BRISTOW GROUP INC. AND SUBSIDIARIES
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
The accompanying notes are an integral part of these condensed consolidated financial statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
The accompanying notes are an integral part of these condensed consolidated financial statements.
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:
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 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’ investment and mezzaninestockholders 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.
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.
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.
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.
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.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 oil and gas production platforms, drilling rigs and otherenergy 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 its common stockthe 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 consistsconsisted of 8 directors, including 6 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.
Specifically, the Era share price declined from $8.59 to $5.16 between the last trading day prior to the announcement of the Merger announcement 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.
The following table presents details on the aircraft sold or disposed of (in thousands, except for number of aircraft):
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 June 30, | | |
| 2021 | | 2020 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Oil and gas services | $ | 189,596 | | | $ | 191,937 | | | | | |
Government services(1) | 70,436 | | | 54,611 | | | | | |
Fixed wing services | 24,654 | | | 11,559 | | | | | |
Other services(2) | 3,665 | | | 3,401 | | | | | |
Total operating revenues | $ | 288,351 | | | $ | 261,508 | | | | | |
____________________ (1)Includes revenues of approximately $2.0 million related to government services that were previously included in the oil and gas and other service lines for the three months ended June 30, 2020.
(2)Includes Asia Pacific and certain Europe revenues of approximately $3.5 million that were previously included in the oil and gas service line for the three months ended June 30, 2020.
Contract Assets, Liabilities and Receivables
The Company generally satisfies performance of contract obligations by providing helicopter and fixed wing 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 additional performance obligations). These contract assets are transferred to receivables when the right to consideration becomes unconditional. Contract liabilities relate to deferred revenuerevenues in which advance consideration is received from customers for contracts where revenue isrevenues are recognized based on future performance of services.
As of SeptemberJune 30 and March 31, 2020 (Successor),2021, receivables related to services performed under contracts with customers were $173.7$160.5 million and $148.3$167.3 million, respectively. During the sixthree months ended SeptemberJune 30, 2020 (Successor),2021, the Company recognized $2.2$4.4 million of revenuerevenues from outstanding contract liabilities. Contract liabilities related to services performed under contracts with customers were $7.9$14.4 million and $4.9$13.3 million as of SeptemberJune 30, 2020 (Successor)2021 and March 31, 2020 (Predecessor),2021, 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 0 contract assets as of SeptemberJune 30 and March 31, 2020 (Successor).
There was $0.6 million and $1.0 million in revenues recognized from satisfied performance obligations related to prior periods (for example, due to changes in transaction price) for the three months and six months ended September 30, 2020 (Successor), respectively.2021.
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 this revenue (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | |
| Remaining Performance Obligations (Successor) |
| Six Months Ending March 31, 2021 | | Fiscal Year Ending March 31, | | Total |
| | 2022 | | 2023 | | 2024 | | 2025 and thereafter | |
Outstanding Service Revenue: | | | | | | | | | | | |
Helicopter contracts | $ | 223,773 |
| | $ | 243,575 |
| | $ | 198,487 |
| | $ | 171,741 |
| | 271,155 |
| | $ | 1,108,731 |
|
Fixed wing contracts | 718 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 718 |
|
Total remaining performance obligation revenue | $ | 224,491 |
| | $ | 243,575 |
| | $ | 198,487 |
| | $ | 171,741 |
| | 271,155 |
| | $ | 1,109,449 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remaining Performance Obligations |
| Nine Months Ending March 31, 2022 | | Fiscal Year Ending March 31, | | Total |
| | 2023 | | 2024 | | 2025 | | 2026 and thereafter | |
Outstanding Service Revenue: | | | | | | | | | | | |
Helicopter contracts | $ | 305,307 | | | $ | 232,564 | | | $ | 192,086 | | | $ | 159,288 | | | 130,461 | | | $ | 1,019,706 | |
Fixed wing contracts | 752 | | | 0 | | | 0 | | | 0 | | | 0 | | | 752 | |
Total remaining performance obligation revenue | $ | 306,059 | | | $ | 232,564 | | | $ | 192,086 | | | $ | 159,288 | | | $ | 130,461 | | | $ | 1,020,458 | |
Although substantially all of the Company’s revenue is derived under contract, due to the nature of the business, the Company does not have significant remaining performance obligations as its contracts typically include unilateral termination clauses that allow its customers to terminate existing contracts with a notice period of 30 to 365 days. The table above includes
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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 revenue is 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 5 — VARIABLE INTEREST ENTITIES AND OTHER INVESTMENTS IN SIGNIFICANT AFFILIATES
.DEBT
A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. If the Company determines that it has operating power and the obligation to absorb losses or receive benefits, it will consolidate the VIE as the primary beneficiary, and if not, the Company does not consolidate.
As of September 30, 2020 (Successor), the Company had interests in 5 VIEs, Bristow Aviation Holdings Limited (“Bristow Aviation”), Impigra Aviation Holdings Limited (“Impigra”), Bristow Helicopters (Nigeria) Limited (“BHNL”), Pan African Airlines (Nigeria) Limited (“PAAN”) and YII 5668 Energy (“YII Energy”), of which the Company was the primary beneficiary, and had
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
no interests in VIEs of which the Company was not the primary beneficiary. See Note 3 to the fiscal year 2020 condensed consolidated financial statements for a description of these VIEs and other investments in significant affiliates.
Bristow Aviation — The Company owns 49% of Bristow Aviation’s common stock and a significant amount of its subordinated debt. Bristow Aviation is incorporated in England and, through its subsidiaries, holds all the outstanding shares in Bristow Helicopters Limited (“Bristow Helicopters”). Impigra, a British company owned 100% by U.K. Bristow employees is considered a VIE that the Company consolidates as the primary beneficiary and is expected to meet the requirements to satisfy a qualified U.K. investor requirement. As of September 30, 2020, the Company and Impigra owned 49% and 51%, respectively, of Bristow Aviation’s total outstanding ordinary shares. Bristow Aviation and its subsidiaries are exposed to similar operational risks as the Company and are therefore monitored and evaluated on a similar basis by management.
The following tables show summarized financial information for Bristow Aviation reflected on the Company’s condensed consolidated statements of operations and balance sheets (in thousands):
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Six Months Ended September 30, |
| Successor | | | Predecessor | | | Successor | | | Predecessor |
| 2020 | | | 2019 | | | 2020 | | | 2019 |
Revenue | $ | 223,232 |
| | | $ | 276,568 |
| | | $ | 448,851 |
| | | $ | 571,723 |
|
Operating income (loss) | 259,435 |
| | | (13,692 | ) | | | 276,726 |
| | | (2,412 | ) |
Net income (loss) | 182,542 |
| | | (21,034 | ) | | | 121,207 |
| | | (383,882 | ) |
|
| | | | | | | |
| Successor |
| September 30, 2020 | | March 31, 2020 |
Total assets | $ | 1,092,018 |
| | $ | 1,030,096 |
|
Total liabilities | $ | 3,736,812 |
| | $ | 3,792,617 |
|
BHNL — is a joint venture in Nigeria in which Bristow Helicopters owns a 48% interest, a Nigerian company owned 100% by Nigerian employees owns a 50% interest and an employee trust fund owns the remaining 2% interestDebt as of September 30, 2020 (Successor). BHNL provides aviation services to customers in Nigeria.
PAAN — is a joint venture in Nigeria with local partners in which the Company owns a 50.17% interest.
Other Significant Affiliates — Unconsolidated
Cougar — The Company owns a 25% voting interest and a 40% economic interest in Cougar Helicopters Inc. (“Cougar”), the largest offshore energy and SAR helicopter service provider in Canada. Cougar’s operations are primarily focused on serving the offshore oil and gas industry off Canada’s Atlantic coast and in the Arctic.
PAS— The Company has a 25% interest in Petroleum Air Services (“PAS”), an Egyptian corporation that provides helicopter and fixed wing transportation to the offshore energy industry in Egypt. As of SeptemberJune 30 and March 31, 2020 (Successor), the investment in PAS was $33.0 million and is included on the consolidated balance sheets in investment in unconsolidated affiliates.
Líder — During the six months ended September 30, 2020 (Successor), the Company recorded an $18.7 million non-cash impairment charge to its investment in Líder Táxi Aéreo S.A. (“Líder”), an unconsolidated affiliate in Brazil, upon evaluating its equity investment in the company. The Company initiated a partial dissolution process to exit its equity investment in Líder in July 2020. As a result of this process, the Company is no longer a shareholder of Líder.
The Company continues to evaluate its unconsolidated affiliates for indicators of other-than-temporary impairment in light of current market conditions. Changes in market conditions or contractual relationships in future periods could result in the identification of other-than-temporary impairment.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Note 6 — DEBT
Debt as of September 30 and March 31, 2020 (Successor)2021, consisted of the following (in thousands):
|
| | | | | | | | |
| | September 30, 2020 | | March 31, 2020 |
PK Air Debt | | $ | 198,217 |
| | $ | 207,326 |
|
Macquarie Debt | | 145,232 |
| | 148,165 |
|
7.750% Senior Notes (1) | | 137,499 |
| | 0 |
|
Lombard Debt | | 139,399 |
| | 136,180 |
|
Promissory notes (2) | | 17,069 |
| | 0 |
|
Airnorth Debt | | 6,624 |
| | 7,618 |
|
Humberside Debt | | 329 |
| | 335 |
|
Term Loan | | 0 |
| | 61,500 |
|
Total debt | | 644,369 |
| | 561,124 |
|
Less short-term borrowings and current maturities of long-term debt | | (64,027 | ) | | (45,739 | ) |
Total long-term debt | | $ | 580,342 |
| | $ | 515,385 |
|
_________________
| |
(1)
| The pre-Merger outstanding principal amount of Era’s 7.750% senior unsecured notes as of March 31, 2020 was $142.0 million, net of unamortized discounts and debt issuance costs. |
| |
(2)
| The pre-Merger outstanding principal amount of Era’s promissory notes as of March 31, 2020 was $17.9 million. |
PK Air Debt — During the three and six months ended September 30, 2020 (Successor), the Company made $5.4 million and $10.6 million, respectively, in principal payments on the PK Air debt. | | | | | | | | | | | |
| June 30, 2021 | | March 31, 2021 |
6.875% Senior Notes | 391,466 | | | 391,550 | |
Lombard Debt | 144,802 | | | 146,006 | |
Airnorth Debt | 5,073 | | | 5,631 | |
Humberside Debt | 273 | | | 306 | |
Total debt | 541,614 | | | 543,493 | |
Less short-term borrowings and current maturities of long-term debt | (16,043) | | | (15,965) | |
Total long-term debt | $ | 525,571 | | | $ | 527,528 | |
Macquarie Debt — During the three and six months ended September 30, 2020 (Successor), the Company made $2.4 million and $4.8 million, respectively, in principal payments on the Macquarie debt.
7.750%6.875% Senior Notes — On December 7, 2012, Era Group In February 2021, the Company issued $200.0$400.0 million aggregate principal amount of its 7.750%6.875% senior unsecuredsecured notes due December 15, 2022March 2028 (the “7.750%“6.875% Senior Notes”) and received net proceeds of $191.9$395.0 million. The 6.875% Senior Notes are fully and unconditionally guaranteed as to payment by a number of subsidiaries. Interest on the 7.750%6.875% Senior Notes is payable semi-annually in arrears on June 15thMarch 1st and December 15thSeptember 1st of each year.year, with the first payment starting on September 1, 2021. The 7.750%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 forth in the indenture governing the 7.750%6.875% Senior Notes, plusinclusive of any accrued and unpaid interest if any,leading up to the redemption date. The indenture governing the 7.750%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 ourits assets. In addition, upon a specified change of control trigger event or specified asset sale, the Company may be required to repurchase the 7.750% Senior Notes. The payment obligations underoutstanding balance of the 7.750%6.875% Senior Notes are fully and unconditionally guaranteed by certain of the Company’s subsidiaries.
As of SeptemberJune 30, 2020 (Successor),2021, the 7.750%Company had $8.5 million of unamortized debt issuance costs associated with the 6.875% Senior Notes had a carrying value of $137.5 million on the condensed consolidated balance sheets. In June 2020, in connection with and upon completion of the Merger, Era’s long-term debt less its current maturities were fair valued and a new value of $136.8 million was assigned to the 7.750% Senior Notes.
Lombard Debt — During the three and six months ended SeptemberJune 30, 2020 (Successor),2021, the Company made $3.1$3.3 million and $6.1 million, respectively, in principal paymentpayments on the Lombard debt.
Promissory Notes — In 2010, Era entered into 2 promissory notes to purchase a heavy and medium helicopter, respectively. In December 2015, upon maturity of the notes, the then outstanding balances of $19.0 million and $5.9 million were refinanced. The notes require monthly principal payments of $0.1 million and less than $0.1 million with final payments of $12.8 million and $4.0 million, respectively. Both promissory notes are due in December 2020.
Term Loan Agreement — In connection with the closing of the Merger on June 11, 2020, the Company fully repaid the Term Loan by making $61.5 million in principal payments and $0.6 million in prepayment premiums.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
4½% Convertible Senior Notes due 2023— Prior to May 11, 2019, the remaining debt discount was being amortized to interest expense over the term of the 4½% Convertible Senior Notes using the effective interest rate. The effective interest rate for April 1, 2019 to May 11, 2019 (Predecessor) was 11.0%. Interest expense related to the 4½% Convertible Senior Notes was as follows (in thousands):
|
| | | |
| Predecessor |
| Six Months Ended September 30, 2019 |
Contractual coupon interest | $ | 715 |
|
Amortization of debt discount | 648 |
|
Total interest expense | $ | 1,363 |
|
As of May 11, 2019, Old Bristow determined that the 4½% Convertible Senior Notes were an allowed claim and therefore reclassified the balance to liabilities subject to compromise and discontinued accruing interest on these obligations. Contractual interest on the 4½% Convertible Senior Notes for the three and six months ended September 30, 2019 (Predecessor) was $1.6 million and $3.2 million, which is $1.6 million and $2.5 million in excess of reported interest expense for the three and six months ended September 30, 2019 (Predecessor).
ABL Facility — On April 17, 2018, 2 of Old Bristow’s subsidiaries entered into anThe Company’s asset-backed revolving credit facility (the(as amended or modified, the “ABL Facility”). The ABL Facility matures in April 2023, 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 are (i) secured by certain accounts receivable owing to the borrower subsidiaries, Bristow Helicopters Limited, Bristow Norway AS, Bristow U.S. LLC and Era Helicopters, LLC (collectively, the “ABL Borrowers”), and the deposit accounts into which payments on such accounts receivable are deposited.
On August 18, 2020,deposited, and (ii) fully and unconditionally guaranteed as to payment by the Company, entered into a Deedas parent guarantor, and each of Amendment and Restatement, Accession, Transfer, Resignation and Confirmation Agreement (the “ABL Amendment”) relating to the ABL Facility (as amended by the ABL Amendment, the “Amended ABL”), by and among the Company, Old Bristow, Bristow Norway AS, Bristow Helicopters Limited and Bristow U.S. LLC, as borrowers and guarantors, the financial institutions from time to time party thereto as lenders and Barclays Bank PLC, in its capacity as agent and security trustee.Borrowers. The ABL Amendment amends the ABL Facility currently provides for commitments in order to, among other things, (i) make available to the borrowers an additionalaggregate amount of $85.0 million, which amount includes a “last in, last out” tranche of revolving loan commitments available to the borrowers under the Amended ABL Borrowers in an aggregate amount not to exceed $5.0 million, (ii) replace Old Bristow with the Company as the parent guarantor under the Amended ABL and (iii) permit the accession at a later date of certain domestic subsidiaries of the Company as borrowers under the Amended ABL and the addition of certain of their receivables to the borrowing base and the collateral for the Amended ABL. The interest rates applicable to loans made under the “last in, last out” tranche of revolving commitments under the Amended ABL are equal to either: (a) the ABR (as defined in the Amended ABL) plus 2.50% per annum or (b) LIBOR or NIBOR (each as defined in the Amended ABL) plus 3.50% per annum. Swingline loans made under the “last in, last out” tranche of revolving commitments under the Amended ABL bear interest at the ABR Rate (as defined in the Amended ABL) plus 2.50% per annum. As a result of the ABL Amendment, the Amended ABL provides for commitments in an aggregate amount of $80.0 million. The Company retains the ability under the Amended ABL Facility to increase the total commitments up to a maximum aggregate amount of $115.0 million, subject to the terms and conditions therein.
As of SeptemberJune 30, 2020 (Successor),2021, there were 0no outstanding borrowings under the Amended ABL Facility nor had the Company made any draws during the three months ended SeptemberJune 30, 2020 (Successor).2021. Letters of credit issued under the Amended ABL Facility in the aggregate face amount of $9.2$21.3 million were outstanding on SeptemberJune 30, 2020 (Successor).2021.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
LIBOR Transition — In 2020, a number of regulators in conjunction with the FASB and the U.S. Federal Reserve announced their intention to suspendbegin the suspension and replacereplacement of the use of LIBOR bystarting towards the beginningend of calendar year 2021.2021 with a complete phase-out to be undertaken by June 2023. The effects of this transition from LIBOR to an alternative reference rate may impact the Company’s current indebtedness that is tied to LIBOR, in addition to the potential overall financial market disruption as a result of this phase-out. The Company is currently evaluating the potential effects of this announcement on its underlying debt, but it does not expect the impact to be material.
Note 76 — 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.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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.
Old Bristow Preferred Stock Embedded Derivative
The fair value of the Old Bristow Preferred Stock embedded derivative relied on the income approach which was derived from Level 3, unobservable inputs that required significant estimates, judgments and assumptions relating to the Company’s equity volatility, capitalization tables, term to exit and equity value. The Old Bristow Preferred Stock was converted into Old Bristow Common Stock immediately prior to consummation of the Merger.
Changes in the fair value of the New Preferred Stock derivative liability, carried at fair value, are reported as change in fair value of the Preferred Stock derivative liability in the condensed consolidated statements of operations. For the six months ended September 30, 2020 (Successor), the Company recognized non-cash expense of approximately $15.4 million due to an increase in the Preferred Stock derivative liability related to the embedded derivative in the New Preferred Stock.
The following table provides a rollforward of the preferred stock embedded derivative Level 3 fair value measurements for the six months ended September 30, 2020 (Successor):
|
| | | | |
| | Significant Unobservable Inputs (Level 3) |
Derivative financial instruments: | | (in thousands) |
March 31, 2020 | | $ | 286,182 |
|
Change in fair value | | (15,416 | ) |
Preferred stock shares conversion | | (266,846 | ) |
Share repurchases | | (3,920 | ) |
September 30, 2020 | | $ | 0 |
|
The Old Bristow Preferred stock embedded derivative considered settlement scenarios which are further defined in Note 11 to the condensed consolidated financial statements. A number of the settlement scenarios required a settlement premium. The specified premium depended on the timing of the liquidity event, ranging from a minimum of (a) 17% Internal Rate of Return (the “IRR”) (b) 2.1x Multiple of Invested Capital (the “MOIC”) and (c) 14% Internal Rate of Return (the “IRR”) if the liquidity event is prior to 3 years, to (y) a 2.1x MOIC and (z) 17% IRR if the liquidity event is in 5 years or more. The fair value for the embedded derivative was determined using a “with” and “without” approach, first determining the fair value of the Old Bristow Preferred Stock (inclusive of all bifurcated features) with the features and comparing it with the fair value of an instrument with identical terms to the Old Bristow Preferred Stock without any of the bifurcated features (i.e., the preferred stock host).
The fair value of the Old Bristow Preferred Stock was estimated using an option pricing method (“OPM”) allocating the total equity value to the various classes of equity. As of June 11, 2020 (Successor), Old Bristow assumed an expected term of 6 years, a risk-free rate of 0.38% and volatility of 85%. Without the redemption or conversion features, the holders of the Old Bristow Preferred Stock would have had right to perpetual preferred with 10% paid-in-kind (“PIK”) dividends, or the right to any upside value from conversion into common stock if the value exceeded the minimum return provided for under the COD (as defined herein). The value of converting to common stock on the upside would be measured as the residual upon a liquidity event. Therefore, the fair value of the host was estimated as the value of the upside conversion into common shares, which was also estimated using the OPM. The valuation as of June 11, 2020 resulted in a decline in fair value of the Old Bristow Preferred Stock embedded derivative of $15.4 million from March 31, 2020 (Successor).
On June 11, 2020, immediately before the Merger was executed, Old Bristow exercised its call right (the “Call Right’) pursuant to section 8 of the Certificate of Designation of the Old Bristow Preferred Stock (“COD”). This provision entitled Old Bristow to repurchase the shares upon a Fundamental Transaction (which included a merger or consolidation) for a repurchase price equal to (i) the Liquidation Preference plus (ii) the present value of the dividends that would have accrued from the call date
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
to the 5th anniversary of the issuance date (had the Call Right not been exercised) multiplied by the Make-Whole Redemption Percentage (equal to 102% because the Call Right was exercised before the 3rd anniversary of the issuance date). Upon exercise of the Call Right, Old Bristow issued 5.17962 shares of Old Bristow Common Stock to the remaining holders of the Preferred Stock for each share of Preferred Stock held.
The carrying values of the Old Bristow Preferred Stock were derecognized, including the Old Bristow Preferred Stock embedded derivative, and recognized the Old Bristow Common Stock issued to the holders of the Old Bristow Preferred Stock at its fair value. The difference between (a) the carrying value of the Old Bristow Preferred Stock embedded derivative plus the carrying value of the Old Bristow Preferred Stock host and (b) the fair value of the Old Bristow Common Stock paid as consideration for the Old Bristow Preferred Stock was recognized in retained earnings because the fair value of the Old Bristow Common Stock was less than the combined carrying values of the Old Bristow Preferred Stock host and embedded derivative. In addition, immediately prior to the Merger, Old Bristow repurchased 98,784 shares of the Old Bristow Preferred Stock and 142,721 shares of Old Bristow Common Stock. The repurchase of the Old Bristow Preferred Stock was accounted for in the same manner as the share-settled redemption described above in connection with the Merger.
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 market prices for those loans and 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 valuevalues of the Company’s debt excluding unamortized debt issuance costs, are as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Successor |
| Carrying Amount | | Level 1 | | Level 2 | | Level 3 |
September 30, 2020 | | | | | | | |
LIABILITIES | | | | | | | |
PK Air Debt | $ | 198,217 |
| | $ | 0 |
| | $ | 205,627 |
| | $ | 0 |
|
Macquarie Debt | 145,232 |
| | 0 |
| | 153,119 |
| | 0 |
|
7.750% Senior Notes | 137,499 |
| | 0 |
| | 136,889 |
| | 0 |
|
Lombard Debt | 139,399 |
| | 0 |
| | 150,211 |
| | 0 |
|
Promissory notes | 17,069 |
| | 0 |
| | 17,069 |
| | 0 |
|
Airnorth Debt | 6,624 |
| | 0 |
| | 6,778 |
| | 0 |
|
Humberside Debt | 329 |
| | 0 |
| | 329 |
| | 0 |
|
| $ | 644,369 |
| | $ | 0 |
| | $ | 670,022 |
| | $ | 0 |
|
March 31, 2020 | | | | | | | |
LIABILITIES | | | | | | | |
PK Air Debt | $ | 207,326 |
| | $ | 0 |
| | $ | 180,290 |
| | $ | 0 |
|
Macquarie Debt | 148,165 |
| | 0 |
| | 138,133 |
| | 0 |
|
Lombard Debt | 136,180 |
| | 0 |
| | 122,165 |
| | 0 |
|
Term Loan | 61,500 |
| | 0 |
| | 56,894 |
| | 0 |
|
Airnorth Debt | 7,618 |
| | 0 |
| | 7,221 |
| | 0 |
|
Humberside Debt | 335 |
| | 0 |
| | 335 |
| | 0 |
|
| $ | 561,124 |
| | $ | 0 |
| | $ | 505,038 |
| | $ | 0 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Amount | | Level 1 | | Level 2 | | Level 3 |
June 30, 2021 | | | | | | | |
LIABILITIES | | | | | | | |
6.875% Senior Notes(1) | $ | 391,466 | | | $ | 0 | | | $ | 411,361 | | | $ | 0 | |
Lombard Debt | 144,802 | | | 0 | | | 151,765 | | | 0 | |
Airnorth Debt | 5,073 | | | 0 | | | 4,950 | | | 0 | |
Humberside Debt | 273 | | | 0 | | | 273 | | | 0 | |
| $ | 541,614 | | | $ | 0 | | | $ | 568,349 | | | $ | 0 | |
March 31, 2021 | | | | | | | |
LIABILITIES | | | | | | | |
6.875% Senior Notes(1) | $ | 391,550 | | | $ | 0 | | | $ | 398,870 | | | $ | 0 | |
Lombard Debt | 146,006 | | | 0 | | | 155,270 | | | 0 | |
Airnorth Debt | 5,631 | | | 0 | | | 5,656 | | | 0 | |
Humberside Debt | 306 | | | 0 | | | 306 | | | 0 | |
| $ | 543,493 | | | $ | 0 | | | $ | 560,102 | | | $ | 0 | |
_________________ (1)The carrying value of the 6.875% Senior Notes is net of unamortized discount as follows (in thousands):debt issuance costs of $8.5 million.
|
| | | | | | | | |
| | Successor |
| | September 30, 2020 | | March 31, 2020 |
PK Air Debt | | $ | 11,095 |
| | $ | 12,620 |
|
Macquarie Debt | | 9,196 |
| | 11,063 |
|
7.750% Senior Notes | | 6,589 |
| | 0 |
|
Lombard Debt | | 23,817 |
| | 26,372 |
|
Airnorth Debt | | 339 |
| | 605 |
|
Total unamortized debt discount | | $ | 51,036 |
| | $ | 50,660 |
|
14
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The carrying values are net of unamortized discount as follows (in thousands):
| | | | | | | | | | | |
| June 30, 2021 | | March 31, 2021 |
| | | |
Lombard Debt | 19,566 | | | 21,495 | |
Airnorth Debt | 103 | | | 154 | |
Total unamortized debt discount | $ | 19,669 | | | $ | 21,649 | |
Old Bristow Preferred Stock Embedded Derivative
The fair value of Old Bristow’s preferred stock embedded derivative was estimated on the pre-merger basis, using the income approach, namely a “with” and “without” analysis. The difference between the value of Old Bristow’s preferred stock in the “with” and “without” analyses represented the value of the embedded derivative. Old Bristow was private on the pre-merger basis and hence, the Old Bristow preferred stock value was estimated based on the expected exchange ratio upon the merger. As there was no trading price or any directly observable market information for the embedded derivative itself or Old Bristow’s preferred stock price the fair value of the embedded derivative represents a model value. Due to these facts and circumstances, the fair value of Old Bristow’s Preferred Stock embedded derivative was derived from Level 3 inputs, due to the nature of unobservable inputs that required significant estimates, judgments and assumptions.
Changes in the fair value of the New Preferred Stock derivative liability, carried at fair value, were reported as change in fair value of the preferred stock derivative liability in the condensed consolidated statements of operations. During the three months ended June 30, 2020, the Company recognized non-cash gain of approximately $15.4 million due to an increase in the preferred stock derivative liability related to the embedded derivative in the New Preferred Stock.
The following table provides a rollforward of the preferred stock embedded derivative Level 3 fair value measurements for the three months ended June 30, 2020:
| | | | | |
| Significant Unobservable Inputs (Level 3) |
Derivative financial instruments: | (in thousands) |
March 31, 2020 | $ | 286,182 | |
Change in fair value | (15,416) | |
Preferred stock shares conversion | (266,846) | |
Share repurchases | (3,920) | |
June 30, 2020 | $ | 0 | |
On June 11, 2020, immediately before the Merger was executed, Old Bristow exercised its call right on the preferred stock, allowing Old Bristow to repurchase the shares upon a Fundamental Transaction (which included a merger or consolidation). Upon exercise of the call right, Old Bristow issued 5.17962 shares of Old Bristow’s common stock to the remaining holders of the Preferred Stock for each share of Preferred Stock held. The Old Bristow preferred stock was converted into Old Bristow common stock immediately prior to consummation of the Merger. For further discussion, see Note 87 in the Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Note 7 — COMMITMENTS AND CONTINGENCIES
Fleet — The Company’s unfunded capital commitments as of SeptemberJune 30, 2020 (Successor)2021 consisted primarily of agreements to purchase helicopters and totaled $85.1$86.0 million, payable beginning in fiscal year 2021 through fiscal year 2022. The Company also had $1.3 million of deposits paid on options not yet exercised. All of the Company’s capital commitments (inclusive of deposits paid on options not yet exercised) may be terminated without further liability other than aggregate liquidated damages of approximately $2.1 million.
Included in these commitments are orders to purchase 3 AW189 heavy helicopters and 5 AW169 light twin helicopters. The AW189 helicopters are scheduled to be delivered in fiscal year 2022. Delivery dates for the AW169 helicopters have yet to be determined. In addition, the Company had outstanding options to purchase up to 10 additional AW189 helicopters. If these options are exercised, the helicopters would be scheduled for delivery in fiscal yearyears 2022 and fiscal year 2023. The Company may, from time to time, purchase aircraft for which it has no orders.
Other Purchase Obligations — As of SeptemberJune 30, 2020 (Successor),2021, the Company had $9.6$21.1 million of other purchase obligations representing non-cancelable PBHpower-by-the-hour (“PBH”) maintenance commitments.commitments and unfilled purchase orders for aircraft parts.
General Litigation and Disputes
In July 2021, the Company settled a bankruptcy preference claim related to amounts paid under a termination agreement between Old Bristow and Columbia Helicopters, Inc. The settlement is considered a gain contingency and is expected to result in the receipt of a $9.0 million cash payment to be recognized in the second fiscal quarter.
The Company operates in jurisdictions internationally where it is subject to risks that include government action to obtain additional tax revenue. 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.
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. In addition, from time to time, the Company is involved in tax and other disputes with various government agencies. 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 98 — TAXES
The Company’s effective tax rate was (44.2)%25.4% and 11.8%(4.8)% during the three months ended SeptemberJune 30, 2020 (Successor)2021 and SeptemberJune 30, 2019 (Predecessor), respectively, and 10.9% and 10.1% during the six months ended September 30, 2020, (Successor) and September 30, 2019 (Predecessor), respectively. The effective tax rate in the three and six months ended SeptemberJune 30, 2020 (Successor)2021 includes the impact of impairment losses, utilization of net operating losses in certain foreign jurisdictions and adjustment to its valuation allowances against future realization of deductible business interest expense. The Company’s provision for income taxes for the interim period ended SeptemberJune 30, 20202021 was prepared by applying the estimated annual income tax rate for the full fiscal year to income from continuing operations, excluding discrete items, for the reporting period. For the interim period ended June 30, 2020, the Company utilized the discrete effectivelyeffective tax rate method to report its provision for income taxes.
The relationship between the Company’s provision for or benefit from income taxes and the Company’s pre-tax book income can vary significantly from period to period considering, among other factors, (a) the overall level of pre-tax book income, including asset sales, (b) changes in the blend of income that is taxed based on gross revenues or at high effective tax rates versus pre-tax book income or at low effective tax rates and (c) the Company’s geographical blend of pre-tax book
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
income. Consequently, the Company’s income tax expense or benefit does not change proportionally with the Company’s pre-tax book income or loss. Significant decreases in the Company’s pre-tax book income typically result in higher effective tax rates, while significant increases in pre-tax book income can lead to lower effective tax rates, subject to the other factors impacting income tax expense noted above. The change in the Company’s effective tax rate excluding discrete items for the three and six months ended SeptemberJune 30, 2020 (Successor)2021 compared to the three and six months ended SeptemberJune 30, 2019 (Predecessor)2020 primarily related to changes in the blend of earnings taxed in relatively high taxed jurisdictions versus low taxed jurisdictions and nondeductible professional fees related to the Merger. The six months ended September 30, 2020 (Successor) income taxes include a benefit of $17.0 million related to the bargain purchase gain and an expense of $3.9 million from the impairment of the Company’s investment in Líder.jurisdictions. Additionally, the Company increased its valuation allowances by $2.8$0.7 million and $3.6released its valuation allowance by $3.3 million for the three months ended SeptemberJune 30, 2021 and 2020, (Successor) and September 30, 2019 (Predecessor), respectively, and decreased its valuation allowances by
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
$6.2 million and increased its valuation allowances by $3.3 million for the six months ended September 30, 2020 (Successor) and September 30, 2019 (Predecessor), respectively, which also impacted the Company’s effective tax rate.respectively.
Valuation allowances represent the reduction ofare presented as reductions to the Company’s deferred tax assets. The Company evaluates its deferred tax assets quarterly, which requires significant management judgment to determine the recoverability of these deferred tax assets by assessing whether it is more likely than not that some or all of the deferred tax asset will be realized before expiration. After considering all available positive and negative evidence using a “more likely than not” standard, the Company believes it is appropriate to value against deferred tax assets related to foreign tax credits and certain foreign net operating losses. For the three months ended September 30, 2019 (Predecessor), the Company released valuation allowances of $0.2 million related to net operating losses in certain foreign jurisdictions and deductible business interest expense. For the six months ended September 30, 2020 (Successor) and September 30, 2019 (Predecessor), the Company released valuation allowances of $9.6 million and $7.2 million, respectively, related to net operating losses in certain foreign jurisdictions and deductible business interest expense, respectively.
The benefit of an uncertain tax position taken or expected to be taken on an income tax return is recognized in the condensed consolidated financial statements at the largest amount that is more likely than not to be sustained upon examination by the relevant taxing authority. Interest and penalties, if any, related to uncertain tax positions would be recorded in interest expense and other expense, respectively.
Note 9 — STOCKHOLDERS’ INVESTMENT, EARNINGS PER SHARE AND ACCUMULATED OTHER COMPREHENSIVE INCOME
Share Repurchases.
On September 16, 2020, the Board authorized a stock repurchase plan providing for the repurchase of up to $75.0 million of the Company's common stock. Repurchases under the program may be made in the open market, including pursuant to a Rule 10b5-1 plan, by block repurchases, in private transactions (including with related parties) or otherwise, from time to time, depending on market conditions. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice.
In June 2021, the Company repurchased 933,208 shares of common stock in open market transactions for gross consideration of $25.1 million, which is an average cost per share of $26.89. After these repurchases, as of June 30, 2021, $39.9 million remained of the $75.0 million share repurchase program.
In July 2021, the Company repurchased an additional 547,596 shares of common stock for gross consideration of $14.9 million, which is an average cost per share of $27.24. After these repurchases, $25.0 million remained available of the authorized $75.0 million share repurchase program.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Earnings per Share
Note 10 — SHARE-BASED COMPENSATION AND OTHER EMPLOYEE BENEFIT PLANS
Management Incentive Plan
OnBasic earnings per common share is computed by dividing income available to common stockholders by the Effective Date, the Compensation Committeeweighted average number of Old Bristow’s Board adopted the 2019 Management Incentive Plan (the “MIP”). At the time of its adoption, the MIP served as an equity-based compensation plan for directors, officers and participating employees and other service providers of Old Bristow and its affiliates, pursuant to which Old Bristow was permitted to issue awards covering shares of common stock outstanding during the period. Diluted earnings per common share excludes options to purchase common shares 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 share and per share amounts):
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2021 | | 2020 | | | | |
| Income (loss): | | | | | | | |
| Net income (loss) attributable to Bristow Group Inc. | $ | (14,197) | | | $ | 71,477 | | | | | |
| Less: PIK dividends (1) | 0 | | | (12,039) | | | | | |
| Plus: Deemed contribution from conversion of preferred stock | 0 | | | 144,986 | | | | | |
| Income available to common stockholders – basic | $ | (14,197) | | | $ | 204,424 | | | | | |
| Add: PIK dividends | 0 | | | 12,039 | | | | | |
| Less: Changes in fair value of preferred stock derivative liability | 0 | | | (15,416) | | | | | |
| Income (loss) available to common stockholders – diluted | $ | (14,197) | | | $ | 201,047 | | | | | |
| Shares: | | | | | | | |
| Weighted average number of common shares outstanding – basic | 28,669,417 | | | 11,102,611 | | | | | |
| Net effect of dilutive preferred stock | 0 | | | 27,885,917 | | | | | |
| Weighted average number of common shares outstanding – diluted(2)(3) | 28,669,417 | | | 38,988,528 | | | | | |
| | | | | | | | |
| Earnings per common share - basic | $ | (0.50) | | | $ | 18.41 | | | | | |
| Earnings per common share - diluted | $ | (0.50) | | | $ | 5.16 | | | | | |
___________________________(1)See Note 6 and discussion below for further details on PIK dividends and changes in fair value of preferred stock derivative liability.
(2)Excludes weighted average common shares of 238,599 and 1,622,332 for the three months ended June 30, 2021 and 2020, respectively, for certain share awards as the effect of their inclusion would have been antidilutive.
Stockholders’ Investment, Old Bristow Common Stock and Old Bristow Preferred Stock. During the five months ended March 31, 2020 (Successor), Old Bristow awarded 188,210 shares of restricted Old Bristow Preferred Stock 312,606 shares of restricted Old Bristow Common Stock, 113,081 Old Bristow Preferred Stock options and 265,049 Old Bristow Common Stock options. Upon the closing of the Merger, these awards converted into 656,617 shares of restricted Combined Company Common Stock and 433,283 stock options to purchase Combined Company Common Stock, of which 73,131 shares of restricted Combined Company Common Stock and 48,448 Combined Company Common Stock options vested and 227,884 shares of restricted of Combined Company Common Stock and 151,307 Combined Company Common Stock options forfeited on June 11, 2020 (Successor). Upon the closing of the Merger, 151,768 shares of unvested Combined Company restricted stock awards previously issued under the Era Group Inc. 2012 Share Incentive Plan (the “2012 Incentive Plan”) remained unvested.
Total stock based compensation expense, which includes stock options and restricted stock was $2.0 million and $7.2 million for the three and six months ended September 30, 2020 (Successor), respectively.
On June 17, 2020 (Successor), the Company awarded 150,001 shares of Combined Company performance restricted stock units at an average grant date fair value of $7.73 and 150,001 stock options to purchase Combined Company Common Stock at a grant date fair value of $10.99 to certain senior executives. The performance restricted stock vests on a cliff-basis after three years based on certain stock price performance targets. The following table shows the assumptions used to compute the stock-based compensation expense for stock options granted on June 17, 2020 (Successor):
|
| | |
| Common Stock Options |
Risk free interest rate | 0.5 | % |
Expected life (years) | 6.5 |
|
Volatility | 80.0 | % |
Weighted average exercise price of options granted | 15.76 |
|
Weighted average grant-date fair value of options granted | 10.99 |
|
During the three months ended September 30, 2020, the Combined Company awarded 218,088 shares of restricted stock units at an average grant date fair value $19.41 per share and 11,667 stock options at a grant date fair value of $14.56.
Pension Plans
The components of net periodic pension cost (benefit) other than the service cost component are included in other income (expense), net on the Company’s condensed consolidated statement of operations. The following table provides a detail of the components of net periodic pension cost (benefit) (in thousands):
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Six Months Ended September 30, |
| Successor | | | Predecessor | | | Successor | | | Predecessor |
| 2020 | | | 2019 | | | 2020 | | | 2019 |
Service cost for benefits earned during the period | $ | 304 |
| | | $ | 152 |
| | | $ | 595 |
| | | $ | 311 |
|
Interest cost on pension benefit obligation | 2,334 |
| | | 2,799 |
| | | 4,576 |
| | | 5,718 |
|
Expected return on assets | (3,233 | ) | | | (3,841 | ) | | | (6,340 | ) | | | (7,846 | ) |
Prior service costs | 0 |
| | | 34 |
| | | 0 |
| | | 69 |
|
Amortization of unrecognized losses | 0 |
| | | 1,976 |
| | | 0 |
| | | 4,037 |
|
Net periodic pension cost | $ | (595 | ) | | | $ | 1,120 |
| | | $ | (1,169 | ) | | | $ | 2,289 |
|
The current estimates of the Company’s cash contributions to the Company’s defined benefit pension plans to be paid in fiscal year 2021 are $16.3 million, of which $7.6 million was paid during the six months ended September 30, 2020 (Successor).
Note 11 — STOCKHOLDERS’ INVESTMENT, EARNINGS PER SHARE AND ACCUMULATED OTHER COMPREHENSIVE INCOME
Stockholders’ Investment, Common Stock and Preferred Stock
As of September 30, 2020 (Successor), there were 29,813,734 shares of Combined Company Common Stock and 0 shares of the Combined Company’s preferred stock issued and outstanding.
In connection with the Merger, the Old Bristow Preferred Stock which was previously defined,Bristow’s preferred stock was converted into Old Bristow Common Stock which was previously defined,common stock, and then all Old Bristow Common Stockcommon stock was subsequently converted into the Combined Company Common Stock.Company’s common stock.
Because theAs Old Bristow Preferred StockBristow’s preferred stock could be redeemed in certain circumstances outside of the sole control of Old Bristow (including at the option of the holder), but was not mandatorily redeemable, the Old Bristow Preferred Stockpreferred stock was classified as mezzanine equity and initially recognized at fair value of $618.9 million as of October 31, 2019 (Successor)its Emergence from Voluntary Reorganization under Chapter 11, the “Effective Date”. This amount was reduced by the fair value of the bifurcated derivative liability as of October 31, 2019 (Successor) of $470.3 million as of the Effective Date, resulting in an initial value of $148.6 million. The difference between (a) the carrying value of the embedded derivative of $270.8 million plus the carrying value of the Preferred Stock Host of $148.6 million and (b) the fair value of the Old Bristow Common Stock of $270.7 million paid as consideration for the Old Bristow Preferred Stock was recognized in retained earnings, because the fair value of the Old Bristow Common Stock was less than the combined carrying values of the Old Bristow Preferred Stock host and embedded derivative.
Prior to the Merger, there were 11,092,845 shares of Old Bristow Common Stock and 6,725,798 shares of Old Bristow Preferred Stock issued and outstanding. As described in Note 7 to the condensed consolidated financial statements, Old Bristow repurchased certain shares of Old Bristow Common Stock and shares of Old Bristow Preferred Stock immediately prior to the conversion of the Old Bristow Preferred Stock into Old Bristow Common Stock. The repurchase was accounted for in the same manner as the share conversion and included in the calculation described above. The Old Bristow Preferred Stock was converted into Old Bristow Common Stock at a rate of 5.179562 shares of Old Bristow Common Stock for each share of Old Bristow Preferred Stock.
The Old Bristow Common Stock was then subsequently exchanged for the Combined Company Common Stock, resulting in a total of 24,195,693 shares of Combined Company Common Stock issued to legacy Old Bristow stockholders. This resulted in a total of 30,882,471 shares of Combined Company Common Stock issued and outstanding immediately after consummation of the Merger. Upon the closing of the Merger, 217,899 shares of restricted stock awards and 145,263 stock options to purchase common stock for certain employees, related to Old Bristow employees, were canceled as a result of separation from the Combined Company. Upon the closing of the Merger, vesting of 145,604 shares of restricted stock awards, related to the Combined Company’s employees were also accelerated.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Share Repurchases.
On September 16, 2020, the Board authorized a stock repurchase plan providing for the repurchase of up to $75.0 million of the Company's common stock. Repurchases under the program may be made in the open market, including pursuant to a Rule 10b5-1 plan, by block repurchases, in private transactions (including with related parties) or otherwise, from time to time, depending on market conditions. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice.
During the three months ended September 30, 2020, the Company repurchased 345,327 shares of common stock in open market transactions for gross consideration of $7.6 million, which is an average cost per share of $21.93. After these repurchases, as of September 30, 2020, $67.4 million remained of the $75.0 million share repurchase program.
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 shares 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 share and per share amounts):
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Six Months Ended September 30, |
| Successor | | | Predecessor | | | Successor | | | Predecessor |
| 2020 | | | 2019 | | | 2020 | | | 2019 |
Income (loss): | | | | | | | | | | |
Net income (loss) attributable to Bristow Group Inc. | $ | (27,861 | ) | | | $ | (162,974 | ) | | | $ | 43,616 |
| | | $ | (332,220 | ) |
Less: PIK dividends (1) | 0 |
| | | 0 |
| | | (12,039 | ) | | | 0 |
|
Plus: Deemed contribution from conversion of preferred stock | 0 |
| | | 0 |
| | | 144,986 |
| | | 0 |
|
Income available to common stockholders – basic | $ | (27,861 | ) | | | $ | (162,974 | ) | | | $ | 176,563 |
| | | $ | (332,220 | ) |
Less: Preferred stock adjustments | 0 |
| | | 0 |
| | | (3,377 | ) | | | 0 |
|
Income available to common stockholders – diluted | $ | (27,861 | ) | | | $ | (162,974 | ) | | | $ | 173,186 |
| | | $ | (332,220 | ) |
Shares: | | | | | | | | | | |
Weighted average number of common shares outstanding – basic | 29,357,959 |
| | | 35,918,916 |
| | | 20,230,285 |
| | | 35,918,916 |
|
Net effect of dilutive stock options and restricted stock | 0 |
| | | 0 |
| | | 13,801,372 |
| | | 0 |
|
Weighted average number of common shares outstanding – diluted(2)(3) | 29,357,959 |
| | | 35,918,916 |
| | | 34,031,657 |
| | | 35,918,916 |
|
| | | | | | | | | | |
Earnings per common share - basic | $ | (0.95 | ) |
| | $ | (4.54 | ) | | | $ | 8.73 |
| | | $ | (9.25 | ) |
Earnings per common share - diluted | $ | (0.95 | ) |
| | $ | (4.54 | ) | | | $ | 5.09 |
| | | $ | (9.25 | ) |
___________________________ | |
(1)
| See “Stockholders’ Investment, Common Stock and Preferred Stock” above for further discussion on PIK dividends.
|
| |
(2)
| Excludes weighted average common shares of 1,280,592 and 4,003,039 for the three months ended September 30, 2020 (Successor) and 2019 (Predecessor), respectively, and 1,267,315 and 3,825,187 for the six months ended September 30, 2020 (Successor) and 2019 (Predecessor), respectively, for certain share awards as the effect of their inclusion would have been antidilutive. The Old Bristow Preferred Stock is not included on an if-converted basis under diluted earnings per common share as the conversion of the shares would have been anti-dilutive. |
| |
(3)
| Potentially dilutive shares issuable pursuant to the warrant transactions entered into concurrently with the issuance of the Combined Company’s 4½% Convertible Senior Notes (the “Warrant Transactions”) were not included in the computation of diluted income per share for the three six months ended September 30, 2019, because to do so would have been anti-dilutive. |
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):
|
| | | | | | | | | | | | | | | |
| Successor |
| Currency Translation Adjustments | | Pension Liability Adjustments (1) | | Unrealized gain (loss) on cash flow hedges (2) | | Total |
Balance as of March 31, 2020 | $ | (16,440 | ) | | $ | 6,389 |
| | $ | 1,410 |
| | $ | (8,641 | ) |
| | | | | | | |
Other comprehensive income (loss) before reclassification | 18,485 |
| | 0 |
| | (2,993 | ) | | 15,492 |
|
Reclassified from accumulated other comprehensive income | 0 |
| | 0 |
| | 829 |
| | 829 |
|
Net current period other comprehensive income (loss) | 18,485 |
| | 0 |
| | (2,164 | ) | | 16,321 |
|
Foreign exchange rate impact | (240 | ) | | 240 |
| | — |
| | — |
|
Balance as of September 30, 2020 | $ | 1,805 |
| | $ | 6,629 |
| | $ | (754 | ) | | $ | 7,680 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Successor |
| Currency Translation Adjustments | | Pension Liability Adjustments (1) | | Unrealized gain (loss) on cash flow hedges (2) | | Total |
Balance as of March 31, 2021 | $ | 32,646 | | | $ | (37,965) | | | $ | (1,596) | | | $ | (6,915) | |
| | | | | | | |
Other comprehensive income (loss) before reclassification | 1,224 | | | 0 | | | 1,672 | | | 2,896 | |
Reclassified from accumulated other comprehensive loss | 0 | | | 0 | | | (730) | | | (730) | |
Net current period other comprehensive income (loss) | 1,224 | | | 0 | | | 942 | | | 2,166 | |
Foreign exchange rate impact | 48 | | | (48) | | | 0 | | | 0 | |
Balance as of June 30, 2021 | $ | 33,918 | | | $ | (38,013) | | | $ | (654) | | | $ | (4,749) | |
__________________________
| |
(1)(1)Reclassification of amounts related to pension liability adjustments are included as a component of net periodic pension cost. | Reclassification of amounts related to pension liability adjustments are included as a component of net periodic pension cost. |
| |
(2)
| Reclassification of amounts related to cash flow hedges were included as direct costs. |
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
(2)Reclassification of amounts related to cash flow hedges were included as direct costs.
Note 1210 — SEGMENT INFORMATION
The Company conducts business in 1 segment: aviation services. The aviation services global operations include 4 regions as follows: Europe, Caspian, Africa, the Americas and Asia Pacific. The Europe Caspian region comprises all of the Company’s operations and affiliates in Europe, and Central Asia, including Norway and the U.K. and Turkmenistan. The Africa region comprises all of the Company’s operations and affiliates on the African continent, including Nigeria and Egypt.Nigeria. The Americas region comprises all of the Company’s operations and affiliates in North America and South America, including Brazil, Canada, Colombia, Guyana, Suriname, Trinidad and the U.S. Gulf of Mexico. The Asia Pacific region comprises all of the Company’s operations and affiliates in Australia and Southeast Asia. Prior to the sale of BHLL and Aviashelf during the six months ended September 30, 2019 (Predecessor), the Company had operations in Sakhalin, Russia which is included in the Asia Pacific region. Prior to the sale of Eastern Airways on May 10, 2019 (Predecessor), the Company had fixed wing operations in the Europe Caspian region.
The following tables show region information reconciled to consolidated totals, and prepared on the same basis as the Company’s condensed consolidated financial statements (in thousands):
| | | | Three Months Ended June 30, | |
| | | 2021 | | 2020 | |
Region revenue from external customers: | | Region revenue from external customers: | | | | |
Europe | | Europe | $ | 174,314 | | | $ | 166,993 | | |
Africa | | Africa | 17,273 | | | 31,722 | | |
Americas | | Americas | 86,338 | | | 59,114 | | |
Asia Pacific | | Asia Pacific | 22,081 | | | 12,258 | | |
Corporate and other | | Corporate and other | 596 | | | 106 | | |
Total region revenue (1) | | Total region revenue (1) | $ | 300,602 | | | $ | 270,193 | | |
| | | Three Months Ended September 30, | | | Six Months Ended September 30, | |
| Successor | | | Predecessor | | | Successor | | | Predecessor | |
| 2020 | | | 2019 | | | 2020 | | | 2019 | |
Region revenue from external customers: | | | | | | | | | | | |
Europe Caspian | $ | 164,920 |
| | | $ | 179,870 |
| | | $ | 331,913 |
| | | $ | 368,464 |
| |
Africa | 23,056 |
| | | 47,165 |
| | | 54,778 |
| | | 96,681 |
| |
Americas | 95,361 |
| | | 61,726 |
| | | 154,475 |
| | | 118,716 |
| |
Asia Pacific | 21,112 |
| | | 29,449 |
| | | 33,370 |
| | | 67,260 |
| |
Corporate and other | 191 |
| | | 10 |
| | | 297 |
| | | 275 |
| |
Total region revenue (1) | $ | 304,640 |
| | | $ | 318,220 |
| | | $ | 574,833 |
| | | $ | 651,396 |
| |
|
_________________________________________________ (1)The above table represents disaggregated revenue from contracts with customers except for the following (in thousands):
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Six Months Ended September 30, |
| Successor | | | Predecessor | | | Successor | | | Predecessor |
| 2020 | | | 2019 | | | 2020 | | | 2019 |
Revenue not from contracts with customers: | | | | | | | | | | |
Europe Caspian | $ | 348 |
| | | $ | 318 |
| | | $ | 690 |
| | | $ | 622 |
|
Africa | 0 |
| | | 0 |
| | | 0 |
| | | 0 |
|
Americas | 9,019 |
| | | 7,983 |
| | | 18,026 |
| | | 15,966 |
|
Asia Pacific | 83 |
| | | 79 |
| | | 157 |
| | | 160 |
|
Corporate and other | 945 |
| | | 0 |
| | | 2,307 |
| | | 0 |
|
Total region revenue | $ | 10,395 |
| | | $ | 8,380 |
| | | $ | 21,180 |
| | | $ | 16,748 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2021 | | 2020 | | | | |
Revenues not from contracts with customers: | | | | | | | |
Europe | $ | 377 | | | $ | 342 | | | | | |
| | | | | | | |
Americas(1) | 7,539 | | | 10,372 | | | | | |
Asia Pacific | 88 | | | 74 | | | | | |
Corporate and other | 0 | | | 0 | | | | | |
Total region revenue | $ | 8,004 | | | $ | 10,788 | | | | | |
_________________________________________________
(1) Includes revenues of approximately $1.4 million from our unconsolidated affiliate in Canada, Cougar Helicopters Inc. (“Cougar”), previously included in Corporate and other for the three months ended June 30, 2020.
BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2021 | | 2020 | | | | |
Earnings (losses) from unconsolidated affiliates, net – equity method investments: | | | | | | | |
| | | | | | | |
Americas | (1,517) | | | (1,978) | | | | | |
| | | | | | | |
Total losses from unconsolidated affiliates, net – equity method investments | $ | (1,517) | | | $ | (1,978) | | | | | |
| | | | | | | |
Consolidated operating income (loss): | | | | | | | |
Europe | $ | 23,032 | | | $ | 27,312 | | | | | |
Africa | (11,479) | | | 4,849 | | | | | |
Americas | 12,232 | | | (13,002) | | | | | |
Asia Pacific | (218) | | | (1,528) | | | | | |
Corporate and other | (36,297) | | | (37,032) | | | | | |
Gain on disposal of assets | 499 | | | 5,522 | | | | | |
Total consolidated operating loss | $ | (12,231) | | | $ | (13,879) | | | | | |
| | | | | | | |
Depreciation and amortization: | | | | | | | |
Europe | $ | 9,944 | | | $ | 8,212 | | | | | |
Africa | 2,676 | | | 1,317 | | | | | |
Americas | 5,752 | | | 2,955 | | | | | |
Asia Pacific | 1,948 | | | 2,006 | | | | | |
Corporate and other | 2,875 | | | 1,866 | | | | | |
Total depreciation and amortization | $ | 23,195 | | | $ | 16,356 | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Six Months Ended September 30, |
| Successor | | | Predecessor | | | Successor | | | Predecessor |
| 2020 | | | 2019 | | | 2020 | | | 2019 |
Earnings from unconsolidated affiliates, net of losses – equity method investments: | | | | | | | | | | |
Europe Caspian | $ | (43 | ) | | | $ | (3 | ) | | | $ | (19 | ) | | | $ | 168 |
|
Americas | 1,948 |
| | | 315 |
| | | (54 | ) | | | 2,491 |
|
Corporate and other | 0 |
| | | 321 |
| | | 0 |
| | | 321 |
|
Total earnings from unconsolidated affiliates, net of losses – equity method investments | $ | 1,905 |
| | | $ | 633 |
| | | $ | (73 | ) | | | $ | 2,980 |
|
| | | | | | | | | | |
Consolidated operating income (loss): | | | | | | | | | | |
Europe Caspian | $ | 19,614 |
| | | $ | 11,224 |
| | | $ | 46,926 |
| | | $ | 23,031 |
|
Africa | (13,790 | ) | | | 6,528 |
| | | (8,941 | ) | | | 14,273 |
|
Americas | 16,188 |
| | | 3,527 |
| | | 3,186 |
| | | 7,095 |
|
Asia Pacific | 4,535 |
| | | (19,848 | ) | | | 3,007 |
| | | (32,282 | ) |
Corporate and other | (40,729 | ) | | | (63,297 | ) | | | (77,761 | ) | | | (91,938 | ) |
Gain (loss) on disposal of assets | (8,473 | ) | | | (230 | ) | | | (2,951 | ) | | | (4,017 | ) |
Total consolidated operating income (loss) | $ | (22,655 | ) | | | $ | (62,096 | ) | | | $ | (36,534 | ) | | | $ | (83,838 | ) |
| | | | | | | | | | |
Depreciation and amortization: | | | | | | | | | | |
Europe Caspian | $ | 8,080 |
| | | $ | 12,395 |
| | | $ | 16,292 |
| | | $ | 24,834 |
|
Africa | 1,284 |
| | | 5,007 |
| | | 2,601 |
| | | 9,998 |
|
Americas | 5,098 |
| | | 7,590 |
| | | 8,053 |
| | | 14,470 |
|
Asia Pacific | 2,048 |
| | | 2,970 |
| | | 4,054 |
| | | 6,691 |
|
Corporate and other | 2,027 |
| | | 3,341 |
| | | 3,893 |
| | | 6,649 |
|
Total depreciation and amortization | $ | 18,537 |
| | | $ | 31,303 |
| | | $ | 34,893 |
| | | $ | 62,642 |
|
| | | | | | | | | | | | |
| June 30, 2021 | | March 31, 2021 | |
Identifiable assets: | | | | |
Europe | $ | 1,032,669 | | | $ | 1,026,042 | | |
Africa | 145,279 | | | 179,445 | | |
Americas | 535,288 | | | 579,169 | | |
Asia Pacific | 72,304 | | | 102,169 | | |
Corporate and other | 128,113 | | | 105,445 | | |
Total identifiable assets | $ | 1,913,653 | | | $ | 1,992,270 | | |
| | | | | | | | | | | | |
Investments in unconsolidated affiliates – equity method: | | | | |
Europe | $ | 680 | | | $ | 679 | | |
Americas | 1,736 | | | 3,851 | | |
| | | | |
Total investments in unconsolidated affiliates – equity method | $ | 2,416 | | | $ | 4,530 | | |
|
| | | | | | | |
| Successor |
| September 30, 2020 | | March 31, 2020 |
Identifiable assets: | | | |
Europe Caspian | $ | 1,193,599 |
| | $ | 1,096,022 |
|
Africa | 203,741 |
| | 235,165 |
|
Americas | 574,914 |
| | 319,015 |
|
Asia Pacific | 135,877 |
| | 166,229 |
|
Corporate and other (2) | 104,254 |
| | 128,830 |
|
Total identifiable assets | $ | 2,212,385 |
| | $ | 1,945,261 |
|
20
|
| | | | | | | |
Investments in unconsolidated affiliates – equity method investments: | | | |
Europe Caspian | $ | 604 |
| | $ | 575 |
|
Americas | 56,320 |
| | 76,483 |
|
Total investments in unconsolidated affiliates – equity method investments | $ | 56,924 |
| | $ | 77,058 |
|
_____________
| |
(2)
| Includes $9.3 million and $7.8 million ofconstruction in progress within property and equipment on the Company’s condensed consolidated balance sheets as of September 30 and March 31, 2020 (Successor), respectively, which primarily represents aircraft modifications and other miscellaneous equipment, tooling and building improvements currently in progress.
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto as well as Old Bristow’s Financial Statementsour Annual Report on Form 10-K for the fiscal year ended March 31, 20202021, filed with the Securities and Exchange Commission (the “fiscal year 2020 Financial Statements”“SEC”) and the related MD&A filed as exhibits to the Company’s Current Reports on Form 8-K filed on June 17, 2020 and July 1, 2020, (the “MD&A 8-K”), respectively.May 27, 2021. In the discussion that follows, the terms “Current Quarter” and “Prior Year Quarter” refer to the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Our fiscal year ends March 31, and we refer to fiscal years based on the end of such period. Therefore, the fiscal year ending March 31, 20212022, is referred to as “fiscal year 2021.2022.”
Unless the context otherwise indicates, in this MD&A: (i) 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 its subsidiaries; (ii) “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; and (iii) “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.
Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).amended. Forward-looking statements are statements about our future business, strategy, operations, capabilities and results: financial projections: plans and objectives of our management: expected actions by us and by third parties, including our customers, competitors, vendors and regulators: and other matters. Some of the forward-looking statements can be identified by the use of words such as “believes”, “belief”, “forecasts”, “expects”, “plans”, “anticipates”, “intends”, “projects”, “estimates”, “may”, “might”, “will”, “would”, “could”, “should” or other similar words; however, all statements in this Quarterly Report, other than statements of historical fact or historical financial results, are forward-looking statements.
Our forward-looking statements reflect our views and assumptions on the date we are filing this Quarterly Report regarding future events and operating performance. We believe that they are reasonable, but they involve significant known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Accordingly, you should not put undue reliance on any forward-looking statements.
You should consider the following key factors when evaluating these forward-looking statements:
the COVID-19•The novel coronavirus pandemic (“COVID-19”) and related economic repercussions have resulted, and may continue to result, in a decrease in the price of and demand for oil, which has caused, and may continue to cause, a decrease in the demand for our services;
•expected cost synergies and other financial or other benefits of the Merger might not be realized within the expected time frames, might be less than projected or may not be realized at all;
•the ability to successfully integrate the operations, accounting and administrative functions of Era and Old Bristow;
•managing a significantly larger company than before the completion of the Merger;
•diversion of management time on issues related to integration of the Company;
•the increase in indebtedness as a result of the Merger;
•operating costs, customer loss and business disruption following the Merger, including, without limitation, difficulties in maintaining relationships with employees and customers, may be greater than expected;
•our reliance on a limited number of customers and the reduction of our customer base as a result of bankruptcies or consolidation;
•the possibility that we may be unable to maintain compliance with covenants in our financing agreements;
•fluctuations in worldwide prices of and demand for oil and natural gas;
•fluctuations in levels of oil and natural gas exploration, development and production activities;
•fluctuations in the demand for our services;
•the possibility that we may impair our long-lived assets and other assets, including goodwill, inventory, property and equipment and investments in unconsolidated affiliates;
•our ability to implement operational improvement efficiencies with the objective of rightsizing our global footprint and further reducing our cost structure;
•the possibility of significant changes in foreign exchange rates and controls, including as a result of voters in the U.K. having approved the exit of the U.K. (“Brexit”)exited from the European Union (“E.U.”) (“Brexit”);
•the impact of continued uncertainty surrounding the affects Brexit negotiations;will have on the British, EU and global economies and demand for oil and natural gas;
•potential effects of increased competition;
•the inability to remediate therisk of future material weaknesses identified inwe may identify while we work to align policies, principles, and practices of the combined company following the Merger or any other failure by us to maintain effective internal controls over financial reporting relating to our monitoring control processes;controls;
•the possibility that we may be unable to re-deploy our aircraft to regions with greater demand;
•the possibility of changes in tax and other laws and regulations;regulations and policies, including, without limitation, actions of the Biden Administration that impact oil and gas operations or favor renewable energy projects in the U.S.;
•the possibility that we may be unable to dispose of older aircraft through sales into the aftermarket;
•general economic conditions, including the capital and credit markets;
•the possibility that segments of our fleet may be grounded for extended periods of time or indefinitely;
•the existence of operating risks inherent in our business, including the possibility of declining safety performance;
•the possibility of political instability, war or acts of terrorism in any of the countries where we operate;
•the possibility that reductions in spending on aviation services by governmental agencies could lead to modifications of our search and rescue (“SAR”) contract terms with the UK government, our contracts with the Bureau of Safety and Environmental Enforcement ("BSEE") or delays in receiving payments under such contracts; and
•our reliance on a limited number of helicopter manufacturers and suppliers.
The above description of risks and uncertainties is by no means all-inclusive, but is designed to highlight what we believe are important factors to consider. For a more detailed descriptionAll forward-looking statements in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and are only made as of risk factors, please see the risks and uncertainties describeddate of this Quarterly Report. The forward-looking statements in the Company’s joint proxy and consent solicitation statement/prospectus (File No. 333-237557), filedthis Quarterly Report should be evaluated together with the SECmany uncertainties that affect our businesses, particularly those discussed in greater detail in Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report on May 5, 2020 (the “Joint Proxy Statement/Prospectus”)Form 10-K and under the heading “Risk Factors” and Part II Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.
All forward-looking statements in this Quarterly Report are qualified by these cautionary statements and are only made as of the date of this Quarterly Report. We do not undertakedisclaim any obligation or undertaking, other than as required by law, to updateprovide any updates or reviserevisions to any forward-looking statements,statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based, whether as a result of new information, future events or otherwise.
Executive Overview
Bristow Group Inc. is the leading global provider of vertical flight solutions. We primarily provide aviation services to a broad base of major integrated, national and independent offshore energy companies. We also provide commercial search and rescue (“SAR”) services in multiple countries and public sector SAR services in the United Kingdom (“U.K.”) on behalf of the Maritime & Coastguard Agency (“MCA”). Additionally, we offer other ad hoc helicopter and fixed wing transportation services.and other aviation related solutions. Our oil and gas customers charter our helicopters primarily to transport personnel to, from and between onshore bases and offshore production platforms, drilling rigs and other installations. To a lesser extent, our customers also charter our helicopters to transport time-sensitive equipment to these offshore locations.
Our core business of providing aviation services to leading global oil and gasenergy companies and public and private sector SAR services, as well as fixed wing transportation and ad hoc services provides us with geographic and customer diversity which helps mitigate risks associated with a single market or customer. We currently have customers in Australia, Brazil, Canada, Chile, Colombia, Guyana, India, Mexico, Nigeria, Norway, Spain, Suriname, Trinidad, the U.K.U.K and the United States (“U.S.”).
Certain of our operations are subject to seasonal factors. For example, operations in the U.S. Gulf of Mexico are often at their highest levels from April to September, as daylight hours increase, and are at their lowest levels from December to February, as daylight hours decrease.
Recent Developments
Merger Involving Bristow Group Inc. See “Markets, Segment and Era Group Inc.
On January 23, 2020, Era, Merger Sub and Old Bristow entered into the Merger Agreement. On June 11, 2020, 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 subsidiarySeasonality” in Item 1 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.
The Merger was accounted for as an acquisition by Old Bristow of Era even though Era was the legal acquirer and remains the ultimate parent of the 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. Therefore, any information in this MD&A that is presented as of dates or for periods prior to the completion of the Merger relates only to Old Bristow, and not the Company. Effective upon the closing of the Merger, the Company changed its fiscal year-end from December 31 to March 31, to correspond with Old Bristow’s fiscal year-end.
For pro forma condensed consolidated financial statements of the Company giving effect to the Merger, refer to the unaudited pro forma condensed combined financial information filed as Exhibit 99.2 to our CurrentAnnual Report on Form 8-K filed10-K further discussion on June 17, 2020.
Impairment of Líder
In June 2020, upon evaluation of our investment in Líder Táxi Aéreo S.A. (“Líder”), an unconsolidated affiliate in Brazil, we recognized a non-cash impairment charge of $18.7 million. The Company initiated a partial dissolution process to exit its equity investment in Líder in July 2020. As a result of this process, the Company is no longer a shareholder of Líder. The amount payable to the Company for its equity interests will be governed by the partial dissolution process set forth under the Brazilian Constitution.seasonality.
COVID-19
The COVID-19 pandemic has resulted in a global crisis, with many countries placing restrictions on national and international travel and instituting other measures, including, among other things, reducing or eliminating public gatherings by placing limits on such events, shuttering non-essential stores and services, encouraging voluntary quarantines and imposing involuntary quarantines, in an effort to reduce and slow the spread of COVID-19.COVID-19 and virus variants. The long-term impact of COVID-19 on the global economy is not yet known, but itpandemic has had a significant influence on economic activity and likely will continue to have a significant impact on the global economy in the near-to-medium-term, especially in light of recent resurgences of the virus, which in turn can cause volatility in global markets, generally, and in oil and natural gas prices.prices, more specifically. Financial markets have also experienced significant volatility.
The outbreak of COVID-19 caused a significant decrease in oil and natural gas prices in the first half of 2020 resulting from demand weakness and oversupply, which has adversely affected demand for our services. Ongoing economic repercussions of the COVID-19 pandemic may further depress the oil and gas market in the future, which may lead to additional decreases in capital spending by oil and natural gas companies.
Together with our customers, we have implemented several measures at our bases, based upon guidance from local public health authorities, to help protect employees and customers, including, but not limited to, measures to restrict access to sites, medical screenings/questionnaires prior to all flights, enhanced sanitization of aircraft and equipment, modification of aircraft and special protocols on travel and passenger transport, and we are also monitoring developments that may require or cause us to modify actions as appropriate. Many of our employees are deemed “essential” in the regions in which they operate and therefore may continue performing their jobs notwithstanding guidance or orders of general applicability issued by governments requiring businesses to close, persons to shelter in place, borders to close and other similar actions. In addition, we have developed and are offering customers COVID-19 medevac transport in certain regions.
Share Repurchases
In June 2021, the Company repurchased 933,208 shares of common stock in open market transactions for gross consideration of $25.1 million, which is an average cost per share of $26.89. After these repurchases, as of June 30, 2021, $39.9 million remained of the $75.0 million share repurchase program.
In July 2021, the Company repurchased an additional 547,596 shares of common stock for gross consideration of $14.9 million, which is an average cost per share of $27.24. After these repurchases, $25.0 million remained available of the authorized $75.0 million share repurchase program.
Sale of Colombian Subsidiary
During the three months ended June 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 industry. The sale resulted in a $2.0 million loss included in loss on sale of subsidiaries on the condensed consolidated statement of operations.
Impairment of PAS
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 three months ended June 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 resulting in a $16.0 million loss on impairment recorded during the three months ended June 30, 2021. As of June 30, 2021, the investment in PAS was $17.0 million and is included on the condesned consolidated balance sheets in investment in unconsolidated affiliates. PAS is carried at cost less impairment.
Columbia Helicopters Preference Claim Settlement
In July 2021, the Company settled a bankruptcy preference claim related to amounts paid under a termination agreement between Old Bristow and Columbia Helicopters, Inc. The settlement is considered a gain contingency and is expected to result in the receipt of a $9.0 million cash payment to be recognized in the second fiscal quarter.
Lines of Service
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, 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 in the Current Quarter. 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.
Oil and Gas.The offshore oil and gas market is highly cyclical with demand highly correlated to the price of oil and gas, which tends to fluctuate depending on many factors, including global economic activity, levels of inventory and overall demand. In addition to the price of oil and gas, the availability of acreage and local tax incentives or disincentives and requirements for maintaining interests in leases affect activity levels in the oil and gas industry. Price levels for oil and gas by themselves can cause additional fluctuations by inducing changes in consumer behavior. The three main regions where we offer oil and gas transportation services are Europe, the Americas and Africa.
Government Services.Since 2015, we have been providing SAR services in the U.K. on behalf of the MCA. Additionally, we provide aviation services to various government agencies, globally.
Fixed Wing Services.Our fixed wing services are currently operating in Australia and Nigeria, providing regular passenger transport (scheduled airline service with individual ticket sales) and charter services.
Other Activities and Services.In order to diversify sources of our earnings and cash flow, we deploy a number of helicopters in support of other industries and activities, one of which includes entering into lease arrangements for our helicopters with operators primarily located in international markets such as Chile, Colombia, India, Mexico and Spain. The helicopters are contracted to non-governmental local helicopter operators, which often prefer to lease helicopters rather than purchase them. Leasing affords us the opportunity to access new markets without significant initial infrastructure investment and generally without ongoing operating risk, as well as countries where we are not eligible to own and control our own operating certificate. Revenues derived from oil and gas services outside of our three major operating regions and other aviation services not included in the three lines of service noted above are also reflected here.
Fleet Information
As of SeptemberJune 30, 2020 (Successor),2021, the aircraft in our fleet were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Aircraft | | | | | |
| Operating Aircraft | | | | | | | | | | | | | |
Type | Owned Aircraft | | Leased Aircraft | | Aircraft Held For Sale | | | | | | Total Aircraft | | Maximum Passenger Capacity | | Average Age (years)(1) | |
Heavy Helicopters: | | | | | | | | | | | | | | | | |
S-92A | 35 | | | 26 | | | — | | | | | | | 61 | | | 19 | | | 12 | | |
S-92A U.K. SAR | 3 | | | 7 | | | — | | | | | | | 10 | | | 19 | | | 7 | | |
H225 | — | | | — | | | 2 | | | | | | | 2 | | | 19 | | | 10 | | |
AW189 | 6 | | | 1 | | | — | | | | | | | 7 | | | 16 | | | 6 | | |
AW189 U.K. SAR | 11 | | | — | | | — | | | | | | | 11 | | | 16 | | | 5 | | |
| 55 | | | 34 | | | 2 | | | | | | | 91 | | | | | | |
Medium Helicopters: | | | | | | | | | | | | | | | | |
AW139 | 52 | | | 7 | | | — | | | | | | | 59 | | | 12 | | | 10 | | |
S-76 C+/C++ | 17 | | | — | | | 4 | | | | | | | 21 | | | 12 | | | 13 | | |
S-76D | 8 | | | — | | | — | | | | | | | 8 | | | 12 | | | 7 | | |
B212 | 2 | | | — | | | — | | | | | | | 2 | | | 12 | | | 39 | | |
| 79 | | | 7 | | | 4 | | | | | | | 90 | | | | | | |
Light—Twin Engine Helicopters: | | | | | | | | | | | | | | | | |
AW109 | 6 | | | — | | | — | | | | | | | 6 | | | 7 | | | 15 | | |
EC135 | 10 | | | — | | | — | | | | | | | 10 | | | 6 | | | 12 | | |
| | | | | | | | | | | | | | | | |
| 16 | | | — | | | — | | | | | | | 16 | | | | | | |
Light—Single Engine Helicopters: | | | | | | | | | | | | | | | | |
AS350 | 17 | | | — | | | — | | | | | | | 17 | | | 4 | | | 24 | | |
AW119 | 13 | | | — | | | — | | | | | | | 13 | | | 7 | | | 15 | | |
| 30 | | | — | | | — | | | | | | | 30 | | | | | | |
| | | | | | | | | | | | | | | | |
Total Helicopters | 180 | | | 41 | | | 6 | | | | | | | 227 | | | | | 12 | | |
Fixed wing | 7 | | | 4 | | | — | | | | | | | 11 | | | | | | |
UAV | — | | | 2 | | | — | | | | | | | 2 | | | | | | |
Total Fleet | 187 | | | 47 | | | 6 | | | | | | | 240 | | | | | | |
______________________ |
| | | | | | | | | | | | | | |
| Number of Aircraft | | |
| Consolidated Affiliates | | | | |
| Operating Aircraft | | | | | | |
Type | Owned Aircraft | | Leased Aircraft | | Aircraft Held For Sale | | Consolidated Aircraft | | Maximum Passenger Capacity |
Heavy Helicopters: | | | | | | | | | |
S-92A | 35 |
| | 30 |
| | — |
| | 65 |
| | 19 |
|
S-92A U.K. SAR | 3 |
| | 9 |
| | — |
| | 12 |
| | 19 |
|
H225 | — |
| | — |
| | 2 |
| | 2 |
| | 19 |
|
AW189 | 6 |
| | 1 |
| | — |
| | 7 |
| | 16 |
|
AW189 U.K. SAR | 11 |
| | — |
| | — |
| | 11 |
| | 16 |
|
| 55 |
|
| 40 |
|
| 2 |
|
| 97 |
| | |
Medium Helicopters: | | | | | | | | | |
AW139 | 53 |
| | 8 |
| | — |
| | 61 |
| | 12 |
|
S-76 C+/C++ | 28 |
| | — |
| | 3 |
| | 31 |
| | 12 |
|
S-76D | 8 |
| | — |
| | 2 |
| | 10 |
| | 12 |
|
B212 | 3 |
| | — |
| | — |
| | 3 |
| | 12 |
|
B412 | — |
| | — |
| | 2 |
| | 2 |
| | 13 |
|
| 92 |
|
| 8 |
|
| 7 |
|
| 107 |
| | |
Light—Twin Engine Helicopters: | | | | | | | | | |
AW109 | 6 |
| | — |
| | — |
| | 6 |
| | 7 |
|
EC135 | 10 |
| | — |
| | — |
| | 10 |
| | 6 |
|
BO 105 | 2 |
| | — |
| | — |
| | 2 |
| | 4 |
|
| 18 |
| | — |
| | — |
| | 18 |
| | |
Light—Single Engine Helicopters: | | | | | | | | | |
AS350 | 17 |
| | — |
| | — |
| | 17 |
| | 4 |
|
AW119 | 13 |
| | — |
| | — |
| | 13 |
| | 7 |
|
B407 | 7 |
| | — |
| | — |
| | 7 |
| | 6 |
|
| 37 |
| | — |
| | — |
| | 37 |
| | |
| | | | | | | | | |
Total Helicopters | 202 |
| | 48 |
| | 9 |
| | 259 |
| | |
Fixed wing | 7 |
| | 5 |
| | 3 |
| | 15 |
| | |
UAV | — |
| | 2 |
| | — |
| | 2 |
| | |
Total Fleet | 209 |
| | 55 |
| | 12 |
| | 276 |
| | |
(1)Reflects the average age of helicopters that are owned.
The chart below presents the number of aircraft in our fleet and their distribution among the regions as of SeptemberJune 30, 2020 (Successor),2021, the number of helicopters we had on order as of SeptemberJune 30, 2020 (Successor),2021, and the percentage of operating revenue each of our regions provided during the Current Quarter. For additional information regarding our commitments and options to acquire aircraft, see Note 9 in the “Notes to Condensed Consolidated Financial Statements” included elsewhere in this Quarterly Report.
| | | | | | | | | | | | | | | | | | | Percentage of Current Quarter Operating Revenue | | Helicopters | | UAV | | Fixed Wing | | | |
| Percentage of Current Quarter Operating Revenue | | Helicopters | | UAV | | Fixed Wing (1) | | | | Heavy | | Medium | | Light Twin | | Light Single | Total (1) | |
| Heavy | | Medium | | Light Twin | | Light Single | Total (2) (3) | |
Europe Caspian | 57 | % | | 66 |
| | 15 |
| | — |
| | 4 |
| | 2 |
| | — |
| | 87 |
| |
Africa | 10 | % | | 7 |
| | 22 |
| | — |
| | — |
| | — |
| | 3 |
| | 32 |
| |
Europe | | Europe | 57 | % | | 63 | | | 12 | | | — | | | 4 | | | 2 | | | — | | | 81 | | |
Americas | 27 | % | | 24 |
| | 68 |
| | 18 |
| | 33 |
| | — |
| | — |
| | 143 |
| Americas | 29 | % | | 22 | | | 58 | | | 16 | | | 26 | | | — | | | — | | | 122 | | |
Asia Pacific | 6 | % | | — |
| | 2 |
| | — |
| | — |
| | — |
| | 12 |
| | 14 |
| Asia Pacific | 8 | % | | — | | | 2 | | | — | | | — | | | — | | | 9 | | | 11 | | |
Africa | | Africa | 6 | % | | 6 | | | 18 | | | — | | | — | | | — | | | 2 | | | 26 | | |
Total | 100 | % | | 97 |
| | 107 |
| | 18 |
| | 37 |
| | 2 |
| | 15 |
| | 276 |
| Total | 100 | % | | 91 | | | 90 | | | 16 | | | 30 | | | 2 | | | 11 | | | 240 | | |
Aircraft not currently in fleet: | | | | | | | | | | | | | | | | Aircraft not currently in fleet: | | | | | | | | | | | | | | | | |
On order | | | 3 |
| | — |
| | 5 |
| | — |
| | — |
| | — |
| | 8 |
| On order | | 3 | | | — | | | 5 | | | — | | | — | | | — | | | 8 | | |
|
_____________
| |
(1)(1)Includes 47 leased aircraft as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Helicopters | | UAV | | Fixed Wing | | | | Heavy | | Medium | | Light Twin | | Light Single | | | Total | Europe | 28 | | | 1 | | | — | | | — | | | 2 | | | — | | | 31 | | Americas | 4 | | | 3 | | | — | | | — | | | — | | | — | | | 7 | | Asia Pacific | — | | | 2 | | | — | | | — | | | — | | | 3 | | | 5 | | Africa | 2 | | | 1 | | | — | | | — | | | — | | | 1 | | | 4 | | Total | 34 | | | 7 | | | — | | | — | | | 2 | | | 4 | | | 47 | |
| Airnorth operates a total of 12 fixed wing aircraft, which are included in the Asia Pacific region.
|
| |
(2)
| The average age of our helicopter fleet was approximately twelve years as of September 30, 2020 (Successor). |
| |
(3)
| Includes 55 leased aircraft as follows: |
|
| | | | | | | | | | | | | | | | | | | | |
| Successor |
| Leased Aircraft in Consolidated Fleet |
| Helicopters | | UAV | | Fixed Wing | | |
| Heavy | | Medium | | Light Twin | | Light Single | | | Total |
Europe Caspian | 31 |
| | 1 |
| | — |
| | — |
| | 2 |
| | — |
| | 34 |
|
Africa | 3 |
| | 1 |
| | — |
| | — |
| | — |
| | 2 |
| | 6 |
|
Americas | 6 |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| | 10 |
|
Asia Pacific | — |
| | 2 |
| | — |
| | — |
| | — |
| | 3 |
| | 5 |
|
Total | 40 |
| | 8 |
| | — |
| | — |
| | 2 |
| | 5 |
| | 55 |
|
Results of Operations
Management believes the comparison of the most recently completed quarter to the immediately preceding quarter provides more relevant information needed to understand and analyze the business. As such, pursuant to Item 303(c)(2)(ii) of Regulation S-K, we have elected to discuss any material changes in our results of operations by including a comparison of our most recently completed fiscal quarter to the immediately preceding fiscal quarter (the “Preceding Quarter”).
The following table presents our operating results and other statement of operations information for the applicable periodsthree months ended June 30, 2021 and three months ended March 31, 2021, (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Favorable (Unfavorable) |
| June 30, 2021 | | March 31, 2021 | |
Revenues: | | | | | | | |
Operating revenues | $ | 288,351 | | | $ | 281,519 | | | $ | 6,832 | | | 2.4 | % |
Reimbursable revenues | 12,251 | | | 11,813 | | | 438 | | | 3.7 | % |
Total revenues | 300,602 | | | 293,332 | | | 7,270 | | | 2.5 | % |
| | | | | | | |
Costs and expenses: | | | | | | | |
Operating expenses | | | | | | | |
Personnel | 74,969 | | | 79,635 | | | 4,666 | | | 5.9 | % |
Repairs and maintenance | 60,465 | | | 62,293 | | | 1,828 | | | 2.9 | % |
Insurance | 5,367 | | | 5,344 | | | (23) | | | (0.4) | % |
Fuel | 16,665 | | | 13,280 | | | (3,385) | | | (25.5) | % |
Leased-in equipment | 26,852 | | | 27,604 | | | 752 | | | 2.7 | % |
Other | 30,185 | | | 30,139 | | | (46) | | | (0.2) | % |
Total operating expenses | 214,503 | | | 218,295 | | | 3,792 | | | 1.7 | % |
Reimbursable expenses | 12,114 | | | 11,697 | | | (417) | | | (3.6) | % |
General and administrative | 37,483 | | | 40,678 | | | 3,195 | | | 7.9 | % |
Merger related costs | 1,735 | | | 16,475 | | | 14,740 | | | nm |
Restructuring costs | 851 | | | 7,887 | | | 7,036 | | | nm |
Depreciation and amortization | 23,195 | | | 17,254 | | | (5,941) | | | (34.4) | % |
Total costs and expenses | 289,881 | | | 312,286 | | | 22,405 | | | 7.2 | % |
| | | | | | | |
Loss on impairment | (21,934) | | | (1,182) | | | (20,752) | | | nm |
Gain (loss) on disposal of assets | 499 | | | (7,199) | | | 7,698 | | | nm |
Earnings from unconsolidated affiliates, net | (1,517) | | | (440) | | | (1,077) | | | nm |
Operating loss | (12,231) | | | (27,775) | | | 15,544 | | | nm |
| | | | | | | |
Interest income | 66 | | | 238 | | | (172) | | | (72.3) | % |
Interest expense | (10,624) | | | (12,108) | | | 1,484 | | | 12.3 | % |
Loss on extinguishment of debt | — | | | (28,515) | | | 28,515 | | | nm |
Reorganization items, net | (446) | | | (407) | | | (39) | | | (9.6) | % |
Loss on sale of subsidiaries | (2,002) | | | — | | | (2,002) | | | nm |
Other, net | 6,184 | | | 7,037 | | | (853) | | | (12.1) | % |
Total other income (expense), net | (6,822) | | | (33,755) | | | 26,933 | | | nm |
Loss before benefit for income taxes | (19,053) | | | (61,530) | | | 42,477 | | | 69.0 | % |
Benefit for income taxes | 4,842 | | | 19,092 | | | (14,250) | | | nm |
Net loss | (14,211) | | | (42,438) | | | 28,227 | | | 66.5 | % |
Net income (loss) attributable to noncontrolling interests | 14 | | | (152) | | | 166 | | | nm |
Net loss attributable to Bristow Group Inc. | $ | (14,197) | | | $ | (42,590) | | | $ | 28,393 | | | 66.7 | % |
|
| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | Favorable (Unfavorable) |
| | Three Months Ended September 30, 2020 | | | Three Months Ended September 30, 2019 | |
Revenue: | | | | | | | | | |
Operating revenue | | $ | 295,722 |
| | | $ | 304,684 |
| | $ | (8,962 | ) | | (2.9 | )% |
Reimbursable revenue | | 8,918 |
| | | 13,536 |
| | (4,618 | ) | | (34.1 | )% |
Total revenues | | 304,640 |
| | | 318,220 |
| | (13,580 | ) | | (4.3 | )% |
| | | | | | | | | |
Costs and expense: | | | | | | | | | |
Operating expense | | 231,953 |
| | | 236,655 |
| | 4,702 |
| | 2.0 | % |
Reimbursable expense | | 8,919 |
| | | 12,840 |
| | 3,921 |
| | 30.5 | % |
General and administrative | | 39,268 |
| | | 37,820 |
| | (1,448 | ) | | (3.8 | )% |
Merger-related costs | | 4,497 |
| | | — |
| | (4,497 | ) | | nm |
|
Depreciation and amortization | | 18,537 |
| | | 31,303 |
| | 12,766 |
| | 40.8 | % |
Total costs and expenses | | 303,174 |
| | | 318,618 |
| | 15,444 |
| | 4.8 | % |
| | | | | | | | | |
Loss on impairment | | (17,596 | ) | | | (62,101 | ) | | 44,505 |
| | 71.7 | % |
Loss on disposal of assets | | (8,473 | ) | | | (230 | ) | | (8,243 | ) | | nm |
|
Earnings from unconsolidated affiliates, net | | 1,948 |
| | | 633 |
| | 1,315 |
| | nm |
|
Operating loss | | (22,655 | ) | | | (62,096 | ) | | 39,441 |
| | 63.5 | % |
| | | | | | | | | |
Interest income | | 434 |
| | | 270 |
| | 164 |
| | 60.7 | % |
Interest expense | | (13,445 | ) | | | (22,715 | ) | | 9,270 |
| | 40.8 | % |
Reorganization items, net | | — |
| | | (93,943 | ) | | 93,943 |
| | nm |
|
Gain on sale of subsidiaries | | — |
| | | 420 |
| | (420 | ) | | nm |
|
Bargain purchase gain | | 5,660 |
| | | — |
| | 5,660 |
| | nm |
|
Other income (expense), net | | 10,592 |
| | | (6,637 | ) | | 17,229 |
| | nm |
|
Total other income (expense) | | 3,241 |
| | | (122,605 | ) | | 125,846 |
| | nm |
|
Loss before benefit (provision) for income taxes | | (19,414 | ) | | | (184,701 | ) | | 165,287 |
| | 89.5 | % |
Benefit (provision) for income taxes | | (8,578 | ) | | | 21,782 |
| | (30,360 | ) | | nm |
|
Net Loss | | (27,992 | ) | | | (162,919 | ) | | 134,927 |
| | 82.8 | % |
Net (income) loss attributable to noncontrolling interests | | 131 |
| | | (55 | ) | | 186 |
| | nm |
|
Net Loss attributable to Bristow Group Inc. | | $ | (27,861 | ) | | | $ | (162,974 | ) | | $ | 135,113 |
| | 82.9 | % |
Revenues by Service Line. The table below sets forth the operating revenues earned by service line for the applicable periods (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Favorable (Unfavorable) |
| June 30, 2021 | | March 31, 2021 | |
Oil and gas services: | | | | | | | |
Europe | $ | 99,901 | | | $ | 93,850 | | | $ | 6,051 | | | 6.4 | % |
Americas | 75,003 | | | 72,785 | | | 2,218 | | | 3.0 | % |
Africa | 14,692 | | | 18,976 | | | (4,284) | | | (22.6) | % |
Total oil and gas services | 189,596 | | | 185,611 | | | 3,985 | | | 2.1 | % |
Government services(1) | 70,436 | | | 67,032 | | | 3,404 | | | 5.1 | % |
Fixed wing services | 24,654 | | | 22,013 | | | 2,641 | | | 12.0 | % |
Other services(2) | 3,665 | | | 6,863 | | | (3,198) | | | (46.6) | % |
| $ | 288,351 | | | $ | 281,519 | | | $ | 6,832 | | | 2.4 | % |
__________________________ (1)Includes revenues of approximately $7.8 million related to government services that were previously included in the oil and gas and other service lines for the three months ended March 31, 2021.
(2)Includes Asia Pacific revenues of approximately $3.2 million that were previously included in the oil and gas service line for the three months ended March 31, 2021.
Operating Revenues. Operating revenues were $6.8 million higher in the three months ended June 30, 2021 (the “Current Quarter”) compared to the three months ended March 31, 2021 (the “Preceding Quarter”).
Operating revenues from oil and gas services were $4.0 million higher in the Current Quarter.
Operating revenues from oil and gas services in the Europe region were $6.1 million higher in the Current Quarter. Operating revenues in Norway and the U.K. were $3.7 million and $2.4 million higher, respectively, primarily due to higher utilization.
Operating revenues from oil and gas services in the Americas were $2.2 million higher in the Current Quarter primarily due to higher cash receipts from Cougar Helicopters Inc. (“Cougar”).
Operating revenues from oil and gas services in Africa were $4.3 million lower primarily due to the end of a customer contract and lower utilization.
Operating revenues from government services were $3.4 million higher in the Current Quarter primarily due to increased flight hours and the strengthening of the British pound sterling relative to the U.S. dollar.
Operating revenues from fixed wing services were $2.6 million higher in the Current Quarter primarily due to increased utilization in Australia.
Operating revenues from other services were $3.2 million lower primarily due to the end of a customer contract.
Operating Expenses. Operating expenses were $3.8 million lower in the Current Quarter. Personnel costs were $4.7 million lower in the Current Quarter primarily due to seasonal personnel cost variations in Norway. Maintenance costs were $1.8 million lower primarily due to the timing of repairs in fixed wing services in Australia. Lease costs were $0.8 million lower in the Current Quarter primarily due to lease return costs in the Preceding Quarter. Partially offsetting these lower costs were higher fuel costs of $3.4 million in the Current Quarter primarily due to higher fuel prices and increased flight hours.
General and Administrative. General and administrative expenses were $3.2 million lower in the Current Quarter primarily due to lower compensation expenses and decreased professional services fees.
Merger-related costs. Merger-related costs, which primarilyconsist of professional services fees and severance costs, were $1.7 million in the Current Quarter compared to $16.5 million in the Preceding Quarter.
Restructuring costs. Restructuring costs were $0.9 million in the Current Quarter compared to $7.9 million in the Preceding Quarter.
Depreciation and Amortization expenses. Depreciation and amortization expenses were $5.9 million higher in the Current Quarter primarily due to the addition of existing assets to the depreciation and amortization calculation.
Loss on Impairment. During the Current Quarter, the Company recognized a loss on impairment of $21.9 million, consisting of $16.0 million related to Petroleum Air Services (“PAS”), an unconsolidated affiliate in Egypt, and $5.9 million in connection with certain helicopters held for sale to reflect the helicopters at expected sales values.
Gain (Loss) on Disposal of Assets. During the Current Quarter, the Company sold two S76D medium helicopters, one B212 medium helicopter and other equipment resulting in gains of $0.5 million. During the Preceding Quarter, the Company disposed of five S-76C++ helicopters via sales-type lease agreements and disposed of three fixed wing aircraft for cash proceeds of $1.4 million, resulting in losses of $7.2 million.
Losses from Unconsolidated Affiliates. During the Current Quarter, the Company recognized losses of $1.5 million from unconsolidated affiliates compared to losses of $0.4 million in the Preceding Quarter.
Operating Income (Loss). Operating loss as a percentage of revenues was (4.2)% in the Current Quarter compared to (9.9)% in the Preceding Quarter. Operating loss in the Current Quarter was primarily due to loss on impairment. Operating loss in the Preceding Quarter was primarily due to Merger-related costs, restructuring costs, loss on disposal of assets and loss on impairment.
Loss on Sale of Subsidiary. During the Current Quarter, the Company recognized a $2.0 million loss on the sale of its subsidiary in Colombia.
Other Income (Expense), net. Other income, net of $6.2 million in the Current Quarter was primarily due to insurance proceeds of $3.7 million, government grants to fixed wing services of $2.7 million, and a favorable interest adjustment to the Company’s pension liability of $0.7 million, partially offset by a contingency reserve of $0.6 million and net foreign exchange losses of $0.4 million. Other income, net in the Preceding Quarter was $7.0 million primarily due to insurance proceeds of $2.6 million, government grants to fixed wing services of $3.8 million, a favorable release of a contract liability of $1.5 million, and a favorable interest adjustment to the Company’s pension liability of $1.0 million, partially offset by net foreign exchange losses of $1.7 million.
| | | | | | | | | | | | | | | | | | | | | | |
| | Current Quarter | | Preceding Quarter | | Favorable (Unfavorable) | | |
| | (In thousands) |
Foreign currency gains (losses): | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign currency losses | | (386) | | | (1,707) | | | 1,321 | | | |
Pension-related costs | | 665 | | | 986 | | | (321) | | | |
Other | | 5,905 | | | 7,758 | | | (1,853) | | | |
Other income (expense), net | | $ | 6,184 | | | $ | 7,037 | | | $ | (853) | | | |
Income Tax Benefit (Expense). Income tax benefit was $4.8 million in the current quarter compared to $19.1 million in the Preceding Quarter. The income tax benefit in the Current Quarter primarily related to changes in the blend of earnings, the tax impact of valuation allowances on the Company’s net operating losses and deductible business interest expense, and the tax impact of the PAS impairment loss.
|
| | | | | | | | | | | | | | | |
| Successor | | | Predecessor | | Favorable (Unfavorable) |
| Six Months Ended September 30, 2020 | | | Six Months Ended September 30, 2019 | |
Revenue: | | | | | | | | |
Operating revenue | $ | 557,230 |
| | | $ | 621,260 |
| | $ | (64,030 | ) | | (10.3 | )% |
Reimbursable revenue | 17,603 |
| | | 30,136 |
| | (12,533 | ) | | (41.6 | )% |
Total revenues | 574,833 |
| | | 651,396 |
| | (76,563 | ) | | (11.8 | )% |
| | | | | | | | |
Costs and expense: | | | | | | | | |
Operating expense | 422,389 |
| | | 494,414 |
| | 72,025 |
| | 14.6 | % |
Reimbursable expense | 17,567 |
| | | 28,974 |
| | 11,407 |
| | 39.4 | % |
Prepetition restructuring charges | — |
| | | 13,476 |
| | 13,476 |
| | nm |
|
General and administrative | 74,791 |
| | | 72,590 |
| | (2,201 | ) | | (3.0 | )% |
Merger-related costs | 21,917 |
| | | — |
| | (21,917 | ) | | nm |
|
Depreciation and amortization | 34,893 |
| | | 62,642 |
| | 27,749 |
| | 44.3 | % |
Total costs and expenses | 571,557 |
| | | 672,096 |
| | 100,539 |
| | 15.0 | % |
| | | | | | | | |
Loss on impairment | (36,829 | ) | | | (62,101 | ) | | 25,272 |
| | 40.7 | % |
Loss on disposal of assets | (2,951 | ) | | | (4,017 | ) | | 1,066 |
| | 26.5 | % |
Earnings (losses) from unconsolidated affiliates, net | (30 | ) | | | 2,980 |
| | (3,010 | ) | | nm |
|
Operating loss | (36,534 | ) | | | (83,838 | ) | | 47,304 |
| | 56.4 | % |
| | | | | | | | |
Interest income | 696 |
| | | 657 |
| | 39 |
| | 5.9 | % |
Interest expense | (25,949 | ) | | | (49,423 | ) | | 23,474 |
| | 47.5 | % |
Reorganization items, net | — |
| | | (170,299 | ) | | 170,299 |
| | nm |
|
Loss on sale of subsidiaries | — |
| | | (55,883 | ) | | 55,883 |
| | nm |
|
Change in fair value of preferred stock derivative liability | 15,416 |
| | | — |
| | 15,416 |
| | nm |
|
Bargain purchase gain | 81,093 |
| | | — |
| | 81,093 |
| | nm |
|
Other income (expense), net | 13,978 |
| | | (10,510 | ) | | 24,488 |
| | nm |
|
Total other income (expense) | 85,234 |
| | | (122,605 | ) | | 207,839 |
| | nm |
|
Income (loss) before benefit (provision) for income taxes | 48,700 |
| | | (369,296 | ) | | 417,996 |
| | nm |
|
Benefit (provision) for income taxes | (5,288 | ) | | | 37,289 |
| | (42,577 | ) | | nm |
|
Net income (loss) | 43,412 |
| | | (332,007 | ) | | 375,419 |
| | nm |
|
Net (income) loss attributable to noncontrolling interests | 204 |
| | | (213 | ) | | 417 |
| | nm |
|
Net income (loss) attributable to Bristow Group Inc. | $ | 43,616 |
| | | $ | (332,220 | ) | | $ | 375,836 |
| | nm |
|
The following table presents our operating results and other statement of operations information for three months ended June 30, 2021 and 2020, (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Favorable (Unfavorable) |
| 2021 | | 2020 | |
Revenues: | | | | | | | |
Operating revenues | $ | 288,351 | | | $ | 261,508 | | | $ | 26,843 | | | 10.3 | % |
Reimbursable revenues | 12,251 | | | 8,685 | | | 3,566 | | | 41.1 | % |
Total revenues | 300,602 | | | 270,193 | | | 30,409 | | | 11.3 | % |
| | | | | | | |
Costs and expenses: | | | | | | | |
Operating expenses | | | | | | | |
Personnel | 74,969 | | | 70,004 | | | (4,965) | | | (7.1) | % |
Repairs and maintenance | 60,465 | | | 50,853 | | | (9,612) | | | (18.9) | % |
Insurance | 5,367 | | | 4,620 | | | (747) | | | (16.2) | % |
Fuel | 16,665 | | | 7,820 | | | (8,845) | | | (113.1) | % |
Leased-in equipment | 26,852 | | | 30,098 | | | 3,246 | | | 10.8 | % |
Other | 30,185 | | | 24,160 | | | (6,025) | | | (24.9) | % |
Total operating expenses | 214,503 | | | 187,555 | | | (26,948) | | | (14.4) | % |
Reimbursable expenses | 12,114 | | | 8,648 | | | (3,466) | | | (40.1) | % |
General and administrative | 37,483 | | | 35,394 | | | (2,089) | | | (5.9) | % |
Merger related costs | 1,735 | | | 17,418 | | | 15,683 | | | nm |
Restructuring costs | 851 | | | 3,012 | | | 2,161 | | | nm |
Depreciation and amortization | 23,195 | | | 16,356 | | | (6,839) | | | (41.8) | % |
Total costs and expenses | 289,881 | | | 268,383 | | | (21,498) | | | (8.0) | % |
| | | | | | | |
Loss on impairment | (21,934) | | | (19,233) | | | (2,701) | | | (14.0) | % |
Gain on disposal of assets | 499 | | | 5,522 | | | (5,023) | | | nm |
Losses from unconsolidated affiliates, net | (1,517) | | | (1,978) | | | 461 | | | 23.3 | % |
Operating loss | (12,231) | | | (13,879) | | | 1,648 | | | 11.9 | % |
| | | | | | | |
Interest income | 66 | | | 262 | | | (196) | | | (74.8) | % |
Interest expense | (10,624) | | | (12,504) | | | 1,880 | | | 15.0 | % |
Loss on extinguishment of debt | — | | | (615) | | | 615 | | | nm |
Reorganization items, net | (446) | | | — | | | (446) | | | nm |
Loss on sale of subsidiaries | (2,002) | | | — | | | (2,002) | | | nm |
Change in fair value of preferred stock derivative liability | — | | | 15,416 | | | (15,416) | | | nm |
Bargain purchase gain | — | | | 75,433 | | | (75,433) | | | nm |
Other, net | 6,184 | | | 4,001 | | | 2,183 | | | 54.6 | % |
Total other income (expense), net | (6,822) | | | 81,993 | | | (88,815) | | | nm |
Income (loss) before benefit (provision) for income taxes | (19,053) | | | 68,114 | | | (87,167) | | | (128.0) | % |
Benefit for income taxes | 4,842 | | | 3,290 | | | 1,552 | | | 47.2 | % |
Net income (loss) | (14,211) | | | 71,404 | | | (85,615) | | | (119.9) | % |
Net loss attributable to noncontrolling interests | 14 | | | 73 | | | (59) | | | nm |
Net income (loss) attributable to Bristow Group Inc. | $ | (14,197) | | | $ | 71,477 | | | $ | (85,674) | | | (119.9) | % |
Revenues by Service Line. The table below sets forth the operating revenues earned by service line for the applicable periods (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Favorable (Unfavorable) |
| 2021 | | 2020 | |
Oil and gas services: | | | | | | | |
Europe | $ | 99,901 | | | $ | 105,029 | | | $ | (5,128) | | | (4.9) | % |
Americas | 75,003 | | | 56,893 | | | 18,110 | | | 31.8 | % |
Africa | 14,692 | | | 30,015 | | | (15,323) | | | (51.1) | % |
Total oil and gas services | 189,596 | | | 191,937 | | | (2,341) | | | (1.2) | % |
Government services(1) | 70,436 | | | 54,611 | | | 15,825 | | | 29.0 | % |
Fixed wing services | 24,654 | | | 11,559 | | | 13,095 | | | 113.3 | % |
Other services(2) | 3,665 | | | 3,401 | | | 264 | | | 7.8 | % |
| $ | 288,351 | | | $ | 261,508 | | | $ | 26,843 | | | 10.3 | % |
__________________________ |
| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | | | |
| | Three Months Ended September 30, 2020 | | | Three Months Ended September 30, 2019 | | Favorable (Unfavorable) |
Oil and gas: | | | | | | | | | |
Europe Caspian | | $ | 98,495 |
| | | $ | 114,537 |
| | $ | (16,042 | ) | | (14.0 | )% |
Americas | | 93,102 |
| | | 60,330 |
| | 32,772 |
| | 54.3 | % |
Africa | | 21,237 |
| | | 40,855 |
| | (19,618 | ) | | (48.0 | )% |
Asia Pacific | | 2,920 |
| | | 6,564 |
| | (3,644 | ) | | (55.5 | )% |
Total oil and gas | | 215,754 |
| | | 222,286 |
| | (6,532 | ) | | (2.9 | )% |
UK SAR Services | | 56,978 |
| | | 54,499 |
| | 2,479 |
| | 4.5 | % |
Fixed Wing Services | | 20,310 |
| | | 27,891 |
| | (7,581 | ) | | (27.2 | )% |
Other | | 2,680 |
| | | 8 |
| | 2,672 |
| | nm |
|
| | $ | 295,722 |
| | | $ | 304,684 |
| | $ | (8,962 | ) | | (2.9 | )% |
(1)Includes revenues of approximately $2.0 million related to government services that were previously included in the oil and gas and other service lines for the three months ended June 30, 2020. |
| | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | | | |
| | Six Months Ended September 30, 2020 | | | Six Months Ended September 30, 2019 | | Favorable (Unfavorable) |
Oil and gas: | | | | | | | | | |
Europe Caspian | | $ | 204,306 |
| | | $ | 228,277 |
| | $ | (23,971 | ) | | (10.5 | )% |
Americas | | 151,262 |
| | | 116,366 |
| | 34,896 |
| | 30.0 | % |
Africa | | 51,253 |
| | | 83,690 |
| | (32,437 | ) | | (38.8 | )% |
Asia Pacific | | 5,623 |
| | | 20,716 |
| | (15,093 | ) | | (72.9 | )% |
Total oil and gas | | 412,444 |
| | | 449,049 |
| | (36,605 | ) | | (8.2 | )% |
UK SAR Services | | 109,600 |
| | | 110,578 |
| | (978 | ) | | (0.9 | )% |
Fixed Wing Services | | 31,781 |
| | | 61,358 |
| | (29,577 | ) | | (48.2 | )% |
Other | | 3,405 |
| | | 275 |
| | 3,130 |
| | nm |
|
| | $ | 557,230 |
| | | $ | 621,260 |
| | $ | (64,030 | ) | | (10.3 | )% |
(2)Includes Asia Pacific and certain Europe revenues of approximately $3.5 million that were previously included in the oil and gas service line for the three months ended June 30, 2020.Current Quarter compared to Prior Year Quarter
Operating Revenues. Operating revenues were $9.0$26.8 million lowerhigher in the Current Quarter compared to the Priorthree months ended June 30, 2020 (the “Prior Year Quarter.Quarter”).
Operating revenues from oil and gas operationsservices were $6.5$2.3 million lower in the Current Quarter.
Operating revenues from oil and gas operationsservices in Africa were $19.6$15.3 million lower primarily due to the end of customer contracts and lower utilization.
Operating revenues from oil and gas operationsservices in the Europe Caspian region were $16.0$5.1 million lower in the Current Quarter. Revenues in the U.K. decreased by $9.3$11.7 million primarily due to lower utilization,the end of customer contracts, partially offset by the strengthening of the British pound sterling relative to the U.S. dollar. Revenues in Norway decreased $5.3increased by $6.7 million primarily due to lower utilization. Revenues in Turkmenistan were $1.3 million lower duestrengthening of the Norwegian krone relative to the end of customer contracts.U.S. dollar and higher utilization in the Current Quarter.
Operating revenues from oil and gas operationsservices in the Asia Pacific regionAmericas were $3.6$18.1 million lowerhigher in the Current Quarter primarily due to lowerthe impact of the Merger.
Operating revenues from government services were $15.8 million higher in the Current Quarter primarily due to the impact of the Merger, strengthening of the British pound sterling relative to the U.S. dollar and an increase in flight hours.
Operating revenues from fixed wing services were $13.1 million higher in the Current Quarter primarily due to higher utilization.
Operating revenues from oil and gas operationsother services were $0.3 million higher primarily due to the impact of the Merger, partially offset by the end of a customer contract.
Operating Expenses. Operating expenses were $26.9 million higher in the AmericasCurrent Quarter. Repairs and maintenance costs were $32.8$9.6 million higher in the Current Quarter primarily due to the impact of the Merger, the timing of repairs and higher flight hours. Fuel expense was $8.8 million higher in the Current Quarter primarily due to higher fuel prices, the impact of the Merger, higher flight hours and unfavorable foreign exchange impacts. Other operating expenses were $6.0 million higher in the Current Quarter primarily due to the impact of the Merger, and increased activity. Personnel costs were $5.0 million higher in the Current Quarter primarily due to unfavorable foreign exchange impacts and the impact of the Merger. Insurance expense was $0.8 million higher in the Current Quarter primarily due to the impact of the Merger. These increases were partially offset by lower utilizationlease costs of small and medium helicopters.
Operating revenues from U.K. SAR services were $2.5$3.3 million higher in the Current Quarter primarily due to an increase in flight hours.
Operating revenues from fixed wing services were $7.6 million lower in the Current Quarter. Revenues from fixed wing services in Australia, Africa and the U.K. were $2.6 million, $3.0 million and $2.0 million lower, respectively, primarily due to lower utilization.
Operating revenues from other services were $2.7 million higher due to the benefit of the Merger.
Operating Expenses. Operating expenses were $4.7 million lower in the Current Quarter. Lease costs were $5.9 million lower in the Current Quarter primarily due to aircraft lease rejections related to Chapter 11 duringreturns since the prior year. Fuel expense was $5.7Prior Year Quarter.
million lower primarily due to a decrease in flight hours and a lower average fuel price. Maintenance costs were $1.4 million lower primarily due to lower power-by-the-hour (“PBH”) expense related to fewer flight hours, partially offset by an increase in PBH amortization costs related to the recognition of a PBH asset as a result of fresh-start accounting. Other direct costs decreased $4.9 million primarily due to the decrease in activity, including lower training costs. This was partially offset by an increase in personnel costs of $11.5 million primarily due to severance costs and an increase in headcount related to the Merger. Insurance costs were $1.7 million higher in the Current Quarter primarily due to deductibles related to hurricane damages.
General and Administrative. General and administrative expenses were $1.4$2.1 million higher in the Current Quarter primarily due to the impact of the Merger.
Merger-related costs. Merger-related costs, of $4.5 millionwhich primarily consist of professional services fees and severance costs, relatedwere $1.7 million in the Current Quarter compared to $17.4 million in the Merger.Prior Year Quarter.
Restructuring costs. Restructuring costs were $0.9 million in the Current Quarter compared to $3.0 million in the Prior Year Quarter.
Depreciation and Amortization. Depreciation and amortization expenses were $12.8$6.8 million lowerhigher in the Current Quarter primarily due to the revaluationaddition of existing assets in connection with the adoption of fresh-start accounting. Old Bristow recorded all property and equipment at fair value upon emergence from Chapter 11 and made certain changes to the useful livesdepreciation and salvage value of its assets. This was partially offset by an increase due toamortization calculation and the impact of the inclusion of Era’s assets.Merger.
Loss on Impairment. During the Current Quarter, the Company recognized a loss on impairment of $12.4$21.9 million, consisting of $16.0 million related to PAS and $5.9 million in connection with certain helicopters held for sale to reflect the write down of inventory andhelicopters at expected sales values. During the Prior Year Quarter, the Company recorded a loss on impairment of $5.2its investment in Lider of $18.7 million related to helicopters that were transferred to held for sale assets. During the Prior Year Quarter, Old Bristow recognized a loss on theand inventory impairment of H225 helicopters of $42.0 million, goodwill impairment of $17.5 million related to Airnorth and a $2.6 million impairment of the investment in Sky Futures Partners Limited.$0.5 million.
Gain (Loss) on Disposal of Assets. During the Current Quarter, the Company sold ten H225 heavy, nine S-76C++two S76D medium helicopters, one B212 medium helicopter and twelve B407 single engine helicopters for cash proceeds of $40.5 million,other equipment resulting in lossesa net gain of $8.5$0.5 million. During the Prior Year Quarter, the Company sold one B412 mediumH225 heavy helicopter and other equipment resulting in lossesa net gain of $0.2$5.5 million.
EarningsLosses from Unconsolidated Affiliates, net of Losses.Affiliates. During the Current Quarter, the Company recognized gainslosses of $1.9$1.5 million from its equity investmentsunconsolidated affiliates compared to gainslosses of $0.6$2.0 million in the Prior Year Quarter.
Operating Income (Loss). Operating loss as a percentage of revenues was (7.7)(4.2)% in the Current Quarter compared to (20.4)(5.3)% in the Prior Year Quarter. Operating loss in the Current Quarter was primarily due to the loss on disposal of assets and losslosses on impairment. Operating loss in the Prior Year Quarter was primarily due to the losslosses on impairment.impairment, Merger-related costs and restructuring costs.
Interest Expense. Interest expense was $9.3$1.9 million lower in the Current Year Quarter primarily due to lower debt balances and the absence of the amortization of deferred financing fees as these fees were written-off as a result of Chapter 11. These decreases were partially offset by increased debt discount amortization related to the fair valuing of debt as a result of fresh-start accounting and the impact of the Merger.balances.
Reorganization Items, net.Loss on sale of subsidiaries. Reorganization items incurredDuring the Current Quarter, the Company recognized a loss of $2.0 million on the sale of its subsidiary in Colombia.
Change in fair value of preferred stock derivative liability. During the Prior Year Quarter, related to Chapter 11 and consistedOld Bristow recognized a $15.4 million gain on the change in fair value of professional services fees of $35.5 million, H175 settlement charges of $31.8 million, Backstop Commitment Agreement estimated fees of $19.3 million, lease termination costs of $4.2 million, debt related expenses of $4.1 million, corporate lease termination cost of $1.1 million and a benefit of $1.9 million resulting from an adjustment to the allowed claim associated with the return of four H225 helicopters.preferred stock derivative liability.
Bargain Purchase Gain. During the CurrentPrior Year Quarter, the Company recognized a bargain purchase gain of $5.7$75.4 million related to the Merger. The Current Quarter gain was an adjustment to the previously calculated excess of the fair value of Era’s identified assets acquired and liabilities assumed.
Other Income (Expense), net. Other income, net was $10.6$6.2 million in the Current Quarter compared to other expense, net of $6.6$4.0 million in the Prior Year Quarter. Other income, net in the Current Quarter was primarily due to insurance proceeds of $3.7 million, government grants to fixed wing services of $2.7 million, and a favorable interest adjustment to the Company’s pension liability of $0.7 million, partially offset by a contingency reserve of $0.6 million and net foreign exchange losses of $0.4 million. Other income, net in the Prior Year Quarter was primarily due to government grants to fixed wing services of $1.4 million, net foreign exchange gains of $6.9$1.4 million, as shown in the table below,and a favorable interest adjustment to the Company’s pension liability of $0.9 million and other income related to Airnorth (government grants) of $2.7 million. Other expense, net in the Prior Year Quarter was primarily due to net foreign exchange losses of $5.8 million as shown in the table below and an unfavorable interest adjustment to the Company’s pension liability of $0.9 million.below.
|
| | | | | | | | | | | | | |
| | Successor | | | Predecessor | | Favorable (Unfavorable) |
| | Current Quarter | | | Prior Year Quarter |
| | | | | | | |
Foreign currency gains (losses) by region: | | | | | | | |
Europe Caspian | | $ | 9,898 |
| | | $ | (6,857 | ) | | $ | 16,755 |
|
Africa | | (2,030 | ) | | | 855 |
| | (2,885 | ) |
Americas | | 85 |
| | | 353 |
| | (268 | ) |
Asia Pacific | | 1,427 |
| | | (1,006 | ) | | 2,433 |
|
Corporate and other | | (2,445 | ) | | | 839 |
| | (3,284 | ) |
Foreign currency gains (losses) | | 6,935 |
| | | (5,816 | ) | | 12,751 |
|
Pension interest | | 939 |
| | | (893 | ) | | 1,832 |
|
Other | | 2,718 |
| | | 72 |
| | 2,646 |
|
Other income (expense), net | | $ | 10,592 |
| | | $ | (6,637 | ) | | $ | 17,229 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Current Quarter | | Prior Year Quarter | | Favorable (Unfavorable) | | |
| | (In thousands, except percentages) |
Foreign currency gains (losses): | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign currency gains (losses) | | (386) | | | 1,374 | | | (1,760) | | | |
Pension-related costs | | 665 | | | 860 | | | (195) | | | |
Other | | 5,905 | | | 1,767 | | | 4,138 | | | |
Other income (expense), net | | $ | 6,184 | | | $ | 4,001 | | | $ | 2,183 | | | |
Income Tax Benefit (Expense).The Company’s effective Income tax ratebenefit was (44.2)% and 11.8% during$4.8 million in the Current Quarter andcompared to $3.3 million in the Prior Year Quarter, respectively.Quarter. The changeincome tax benefit in the Company’s effective tax rateCurrent Quarter primarily related to changes in the blend of earnings, nondeductible professional fees, and the tax impact of valuation allowances on the Company’s net operating losses and deductible business interest expense.
Current Six Months compared to Prior Year Six Months
Operating Revenues. Operating revenues were $64.0 million lower in the six months ended September 30, 2020 (the "Current Period") compared to the six months ended September 30, 2019 (the "Prior Year Period").
Operating revenues from oil and gas operations were $36.6 million lower in the Current Period.
Operating revenues from oil and gas operations in Africa were $32.4 million lower primarily due to lower utilization.
Operating revenues from oil and gas operations in the Europe Caspian region were $24.0 million lower in the Current Period. Revenues in the U.K. decreased $6.5 million primarily due to lower utilization. Revenues in Norway decreased $15.1 million primarily due to lower utilization. Revenues in Turkmenistan decreased $2.1 million due to the end of customer contracts.
Operating revenues from oil and gas operations in the Asia Pacific region were $15.1 million lower in the Current Period. The Prior Year Period included revenues of $5.6 million related to a business that was subsequently sold. Revenues in Australia decreased $9.5 million primarily due to lower utilization.
Operating revenues from oil and gas operations in the Americas were $34.9 million higher in the Current Period primarily due to the addition of Era’s operations upon conclusion of the Merger. These increases were partially offset by lower utilization of small and medium helicopters in the U.S. Gulf of Mexico and Trinidad.
Operating revenues from U.K. SAR services were $1.0 million lower in the Current Period.
Operating revenues from fixed wing services decreased by $29.6 million in the Current Period. Fixed wing services in the Prior Year Period included revenues from Eastern Airways, which was sold during the Prior Year Period, of $10.2 million. Revenues from fixed wing services in Australia and Africa were $13.5 million and $5.9 million lower, respectively, primarily due to lower utilization.
Operating revenues from other services were $3.1 million higher due to the benefit of the Merger.
Operating Expenses. Operating expenses were $72.0 million lower in the Current Period. Lease costs were $26.4 million lower in the Current Period primarily due to aircraft lease rejections in the Chapter 11 Cases prior to the Current Periodexpense, and the absence of $10.8 million in net lease return costs incurred in the Prior Year Period. Fuel expense was $17.3 million lower primarily due to a decrease in flight hours and a lower average fuel price. Maintenance costs were $9.7 million lower primarily due to lower PBH expense related to fewer flight hours, partially offset by an increase in PBH amortization costs related to the recognition of a PBH asset as a result of fresh-start accounting. Other direct costs decreased $19.1 million primarily due to the decrease in activity,
including lower training, travel and freight costs. These decreases were partially offset by an increase in personnel costs of $0.6 million primarily due to a net increase in headcount and severance costs following the Merger.
Pre-Petition Restructuring Charges. In the Prior Year Period, the Company incurred $13.5 million in professional fees prior to the petition date related to the Chapter 11 Cases.
General and Administrative. General and administrative expenses were $2.2 million higher in the Current Period primarily due to thetax impact of the Merger.
Merger-related costs. Merger-related costs of $21.9 millionprimarilyconsist of professional services fees and severance costs related to the Merger.
Depreciation and Amortization. Depreciation and amortization expense decreased by $27.7 million in the Current Period primarily due to the revaluation of assets in connection with the adoption of fresh-start accounting. Old Bristow recorded all property and equipment at fair value upon emergence from Chapter 11 and made certain changes to the useful lives and salvage value of assets.
Loss on Impairment. During the Current Period, the Company recognized a loss on thePAS impairment of its investment in Líder of $18.7 million, a loss on impairment of $12.4 million related to the write down of inventory, which was agreed to be sold with helicopters, a loss on impairment of $5.2 million related to helicopters that were transferred to held for sale assets and a separate inventory impairment of $0.5 million.
Loss on Disposal of Assets. During the Current Period, the Company sold eleven H225 heavy, nine S-76C++ medium and twelve B407 single engine helicopters and other equipment for cash proceeds of $52.1 million, resulting in losses of $3.0 million. During the Prior Year Period, the Company sold two B412 medium helicopters, a fixed wing aircraft and other equipment resulting in losses of $4.0 million.
Earnings from Unconsolidated Affiliates, net of Losses. During the Current Period, the Company recognized losses of less than $0.1 million from equity investments compared to gains of $3.0 million in the Prior Year Period.
Operating Loss. Operating loss as a percentage of revenues was (6.6)% in the Current Period compared to (13.5)% in the Prior Year Period. Operating loss in the Current Period was primarily due to losses on impairment and losses on disposal of assets. Operating loss in the Prior Year Period was primarily due to pre-petition restructuring costs, the recognition of lease return costs and the loss on impairment.
Interest Expense. Interest expense was $23.5 million lower in the Current Year Period primarily due to lower debt balances and the absence of the amortization of deferred financing fees as these fees were written-off as a result of Chapter 11. These decreases were partially offset by increased debt discount amortization related to the fair valuing of debt as a result of fresh-start and purchase price accounting.
Reorganization Items, net. Reorganization items incurred in the Prior Year Period related to the Chapter 11 Cases and consisted of professional fees of $51.0 million, H175 settlement agreement of $31.8 million, lease termination costs of $30.2 million, the write-off of debt discount of $30.2 million, backstop agreement cost of $19.3 million, the write-off of deferred financing costs of $4.6 million, fees incurred related to the DIP Credit Agreement of $4.1 million and corporate lease termination costs of $1.1 million, slightly offset by the benefit on the Milestone Omnibus Agreement allowed claim adjustment of $1.9 million.
Loss on sale of Subsidiaries. During the Prior Year Period, Old Bristow sold two subsidiaries, Eastern Airways and Aviashelf, resulting in losses of $46.9 million and $9.0 million, respectively.
Change in Fair Value of Preferred Stock Derivative. During the Current Period, Old Bristow recognized a benefit of $15.4 million related to a decrease in the fair value of preferred stock derivative.
Gain on Bargain Purchase. During the Current Period, the Company recognized a bargain purchase gain of $81.1 million related to the Merger. The net tangible and intangible assets acquired, and liabilities assumed in connection with the Merger, were recorded at their acquisition date fair values. The excess of the fair value of Era’s identified assets acquired and liabilities assumed was recognized as a gain.loss.
Other Income (Expense), net. Other income, net was $14.0 million in the Current Period compared to other expense, net of $10.5 million in the Prior Year Period. Other income in the Current Period was primarily due to net foreign exchange gains of $8.3 million as shown in the table below, a favorable interest adjustment to the Company’s pension liability of $1.8 million and other income related to Airnorth (government grants) of $3.9 million. Other expense, net in the Prior Year Period was primarily due to net foreign exchange losses of $8.7 million as shown in the table below and an unfavorable interest adjustment to the Company’s pension liability of $1.8 million.
|
| | | | | | | | | | | | | |
| | Successor | | | Predecessor | | Favorable (Unfavorable) |
| | Current Period | | | Prior Year Period |
| | | | | | | |
Foreign currency gains (losses) by region: | | | | | | | |
Europe Caspian | | $ | 10,257 |
| | | $ | (10,681 | ) | | $ | 20,938 |
|
Africa | | (2,870 | ) | | | 622 |
| | (3,492 | ) |
Americas | | (1,016 | ) | | | 679 |
| | (1,695 | ) |
Asia Pacific | | 5,221 |
| | | (1,276 | ) | | 6,497 |
|
Corporate and other | | (3,283 | ) | | | 1,910 |
| | (5,193 | ) |
Foreign currency gains (losses) | | 8,309 |
| | | (8,746 | ) | | 17,055 |
|
Pension interest | | 1,799 |
| | | (1,845 | ) | | 3,644 |
|
Other | | 3,870 |
| | | 81 |
| | 3,789 |
|
Other income (expense), net | | $ | 13,978 |
| | | $ | (10,510 | ) | | $ | 24,488 |
|
Income Tax Benefit (Expense). The Company’s effective tax rate was 10.9% and 10.1% during the Current Period and Prior Year Period, respectively.
Liquidity and Capital Resources
General
Our ongoing liquidity requirements arise primarily from working capital needs, meeting our capital commitments (including the purchase of helicopters and other equipment) and the repayment of debt obligations. In addition, we may use our liquidity to fund acquisitions, repay debt, repurchase shares or debt securities or make other investments. Our primary sources of liquidity are cash balances and cash flows from operations, borrowings under our ABL and, from time to time, we may obtain additional liquidity through the issuance of equity, or debt or other financing options or through asset sales.
Summary of Cash Flows
| | | Successor | | | Predecessor | | Three Months Ended June 30, | |
| Six Months Ended September 30, 2020 | | | Six Months Ended September 30, 2019 | | 2021 | | 2020 | |
| (in thousands) | | (in thousands) | |
Cash flows provided by or (used in): | | | | | Cash flows provided by or (used in): | | |
Operating activities | $ | 34,991 |
| | | $ | (57,165 | ) | Operating activities | $ | 36,441 | | | $ | (6,866) | | |
Investing activities | 168,441 |
| | | (43,405 | ) | Investing activities | 6,802 | | | 149,052 | | |
Financing activities | (96,604 | ) | | | 110,904 |
| Financing activities | (27,690) | | | (78,194) | | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,756 | ) | | | 4,406 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 2,042 | | | 302 | | |
Net increase in cash, cash equivalents and restricted cash | $ | 105,072 |
| | | $ | 14,740 |
| Net increase in cash, cash equivalents and restricted cash | $ | 17,595 | | | $ | 64,294 | | |
Operating Activities
Cash flows provided by operating activities were $35.0$36.4 million during the Current PeriodQuarter compared to cash flows used in operating activities of $57.2$6.9 million during the Prior Year Period.Quarter. Operating income before depreciation, impairment charges and losses on asset dispositions, net was $6.8$15.8 million lowerhigher in the Current PeriodQuarter compared to the Prior Year PeriodQuarter primarily due to lower utilizationMerger-related and restructuring costs.
During the Current Quarter, changes in working capital provided cash flows of aircraft and Merger-related costs. The$2.5 million primarily due to a decrease in accounts receivables. During the Prior Year Period was, however, impacted by significant reorganization costs relatedQuarter, changes in working capital used cash flows of $29.3 million primarily due to Chapter 11, with a net cash impact of $51.0 million.decrease in accrued liabilities and an increase in inventory and other assets.
Cash paid for interest expense and income taxes was $14.5$1.2 million and $7.7$3.0 million, respectively, in the Current PeriodQuarter compared to $37.2$8.3 million and $8.6$2.3 million, respectively, in the Prior Year Period.
Quarter.
Investing Activities
During the Current Period,Quarter, net cash provided by investing activities was $168.4$6.8 million primarily as follows:
•Proceeds of $10.6 million from the sale or disposal of aircraft and certain other equipment, partially offset by
•Cash transferred in the sale of a subsidiary of $0.9 million, and
•Capital expenditures of $3.0 million.
During the Prior Year Quarter, net cash provided by investing activities was $149.1 million primarily as follows:
•Increase in cash from the Merger of $120.2$120.2 million,,
•Proceeds of $52.1 million from the sale or disposal of thirty-two aircraft and certain other equipment, and
•Non-refundable deposits on assets held for sale of $3.4$20.0 million, and
•Proceeds of $11.7 million from the sale or disposal of aircraft and certain other equipment, partially offset by
•Capital expenditures of $7.4 million.
During the Prior Year Period, net cash used in investing activities was $43.4 million primarily as follows:
Capital expenditures of $26.0 million, and
Net payments of $22.5 million for the disposal of Eastern Airways, BHLL and Aviashelf, partially offset by
•Proceeds of $5.0 million from the sale or disposal of three aircraft and certain other equipment.$2.8 million.
Financing Activities
During the Current Period,Quarter, net cash used in financing activities was $96.6$27.7 million primarily as follows:
•Share repurchases of $21.8 million,
•Net repayments of debt and redemption premiums of $85.4$4.0 million, and
•Payment on debt issuance costs of $1.9 million.
During the Prior Year Quarter, net cash used in financing activities was $78.2 million primarily as follows:
•Net repayments of debt and redemption premiums of $73.4 million, and
•Share repurchases of $11.2 million.
During the Prior Year Period, net cash provided by financing activities was $110.9 million primarily as follows:
•Borrowings under the Term Loan Agreement were $225.6 million, partially offset by
•Debt issuance costs of $14.1 million, and
•Net repayments of debt of $99.2$4.8 million.
Short and Long-Term Liquidity Requirements
We anticipate that we will generate positive cash flows from operating activities and that these cash flows will be adequate to meet our working capital requirements. To support our capital expenditure program and/or other liquidity requirements, we may use any combination of operating cash flow, cash balances, orborrowings under our ABL, proceeds from sales of assets, issue debt or equity, or other financing options.
Our availability of long-term liquidity is dependent upon our ability to generate operating profits sufficient to meet our requirements for working capital, debt service, capital expenditures and a reasonable return on investment. While the COVID-19 pandemic, in general, and the related decrease in oil and natural gas prices, more specifically, have not had a material impact on our liquidity, a sustained environment of depressed oil and natural gas prices could affect capital spending for offshore oil and gas exploration, drilling and production, which in turn could affect our business and liquidity. As of SeptemberJune 30, 2020,2021, we had $301.4$244.7 million of unrestricted cash and $57.2$54.1 million of remaining availability under our amended asset-backed revolving credit facility (the “ABL Facility”) for total liquidity of $358.6$298.8 million. Borrowings under the amended ABL Facility are subject to certain conditions and requirements.
As of SeptemberJune 30, 2020,2021, approximately 47%77% of our total cash balance was held outside the U.S. and is generally used to meet the liquidity needs of our non-U.S. operations. Most of our cash held outside the U.S. could be repatriated to the U.S., and any such repatriation could be subject to additional taxes. If cash held by non-U.S. operations is required for funding operations in the U.S., we may make a provision for additional taxes in connection with repatriating this cash, which is not expected to have a significant impact on our results of operations.
The significant factors that affect our overall liquidity include cash from or used to fund operations, capital expenditure commitments, debt service, pension funding, adequacy of bank lines of credit and the Company’s ability to attract capital on satisfactory terms.
We believe we have enough liquidity to weather the current COVID-19 crisis, while continuing to fulfill our debt obligations. Management will continue to closely monitor our liquidity, the credit markets and oil and gas prices.
Debt Obligations
TotalOur principal debt (excluding unamortized discounts)balance as of SeptemberJune 30, 2020 (Successor)2021, was $644.4 million. The following table summarizes$541.6 million primarily comprised of the contractual maturity dates for our significant debt as6.875% Senior Notes due in March 2028 and two tranches of Septemberthe Lombard Debt due December 29, 2023 and January 30, 2020 (Successor):
|
| | |
Debt | | Maturity Date |
Promissory notes | | December 2020 |
7.750% Senior Notes | | December 15, 2022 |
Macquarie Debt | | March 6, 2023 |
Lombard Debt | | December 29, 2023 and January 30, 2024 |
PK Air Debt | | January 13 and 27, 2025 |
2024, respectively.Currently, we do not believe the conditions caused by COVID-19 will affect our abilitywe are able to meet the maintenance and other covenants in our debt instruments.
See further discussion of outstanding debt as of September 30, 2020 (Successor) in Note 6 of the condensed consolidated financial statements.
Lease Obligations
We have non-cancelable operating leases in connection with the lease of certain equipment, including leases for aircraft, and land and facilities used in our operations. The related lease agreements, which range from non-cancelable and month-to-month terms, generally provide for fixed monthly rentals and can also include renewal options. As of SeptemberJune 30, 2020 (Successor),2021, aggregate future payments under all non-cancelable operating leases that have initial or remaining terms in excess of one year, including leases for 4547 aircraft, were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Aircraft | | Other | | Total |
Fiscal year ending March 31, | | | | | |
2022(1) | 57,378 | | | 9,509 | | | $ | 66,887 | |
2023 | 57,897 | | | 10,689 | | | 68,586 | |
2024 | 45,362 | | | 9,723 | | | 55,085 | |
2025 | 28,370 | | | 7,632 | | | 36,002 | |
2026 | 2,170 | | | 6,637 | | | 8,807 | |
Thereafter | — | | | 21,003 | | | 21,003 | |
| $ | 191,177 | | | $ | 65,193 | | | $ | 256,370 | |
____________________ (1)Reflects the amounts remaining for the nine months ended March 31, 2022.
During the three months ended June 30, 2021 and 2020, we recognized $27.5 million and $30.9 million of operating lease expense, respectively.
Cash paid for amounts included in the measurement of lease liabilities during the three months ended June 30, 2021 and 2020 was $24.4 million and $27.8 million, respectively.
|
| | | | | | | | | | | |
| Aircraft | | Other | | Total |
Fiscal year ending March 31, | | | | | |
2021 | $ | 44,047 |
| | $ | 14,781 |
| | $ | 58,828 |
|
2022 | 77,287 |
| | 25,835 |
| | 103,122 |
|
2023 | 58,616 |
| | 10,154 |
| | 68,770 |
|
2024 | 46,005 |
| | 8,235 |
| | 54,240 |
|
2025 | 28,370 |
| | 6,127 |
| | 34,497 |
|
Thereafter | 2,170 |
| | 25,734 |
| | 27,904 |
|
| $ | 256,495 |
| | $ | 90,866 |
| | $ | 347,361 |
|
From time to time we may, under favorable market conditions and when necessary, enter into opportunistic aircraft lease agreements in support of our global operations. The following table reflects the timing of our current contractual lease expirations by fiscal year and aircraft type. The timing and amounts shown below do not factor in any potential renewals that management may consider to ensure sufficient aircraft availability to meet future demand and activity levels.Pension Obligations | | | | | | | | | | | | | | | | | | | | | | | |
| 2022(1) | | 2023 | | 2024 | | 2025 and Beyond |
Aircraft type: | | | | | | | |
S-92A | 11 | | 2 | | 10 | | 10 |
AW189 | — | | | 1 | | — | | | — | |
AW139 | 4 | | 1 | | 2 | | — | |
Fixed wing/ UAV | 2 | | 4 | | — | | | — | |
| 17 | | | 8 | | | 12 | | | 10 | |
| | | | | | | |
| | | | | | | |
___________________________As of September 30, 2020 (Successor), we had recorded on our balance sheet a net $8.9 million pension liability related to(1)FY22 includes leases that have already been returned as well as leases that will expire during the Bristow Helicopters Limited and Bristow International Aviation (Guernsey) Limited (“BIAGL”) pension plans. The liability represents the excessremainder of the present value of the defined benefit pension plan liabilities over the fair value of plan assets that existed at that date. The minimum funding rules of the U.K. require the employer to agree to a funding plan with the plans’ trustee for securing that the pension plan has sufficient and appropriate assets to meet its technical provisions liabilities. In addition, where there is a shortfall in assets against this measure, we are required to make scheduled contributions in amounts sufficient to bring the plan up to 100% funded as quickly as can be reasonably afforded. The employer contributions for the main U.K. pension plan for the Combined Fiscal Year 2020, the Predecessor Fiscal Year 2019 and the Predecessor Fiscal Year 2018 were £12.7 million ($16.2 million), £12.7 million ($16.6 million), and £12.8 million ($17.0 million), respectively. See further discussion of pension plans in Note 10 to the condensed consolidated financial statements.fiscal year.
Contractual Obligations and Commercial Commitments
We have various contractual obligations that are recorded as liabilities on our condensed consolidated balance sheet. Other items, such as certain purchase commitments and other executory contracts, are not recognized as liabilities on our condensed consolidated balance sheet such as certain minimum lease payments for the use of property and equipment under operating lease agreements we are contractually committed to make.
As of SeptemberJune 30, 2020,2021, we had unfunded capital commitments of $85.1$86.0 million, consisting primarily of agreements to purchase helicopters, including three AW189 heavy helicopters and five AW169 light twin helicopters. The AW189 helicopters are scheduled to be delivered in fiscal year 2022. Delivery dates for the AW169 helicopters have yet to be determined. These commitments are payable beginning in fiscal year 2021 through fiscal year 2022, and all of the commitments (inclusive of deposits paid on options not yet exercised) may be terminated without further liability to us other than aggregate liquidated damages of $2.2$2.1 million. If we do not exercise our rights to cancel these capital commitments, we expect to finance the remaining acquisition costs for these helicopters through a combination of cash on hand, cash provided by operating activities, asset sales and financing options.
In addition, we 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 yearyears 2022 and fiscal year 2023.
We had $9.6$21.1 million of other purchase obligations representing non-cancelable PBH maintenance commitments.commitments and unfilled purchase orders for aircraft parts..
Off Balance Sheet Arrangements
On occasion, we and our partners will guarantee certain obligations on behalf of our subsidiaries and affiliates. As of September 30, 2020, we had no such guarantees in place. Letters of credit issued under the ABL Facility in the aggregate face amount of $9.2 million were outstanding on September 30, 2020 (Successor).
Selected Financial Information on Guarantors of Securities
On December 12, 2012, Era Group Inc., renamedFebruary 25, 2021, Bristow Group Inc. (“the Parent”) upon closing of the Merger, issued its 7.750%6.875% Senior Notes due 2022.2028 (the “Registered Notes”). The Registered Notes, issued under an indenture, are fully and unconditionally guaranteed as to payment by a number of subsidiaries of the Parent (collectively, the “Guarantors”). The Parent is a holding company with no significant assets other than the stock of its subsidiaries. In order to meet its financial needs and obligations, the Parent relies exclusively on income from dividends and other cash flow from such subsidiaries. The subsidiary guarantees provide that, in the event of a default on the Registered Notes, the holders of the Registered Notes may institute legal proceedings directly against the Guarantors to enforce the guarantees without first proceeding against the Parent.
None of the non-Guarantor subsidiaries of the Parent are under any direct obligation to pay or otherwise fund amounts due on the Registered Notes or the guarantees, whether in the form of dividends, distributions, loans or other payments. If such subsidiaries are unable to transfer funds to the Parent or Guarantors and sufficient cash or liquidity is not otherwise available, the Parent or Guarantors may not be able to make principal and interest payments on their outstanding debt, including the Registered Notes or the guarantees. We believe the following selected financial information of the Guarantors presents a sufficient financial position of Bristow Group Inc. to continue to fulfill its obligations under the requirements of the Registered Notes. This selected financial information should be read in conjunction with the accompanying condensed consolidated financial statements and notes (amounts shown in thousands).
| | | | | | | | | | | |
| June 30, 2021 | | March 31, 2021 |
Current assets | $ | 577,423 | | | $ | 798,189 | |
Non-current assets | $ | 1,352,331 | | | $ | 1,686,646 | |
Current liabilities | $ | 292,358 | | | $ | 224,078 | |
Non-current liabilities | $ | 762,214 | | | $ | 1,112,490 | |
| |
| Three Months Ended June 31, 2021 | | |
Total revenues | $ | 300,603 | | | |
Operating income (expense) | $ | 4,939 | | | |
Net income (loss) | $ | (5,249) | | | |
Net income (loss) attributable to Bristow Group | $ | (5,235) | | | |
|
| | | | | | | | |
| | Successor | | |
| | September 30, 2020 | | |
| | | | |
Current assets | | $ | 521,826 |
| | |
Non-current assets | | $ | 1,387,549 |
| | |
Current liabilities | | $ | 260,380 |
| | |
Non-current liabilities | | $ | 632,969 |
| |
|
|
| | | | |
| | Successor |
| | Three Months Ended September 30, 2020 | | Six Months Ended September 30, 2020 |
Total revenues | | $ | 85,862 |
| | $ | 137,982 |
|
Operating income (expense) | | $ | (29,350 | ) | | $ | (52,625 | ) |
Net income (loss) | | $ | (31,852 | ) | | $ | (37,896 | ) |
Net income (loss) attributable to Bristow Group | | $ | (31,863 | ) | | $ | (37,918 | ) |
Critical Accounting Policies and Estimates
See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” inof the MD&A 8-Kthe Annual Report on Form 10-K for a discussion of our critical accounting policies.estimates. There have been no material changes to our critical accounting policies and estimates provided insince the MD&A 8-K.Annual Report on Form 10-K.
For discussion of recent accounting pronouncements and accounting changes, see Part I, Item 1. Financial Statements, Note 1 of this Quarterly Report on Form 10-Q. Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are subject to certain market risks arising from the use of financial instruments in the ordinary course of business. This risk arisesThese risks arise primarily as a result of potential changes in the fair market value of financial instruments that would result from adverse fluctuations in foreign currency exchange rates, credit risk, and interest rates.
For additional information about our exposure to market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” inof the MD&A 8-K.
Market Risk
On September 30, 2020, Brent crude oil prices closed at $40.05 per barrel having previously closed at $20.51 per barrelAnnual Report on Form 10-K. Our exposure to market risk has not changed materially since March 31, 2020, declining from $61.14 per barrel closing price on December 31, 2019. A combination of factors led to this initial decline and continued volatility, including an increase in low-priced oil from Saudi Arabia supplied into the market coupled with Russia’s position to abstain from participating in the supply reduction agreement with the Organization of the Petroleum Exporting Countries (“OPEC”) and the reduction in demand for oil due to the global COVID-19 pandemic. We are continuing to closely monitor our exposure to this risk and the potential impacts on our business.2021.
Foreign Currency Risk
Our primary foreign currency exposure is to the British pound sterling, the euro, the Australian dollar, the Norwegian kroner, the Nigerian naira and the Brazilian real. The value of these currencies has fluctuated relative to the U.S. dollar as indicated in the following table:
|
| | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | Successor | | | Predecessor |
| | Three Months Ended September 30, 2020 | | | Three Months Ended September 30, 2019 | | Six Months Ended September 30, 2020 | | | Six Months Ended September 30, 2019 |
One British pound sterling into U.S. dollars | | | | | | | | | | |
High | | 1.34 |
| | | 1.27 |
| | 1.34 |
| | | 1.32 |
|
Average | | 1.29 |
| | | 1.23 |
| | 1.27 |
| | | 1.26 |
|
Low | | 1.25 |
| | | 1.21 |
| | 1.21 |
| | | 1.21 |
|
At period-end | | 1.29 |
| | | 1.23 |
| | 1.29 |
| | | 1.23 |
|
One euro into U.S. dollars | | | | | | | | | | |
High | | 1.20 |
| | | 1.13 |
| | 1.20 |
| | | 1.14 |
|
Average | | 1.17 |
| | | 1.11 |
| | 1.14 |
| | | 1.12 |
|
Low | | 1.12 |
| | | 1.09 |
| | 1.08 |
| | | 1.09 |
|
At period-end | | 1.17 |
| | | 1.09 |
| | 1.17 |
| | | 1.09 |
|
One Australian dollar into U.S. dollars | | | | | | | | | | |
High | | 0.74 |
| | | 0.70 |
| | 0.74 |
| | | 0.72 |
|
Average | | 0.71 |
| | | 0.69 |
| | 0.69 |
| | | 0.69 |
|
Low | | 0.69 |
| | | 0.67 |
| | 0.60 |
| | | 0.67 |
|
At period-end | | 0.72 |
| | | 0.67 |
| | 0.72 |
| | | 0.67 |
|
One Norwegian kroner into U.S. dollars | | | | | | | | | | |
High | | 0.1152 |
| | | 0.1172 |
| | 0.1152 |
| | | 0.1179 |
|
Average | | 0.1095 |
| | | 0.1129 |
| | 0.1048 |
| | | 0.1143 |
|
Low | | 0.1043 |
| | | 0.1097 |
| | 0.0928 |
| | | 0.1097 |
|
At period-end | | 0.1069 |
| | | 0.1101 |
| | 0.1069 |
| | | 0.1101 |
|
One Nigerian naira into U.S. dollars | | | | | | | | | | |
High | | 0.0026 |
| | | 0.0028 |
| | 0.0026 |
| | | 0.0028 |
|
Average | | 0.0026 |
| | | 0.0028 |
| | 0.0026 |
| | | 0.0028 |
|
Low | | 0.0026 |
| | | 0.0028 |
| | 0.0026 |
| | | 0.0028 |
|
At period-end | | 0.0026 |
| | | 0.0028 |
| | 0.0026 |
| | | 0.0028 |
|
One Brazilian real into U.S. dollars | | | | | | | | | | |
High | | 0.1961 |
| | | 0.2675 |
| | 0.2043 |
| | | 0.2675 |
|
Average | | 0.1862 |
| | | 0.2524 |
| | 0.1862 |
| | | 0.2538 |
|
Low | | 0.1769 |
| | | 0.2393 |
| | 0.1688 |
| | | 0.2393 |
|
At period-end | | 0.1774 |
| | | 0.2401 |
| | 0.1774 |
| | | 0.2401 |
|
______________________
Source: FactSet
Other income (expense), net, in the Company’s condensed consolidated statements of operations includes foreign currency transaction gains and losses as shown in the following table. Earnings from unconsolidated affiliates, net of losses, are also affected by the impact of changes in foreign currency exchange rates on the reported results of the Company’s unconsolidated affiliates as shown in the following table (in thousands):
|
| | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | | Successor | | | Predecessor |
| | Three Months Ended September 30, 2020 | | | Three Months Ended September 30, 2019 | | | Six Months Ended September 30, 2020 | | | Six Months Ended September 30, 2019 |
| | | | | | | | | | | |
Foreign currency transaction gains (losses) | | 6,935 |
| | | (5,816 | ) | | | 8,309 |
| | | (8,746 | ) |
Foreign currency transaction gains (losses) from earnings from unconsolidated affiliates, net of losses | | — |
| | | (1,596 | ) | | | — |
| | | (1,710 | ) |
Transaction gains and losses represent the revaluation of monetary assets and liabilities from the currency that will ultimately be settled into the functional currency of the legal entity holding the asset or liability. The most significant items revalued are denominated in U.S. dollars on entities with British pound sterling and Nigerian naira functional currencies and denominated in British pound sterling on entities with U.S. dollar functional currencies, with transaction gains or losses primarily resulting from the strengthening or weakening of the U.S. dollar versus those other currencies.
Item 4. Controls and Procedures.
At the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision of and withWith the participation of our management, including Christopher S. Bradshaw, our Chief Executive Officer (“CEO”), and Jennifer Whalen, our Chief Financial Officer (“CFO”), ofmanagement evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Due solely to the existence as of the material weaknesses described below,end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluation, our CEOprincipal executive officer and CFO haveprincipal financial officer concluded ourthat the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective to provide reasonable assurance that the information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms and that information relating to us (including our consolidated subsidiaries) required to be disclosed is accumulated and communicated to management, including the CEO and CFO, to allow timely decisions regarding required disclosure.
Material Weakness in Internal Control Over Financial Reporting
In connection with its evaluation of internal control over financial reporting for the fiscal years ended March 31, 2018 and 2019, management of Old Bristow identified the following material weaknesses which have not been remediated as of SeptemberJune 30, 2020.
Control Environment. We did not maintain an effective control environment as we had an insufficient complement of resources with an appropriate level of knowledge, expertise and skills commensurate with our financial reporting requirements in certain areas. The material weakness contributed to additional control deficiencies, as we did not maintain effective internal controls over monitoring of debt covenant compliance as described below and certain areas of asset impairment testing including the review of certain key assumptions and asset grouping determinations, none of which resulted in a misstatement of the condensed consolidated financial statements. In addition, we determined the insufficient complement of resources, resulted in an additional material weakness within our Risk Assessment process as described further below. This deficiency was originally identified in the fiscal year ended March 31, 2019.
Risk Assessment. We concluded, as a result of the control environment deficiency above, there exists a material weakness within our risk assessment process, specifically, the process to identify the potential for management override of controls at locations not operating on our centralized enterprise resource planning (“ERP”) system and the process to identify and assess changes that could significantly impact our system of internal control, specifically, changes within our capital structure which resulted in more onerous non-financial debt covenants. This material weakness contributed to additional control deficiencies, as the Company did not maintain effective internal controls over (i) debt covenant compliance monitoring as described above, (ii) verification of the review of journal entries are performed by individuals separate from the preparer as described further below in certain locations, and (iii) the reassessment of accounting for certain elements of our accounting for investments in unconsolidated affiliates. This deficiency was originally identified in the fiscal year ended March 31, 2019.
Debt Covenant Compliance. We identified a material weakness in our internal controls over financial reporting for monitoring of compliance with non-financial covenants within certain secured financing and lease agreements. This deficiency was originally identified in the fiscal year ended March 31, 2018.
Journal Entries. The Company failed to design and maintain effective controls over the review, approval, and documentation of manual journal entries at our subsidiary, Airnorth, which is not operating on our centralized ERP system. There were ineffective internal controls over the review of journal entries at this subsidiary by individuals separate from the preparer. Management concluded this represented a material weakness in our internal control over financial reporting. This deficiency was originally identified in the fiscal year ended March 31, 2019.
REMEDIATION PLAN FOR MATERIAL WEAKNESSES
Management and the board of directors take internal control over financial reporting and the integrity of financial statements seriously. Management and the board of directors are committed to maintaining a strong internal control environment and will make every effort to ensure that the material weakness described above will be promptly remediated, however, no material weakness can be considered remediated until the applicable remedial control is implemented and operates for a sufficient period of time to allow management to conclude, through testing, that this remediation plan is implemented and the control is operating effectively. Our remediation plans for each of the material weaknesses are described below.
Control Environment. In response to the material weakness described above, we are actively implementing certain organizational enhancements, including: (i) augmenting our treasury and legal teams with additional internal or external professionals with the appropriate levels of knowledge, expertise, and skills in the area of non-financial debt covenant compliance monitoring, (ii) augmenting our financial planning and analysis team with additional internal or external professionals with the appropriate level of knowledge, expertise and skills to enhance the level of precision at which our internal controls over financial reporting related to asset impairment assessments are performed and (iii) augmenting our technical accounting team with additional internal or external professionals with the appropriate levels of knowledge, expertise and skills to assist in the evaluation of asset impairment assessments. In order to consider this material weakness remediated, we believe additional time is needed to evaluate and implement the necessary organizational enhancements and demonstrate sustainability as it relates to the revised controls.
Risk Assessment. In response to the material weakness described above, we have enhanced our risk assessment process to better identify, evaluate and monitor changes that could significantly impact our system of internal control. These enhancements include the establishment of a charter for, and the formation of, a formal Enterprise Risk Management Committee responsible for defining and continually evaluating our enterprise risk assessment objectives, overseeing the Company’s enterprise risk assessment process and ensuring the Company responds appropriately to identified risks through the selection and development of control activities responsive to the identified risks. The enhancements culminated in the presentation of our revised risk assessment output to the board of directors during the period. We believe the enhancements we have made during the period will be sufficient to remediate this material weakness; however, to consider this material weakness remediated, we believe additional time is needed to demonstrate sustainability as it relates to the revised controls.
Debt Compliance. In response to the material weakness described above, we will continue the ongoing implementation of our remediation plan, that includes the formal establishment of a debt and lease compliance program with the specific objective of creating a sustainable and executable compliance process that can be repeated on a recurring basis to ensure timely monitoring of compliance with covenants and provisions. We are actively implementing this compliance program by executing the following:
Development of a more complete reporting process to ensure information gathered or created by our separate control processes throughout the business are reported to the appropriate level of management with the responsibility for reporting on debt and lease agreement compliance. We have implemented a third-party debt compliance software to assist with monitoring compliance with covenants and requirements of our financing and helicopter lease agreements throughout the organization. The software provides a reminder and required reporting task on a sufficiently recurring basis for subject matter experts within the business to report potential compliance issues for evaluation resolution by our management.
Implementation of new or redesigned processes, where necessary, for compliance with collateral maintenance requirements under our debt and lease agreements, specifically, tracking the movement of collateral throughout our operations. We have implemented a manual engine tracking process supported by our maintenance, treasury and legal teams.
Establishment of procedures for reassessment of our debt and lease compliance program in response to changes in operations or agreements, to ensure timely actions are taken when risks change.
Evaluation of the current process and expected changes to ensure a sufficient complement of resources with an appropriate level of knowledge, expertise and skills commensurate with our non-financial debt covenant compliance monitoring requirements. We expect the changes when fully implemented, to necessitate the need to augment certain of our teams with additional internal or external professionals with the appropriate levels of knowledge, expertise, and skills in the area of non-financial debt covenant compliance monitoring.
We anticipate the actions currently underway and those remaining to be taken will address the material weakness. In order to consider this material weakness remediated, we believe additional time is needed to finalize and implement the enhanced procedures and demonstrate sustainability as it relates to the revised controls.
Journal Entries. In response to the material weakness described above, we have developed enhanced procedures which have been implemented at Airnorth to ensure that manual journal entries recorded in our financial records are properly reviewed and approved preventing the potential for management override of controls. This material weakness will not be considered remediated until the enhanced control procedures operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.2021.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Other thanDuring the changes resulting from the remediation of the material weaknesses described above,quarter ended June 30, 2021, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2020 (Successor), that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The following table presents information regarding our repurchases of shares of our Common Stock on a monthly basis during the three months ended SeptemberJune 30, 2020:2021:
None.
Not applicable.
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.