Bristow Group Reports First Quarter Fiscal Year 2018 Results

HOUSTON, Aug. 3, 2017 /PRNewswire/ -- Bristow Group Inc. (NYSE: BRS) today reported the following results for the three months ended June 30, 2017. All amounts shown are dollar amounts in thousands unless otherwise noted:

For the June 2017 quarter, we reported a GAAP net loss of $55.3 million and diluted loss per share of $1.57 compared to a GAAP net loss of $40.8 million and diluted loss per share of $1.17 for the June 2016 quarter. Additionally, we reported an adjusted net loss of $29.1 million and adjusted diluted loss per share of $0.83 for the June 2017 quarter compared to adjusted net loss of $12.0 million and adjusted diluted loss per share of $0.34 for the June 2016 quarter.

BUSINESS AND FINANCIAL UPDATE

• Our June 2017 quarter adjusted EBITDA was better than our internal expectations as a result of higher revenue primarily from increased activity levels in Europe and Africa, and reduced expenses from the actions taken during the quarter, which included the reversal of $8.0 million in previously accrued annual and long-term incentive bonuses and reduced corporate salary and professional fee expenses.
• We had $293.0 million of total liquidity as of June 30, 2017 with negative operating cash flow during the quarter driven primarily by working capital changes from the timing of receivable collections, and interest and severance payments being only partially offset by $40 million in proceeds from the sale of a SAR S-92.
• In July 2017, we entered into a $230 million Credit Agreement that is currently expected to fund on or before August 30, 2017.  We anticipate an improved fiscal year 2018 liquidity outlook reflecting the benefit of actions taken in fiscal year 2018, including cost reductions and the suspension of our $2.5 million quarterly dividend.
• Our expectations for fiscal year 2018 full year operating results remain largely consistent with our May 2017 guidance with the bonus accrual benefit not expected to recur.

"While our first quarter financial performance continues to reflect the difficult environment in the offshore oil and gas industry, I am incredibly proud that our teams delivered safe operations and a more competitive and cost efficient service for our clients as a result of aggressive actions taken during the quarter," said Jonathan Baliff, President and Chief Executive Officer of Bristow Group.

"Even with the better-than-expected first quarter performance, we expect the full fiscal 2018 operating results to be largely consistent with our May 2017 guidance as the current downturn persists with low offshore oil and gas activity levels. However, since the beginning of this fiscal year, we have taken several actions designed to significantly strengthen our liquidity. We sold a SAR S-92 for approximately $40 million, announced an agreement for a secured financing of $230 million, and therefore anticipate an improved fiscal 2018 liquidity outlook."

"We remain committed to our four fiscal 2018 priorities for the New Bristow. One, safety improvement remains Bristow's top priority while; two, continuing to improve efficiency with G&A expenses expected to decrease to approximately 12% of revenues; three, further optimizing our portfolio and our fleet, recovering costs incurred as a result of the actions of original equipment manufacturers (OEMs) while reducing or deferring capital expenditures; and four, growing revenue as we better serve our clients in our Europe and Americas Hubs."

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

The year-over-year decrease in revenue was driven by lower oil and gas activity levels and an unfavorable impact from changes in foreign currency exchange rates compared to the June 2016 quarter of $18.8 million, which related mostly to the depreciation in the British pound sterling. The decline in oil and gas services revenue was partially offset by the increase in U.K. SAR services revenue due to additional bases coming online in fiscal years 2017 and 2018.

The year-over-year change in net loss and diluted loss per share was primarily driven by the decline in oil and gas revenue discussed above, higher income tax, rent and interest expense, lower earnings from unconsolidated affiliates and an inventory impairment charge recorded in the June 2017 quarter. These unfavorable changes were partially offset by higher impairment of asset charges recorded in the June 2016 quarter, a decrease in general and administrative expense and direct costs primarily from lower salaries and benefits and lower depreciation and amortization expense due to accelerated depreciation recorded in the June 2017 quarter. The year-over-year impact of changes in foreign currency exchange rates on revenue was offset by a positive impact on operating expenses and lower transaction losses compared to the June 2016 quarter.

The GAAP net loss and diluted loss per share for the June 2017 quarter included the following special items:

• Organizational restructuring costs of $9.7 million ($6.6 million net of tax) included in general and administrative expense, which includes severance expense of $8.7 million related to separation programs across our global organization designed to increase efficiency and reduce costs and other restructuring costs of $1.0 million,
• Impairment of inventories of $1.2 million ($0.8 million net of tax) included in loss on impairment, and
• Tax items of $14.9 million that include non-cash adjustments related to the ongoing impact of valuation of deferred tax assets of $13.9 million and a one-time non-cash tax effect from repositioning of certain aircraft from one tax jurisdiction to another related to recent financing transactions resulting in additional income tax expense of $1.0 million.

The June 2016 quarter was impacted by similar items as reflected in the table at the end of this release.

Excluding the effect of these special items, the year-over-year increase in adjusted net loss and diluted earnings per share and decrease in adjusted EBITDA was primarily driven by the decline in oil and gas revenue, higher adjusted income tax expense, higher rent expense and lower earnings from unconsolidated affiliates.

DIVIDEND, LIQUIDITY AND FINANCIAL FLEXIBILITY

In August 2017, the Board of Directors voted to suspend our quarterly dividend as part of our fiscal 2018 priorities. By suspending what had been a $0.07 per share quarterly dividend, we will preserve approximately $10 million of cash annually.

Our total liquidity decreased approximately $64 million to $293 million as of June 30, 2017 primarily due to cash used in operations of $51.2 million, including negative working capital changes of $32.1 million as well as principal debt repayments of $33.5 million, partially offset by proceeds from asset dispositions of $42.0 million. We expect ending total liquidity as of March 31, 2018 to be between $225 million and $265 million, which is higher than we forecasted in May 2017 as we continue to take actions to reduce cost, manage working capital and leverage our asset portfolio.

"The actions we have taken over the past two years were designed to strengthen our financial position and further extend our liquidity runway as we work through this generational downturn," said Don Miller, Senior Vice President and Chief Financial Officer.  "Our focused effort on continued cost reductions, including the return of expiring leased aircraft and working capital reductions, are expected to improve our liquidity as we navigate through this challenging market environment."

The year-over-year decrease in operating revenue was primarily driven by the unfavorable impact of foreign currency exchange rates during the June 2017 quarter of $18.0 million, partially offset by an increase in operating revenue driven by the start-up of U.K. SAR bases since the June 2016 quarter and an additional contract in Norway. Eastern Airways contributed $27.9 million and $30.9 million in operating revenue and $0.1 million and $1.5 million in adjusted EBITDA for the June 2017 and June 2016 quarters, respectively.

Excluding the impact of foreign currency exchange rate changes, operating margin and adjusted EBITDA margin, would have been 3.0% and 9.6% in the June 2017 quarter compared to 5.5% and 11.5% in the June 2016 quarter, respectively. Operating margin and adjusted EBITDA margin, excluding the impact of foreign currency exchange rate changes, decreased from the June 2016 quarter as a result of the impact from the downturn in the offshore energy market, which was only partially offset by the start-up of the U.K. SAR bases and cost reduction activities.

Operating revenue for Africa decreased for the June 2017 quarter due to an overall decrease in helicopter activity compared to the June 2016 quarter. We began providing fixed wing services in Africa which generated $1.8 million of operating revenue for the June 2017 quarter which partially offset the decline in helicopter activity.

Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin increased in the June 2017 quarter primarily due to a decline in direct costs driven by cost management efforts and the benefit of the devalued Nigerian naira, partially offset by the decrease in revenue discussed above. Operating income and operating margin also benefited from lower depreciation expense compared to the June 2016 quarter; we recorded $2.8 million of accelerated depreciation expense in the June 2016 quarter related to aircraft where management made the decision to exit model types earlier than originally anticipated.  The year-over-year devaluation of the Nigerian naira benefited our regional results by $2.0 million as expenses denominated in naira translated into fewer U.S. dollars for reporting purposes.

Operating revenue was slightly lower for the June 2017 quarter compared to the June 2016 quarter primarily due to the decline in medium and large aircraft activity in our U.S. Gulf of Mexico operations, a decrease in revenue in Trinidad and a decrease in revenue in Brazil; no aircraft were leased to Líder during the June 2017 quarter. These decreases were mostly offset by a new contract in Guyana and additional revenue from the search and rescue consortium in the U.S. Gulf of Mexico.

Earnings from unconsolidated affiliates decreased $4.4 million year-over-year primarily due to a decrease in earnings from our investment in Líder in Brazil. Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin were negatively impacted by this decrease in earnings from Líder, which included an unfavorable exchange rate impact of $1.1 million year-over-year.

Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin decreased primarily due to the decrease in earnings from unconsolidated affiliates and revenue and an increase in lease costs. Operating income and operating margin benefited from lower depreciation expense compared to the June 2016 quarter; we recorded $3.9 million of accelerated depreciation expense in the June 2016 quarter related to aircraft where management made the decision to exit model types earlier than originally anticipated.

Operating revenue decreased for the June 2017 quarter compared to the June 2016 quarter primarily due to the ending of short-term contracts, partially offset by an increase in revenue from our fixed-wing operations at Airnorth. Airnorth contributed $21.0 million and $19.7 million in operating revenue and $0.9 million and $3.5 million in adjusted EBITDA for the June 2017 and June 2016 quarters, respectively.

Operating income, operating margin, adjusted EBITDA and adjusted EBITDA margin decreased in the June 2017 quarter primarily due to decreased revenue and an increase in lease costs, which was only partially offset by a decrease in salaries and benefits. Additionally, operating income and operating margin in the June 2017 quarter were negatively impacted by an increase in depreciation and amortization expense.

Operating revenue decreased for the June 2017 quarter primarily due to a decline in Bristow Academy revenue.

Adjusted EBITDA improved primarily due to overall cost reduction activities that decreased general and administrative expenses, partially offset by a decline in revenue discussed above. In addition to the items impacting adjusted EBITDA, operating loss for the June 2017 quarter was impacted by $1.2 million of inventory impairment charges.

GUIDANCE

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

CONFERENCE CALL

Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Friday, August 4, 2017 to review financial results for the fiscal year 2018 first quarter ended June 30, 2017.  This release and the most recent investor slide presentation are available in the investor relations area of our web page at www.bristowgroup.com.  The conference call can be accessed as follows:

Via Webcast:

• Visit Bristow Group's investor relations Web page at www.bristowgroup.com
• Live: Click on the link for "Bristow Group Fiscal 2018 First Quarter Earnings Conference Call"
• Replay: A replay via webcast will be available approximately one hour after the call's completion and will be accessible for approximately 90 days

Via Telephone within the U.S.:

• Live: Dial toll free 1-877-404-9648
• Replay: A telephone replay will be available through August 18, 2017 and may be accessed by calling toll free 1-877-660-6853, passcode: 13665035#

Via Telephone outside the U.S.:

• Live: Dial 1-412-902-0030
• Replay: A telephone replay will be available through August 18, 2017 and may be accessed by calling 1-201-612-7415, passcode: 13665035#

ABOUT BRISTOW GROUP INC.

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

FORWARD-LOOKING STATEMENTS DISCLOSURE

Statements contained in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements.  These forward-looking statements include statements regarding earnings guidance, expected contract revenue, capital deployment strategy, operational and capital performance, expected cost management activities, expected capital expenditure deferrals, shareholder return, liquidity, market and industry conditions.  It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements.  Risks and uncertainties include without limitation:  fluctuations in the demand for our services; fluctuations in worldwide prices of and supply and demand for oil and natural gas; fluctuations in levels of oil and natural gas production, exploration and development activities; the impact of competition; actions by clients and suppliers; the risk of reductions in spending on industrial aviation services by governmental agencies; changes in tax and other laws and regulations; changes in foreign exchange rates and controls; risks associated with international operations; operating risks inherent in our business, including the possibility of declining safety performance; general economic conditions including the capital and credit markets; our ability to obtain financing; the risk of grounding of segments of our fleet for extended periods of time or indefinitely; our ability to re-deploy our aircraft to regions with greater demand; our ability to acquire additional aircraft and dispose of older aircraft through sales into the aftermarket; the possibility that we do not achieve the anticipated benefit of our fleet investment program; availability of employees; and political instability, war or acts of terrorism in any of the countries where we operate.  Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including but not limited to the Company's annual report on Form 10-K for the fiscal year ended March 31, 2017.  Bristow Group Inc. disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

News Release

Linda McNeill
Investor Relations
(713) 267-7622

(financial tables follow)

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SOURCE Bristow Group Inc.