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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, 2022 |
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.
| | | | | | | | | | | | | | |
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 27, 2022 was 28,016,388. The Registrant has no other class of common stock outstanding.
BRISTOW GROUP INC.
INDEX
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| Item 1. | | |
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| Item 2. | | |
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| Item 3. | | |
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| Item 4. | | |
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| Item 1. | | |
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| Item 1A. | | |
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| Item 2. | | |
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| Item 3. | | |
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| Item 4. | | |
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| Item 5. | | |
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| Item 6. | | |
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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, |
| 2022 | | 2021 | | 2022 | | 2021 |
Revenues: | | | | | | | |
Operating revenues | $ | 299,391 | | | $ | 290,120 | | | $ | 593,539 | | | $ | 578,471 | |
Reimbursable revenues | 7,879 | | | 11,464 | | | 15,468 | | | 23,715 | |
Total revenues | 307,270 | | | 301,584 | | | 609,007 | | | 602,186 | |
| | | | | | | |
Costs and expenses: | | | | | | | |
Operating expenses | 231,423 | | | 218,768 | | | 455,924 | | | 433,271 | |
Reimbursable expenses | 7,673 | | | 11,188 | | | 14,960 | | | 23,302 | |
General and administrative expenses | 41,146 | | | 38,970 | | | 81,305 | | | 76,453 | |
Merger and integration costs | 291 | | | 647 | | | 659 | | | 2,382 | |
Restructuring costs | — | | | 117 | | | — | | | 968 | |
Depreciation and amortization expense | 16,051 | | | 17,644 | | | 32,587 | | | 40,839 | |
Total costs and expenses | 296,584 | | | 287,334 | | | 585,435 | | | 577,215 | |
| | | | | | | |
Loss on impairment | — | | | (2,901) | | | (5,187) | | | (24,835) | |
Gain on disposal of assets | 3,368 | | | 162 | | | 1,267 | | | 661 | |
Earnings (losses) from unconsolidated affiliates, net | 630 | | | 964 | | | 745 | | | (553) | |
Operating income | 14,684 | | | 12,475 | | | 20,397 | | | 244 | |
| | | | | | | |
Interest income | 627 | | | 42 | | | 701 | | | 108 | |
Interest expense, net | (10,008) | | | (10,426) | | | (20,250) | | | (21,050) | |
Loss on extinguishment of debt | — | | | (124) | | | — | | | (124) | |
Reorganization items, net | (29) | | | (103) | | | (78) | | | (549) | |
Loss on sale of subsidiaries | — | | | — | | | — | | | (2,002) | |
| | | | | | | |
| | | | | | | |
Other, net | 11,343 | | | 15,330 | | | 28,093 | | | 21,514 | |
Total other income (expense), net | 1,933 | | | 4,719 | | | 8,466 | | | (2,103) | |
Income (loss) before income taxes | 16,617 | | | 17,194 | | | 28,863 | | | (1,859) | |
Income tax expense | (116) | | | (14,484) | | | (8,347) | | | (9,642) | |
Net income (loss) | 16,501 | | | 2,710 | | | 20,516 | | | (11,501) | |
Net loss (income) attributable to noncontrolling interests | 17 | | | 65 | | | (11) | | | 79 | |
Net income (loss) attributable to Bristow Group Inc. | $ | 16,518 | | | $ | 2,775 | | | $ | 20,505 | | | $ | (11,422) | |
Earnings (loss) per common share: | | | | | | | |
Basic | $ | 0.59 | | | $ | 0.10 | | | $ | 0.73 | | | $ | (0.40) | |
Diluted | $ | 0.58 | | | $ | 0.10 | | | $ | 0.72 | | | $ | (0.40) | |
Weighted average shares of common stock outstanding: | | | | | | | |
Basic | 27,958 | | | 28,234 | | | 28,112 | | | 28,845 | |
Diluted | 28,405 | | | 28,685 | | | 28,635 | | | 28,845 | |
See accompanying notes to 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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
Net income (loss) | $ | 16,501 | | | $ | 2,710 | | | $ | 20,516 | | | $ | (11,501) | |
Other comprehensive income (loss): | | | | | | | |
Currency translation adjustments | (41,747) | | | (15,683) | | | (89,810) | | | (14,411) | |
Pension liability adjustment | 2,261 | | | 922 | | | 4,616 | | | 873 | |
Unrealized gain on cash flow hedges, net | 901 | | | 1,609 | | | 2,197 | | | 2,552 | |
Total other comprehensive loss | (38,585) | | | (13,152) | | | (82,997) | | | (10,986) | |
Total comprehensive loss | (22,084) | | | (10,442) | | | (62,481) | | | (22,487) | |
Net comprehensive loss (income) attributable to noncontrolling interests | 17 | | | 65 | | | (11) | | | 79 | |
Total comprehensive loss attributable to Bristow Group Inc. | $ | (22,067) | | | $ | (10,377) | | | $ | (62,492) | | | $ | (22,408) | |
See accompanying notes to condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
| | | | | | | | | | | |
| September 30, 2022 | | March 31, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 199,485 | | | $ | 263,769 | |
Restricted cash | 1,818 | | | 2,245 | |
Accounts receivable, net of allowance for doubtful accounts of $1,840 and $1,887 as of September 30, 2022 and March 31, 2022, respectively | 204,762 | | | 203,771 | |
Inventories | 79,430 | | | 81,674 | |
| | | |
Prepaid expenses and other current assets | 38,961 | | | 28,426 | |
Total current assets | 524,456 | | | 579,885 | |
Property and equipment, net of accumulated depreciation of $164,577 and $149,532 as of September 30, 2022 and March 31, 2022, respectively | 867,521 | | | 942,608 | |
Investment in unconsolidated affiliates | 17,000 | | | 17,585 | |
Right-of-use assets | 228,799 | | | 193,505 | |
Other assets | 125,564 | | | 90,696 | |
Total assets | $ | 1,763,340 | | | $ | 1,824,279 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 73,371 | | | $ | 63,497 | |
Accrued wages, benefits and related taxes | 40,109 | | | 53,424 | |
Income taxes payable and other accrued taxes | 11,902 | | | 13,410 | |
Deferred revenue | 13,815 | | | 15,161 | |
Accrued maintenance and repairs | 51,513 | | | 38,354 | |
Current portion of operating lease liabilities | 72,886 | | | 69,866 | |
Accrued interest and other accrued liabilities | 19,995 | | | 21,284 | |
Short-term borrowings and current maturities of long-term debt | 10,817 | | | 12,759 | |
Total current liabilities | 294,408 | | | 287,755 | |
Long-term debt, less current maturities | 492,868 | | | 512,909 | |
Accrued pension liabilities | 6,484 | | | 18,170 | |
Other liabilities and deferred credits | 4,864 | | | 4,825 | |
Deferred taxes | 37,371 | | | 39,811 | |
Long-term operating lease liabilities | 158,511 | | | 125,441 | |
Total liabilities | $ | 994,506 | | | $ | 988,911 | |
Commitments and contingencies (Note 7) | | | |
Stockholders’ equity: | | | |
Common stock, $0.01 par value, 110,000 authorized; 28,016 and 28,287 outstanding as of September 30, 2022 and March 31, 2022, respectively | 306 | | | 303 | |
Additional paid-in capital | 706,657 | | | 699,401 | |
Retained earnings | 231,725 | | | 211,220 | |
Treasury stock, at cost; 2,456 and 1,983 shares as of September 30, 2022 and March 31, 2022, respectively | (63,009) | | | (51,659) | |
Accumulated other comprehensive loss | (106,447) | | | (23,450) | |
Total Bristow Group Inc. stockholders’ equity | 769,232 | | | 835,815 | |
Noncontrolling interests | (398) | | | (447) | |
Total stockholders’ equity | 768,834 | | | 835,368 | |
Total liabilities and stockholders’ equity | $ | 1,763,340 | | | $ | 1,824,279 | |
See accompanying notes to condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Bristow Group Inc. Stockholders’ Equity | | | | |
| Common Stock | | Common Stock (Shares) | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Stockholders’ Equity |
March 31, 2022 | $ | 303 | | | 28,287 | | | $ | 699,401 | | | $ | 211,220 | | | $ | (51,659) | | | $ | (23,450) | | | $ | (447) | | | $ | 835,368 | |
Stock-based compensation | 3 | | | 109 | | | 3,095 | | | — | | | — | | | — | | | — | | | 3,098 | |
Purchase of treasury stock. | — | | | (192) | | | — | | | — | | | (4,702) | | | — | | | — | | | (4,702) | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 20 | | | 20 | |
Net income | — | | | — | | | — | | | 3,987 | | | — | | | — | | | 28 | | | 4,015 | |
| | | | | | | | | | | | | | | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (44,412) | | | — | | | (44,412) | |
June 30, 2022 | $ | 306 | | | 28,204 | | | $ | 702,496 | | | $ | 215,207 | | | $ | (56,361) | | | $ | (67,862) | | | $ | (399) | | | $ | 793,387 | |
Stock-based compensation | — | | | 93 | | | 4,161 | | | — | | | — | | | — | | | — | | | 4,161 | |
Purchase of treasury stock. | — | | | (281) | | | — | | | — | | | (6,648) | | | — | | | — | | | (6,648) | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 18 | | | 18 | |
Net income (loss) | — | | | — | | | — | | | 16,518 | | | — | | | — | | | (17) | | | 16,501 | |
| | | | | | | | | | | | | | | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (38,585) | | | — | | | (38,585) | |
September 30, 2022 | $ | 306 | | | 28,016 | | | $ | 706,657 | | | $ | 231,725 | | | $ | (63,009) | | | $ | (106,447) | | | $ | (398) | | | $ | 768,834 | |
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See accompanying notes to condensed consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total Bristow Group Inc. Stockholders’ Equity | | | | |
| Redeemable Noncontrolling Interests | | Common Stock | | Common Stock (Shares) | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Noncontrolling Interests | | Total Stockholders’ Investment |
March 31, 2021 | $ | 1,572 | | | $ | 303 | | | 29,694 | | | $ | 687,715 | | | $ | 227,011 | | | $ | (6,915) | | | $ | (10,501) | | | $ | (542) | | | $ | 897,071 | |
Stock-based compensation | — | | | — | | | 49 | | | 2,326 | | | — | | | — | | | — | | | — | | | 2,326 | |
Purchase of treasury stock. | — | | | — | | | (937) | | | — | | | — | | | — | | | (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 | | | 690,041 | | | 212,814 | | | (4,749) | | | (35,700) | | | (551) | | | 862,158 | |
Stock-based compensation | | | — | | | 60 | | | 2,661 | | | — | | | — | | | — | | | — | | | 2,661 | |
Purchase of treasury stock. | — | | | — | | | (564) | | | — | | | — | | | — | | | (15,383) | | | — | | | (15,383) | |
Currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 5 | |
Net income | — | | | — | | | — | | | — | | | 2,775 | | | — | | | — | | | (65) | | | 2,710 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (13,152) | | | — | | | — | | | (13,152) | |
September 30, 2021 | — | | | 303 | | | 28,302 | | | 692,702 | | | 215,589 | | | (17,901) | | | (51,083) | | | (611) | | | 838,999 | |
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See accompanying notes to condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| | | | | | | | | | | |
| Six Months Ended September 30, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | 20,516 | | | $ | (11,501) | |
Adjustments to reconcile net income (loss) to net cash from operating activities: | | | |
Depreciation and amortization expense | 39,119 | | | 46,959 | |
Deferred income taxes | (1,930) | | | 2,858 | |
Loss from extinguishment of debt | — | | | 124 | |
| | | |
Bad debt expense | — | | | 309 | |
Amortization of deferred financing fees | 769 | | | 636 | |
Discount amortization on long-term debt | 3,343 | | | 3,963 | |
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Gain on disposal of assets | (1,267) | | | (661) | |
Loss on impairment | 5,187 | | | 24,835 | |
Loss on sale of subsidiaries | — | | | 2,002 | |
Stock-based compensation | 7,259 | | | 4,987 | |
Equity in earnings (losses) from unconsolidated affiliates, net | (745) | | | 553 | |
Increase (decrease) in cash resulting from changes in: | | | |
Accounts receivable | (17,502) | | | 17,801 | |
Inventory, prepaid expenses and other assets | (41,699) | | | 1,448 | |
Accounts payable, accrued expenses and other liabilities | (7,870) | | | (21,119) | |
Net cash provided by operating activities | 5,180 | | | 73,194 | |
Cash flows from investing activities: | | | |
Capital expenditures | (18,064) | | | (17,306) | |
Proceeds from asset dispositions | 16,688 | | | 13,809 | |
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Cash transferred in sale of subsidiaries, net of cash received | — | | | (851) | |
Acquisition, net of cash received | (12,600) | | | — | |
Net cash used in investing activities | (13,976) | | | (4,348) | |
Cash flows from financing activities: | | | |
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Debt issuance costs | (527) | | | (2,708) | |
Repayment of debt and debt redemption premiums | (5,646) | | | (12,479) | |
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Purchase of treasury stock. | (11,350) | | | (40,582) | |
Net cash used in financing activities | (17,523) | | | (55,769) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (38,392) | | | (4,676) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (64,711) | | | 8,401 | |
Cash, cash equivalents and restricted cash at beginning of period | 266,014 | | | 231,079 | |
Cash, cash equivalents and restricted cash at end of period | $ | 201,303 | | | $ | 239,480 | |
Cash paid during the period for: | | | |
Interest | $ | 16,034 | | | $ | 16,369 | |
Income taxes | $ | 15,419 | | | $ | 8,539 | |
See accompanying notes to 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. Unless the context otherwise indicates, any references to the “Company”, “Bristow”, “we”, “us” and “our” refer to Bristow Group Inc. and its consolidated entities.
The condensed consolidated financial information for the three and six months ended September 30, 2022 and 2021, has been prepared by the Company in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (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. In August 2022, the Board of Directors (the “Board”) approved a change in the Company’s fiscal year from March 31st to December 31st. Notwithstanding such change, for purposes of this Quarterly Report on Form 10-Q, the Company’s fiscal year assumes a March 31st fiscal year end and fiscal years are referenced based on the end of such period. Therefore, the fiscal year ending March 31, 2023, is referred to as “fiscal year 2023”. 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, 2022, filed with the SEC on May 31, 2022.
The preparation of these condensed consolidated 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 statements of operations and comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statements of changes in stockholders equity and the condensed consolidated statements of cash flows. Operating results for the interim period presented are not necessarily indicative of the results that may be expected for the entire fiscal year.
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 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
Maintenance and Repairs — The Company generally charges maintenance and repair costs, including major aircraft component overhaul costs, to earnings as the costs are incurred. However, certain aircraft components, such as engines and transmissions, are maintained by third-party vendors under contractual agreements also referred to as power-by-the-hour (“PBH”) maintenance agreements. Under these agreements, the Company is charged an agreed amount per hour of flying time related to maintenance, repair and overhaul of the parts and components covered. The costs charged under these contractual agreements are recognized in the period in which the flight hours occur. To the extent that the Company has not yet been billed for costs incurred under these arrangements, these costs are included in accrued maintenance and repairs on its consolidated balance sheets. From time to time, the Company receives credits from its original equipment manufacturers. The Company records these credits as a reduction in maintenance expense when the credits are utilized in lieu of cash payments for purchases or services.
In the event the Company places a helicopter in a PBH program after a maintenance period has begun, it may be necessary to pay an initial buy-in charge based on hours flown since the previous maintenance event. This buy-in charge is normally recorded as a prepaid expense and amortized as an operating expense over the remaining PBH contract period. If a helicopter is sold or otherwise removed from a program before the scheduled maintenance work is carried out, the Company may be able to recover part of its payments to the PBH provider, in which case the Company records a reduction to operating expense.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
During the six months ended September 30, 2022, the Company entered into and amended two existing PBH agreements with maintenance service providers for its AW139 helicopter fleet. The terms of these agreements included a buy-in payable of approximately $55 million for the hours flown on the aircraft prior to entry into the PBH agreements. The buy-in amount for the transaction is reflected in other long-term assets with the amount due for amortization within a year reflected in prepaid expenses and other current assets on the condensed consolidated balance sheet. The balance is amortized through operating expense on the statement of operations on a straight-line basis over the contract term. As of September 30, 2022, $31.2 million of the buy-in had been paid, with the remaining $24.2 million payable due in December 2022, included on the condensed consolidated balance sheet in accrued maintenance and repairs.
During the six months ended September 30, 2022, the Company also wrote off $5.2 million of intangible assets related to legacy AW139 airframe agreements in connection with the new PBH agreements. This loss is reflected on the loss on impairment line of 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, 2022, 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.
Recently Adopted Accounting Standards
In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASU 2021-10 - Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 applies to business entities that account for a transaction with a government by applying a grant or contribution accounting model and increases the transparency of the recognition, measurement, presentation and disclosure of government assistance received. Our adoption of this ASU, effective April 1, 2022, had no material impact to the Company’s financial statements.
In October 2021, the FASB issued ASU 2021-08 - Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 provides specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in business combinations. Our adoption of this ASU, effective April 1, 2022, had no material impact to the Company’s financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Note 2 — BUSINESS COMBINATIONS
On August 2, 2022, the acquisition of British International Helicopter Services Limited (“BIH”) was successfully completed, in an all cash transaction for $12.7 million. The transaction was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Company will integrate BIH into its United Kingdom (“U.K.”) operations, within the government services line of service, and BIH will adopt the Bristow name and brand throughout its operations. BIH delivers combined search and rescue (“SAR”) and support helicopter services for the U.K. Ministry of Defence (“MOD”) with operations in the Falkland Islands and delivers fleet operational sea training helicopter support for the Royal Navy in the U.K. The acquisition is expected to strengthen the Company’s global government services offering.
The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition,
August 2, 2022 (in thousands):
| | | | | |
Assets acquired: | |
Cash and cash equivalents | $ | 109 | |
Accounts receivable | 2,197 | |
Prepaid expenses and other current assets | 2,464 | |
Inventories | 125 | |
Property and equipment | 4,378 | |
Intangible assets, net | 7,037 | |
| |
Total assets acquired | $ | 16,310 | |
Liabilities assumed: | |
Accounts payable | $ | 1,530 | |
Accrued wages, benefits and related taxes | 260 | |
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| |
Other accrued liabilities | 1,010 | |
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Deferred taxes | 802 | |
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Total liabilities | $ | 3,602 | |
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Net assets acquired | $ | 12,708 | |
The acquisition resulted in $7.0 million amortizable intangible assets associated with the two BIH customer contracts acquired. These intangible assets will be amortized over the life of the contracts and are included on the condensed consolidated balance sheet in other assets. There were no material transaction related costs.
Consistent with the guidelines of ASC 805, if the initial accounting for the business combination has not concluded by the end of the reporting period in which the acquisition occurs, an estimate may be recorded. The Company may record any material adjustments to the initial amounts recorded based on new information obtained that would have existed as of the date of the acquisition within a year of the acquisition date. The Company is continuing to analyze and assess relevant information to determine the fair value of assets acquired and liabilities assumed. The pro forma results were not included as the impact was not material to the Company’s financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Note 3 — REVENUES
The Company derives its revenues primarily from oil and gas flight services, government services and fixed wing services through a single operating segment, aviation services. A majority of the Company’s revenues are generated through two types of contracts: helicopter services contracts and fixed wing services contracts.
The following table shows the total revenues (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Revenues from contracts with customers | $ | 298,375 | | | $ | 295,968 | | | $ | 594,565 | | | $ | 588,566 | |
Other revenues | 8,895 | | | 5,616 | | | 14,442 | | | 13,620 | |
Total revenues | $ | 307,270 | | | $ | 301,584 | | | $ | 609,007 | | | $ | 602,186 | |
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, |
| 2022 | | 2021 | | 2022 | | 2021 |
Oil and gas services | $ | 197,076 | | | $ | 193,681 | | | $ | 392,156 | | | $ | 383,465 | |
Government services | 69,908 | | | 69,742 | | | 140,015 | | | 140,184 | |
Fixed wing services | 28,945 | | | 23,501 | | | 54,887 | | | 48,057 | |
Other services | 3,462 | | | 3,196 | | | 6,481 | | | 6,765 | |
Total operating revenues | $ | 299,391 | | | $ | 290,120 | | | $ | 593,539 | | | $ | 578,471 | |
Contract Assets, Liabilities and Receivables
The Company generally satisfies performance of contract obligations by providing aviation services to its customers in exchange for consideration. The timing of performance may differ from the timing of the customer’s payment, which results in the recognition of a contract asset or a contract liability. A contract asset exists when the Company has a contract with a customer for which revenue has been recognized (i.e., services have been performed), but customer payment is contingent on a future event (i.e., satisfaction of contract milestones). These contract assets are transferred to receivables when billing milestones are met. Contract liabilities relate to deferred revenues in which advance consideration is received from customers for contracts where revenues are recognized based on future performance of services.
As of September 30, 2022 and March 31, 2022, receivables related to services performed under contracts with customers were $177.4 million and $165.2 million, respectively. During the six months ended September 30, 2022, the Company recognized $5.8 million of revenues from outstanding contract liabilities. Contract liabilities related to services performed under contracts with customers were $12.5 million and $13.3 million as of September 30, 2022 and March 31, 2022, respectively. Contract liabilities are primarily generated by fixed wing services where customers pay for tickets in advance of receiving the Company’s services and advanced payments from helicopter services customers. There were no contract assets as of September 30, 2022 and March 31, 2022.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Remaining Performance Obligations
Remaining performance obligations represent firm contracts for which work has not been performed and future revenue recognition is expected. The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period and (2) the expected timing to recognize these revenues (in thousands):
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| Remaining Performance Obligations as of September 30, 2022 |
| Six Months Ending March 31, 2023 | | Fiscal Year Ending March 31, | | Total |
| | 2024 | | 2025 | | 2026 | | 2027 and thereafter | |
Outstanding Service Revenues: | | | | | | | | | | | |
Helicopter contracts | $ | 228,922 | | | $ | 298,297 | | | $ | 226,586 | | | $ | 134,473 | | | $ | 112,689 | | | $ | 1,000,967 | |
Fixed wing contracts | 504 | | | — | | | — | | | — | | | — | | | 504 | |
Total remaining performance obligation revenue | $ | 229,426 | | | $ | 298,297 | | | $ | 226,586 | | | $ | 134,473 | | | $ | 112,689 | | | $ | 1,001,471 | |
The table above includes performance obligations up to the point where the parties can cancel existing contracts. Any applicable cancellation penalties have been excluded. As such, the Company’s actual remaining performance obligation revenues are expected to be greater than what is reflected in the table above. In addition, the remaining performance obligation disclosure does not include expected consideration related to performance obligations of a variable nature (i.e., flight services) as they cannot be reasonably and reliably estimated.
Note 4 — RELATED PARTY TRANSACTIONS
The Company owns a 25% voting interest and a 40% economic interest in Cougar Helicopters Inc. (“Cougar”), an aviation services provider in Canada. Due to common ownership of Cougar, the Company considers VIH Aviation Group Ltd. a related party.
During the three months ended September 30, 2022 and 2021, the Company generated total revenues of $8.8 million and $5.4 million from its related parties and also paid lease fees of $1.6 million and $2.5 million to related parties for leased aircraft and facilities, respectively. During the six months ended September 30, 2022 and 2021, the Company generated total revenues of $13.6 million and $14.0 million from its related parties and also paid lease fees of $2.9 million and $4.6 million to related parties for leased aircraft and facilities, respectively.
As of September 30, 2022 and March 31, 2022, accounts receivables from related parties included in accounts receivables on the condensed consolidated balance sheets were $1.2 million and $1.8 million, respectively.
Note 5 — DEBT
Debt as of September 30, 2022 and March 31, 2022, consisted of the following (in thousands):
| | | | | | | | | | | |
| September 30, 2022 | | March 31, 2022 |
6.875% Senior Notes | $ | 392,405 | | | $ | 391,690 | |
Lombard Debt | 111,280 | | | 133,978 | |
Total debt | 503,685 | | | 525,668 | |
Less short-term borrowings and current maturities of long-term debt | (10,817) | | | (12,759) | |
Total long-term debt | $ | 492,868 | | | $ | 512,909 | |
6.875% Senior Notes — In February 2021, the Company issued $400.0 million aggregate principal amount of its 6.875% senior secured notes due March 2028 (the “6.875% Senior Notes”) and received net proceeds of $395.0 million. The 6.875% Senior Notes are fully and unconditionally guaranteed as to payment by a number of subsidiaries. Interest on the 6.875% Senior Notes is payable semi-annually in arrears on March 1st and September 1st of each year. The 6.875% Senior Notes may be redeemed at any time and from time to time, with sufficient notice and at the applicable redemption prices set
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
forth in the indenture governing the 6.875% Senior Notes, plus accrued and unpaid interest leading up to the redemption date. The indenture governing the 6.875% Senior Notes contains covenants that restrict the Company’s ability to, among other things, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem the Company’s capital stock, prepay, redeem or repurchase certain debt, make loans and investments, sell assets, incur liens, enter into transactions with affiliates, enter into agreements restricting its subsidiaries’ ability to pay dividends, and consolidate, merge or sell all or substantially all of its assets. In addition, upon a specified change of control trigger event, the Company must make an offer to repurchase all or part of each noteholder’s notes at an offer price of 101% of the aggregate principal amount, plus accrued and unpaid interest. As of September 30, 2022 and March 31, 2022, the Company had $7.6 million and $8.3 million of unamortized debt issuance costs associated with the 6.875% Senior Notes.
Lombard Debt — During the three months ended September 30, 2022 and 2021, the Company made $2.7 million and $3.3 million, respectively, in principal payments on the Lombard debt. During the six months ended September 30, 2022 and 2021, the Company made $5.6 million and $6.6 million, respectively, in principal payments on the Lombard debt. The two tranches of this debt mature in December 2023 and January 2024, respectively. The Company intends to refinance the Lombard debt facilities.
ABL Facility — The Company’s asset-backed revolving credit facility (the “ABL Facility”) matures in May 2027, subject to certain early maturity triggers related to maturity of other material debt or a change of control of the Company. Amounts borrowed under the ABL Facility (i) are secured by certain accounts receivable owing to the borrower subsidiaries and the deposit accounts into which payments on such accounts receivable are deposited, and (ii) are fully and unconditionally guaranteed as to payment by the Company, as a parent guarantor, and each of Bristow Norway AS, Bristow Helicopters Limited, Bristow U.S. LLC and Era Helicopters, LLC. As of September 30, 2022, the ABL Facility provided for commitments in an aggregate amount of $85.0 million with the ability to increase the total commitments up to a maximum aggregate amount of $120.0 million, subject to the terms and conditions therein.
As of September 30, 2022, there were no outstanding borrowings under the ABL Facility nor had the Company made any draws during the three months ended September 30, 2022. Letters of credit issued under the ABL Facility in the aggregate face amount of $15.9 million were outstanding on September 30, 2022.
Note 6 — FAIR VALUE DISCLOSURES
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. The fair values of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to the short-term nature of these items.
Assets and liabilities subject to fair value measurement are categorized into one of three different levels depending on the observability of the inputs employed in the measurement, as follows:
•Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2 – inputs that reflect quoted prices for identical assets or liabilities in markets which are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 – unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Fair Value of Debt
The fair value of the Company’s debt has been estimated in accordance with the accounting standard regarding fair value. The fair value of the Company’s long-term debt was estimated using discounted cash flow analysis based on estimated current rates for similar types of arrangements. Considerable judgment was required in developing certain of the estimates of fair value, and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The carrying and fair values of the Company’s debt are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Amount | | Level 1 | | Level 2 | | Level 3 |
September 30, 2022 | | | | | | | |
LIABILITIES | | | | | | | |
6.875% Senior Notes(1) | $ | 392,405 | | | $ | — | | | $ | 351,782 | | | $ | — | |
Lombard Debt(2) | 111,280 | | | — | | | 110,601 | | | — | |
| | | | | | | |
| | | | | | | |
| $ | 503,685 | | | $ | — | | | $ | 462,383 | | | $ | — | |
March 31, 2022 | | | | | | | |
LIABILITIES | | | | | | | |
6.875% Senior Notes(1) | $ | 391,690 | | | $ | — | | | $ | 407,436 | | | $ | — | |
Lombard Debt(2) | 133,978 | | | — | | | 138,328 | | | — | |
| | | | | | | |
| | | | | | | |
| $ | 525,668 | | | $ | — | | | $ | 545,764 | | | $ | — | |
_________________ (1)As of September 30, 2022 and March 31, 2022, the carrying value is net of unamortized deferred financing fees of $7.6 million and $8.3 million respectively.
(2)As of September 30, 2022 and March 31, 2022, the carrying values of unamortized discounts were $8.0 million and $13.1 million, respectively.
Note 7 — COMMITMENTS AND CONTINGENCIES
Fleet — The Company’s unfunded capital commitments as of September 30, 2022 consisted primarily of agreements to purchase helicopters and totaled $71.3 million, payable beginning in fiscal year 2023. The Company also had $1.3 million of deposits paid on options not yet exercised.
Included in these commitments are orders to purchase three AW189 heavy helicopters and five AW169 light twin helicopters. The AW189 helicopters are scheduled to be delivered in fiscal year 2023 through 2025. Delivery dates for the AW169 helicopters have yet to be determined. In addition, the Company had outstanding options to purchase up to ten additional AW189 helicopters. If these options are exercised, the helicopters would be scheduled for delivery in fiscal years 2024 through 2026. The Company may, from time to time, purchase aircraft for which it has no orders.
The Company may terminate $59.5 million of its capital commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of approximately $1.9 million.
General Litigation and Disputes
The Company operates in jurisdictions internationally where it is subject to risks that include government action to obtain additional tax revenues. In a number of these jurisdictions, political unrest, the lack of well-developed legal systems and legislation that is not clear enough in its wording to determine the ultimate application, can make it difficult to determine whether legislation may impact the Company’s earnings until such time as a clear court or other ruling exists. The Company operates in jurisdictions currently where amounts may be due to governmental bodies that the Company is not currently recording liabilities for as it is unclear how broad or narrow legislation may ultimately be interpreted. The Company believes that payment of amounts in these instances is not probable at this time, but is reasonably possible.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
In the normal course of business, the Company is involved in various litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its condensed consolidated financial statements related thereto as appropriate. It is possible that a change in its estimates related to these exposures could occur, but the Company does not expect such changes in estimated costs or uninsured losses, if any, would have a material effect on its business, consolidated financial position or results of operations.
Note 8 — TAXES
The Company’s income tax expense during the three and six months ended September 30, 2022, was prepared using the actual year-to-date effective tax rate as the best estimate of the annual effective tax rate, whereas income tax expense during the three and six months ended September 30, 2021, was prepared using the estimated annual effective tax rate. The actual year-to-date effective tax rate calculates tax expense only for the year-to-date interim period earnings and does not consider the earnings estimate for the full-year. The Company determined that since small changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the estimated annual effective tax rate method would not provide a reliable estimate of income taxes for the three and six months ended September 30, 2022. The Company will continue to evaluate income tax estimates using the estimated annual effective tax rate in subsequent quarters or may use the actual year-to-date effective tax rate if warranted.
During the three months ended September 30, 2022 and 2021, the Company recorded an income tax expense of $0.1 million resulting in an effective tax rate of 0.7% and income tax expense of $14.5 million resulting in an effective tax rate of 84.2%, respectively. During the six months ended September 30, 2022 and 2021, the Company recorded an income tax expense of $8.3 million resulting in an effective tax rate of 28.9% and income tax expense of $9.6 million resulting in an effective tax rate of (518.7)%, respectively. The effective tax rate during the three months ended September 30, 2022, is lower than the U.S. statutory rate due to the mix of earnings, the impact of utilizing net operating losses in certain jurisdictions and the tax impact of foreign exchange losses outside of the U.S.
Note 9 — STOCKHOLDERS’ EQUITY
Stock Repurchases.
In September 2020, the Board authorized a stock repurchase program providing for the repurchase of up to $75.0 million of the Company’s common stock. In August 2022, the Board approved a new $40.0 million stock repurchase program and terminated the prior program, under which $15.0 million remained available of the original $75.0 million authorized. Purchases of the Company’s common stock under the stock repurchase program may be made in the open market, including pursuant to a Rule 10b5-1 program, by block repurchases, in private transactions (including with related parties) or otherwise, from time to time, depending on market conditions. The stock repurchase program has no expiration date and may be suspended or discontinued at any time without notice, subject to any changes in applicable law or regulations thereunder.
During the three months ended September 30, 2022, the Company repurchased 267,419 shares of common stock in open market transactions for gross consideration of $6.3 million, at an average cost per share of $23.41. During the six months ended September 30, 2022, the Company repurchased 425,938 shares of common stock for gross consideration of $10.0 million, which is an average cost per share of $23.48. As of September 30, 2022, $40.0 million remained available of the $40.0 million stock purchase program authorized in August 2022.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Accumulated Other Comprehensive Income (Loss)
The following table shows the changes in balances for accumulated other comprehensive income (loss) (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Currency Translation Adjustments | | Pension Liability Adjustments | | Unrealized gain on cash flow hedges | | Total |
Balance as of March 31, 2022 | $ | 5,643 | | | $ | (30,274) | | | $ | 1,181 | | | $ | (23,450) | |
| | | | | | | |
Other comprehensive income (loss) | $ | (85,194) | | | $ | — | | | $ | 2,197 | | | $ | (82,997) | |
| | | | | | | |
| | | | | | | |
Foreign exchange rate impact | (4,616) | | | 4,616 | | | — | | | — | |
Balance as of September 30, 2022 | $ | (84,167) | | | $ | (25,658) | | | $ | 3,378 | | | $ | (106,447) | |
Note 10 — EARNINGS PER SHARE
Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share excludes options to purchase common stock and restricted stock units and awards which were outstanding during the period but were anti-dilutive. The following table shows the computation of basic and diluted earnings per share (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Income (loss): | | | | | | | |
Net income (loss) attributable to Bristow Group Inc. | $ | 16,518 | | | $ | 2,775 | | | $ | 20,505 | | | $ | (11,422) | |
| | | | | | | |
| | | | | | | |
Shares of common stock: | | | | | | | |
Weighted average shares of common stock outstanding – basic | 27,958 | | | 28,234 | | | 28,112 | | | 28,845 | |
| | | | | | | |
Effect of dilutive stock options and restricted stock | 447 | | | 451 | | | 523 | | | — | |
Weighted average shares of common stock outstanding – diluted(1) | 28,405 | | | 28,685 | | | 28,635 | | | 28,845 | |
| | | | | | | |
Earnings (losses) per common share - basic | $ | 0.59 | | | $ | 0.10 | | | $ | 0.73 | | | $ | (0.40) | |
Earnings (losses) per common share - diluted | $ | |