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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | September 30, 2021 |
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
| | | | | | | | | | | | | | |
| Commission File Number | 001-35701 | |
Bristow Group Inc. |
(Exact name of registrant as specified in its charter) |
| | | | | | | | | | | |
Delaware | | 72-1455213 |
(State or Other Jurisdiction of Incorporation or Organization) | | (IRS Employer Identification No.) |
| | | |
3151 Briarpark Drive, Suite 700 | | |
Houston, | Texas | | 77042 |
(Address of Principal Executive Offices) | | (Zip Code) |
Registrant’s telephone number, including area code:
(713) 267-7600
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | VTOL | NYSE |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☑ No ☐
The total number of shares of common stock, par value $0.01 per share, outstanding as of October 29, 2021 was 28,264,765. The Registrant has no other class of common stock outstanding.
BRISTOW GROUP INC.
INDEX
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues: | | | | | | | |
Operating revenues | $ | 290,120 | | | $ | 295,722 | | | 578,471 | | | 557,230 | |
Reimbursable revenues | 11,464 | | | 8,918 | | | 23,715 | | | 17,603 | |
Total revenues | 301,584 | | | 304,640 | | | 602,186 | | | 574,833 | |
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Costs and expenses: | | | | | | | |
Operating expenses | 218,768 | | | 218,282 | | | 433,271 | | | 405,837 | |
Reimbursable expenses | 11,188 | | | 8,919 | | | 23,302 | | | 17,567 | |
General and administrative expenses | 38,970 | | | 39,613 | | | 76,453 | | | 75,007 | |
Merger-related costs | 647 | | | 4,497 | | | 2,382 | | | 21,917 | |
Restructuring costs | 117 | | | 13,326 | | | 968 | | | 16,336 | |
Depreciation and amortization | 17,644 | | | 18,537 | | | 40,839 | | | 34,893 | |
Total costs and expenses | 287,334 | | | 303,174 | | | 577,215 | | | 571,557 | |
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Loss on impairment | (2,901) | | | (17,596) | | | (24,835) | | | (36,829) | |
Gain (loss) on disposal of assets | 162 | | | (8,473) | | | 661 | | | (2,951) | |
Earnings (losses) from unconsolidated affiliates, net | 964 | | | 1,948 | | | (553) | | | (30) | |
Operating income (loss) | 12,475 | | | (22,655) | | | 244 | | | (36,534) | |
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Interest income | 42 | | | 434 | | | 108 | | | 696 | |
Interest expense | (10,426) | | | (13,445) | | | (21,050) | | | (25,949) | |
Loss on extinguishment of debt | (124) | | | — | | | (124) | | | (615) | |
Reorganization items, net | (103) | | | — | | | (549) | | | — | |
Loss on sale of subsidiaries | — | | | — | | | (2,002) | | | — | |
Change in fair value of preferred stock derivative liability | — | | | — | | | — | | | 15,416 | |
Gain on bargain purchase | — | | | 5,660 | | | — | | | 81,093 | |
Other, net | 15,330 | | | 10,592 | | | 21,514 | | | 14,593 | |
Total other income (expense), net | 4,719 | | | 3,241 | | | (2,103) | | | 85,234 | |
Income (loss) before income taxes | 17,194 | | | (19,414) | | | (1,859) | | | 48,700 | |
Income tax expense | (14,484) | | | (8,578) | | | (9,642) | | | (5,288) | |
Net income (loss) | 2,710 | | | (27,992) | | | (11,501) | | | 43,412 | |
Net loss attributable to noncontrolling interests | 65 | | | 131 | | | 79 | | | 204 | |
Net income (loss) attributable to Bristow Group Inc. | $ | 2,775 | | | $ | (27,861) | | | $ | (11,422) | | | $ | 43,616 | |
Income (loss) per common share(1): | | | | | | | |
Basic | $ | 0.10 | | | $ | (0.95) | | | $ | (0.40) | | | $ | 8.73 | |
Diluted | $ | 0.10 | | | $ | (0.95) | | | $ | (0.40) | | | $ | 5.09 | |
Weighted average common shares outstanding(1): | | | | | | | |
Basic | 28,233,527 | | | 29,357,959 | | | 28,844,633 | | | 20,230,285 | |
Diluted | 28,684,660 | | | 29,357,959 | | | 28,844,633 | | | 34,031,657 | |
(1) See Note 9 to the condensed consolidated financial statements for details on prior year income (loss) per share and weighted average common shares outstanding.
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
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Net income (loss) | $ | 2,710 | | | $ | (27,992) | | | $ | (11,501) | | | $ | 43,412 | |
Other comprehensive income (loss): | | | | | | | |
Currency translation adjustments | (15,683) | | | 15,326 | | | (14,411) | | | 18,485 | |
Pension liability adjustment, net | 922 | | | — | | | 873 | | | — | |
Unrealized gain (loss) on cash flow hedges, net | 1,609 | | | (1,283) | | | 2,552 | | | (2,164) | |
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Total comprehensive income (loss) | (10,442) | | | (13,949) | | | (22,487) | | | 59,733 | |
Net comprehensive loss attributable to noncontrolling interests | 65 | | | 131 | | | 79 | | | 204 | |
Total comprehensive income (loss) attributable to Bristow Group Inc. | $ | (10,377) | | | $ | (13,818) | | | $ | (22,408) | | | $ | 59,937 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share amounts)
| | | | | | | | | | | |
| September 30, | | March 31, |
| 2021 | | 2021 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 236,989 | | | $ | 228,010 | |
Restricted cash | 2,492 | | | 3,069 | |
Accounts receivable, net of allowance for doubtful accounts of $2,506 and $2,300 as of September 30 and March 31, 2021, respectively | 196,292 | | | 215,620 | |
Inventories | 87,855 | | | 92,180 | |
Assets held for sale | 5,432 | | | 14,750 | |
Prepaid expenses and other current assets | 30,419 | | | 32,119 | |
Total current assets | 559,479 | | | 585,748 | |
Property and equipment | 1,082,076 | | | 1,090,094 | |
Accumulated depreciation and amortization | (120,474) | | | (85,535) | |
Property and equipment, net | 961,602 | | | 1,004,559 | |
Investment in unconsolidated affiliates | 20,146 | | | 37,530 | |
Right-of-use assets | 211,878 | | | 246,667 | |
Other assets | 108,131 | | | 117,766 | |
Total assets | $ | 1,861,236 | | | $ | 1,992,270 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 60,081 | | | $ | 69,542 | |
Accrued wages, benefits and related taxes | 44,764 | | | 58,595 | |
Income taxes payable and other accrued taxes | 18,722 | | | 19,972 | |
Deferred revenue | 12,988 | | | 13,598 | |
Accrued maintenance and repairs | 32,536 | | | 26,907 | |
Current portion of operating lease liabilities | 72,394 | | | 77,909 | |
Accrued interest and other accrued liabilities | 24,458 | | | 22,632 | |
Short-term borrowings and current maturities of long-term debt | 13,180 | | | 15,965 | |
Total current liabilities | 279,123 | | | 305,120 | |
Long-term debt, less current maturities | 518,635 | | | 527,528 | |
Accrued pension liabilities | 33,654 | | | 44,150 | |
Other liabilities and deferred credits | 6,668 | | | 6,681 | |
Deferred taxes | 44,413 | | | 42,430 | |
Long-term operating lease liabilities | 139,744 | | | 167,718 | |
Total liabilities | $ | 1,022,237 | | | $ | 1,093,627 | |
Commitments and contingencies (Note 10) | | | |
Redeemable noncontrolling interests | — | | | 1,572 | |
Stockholders’ equity: | | | |
Common stock, $0.01 par value, 110,000,000 authorized; 28,302,220 and 29,694,071 outstanding as of September 30 and March 31, 2021, respectively | 303 | | | 303 | |
Additional paid-in capital | 692,702 | | | 687,715 | |
Retained earnings | 215,589 | | | 227,011 | |
Treasury shares, at cost; 1,967,769 and 466,700 shares as of September 30 and March 31, 2021, respectively | (51,083) | | | (10,501) | |
Accumulated other comprehensive loss | (17,901) | | | (6,915) | |
Total Bristow Group Inc. stockholders’ equity | 839,610 | | | 897,613 | |
Noncontrolling interests | (611) | | | (542) | |
Total stockholders’ equity | 838,999 | | | 897,071 | |
Total liabilities and stockholders’ equity | $ | 1,861,236 | | | $ | 1,992,270 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| | | | | | | | | | | |
| Six Months Ended September 30, |
| 2021 | | 2020 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | (11,501) | | | $ | 43,412 | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | |
Depreciation and amortization | 46,959 | | | 45,675 | |
Deferred income taxes | 2,858 | | | (1,345) | |
Loss from extinguishment of debt | 124 | | | 615 | |
| | | |
Bad debt expense | 309 | | | — | |
Amortization of deferred financing fees | 636 | | | — | |
Discount amortization on long-term debt | 3,963 | | | 7,957 | |
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Loss (gain) on disposal of assets | (661) | | | 2,951 | |
Loss on impairment | 24,835 | | | 36,829 | |
Loss on sale of subsidiaries | 2,002 | | | — | |
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Gain on bargain purchase | — | | | (81,093) | |
Change in fair value of preferred stock derivative liability | — | | | (15,416) | |
Stock-based compensation | 4,987 | | | 7,192 | |
Equity in earnings from unconsolidated affiliates less than dividends received | 553 | | | 2,935 | |
Increase (decrease) in cash resulting from changes in: | | | |
Accounts receivable | 17,801 | | | 21,556 | |
Inventory, prepaid expenses and other assets | 1,448 | | | (8,075) | |
Accounts payable, accrued expenses and other liabilities | (21,119) | | | (28,202) | |
Net cash provided by operating activities | 73,194 | | | 34,991 | |
Cash flows from investing activities: | | | |
Capital expenditures | (17,306) | | | (7,372) | |
Proceeds from asset dispositions | 13,809 | | | 52,140 | |
Deposits on assets held for sale | — | | | 3,437 | |
Cash transferred in sale of subsidiaries, net of cash received | (851) | | | — | |
Increase in cash from Era merger | — | | | 120,236 | |
Net cash provided by (used in) investing activities | (4,348) | | | 168,441 | |
Cash flows from financing activities: | | | |
| | | |
Debt issuance costs | (2,708) | | | — | |
Repayment of debt and debt redemption premiums | (12,479) | | | (85,369) | |
Purchase of treasury shares | (40,582) | | | (6,428) | |
Old Bristow share repurchases | — | | | (4,807) | |
Net cash used in financing activities | (55,769) | | | (96,604) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (4,676) | | | (1,756) | |
Net increase in cash, cash equivalents and restricted cash | 8,401 | | | 105,072 | |
Cash, cash equivalents and restricted cash at beginning of period | 231,079 | | | 199,121 | |
Cash, cash equivalents and restricted cash at end of period | $ | 239,480 | | | $ | 304,193 | |
Cash paid during the period for: | | | |
Interest | $ | 16,369 | | | $ | 14,467 | |
Income taxes | $ | 8,539 | | | $ | 7,726 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
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| | | Total Bristow Group Inc. Stockholders’ Equity | | | | |
| Redeemable Noncontrolling Interests | | Common Stock | | Common Stock (Shares) | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total Stockholders’ Equity |
March 31, 2021 | $ | 1,572 | | | $ | 303 | | | 29,694,071 | | | $ | 687,715 | | | $ | 227,011 | | | $ | (10,501) | | | $ | (6,915) | | | $ | (542) | | | $ | 897,071 | |
Share award amortization | — | | | — | | | 48,851 | | | 2,326 | | | — | | | — | | | — | | | — | | | 2,326 | |
Share repurchases | — | | | — | | | (936,567) | | | — | | | — | | | (25,199) | | | — | | | — | | | (25,199) | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 5 | |
Net loss | — | | | — | | | — | | | — | | | (14,197) | | | — | | | — | | | (14) | | | (14,211) | |
Sale of noncontrolling interest | (1,572) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 2,166 | | | — | | | 2,166 | |
June 30, 2021 | — | | | 303 | | | 28,806,355 | | | 690,041 | | | 212,814 | | | (35,700) | | | (4,749) | | | (551) | | | 862,158 | |
Share award amortization | — | | | — | | | 60,367 | | | 2,661 | | | — | | | — | | | — | | | — | | | 2,661 | |
Share repurchases | — | | | — | | | (564,502) | | | — | | | — | | | (15,383) | | | — | | | — | | | (15,383) | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 5 | |
Net income (loss) | — | | | — | | | — | | | — | | | 2,775 | | | — | | | — | | | (65) | | | 2,710 | |
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Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (13,152) | | | — | | | (13,152) | |
September 30, 2021 | $ | — | | | $ | 303 | | | 28,302,220 | | | $ | 692,702 | | | $ | 215,589 | | | $ | (51,083) | | | $ | (17,901) | | | $ | (611) | | | $ | 838,999 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
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| | | | | Total Bristow Group Inc. Stockholders’ Investment | | | | |
| Redeemable Noncontrolling Interests | | Mezzanine Equity Preferred Stock | | Common Stock | | Common Stock (Shares)(1) | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Noncontrolling Interests | | Total Stockholders’ Investment |
March 31, 2020 | $ | — | | | $ | 149,785 | | | $ | 1 | | | 11,235,566 | | | $ | 295,897 | | | $ | 139,228 | | | $ | (8,641) | | | $ | — | | | $ | (269) | | | $ | 426,216 | |
Share repurchases | — | | | (2,151) | | | — | | | (142,721) | | | — | | | 1,263 | | | — | | | — | | | — | | | 1,263 | |
Preferred stock share conversion | — | | | (146,448) | | | 4 | | | 34,836,688 | | | 270,678 | | | 142,614 | | | — | | | — | | | — | | | 413,296 | |
Elimination of Old Bristow stock | — | | | — | | | (5) | | | (45,929,533) | | | 5 | | | — | | | — | | | — | | | — | | | — | |
Exchange of common stock | — | | | — | | | 231 | | | 23,026,894 | | | (231) | | | — | | | — | | | — | | | — | | | — | |
Era purchase price | — | | | — | | | 72 | | | 7,175,029 | | | 108,268 | | | — | | | — | | | — | | | — | | | 108,340 | |
Preferred stock compensation activity and conversion | — | | | (1,186) | | | — | | | — | | | 6,370 | | | — | | | — | | | — | | | — | | | 6,370 | |
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Purchase of Company common stock (tax withholding) | — | | | — | | | — | | | (42,199) | | | — | | | — | | | — | | | — | | | — | | | — | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 13 | | | 13 | |
Net income (loss) | — | | | — | | | — | | | — | | | — | | | 71,477 | | | — | | | — | | | (73) | | | 71,404 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 2,278 | | | — | | | — | | | 2,278 | |
June 30, 2020 | — | | | — | | | 303 | | | 30,159,724 | | | 680,987 | | | 354,582 | | | (6,363) | | | — | | | (329) | | | 1,029,180 | |
Share award amortization | | | — | | | — | | | — | | | 2,008 | | | — | | | — | | | — | | | — | | | 2,008 | |
Purchase of treasury shares | — | | | — | | | — | | | (345,757) | | | — | | | — | | | — | | | (7,579) | | | — | | | (7,579) | |
Era purchase price adjustment | 1,501 | | | — | | | — | | | (233) | | | 395 | | | — | | | — | | | — | | | — | | | 395 | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (14) | | | (14) | |
Net loss | (18) | | | — | | | — | | | — | | | — | | | (27,861) | | | — | | | — | | | (113) | | | (27,974) | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 14,043 | | | — | | | — | | | 14,043 | |
September 30, 2020 (Successor) | 1,483 | | | — | | | 303 | | | 29,813,734 | | | 683,390 | | | 326,721 | | | 7,680 | | | (7,579) | | | (456) | | | 1,010,059 | |
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_______________________(1) Certain shares were reclassified out of common stock issued and into un-issued.
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — BASIS OF PRESENTATION, CONSOLIDATION AND ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements include the accounts of Bristow Group Inc. and its consolidated entities. On January 23, 2020, Era Group Inc. (“Era”), Ruby Redux Merger Sub, Inc., a wholly owned subsidiary of Era (“Merger Sub”) and Bristow Group Inc. (“Old Bristow”) entered into an Agreement and Plan of Merger, as amended on April 22, 2020 (the “Merger Agreement”). On June 11, 2020, the merger (the “Merger”) contemplated by the Merger Agreement was consummated and Merger Sub merged with and into Old Bristow, with Old Bristow continuing as the surviving corporation and as a direct wholly owned subsidiary of Era. Following the Merger, Era changed its name to Bristow Group Inc., and Old Bristow changed its name to Bristow Holdings U.S. Inc. Unless the context otherwise indicates, in this Quarterly Report on Form 10-Q, references to:
•the “Company”, “Combined Company,” “Bristow”, “we”, “us” and “our” refer to the entity currently known as Bristow Group Inc. and formerly known as Era Group Inc., together with all of its current subsidiaries;
•“Old Bristow” refers to the entity formerly known as Bristow Group Inc. and now known as Bristow Holdings U.S. Inc., together with its subsidiaries prior to the consummation of the Merger; and
•“Era” refers to Era Group Inc. (currently known as Bristow Group Inc., the parent of the Combined Company) and its subsidiaries prior to consummation of the Merger.
Pursuant to the United States (“U.S.”) generally accepted accounting principles (“GAAP”), the Merger was accounted for as an acquisition by Old Bristow of Era even though Era was the legal acquirer and remained the ultimate parent of the Combined Company. As a result, upon the closing of the Merger, Old Bristow’s historical financial statements replaced Era’s historical financial statements for all periods prior to the completion of the Merger, and the financial condition, results of operations, comprehensive income and cash flows of Era have been included in those financial statements since June 12, 2020. Any reference to comparative period disclosures in the Quarterly Report on Form 10-Q refers to Old Bristow.
The Company’s fiscal year ends March 31, and fiscal years are referenced based on the end of such period. Therefore, the fiscal year ending March 31, 2022 is referred to as “fiscal year 2022”.
The condensed consolidated financial information for the three and six months ended September 30, 2021 and September 30, 2020 has been prepared by the Company in accordance with GAAP and pursuant to the rules and regulations of the SEC for interim financial information reporting on Quarterly Form 10-Q and Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from that which would appear in the annual consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on May 27, 2021.
The preparation of these financial statements and accompanying footnotes requires the Company to make estimates and assumptions; however, they include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the condensed consolidated balance sheet, the condensed consolidated statements of operations and comprehensive loss, the condensed consolidated statements of cash flows and the condensed consolidated statements of changes in stockholders equity. Operating results for the interim period presented are not necessarily indicative of the results that may be expected for the entire fiscal year.
The condensed consolidated financial information found on this Quarterly Form 10-Q has not been audited by the Company’s independent registered public accounting firm.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Basis of Consolidation
The consolidated financial statements include the accounts of Bristow Group Inc., its wholly and majority-owned subsidiaries and entities that meet the criteria of variable interest entities (“VIEs”) of which the Company is the primary beneficiary. All significant inter-company accounts and transactions are eliminated in consolidation.
Summary of Significant Accounting Policies and Other Accounting Considerations
Reclassifications — Certain amounts reported for prior periods in the consolidated financial statements have been reclassified to conform with the current period’s presentation.
Sale of Subsidiary — During the six months ended September 30, 2021, the Company sold its 75% interest in Hauser Investments Limited (“Hauser”), which owns 100% of Sicher Helicopters SAS (“Sicher”), a provider of helicopter services to Colombia’s oil and gas market. The sale resulted in a $2.0 million loss included in loss on sale of subsidiaries on the condensed consolidated statement of operations.
Investment in Unconsolidated Affiliates — The Company has a 25% economic interest in Petroleum Air Services (“PAS”), an Egyptian corporation that provides helicopter and fixed wing transportation to the offshore energy industry and other general aviation services in Egypt. During the six months ended September 30, 2021, upon evaluating its investment in PAS, the Company identified an indicator for impairment due to a decline in PAS’s performance. As a result, the Company performed a fair valuation of its investment in PAS using a market approach that relied on significant Level III inputs due to the nature of unobservable inputs that required significant judgment and assumptions. The market approach utilized two methods, each yielding similar valuation outcomes through the use of a multiple relevant to each method, derived from select guideline public companies, and an expected dividend rate or earnings of PAS. This resulted in a $16.0 million loss on impairment recorded during the six months ended September 30, 2021. As of September 30, 2021, the investment in PAS was $17.0 million and is included on the condensed consolidated balance sheets in investment in unconsolidated affiliates. PAS is a cost method investment.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standard updates (“ASUs”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position or results of operations.
Adopted
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform” (Topic 848). The guidance is intended to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The standard was effective beginning in fiscal year 2022 for the Company. Adoption of this accounting standard had no material impact to the Company’s financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740), new guidance to simplify the accounting for income taxes, which eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This standard also included guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The standard was effective beginning in fiscal year 2022 for the Company. Adoption of this accounting standard had no material impact to the Company’s financial statements.
Not Yet Adopted
In May 2021, the FASB issued ASU Update No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The purpose of this update is to clarify and reduce diversity in practice for the accounting of certain modifications or exchanges of equity written call options. Under the guidance, an issuer determines
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
the accounting for the modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt, or for other reasons. The standard will be effective for the Company beginning in fiscal year 2023 and early adoption is permitted. The Company is currently evaluating the effect this accounting guidance will have on its consolidated financial statements.
Note 2 — BUSINESS COMBINATIONS
Era Group Inc.
On June 11, 2020, the combination of Old Bristow with Era was successfully completed in an all-stock transaction with Era having issued shares of common stock (“Combined Company Common Stock”) to Old Bristow’s stockholders in exchange for such holders shares of common stock in Old Bristow. The transaction was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). In the Merger, Old Bristow merged with and into Merger Sub, a subsidiary of Era, with Old Bristow remaining as the surviving company and as a subsidiary of Era, the ultimate parent of the Combined Company. Era is one of the largest helicopter operators in the world and the longest serving helicopter transport operator in the U.S., primarily servicing offshore energy installations. The transaction was structured as an all-stock, reverse-triangular merger, whereby Era issued shares of Combined Company Common Stock to Old Bristow stockholders, allowing it to qualify as a tax free reorganization for U.S. federal income tax purposes. Following the Merger, Era changed its name to Bristow Group Inc., and the Combined Company Common Stock continued to trade on the NYSE under the new ticker symbol VTOL.
While Era was the legal acquirer in the Merger, Old Bristow was determined to be the accounting acquirer, based upon the terms of the Merger and other considerations including that: (i) immediately following completion of the Merger, Old Bristow stockholders owned approximately 77% of the outstanding shares of Combined Company Common Stock and pre-Merger holders of Era common stock (“Era Common Stockholders”) owned approximately 23% of the outstanding shares of Combined Company Common Stock and (ii) the board of directors of the Company consisted of eight directors, including six Old Bristow designees. The Merger was accounted for under the acquisition method of accounting under ASC 805, Business Combinations. The acquisition method of accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company completed its assessment of the fair value of assets acquired and liabilities assumed within the required one-year period from the date of acquisition. Management recorded the acquired aircraft at an aggregate fair value of $179.9 million. Based upon the illiquid state of the secondary market, relevant and reliable market data for the Era fleet was not readily available. As a result, the Company derived the fair value of the Era fleet of aircraft from the estimated enterprise value of Era, using the discounted cash flow method of the income approach. The estimated enterprise value of Era was made using principal assumptions such as forecasted revenues and discount rate. All non-aircraft acquired assets and assumed liabilities were valued at fair value, which based upon their nature were more readily determinable. After allocating fair values to all the non-aircraft acquired assets and assumed liabilities, the remaining value was attributed to the aircraft.
The acquisition date fair value of the consideration transferred consisted of the following (in thousands):
| | | | | |
Fair value of Combined Company Common Stock issued (1) | $ | 106,440 | |
Fair value of accelerated stock awards (2) | 2,067 | |
Fair value of exchanged stock awards (3) | 228 | |
Total consideration transferred | $ | 108,735 | |
Fair value of redeemable noncontrolling interest | 1,501 | |
Total fair value of Era | $ | 110,236 | |
___________________________
(1)Represents the fair value of Combined Company Common Stock retained by Era Common Stockholders based on the closing market price of Era shares on June 11, 2020, the acquisition date.
(2)Represents the fair value of restricted share awards of Combined Company Common Stock held by Era employees that were accelerated upon consummation of the Merger.
(3)Represents the fair value of restricted share awards of Combined Company Common Stock held by Era employees relating to the pre-Merger vesting period.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition, June 11, 2020 (in thousands):
| | | | | |
Assets acquired: | |
Cash and cash equivalents | $ | 120,236 | |
Accounts receivable from non-affiliates | 35,079 | |
Prepaid expenses and other current assets | 17,598 | |
Inventories | 8,826 | |
Property and equipment | 223,256 | |
Right-of-use assets | 8,395 | |
Other assets | 14,792 | |
Total assets acquired | $ | 428,182 | |
Liabilities assumed: | |
Accounts payable | $ | 9,686 | |
Accrued wages, benefits and related taxes | 8,319 | |
Income taxes payable | 1,791 | |
Deferred revenue | 236 | |
| |
| |
Current portion of operating lease liabilities | 1,711 | |
Other accrued liabilities | 18,474 | |
Short-term borrowings and current maturities of long-term debt | 17,485 | |
Long-term debt, less current maturities | 136,704 | |
Other liabilities and deferred credits | 1,404 | |
Deferred taxes | 34,198 | |
Long-term operating lease liabilities | 6,845 | |
Total liabilities and redeemable noncontrolling interest assumed | $ | 236,853 | |
| |
Net assets acquired | $ | 191,329 | |
The Merger initially resulted in a gain on bargain purchase due to the estimated fair value of the identifiable net assets acquired exceeding the purchase consideration transferred by $75.4 million; after further analysis, during the second quarter of fiscal year 2021, the Company recorded measurement period adjustments to its preliminary estimates due to additional information received primarily related to aircraft, redeemable noncontrolling interest and income taxes, resulting in an increase in bargain purchase gain of $5.7 million, for a total of $81.1 million shown as a gain on bargain purchase on the consolidated statements of operations, for the fiscal year ended March 31, 2021. The bargain purchase was a result of a combination of factors including depressed oil and gas prices and market volatility linked to the COVID-19 pandemic between the initial announcement and consummation of the Merger.
Specifically, the Era share price declined from $8.59 to $5.16 between the last trading day prior to the announcement of the Merger and the date the Merger closed. The aggregate Merger consideration was based on an exchange ratio that was fixed and did not fluctuate in the event that the value of Old Bristow’s common stock increased or Era’s common stock decreased, between the date of entry into the Merger agreement and consummation of the Merger.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following unaudited supplemental pro forma combined financial information presents the Company’s results of operations for the three months ended September 30, 2020, as though the Merger had occurred on November 1, 2019, the effective date of Old Bristow’s emergence from the Chapter 11 Cases. The unaudited pro forma financial information is as follows (in thousands)(1):
| | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2020 | | 2020 |
Total revenues | $ | 304,640 | | | $ | 609,963 | |
Net loss | $ | (34,333) | | | $ | (10,015) | |
Net loss attributable to Bristow Group Inc. | $ | (34,200) | | | $ | (9,828) | |
____________________(1)As a result of the Merger, the Company was required to dispose of its investment in Líder which occurred in August 2020. The Company recorded an impairment in June 2020 of $18.7 million related to the future disposition of the investment. This impairment has been excluded from the pro forma combined Net income and Net income attributable to Bristow Group Inc. for the six months ended September 30, 2020, due to its nonrecurring nature.
Note 3 — PROPERTY AND EQUIPMENT
Property and Equipment Acquisitions
The Company made capital expenditures as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Number of aircraft delivered(1) | 1 | | | — | | | 1 | | | — | |
Capital expenditures: | | | | | | | |
Aircraft and equipment | $ | 13,710 | | | $ | 4,291 | | | $ | 15,960 | | | $ | 7,048 | |
Land and buildings | 628 | | | 232 | | | 1,346 | | | 324 | |
Total capital expenditures | $ | 14,338 | | | $ | 4,523 | | | $ | 17,306 | | | $ | 7,372 | |
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(1)Previously leased S92 heavy helicopter acquired during the three months ended September 30, 2021 pursuant to a contractual obligation in the lease.
Property and Equipment Dispositions
The following table presents details on the aircraft sold or disposed of (in thousands, except for number of aircraft):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Number of aircraft sold or disposed of | 6 | | | 31 | | | 9 | | | 32 | |
Proceeds from sale or disposal of assets | $ | 3,188 | | | $ | 40,475 | | | $ | 13,809 | | | $ | 52,140 | |
Deposits on assets held for sale | $ | — | | | $ | 3,437 | | | $ | — | | | $ | 3,437 | |
Gain (loss) on disposal of assets | $ | 162 | | | $ | (8,473) | | | $ | 661 | | | $ | (2,951) | |
Property, Equipment and Inventory Considerations
During the three and six months ended September 30, 2021, the Company recognized a $2.9 million and $8.8 million loss on impairment, respectively, in connection with H225 helicopter parts inventory and aircraft held for sale to reflect the aircraft at expected sales values. During the three and six months ended September 30, 2020, the Company recognized a $12.4 million loss on impairment related to certain equipment and inventory items in connection to the sale of aircraft.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Note 4 — REVENUES
Revenue Recognition
The Company derives its revenues primarily from oil and gas flight services, government services and fixed wing services. A majority of the Company’s revenue is generated through two types of contracts: helicopter services, which includes oil and gas, government and other services, and fixed wing services. Revenue is recognized when control of the identified distinct goods or services has been transferred to the customer, the transaction price is determined and allocated to the satisfied performance obligations and the Company has determined that collection has occurred or is probable of occurring.
The Company determines revenue recognition by applying the following steps:
1.Identify the contract with a customer;
2.Identify the performance obligations in the contract;
3.Determine the transaction price;
4.Allocate the transaction price to the performance obligations; and
5.Recognize revenue as the performance obligations are satisfied.
Operating revenue from the Company’s oil and gas line of service is derived mainly from fixed-term contracts with its customers. Fixed-term contracts typically have original terms of one to five years, subject to provisions permitting early termination by customers. Customers are typically invoiced on a monthly basis with payment terms of 30-60 days.
The following table shows the total revenues (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues from contracts with customers | $ | 295,968 | | | $ | 294,245 | | | 588,566 | | | 553,653 | |
Total other revenues | 5,616 | | | 10,395 | | | 13,620 | | | 21,180 | |
Total revenues | 301,584 | | | 304,640 | | | 602,186 | | | 574,833 | |
Beginning in fiscal year 2022, the revenues by line of service tables have been modified to more accurately reflect how management views the Company’s lines of service. These changes include the addition of a Government services line of service which includes revenues from U.K. SAR, the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”), and other government contracts. In addition, our Other activities and services (“other” services) will now reflect revenues derived from leasing aircraft to non-governmental third party operators, oil and gas contracts that do not materially fit into one of the three major oil and gas operating regions and other services as they arise. As such, operating revenues from Asia Pacific oil and gas services are now shown under other services following the exit of that line of service in the Asia Pacific region. Prior period amounts will not match the previously reported amounts by individual lines of service. Management believes this change provides more relevant information needed to understand and analyze the Company’s current lines of service.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Revenues by Service Line. The following table sets forth the operating revenues earned by service line for the applicable periods (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Oil and gas services | $ | 193,681 | | | $ | 204,790 | | | 383,465 | | | 396,385 | |
Government services(1) | 69,742 | | | 65,610 | | | 140,184 | | | |