Bristow Group Reports Second Quarter Fiscal Year 2017 Results

HOUSTON, Nov. 3, 2016 /PRNewswire/ -- Bristow Group Inc. (NYSE: BRS) today reported the following results for the quarter ended September 30, 2016. All amounts shown are dollar amounts in thousands unless otherwise noted:

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For the September 2016 quarter, we reported a GAAP net loss of $29.8 million or diluted loss per share of $0.85 compared to a GAAP net loss of $47.1 million or diluted loss per share of $1.21 for the September 2015 quarter. Additionally, we reported an adjusted net loss of $12.3 million or adjusted diluted loss per share of $0.35 for the September 2016 quarter compared to adjusted net income of $1.3 million or adjusted diluted earnings per share of $0.04 for the September 2015 quarter.

For the September 2016 year-to-date period, we reported a GAAP net loss of $70.6 million or diluted loss per share of $2.02 compared to a GAAP net loss of $50.4 million or diluted loss per share of $1.49 for the September 2015 year-to-date period. Additionally, we reported an adjusted net loss of $24.3 million or adjusted diluted loss per share of $0.69 for the September 2016 year-to-date period compared to adjusted net income of $19.9 million or adjusted diluted earnings per share of $0.56 for the September 2015 year-to-date period.

BUSINESS AND FINANCIAL UPDATE

• The September 2016 quarter results are consistent with our view that our global oil and gas business is bottoming with financial results in line with internal expectations.
• We had $267 million of liquidity as of September 30, 2016 after $80.8 million of capital expenditures and $43.4 million of operating cash flows during the September 2016 quarter.
• U.K. SAR continues to generate stable cash flows; however the post-Brexit depreciation of British pound sterling reduced net income by $5.6 million, diluted earnings per share by $0.16 and adjusted EBITDAR by $7.4 million in the September 2016 quarter.

"While our results continue to be impacted by the challenges facing the oil and gas industry, we have been successful on a number of fronts, including generating positive cash flow, reducing and deferring capital expenditures and amending our bank group facilities in order to improve our business in fiscal 2017 and beyond," said Bristow Group President and Chief Executive Officer Jonathan Baliff. "We continue to be laser focused on safety, liquidity and improving cash generation through revenue and cost savings."

"Our second quarter financial performance was in line with our expectations with sequential quarterly improvement in adjusted EBITDAR. We are actively pursuing financing options and other initiatives to improve our liquidity position and maintain our leadership in this current market environment with further cost reductions and ongoing negotiations with our key business partners."

"On the commercial front, we continue to see lower global oil and gas business performance in line with our expectations. Although we are seeing an increased level of tender activity globally, fiscal 2017 will remain a challenging year from an earnings perspective. Our strategy beyond the fiscal 2017 action plan is designed to return us to profitability, with or without a market recovery, and includes further revenue diversification and operating efficiencies as we continue to prudently manage our balance sheet."

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

SECOND QUARTER FY2017 RESULTS

The oil and gas industry experienced a significant downturn during fiscal years 2015 and 2016 primarily due to a decline in crude oil prices which negatively impacted activity with our oil and gas clients. While this decline started in fiscal year 2015, activity and pricing declined further in fiscal year 2016 and has continued into fiscal year 2017, resulting in a significant decrease in gross revenue for our oil and gas services year-over-year. This decline in oil and gas revenue was partially offset by the benefit of our diversification efforts with the start-up of the U.K. SAR contract in April 2015 with seven bases coming online throughout fiscal year 2016.

We reported a net loss of $29.8 million and $47.1 million and diluted loss per share of $0.85 and $1.21 for the September 2016 and 2015 quarters, respectively. The year-over-year decrease in net loss and diluted loss per share is primarily driven by goodwill impairment charges recorded in the September 2015 quarter (included in loss on impairment), less of an unfavorable impact from changes in foreign currency exchange rates, lower losses from disposal of assets and lower depreciation and amortization expense, partially offset by the decline in oil and gas revenue discussed above.

The most significant foreign currency exchange rate impacts were from an $11.4 million loss in the September 2015 quarter compared to a $2.9 million gain in the September 2016 quarter from balance sheet revaluations presented as transaction gains (losses) in other income (expense), net, and an $18.6 million larger unfavorable impact in the September 2015 quarter on our earnings from unconsolidated affiliates as results related to Líder were negatively impacted by the devaluation of the Brazilian real in the September 2015 quarter. This favorable year-over-year change was partially offset by a $3.0 million unfavorable income statement translation impact from changes in foreign currency exchange rates compared to the September 2015 quarter driven by the impact of the depreciating British pound sterling resulting from Brexit on the translation of our results in our Europe Caspian region, partially offset by a favorable impact of the devalued naira in our Africa region. Compared to the pre-Brexit exchange rates, the depreciation of the pound sterling versus the U.S. dollar resulted in a $6.7 million pre-tax decrease in earnings during the September 2016 quarter. Similarly, compared to pre-naira devaluation exchange rates from late June 2016, the devaluation of the naira versus the U.S. dollar resulted in a $6.4 million pre-tax increase in earnings during the September 2016 quarter. During the September 2016 quarter, we benefited from the devaluation of the naira as a majority of our revenue in our Africa region is contracted at fixed U.S. dollar values while the expenses incurred in this region are more evenly split between U.S. dollars and naira, resulting in a significant net expense exposure to the naira that translates into higher U.S. dollar earnings for reporting purposes. This is contrary to our position in our Europe Caspian region, where a majority of our revenue is contracted in British pound sterling with our expense being more evenly split between U.S. dollars and pound sterling, resulting in a significant net revenue exposure to the pound sterling that translates into lower U.S. dollar earnings for reporting purposes. 

The GAAP net loss and diluted loss per share for the September 2016 quarter were significantly impacted by the following special items:

• Organizational restructuring costs of $10.7 million ($7.3 million net of tax), which includes severance expense of $9.6 million related to separation programs across our global organization designed to increase efficiency and reduce costs and other restructuring costs of $1.1 million; $5.0 million of the restructuring costs are included in direct costs and $5.7 million are included in general and administrative expense,
• Loss on disposal of assets of $2.2 million ($1.5 million net of tax), accelerated depreciation of $1.3 million ($0.9 million net of tax) and impairment of inventory of $7.6 million ($5.3 million net of tax), and
• A non-cash adjustment related to the valuation of deferred tax assets of $2.5 million.

The September 2015 quarter was impacted by similar items as reflected in the table at the end of this release.

Excluding these items, adjusted net loss and adjusted diluted loss per share were $12.3 million and $0.35, respectively, for the September 2016 quarter. These adjusted results compare to adjusted net income and adjusted diluted earnings per share of $1.3 million and $0.04, respectively, for the September 2015 quarter.

LIQUIDITY AND FINANCIAL FLEXIBILITY

We expect that our liquidity as of September 30, 2016 of $266.6 million, cash flow from operations and proceeds from aircraft sales, as well as future financings will be sufficient to satisfy our capital commitments, including our oil and gas aircraft purchase commitments and remaining capital requirements in connection with our U.K. SAR contract.

"Despite the challenging operating environment, we generated $43 million in operating cash flow in the September quarter demonstrating our commitment to maintaining strong liquidity," said Don Miller, Senior Vice President and Chief Financial Officer. "With the financial flexibility provided by our current amended debt covenants and the deferral of oil and gas aircraft capital expenditures into fiscal 2019 and beyond, we continue to focus on addressing our debt maturities as part of our commitment to maintaining a prudent balance sheet."

REGIONAL PERFORMANCE

Europe Caspian

The decrease in operating revenue for the September 2016 quarter was primarily driven by the impact of the downturn in the oil and gas industry, which has resulted in decreased activity levels with our oil and gas clients and impacted our revenue for Eastern Airways, the end of an oil and gas contract that began in late fiscal year 2015 and ended in late fiscal year 2016 that contributed $13.5 million in operating revenue in the September 2015 quarter and the impact of changes in foreign currency exchange rates. Partially offsetting these decreases was an increase in operating revenue driven by the start-up of U.K. SAR bases since the September 2015 quarter, which contributed $11.8 million in additional operating revenue for the September 2016 quarter. Eastern Airways contributed $29.8 million and $32.9 million in operating revenue and $3.1 million and $7.8 million in adjusted EBITDAR for the September 2016 and 2015 quarters, respectively.

A substantial portion of our operations in the Europe Caspian region are contracted in the British pound sterling, which depreciated significantly against the U.S. dollar since June 2016 as a result of Brexit. Translation of results at lower pound sterling exchange rates decreased operating revenue, operating income and adjusted EBITDAR by $25.3 million, $11.5 million and $7.0 million, respectively, for the September 2016 quarter compared to the September 2015 quarter. Additionally, we recorded foreign exchange losses of $1.3 million and $6.8 million primarily from the revaluation of assets and liabilities on pound sterling functional currency entities as of September 30, 2016 and 2015, respectively, which is recorded in other income (expense), net and included in adjusted EBITDAR. We expect a greater negative impact on operating revenue, operating income and adjusted EBITDAR from translation of operating results over the remainder of fiscal year 2017 if exchange rates remain at current rates or the British pound sterling weakens further.

Operating margin and adjusted EBITDAR margin for the September 2016 quarter decreased from the September 2015 quarter as a result of the impact from the downturn in the offshore energy market, which was only partially offset by the start-up of the U.K. SAR bases and cost reduction activities.

Africa

Operating revenue for Africa decreased for the September 2016 quarter due to an overall decrease in activity compared to the September 2015 quarter driven by the downturn in the oil and gas industry. A majority of our revenue in our Africa region is contracted at fixed U.S. dollar values, resulting in minimal exposure to the devalued naira upon translation into U.S. dollars for reporting purposes.

Operating income and operating margin increased in the September 2016 quarter primarily due to a decrease in depreciation and amortization expense and a decline in direct costs. These costs were impacted by the devaluation of the naira since the September 2015 quarter as our naira based expenses translate into less U.S. dollars. The impact of exchange rate changes resulted in a benefit of $8.0 million in reduced operating expenses driving the improvement in operating margin and adjusted EBITDAR margin. Operating income and adjusted EBITDAR benefited from changes in foreign currency exchange rates by $6.8 million and $6.5 million, respectively, year-over-year due to the combination of currencies we transact in for our Nigerian operations.

Americas

Operating revenue decreased for the September 2016 quarter primarily due to a decline in activity in our U.S. Gulf of Mexico operations resulting from the oil and gas industry downturn, a decrease in Brazil due to fewer aircraft leased to Líder and a decrease in Suriname due to the end of a contract. These decreases were partially offset by an increase in Trinidad due to additional aircraft on contract and a new contract in Guyana.

Operating income, operating margin, adjusted EBITDAR and adjusted EBITDAR margin were negatively impacted by unfavorable exchange rate changes in both the September 2016 and 2015 quarters which reduced our results from our investment in Líder. Earnings from our investment in Líder were reduced by $1.3 million and $19.9 million for the September 2016 and 2015 quarters, respectively, due to the impact of unfavorable exchange rate changes. Excluding this impact, earnings from our investment in Líder would have been $2.2 million and $4.7 million, respectively, operating income for the Americas region would have been $3.9 million (6.9% operating margin) and $10.9 million (14.8% operating margin), respectively, and adjusted EBITDAR for the Americas region would have been $16.6 million (29.1% adjusted EBITDAR margin) and $27.2 million (37.1% adjusted EBITDAR margin), respectively, in the September 2016 and 2015 quarters. Further, this year-over-year decrease in the Americas region's operating income, operating margin, adjusted EBITDAR and adjusted EBITDAR margin primarily resulted from lower revenue driven by a decline in activity discussed above, partially offset by a decrease in direct costs, including a decrease in salaries and benefits and maintenance expense.

Asia Pacific

Operating revenue decreased for the September 2016 quarter compared to the September 2015 quarter primarily due to the ending of short-term contracts. A substantial portion of our operations in the Asia Pacific region are contracted in the Australian dollar, which has strengthened against the U.S. dollar since fiscal year 2016.  Foreign currency exchange rate changes resulted in an increase of our revenue for our Asia Pacific region of $1.9 million for the September 2016 quarter. Airnorth contributed $21.5 million and $21.6 million in operating revenue and $5.2 million and $4.9 million in adjusted EBITDAR for the September 2016 and 2015 quarters, respectively.

Operating income, operating margin, adjusted EBITDAR and adjusted EBITDAR margin decreased primarily due to lower activity partially offset by cost reduction activities, including a decrease in salaries and benefits, maintenance expense and travel and training expense.

Corporate and other

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Operating revenue decreased in the September 2016 quarter primarily due to a decline in Bristow Academy revenue of $3.3 million.

Operating loss and adjusted EBITDAR improved from the September 2015 quarter primarily due to overall cost reduction activities that reduced professional fees and other costs including information technology, staff relocation and recruitment and travel expenses, partially offset by a decline in revenue discussed above and an increase in salaries and benefits. Salaries and benefits were impacted by the reversal of a bonus accrual in the September 2015 quarter, an increase in performance cash plan expense as a result of an increase in stock price performance and an increase in severance expense associated with the organizational restructuring efforts, mostly offset by a reduction in other salaries and benefits as a result of a reduced headcount from organizational restructuring efforts.

DIVIDEND

On November 1, 2016, our Board of Directors approved a dividend of $0.07 per share to be paid on December 15, 2016 to shareholders of record on December 1, 2016. Based on shares outstanding as of September 30, 2016, the total quarterly dividend payment will be approximately $2.5 million.

GUIDANCE

Fiscal year 2017 guidance for selected financial measures is provided in the financial tables that follow.

CONFERENCE CALL

Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Friday, November 4, 2016 to review financial results for the fiscal year 2017 second quarter ended September 30, 2016.  This release and the most recent investor slide presentation are available in the investor relations area of our web page at www.bristowgroup.com.  The conference call can be accessed as follows:

Via Webcast:

• Visit Bristow Group's investor relations Web page at www.bristowgroup.com
• Live: Click on the link for "Bristow Group Fiscal 2017 Second Quarter Earnings Conference Call"
• Replay: A replay via webcast will be available approximately one hour after the call's completion and will be accessible for approximately 90 days

Via Telephone within the U.S.:

• Live: Dial toll free 1-877-404-9648
• Replay: A telephone replay will be available through November 18, 2016 and may be accessed by calling toll free 1-877-660-6853, passcode: 13646189#

Via Telephone outside