16 | ) | ||||||
Tax items (3) | — | (45,156 | ) | (1.26 | ) | |||||||
Total special items | $ | (9,568 | ) | $ | (53,210 | ) | (1.49 | ) | ||||
Three Months Ended December 31, 2017 | ||||||||||||
Adjusted EBITDA | Adjusted Net Loss | Adjusted Diluted Loss Per Share | ||||||||||
(In thousands, except per share amounts) | ||||||||||||
Organizational restructuring costs (1) | $ | (2,810 | ) | $ | (2,501 | ) | $ | (0.07 | ) | |||
Tax items (3) | — | 15,139 | 0.42 | |||||||||
Total special items | $ | (2,810 | ) | $ | 12,638 | 0.36 | ||||||
Nine Months Ended December 31, 2018 | |||||||||||
Adjusted EBITDA | Adjusted Net Loss | Adjusted Diluted Loss Per Share | |||||||||
(In thousands, except per share amounts) | |||||||||||
Loss on impairment (4) | $ | (117,220 | ) | $ | (101,105 | ) | (2.83 | ) | |||
Organizational restructuring costs (1) | (6,855 | ) | (6,501 | ) | (0.18 | ) | |||||
Transaction costs (2) | (8,406 | ) | (6,641 | ) | (0.19 | ) | |||||
Tax items (3) | — | (55,463 | ) | (1.55 | ) | ||||||
Total special items | $ | (132,481 | ) | $ | (169,710 | ) | (4.75 | ) | |||
Nine Months Ended December 31, 2017 | |||||||||||
Adjusted EBITDA | Adjusted Net Loss | Adjusted Diluted Loss Per Share | |||||||||
(In thousands, except per share amounts) | |||||||||||
Organizational restructuring costs (1) | $ | (15,160 | ) | $ | (11,337 | ) | (0.32 | ) | |||
Loss on impairment (4) | (1,192 | ) | (775 | ) | (0.02 | ) | |||||
Tax items (3) | — | (2,968 | ) | (0.08 | ) | ||||||
Total special items | $ | (16,352 | ) | $ | (15,080 | ) | (0.43 | ) | |||
(1) | Organizational restructuring costs include severance expense related to separation programs across the Company’s global organization designed to increase efficiency and cut costs as well other restructuring costs. |
(2) | Relates to transaction costs included in general and administrative expense, resulting from the announced agreement to acquire Columbia Helicopters. |
(3) | Relates to non-cash adjustments related to valuation of deferred tax assets and the Tax Cuts and Jobs Act. |
(4) | Loss on impairment for the nine months ended December 31, 2018 includes $87.5 million for the impairment of H225 aircraft, $8.9 million for the impairment of H225 inventory, and $20.8 million for the 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. Loss on impairment for the nine months ended December 31, 2017 includes impairment charge on inventory used on the Company’s training fleet. |
16
EXHIBIT 99.2
February 11, 2019
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We are principal accountants for Bristow Group Inc. and, under the date of May 23, 2018, we reported on the consolidated financial statements of Bristow Group Inc. as of March 31, 2018 and 2017 and for each of the years in the three-year period ended March 31, 2018, and the effectiveness of internal control over financial reporting as of March 31, 2018. We have read Bristow Group Inc.’s statements included under Item 8.01 of its Form 8-K dated February 11, 2019, and we agree with such statements.
Very truly yours,
(Signed) KPMG LLP