Bristow Group Inc. (NYSE: BRS) today reported a net loss for the June 2015 quarter of $3.3 million, or $0.27 per diluted share on a GAAP basis, compared to net income of $44.1 million, or $1.23 per diluted share, in the same period in the prior year.
Adjusted net income, which excludes special items and asset disposition effects, decreased 58% to $19.8 million, or $0.56 per diluted share, for the June 2015 quarter, compared to $47.4 million, or $1.32 per diluted share, in the June 2014 quarter.
Adjusted earnings before interest, taxes, depreciation, amortization and rent (“adjusted EBITDAR”), which also excludes special items and asset disposition effects, decreased 5% to $121.0 million for the June 2015 quarter compared to $127.6 million in the same period in the prior year. Net cash provided by operating activities was $15.9 million for the June 2015 quarter compared to $37.3 million for the prior year period.
The year-over-year decline in our financial results were significantly impacted by a decline in oil and gas activity, especially in our North Sea operations within our Europe Caspian region, while our Asia, Africa and Americas regions were impacted to a lesser degree. Also, during the June 2015 quarter, our results were impacted by a $20.8 million increase in rental expense primarily related to the number of aircraft, including those involved U.K. search and rescue (“SAR”), under operating leases compared to theJune 2014 quarter, as well as bad debt expense recorded against client receivables totaling $4.1 million in our Africa region. The June 2014 quarter benefited from the recovery of $6.8 million from our original equipment manufacturers provided in the form of maintenance credits and the reversal of $4.4 million in bad debt expense in ourAmericas region.
The decline in our results was partially offset by the positive impact from the addition of Airnorth in Australia, the startup of new contracts across all regions, including the SAR contract in our Europe Caspian region and cost management efforts in our regions.
We expect results over the remainder of fiscal year 2016 to continue to be impacted by the market conditions affecting our oil and gas clients, partially offset by further SAR bases that come on line over the remainder of the fiscal year and benefits from additional economic restructuring measures. We expect operating results for the second half of the fiscal year to be stronger than the first half as new contracts start up and cost reduction initiatives take full effect resulting in reduced operating expense and margin improvements.
“Our results for the first quarter of fiscal 2016 reflect the reduced demand for our oil and gas services primarily in the North Sea while also successfully starting the SAR contract with the U.K. Maritime and Coastguard Agency,” said Jonathan Baliff, President and Chief Executive Officer of Bristow Group. “Despite the significant oil and gas industry headwinds that we have been facing with our clients since the end of 2014, our regional leaders delivered an increase in operating revenue and in two regions managed to generate an increase in adjusted EBITDAR during the June 2015 quarter.”
“We initiated a $75-95 million cost efficiency program in February that mitigated the impacts of this downturn for our clients’ benefit. However, we will now implement a second phase economic restructuring to deliver an additional $60 million minimum in annualized cost base reductions as we see the velocity and duration of the downturn worsen. We continue to be focused on managing our oil and gas operations with Target Zero Safety while helping our clients execute their long-term growth strategies.”
“Our financial strength has been a differentiator in this downturn and has ensured the successful startup of U.K. SAR, which correspondingly will help mitigate future pressure on our oil and gas margins. We are also seeing signs of strength in certain regions like our U.S. Gulf of Mexico operations. We are confident in the economic restructuring of our cost base and remain committed to positioning Bristow to capitalize on opportunities that are emerging during this downturn, while preserving our strong balance sheet,” added Mr. Baliff.
FIRST QUARTER FY2016 RESULTS
- Operating revenue increased to $440.1 million compared to $437.3 million in the same period a year ago.
- Operating income decreased 93% to $4.8 million compared to $65.2 million in theJune 2014 quarter.
- GAAP net loss was $9.6 million, or $0.27 per diluted share, in the June 2015 quarter, compared to net income of $44.1 million, or $1.23 per diluted share, in the June 2014quarter.
- GAAP results for the June 2015 quarter were affected by the following items that are excluded from our adjusted non-GAAP financial measures for the quarter:
- $8.0 million ($0.16 per diluted share) due to severance expense resulting from cost reduction efforts and included in direct costs and general and administrative expense,
- Additional depreciation expense related to accelerated fleet retirements of $10.5 million ($0.23 per diluted share),
- Impairment of inventories of $5.4 million ($0.10 per diluted share) primarily related to the accelerated fleet retirements, and
- A net loss on disposal of assets of $7.7 million ($0.17 per diluted share) including impairment charges of $9.9 million on aircraft held for sale, partially offset by gains from sales or disposals of assets of $2.2 million.
- Diluted earnings per share was also negatively impacted by $0.18 related to the accounting for changes in the redeemable value of put arrangements whereby the noncontrolling interest holders in Airnorth and Eastern Airways may require us to redeem the remaining shares in these companies. This change does not impact net earnings (loss), but rather is accounted for as a reduction of earnings (loss) available to common shareholders in the calculation of diluted earnings (loss) per share.
FIRST QUARTER FY2016 BUSINESS UNIT RESULTS
Europe Caspian Region
As a result of the downturn in the oil and gas industry, activity levels declined with the implementation of efficiency initiatives through collaboration with our clients. This activity decline resulted in a decrease in oil and gas revenue in this region. Despite these results, operating revenue was mostly flat for the June 2015 quarter compared to theJune 2014 quarter as a result of the April 2015 startup of two U.K. SAR bases which contributed $17.2 million in additional operating revenue and a new oil and gas contract which contributed $11.8 million in operating revenue during the quarter.
Adjusted EBITDAR decreased 8% year-over-year and adjusted EBITDAR margin decreased to 32.0% in the June 2015 quarter compared to 34.1% in the June 2014quarter primarily due to maintenance expense credits realized in the June 2014 quarter. The contribution from the U.K. SAR contract and the new oil and gas contract were mostly offset by lower oil and gas activity declines. Sequential quarterly adjusted EBITDAR increased to $65.2 million in the June 2015 compared to $55.3 million in theMarch 2015 quarter while EBITDAR margins remained strong at 32.0% in June 2015quarter compared to 30.9% in the March 2015 quarter.
Despite a 8.4% decrease in operating revenue for the June 2015 quarter compared to the June 2014 quarter driven by a decline in activity, adjusted EBITDAR increased 4.3% to $22.8 million for the June 2015 quarter compared to $21.9 million for the June 2014quarter and adjusted EBITDAR margin improved to 29.4% for the June 2015 quarter compared to 25.9% for the June 2014 quarter. The increase in adjusted EBITDAR and adjusted EBITDAR margin are due to recently implemented cost management activities, partially offset by $4.1 million in bad debt expense recorded in the June 2015 quarter. Sequential quarterly adjusted EBITDAR decreased to $22.8 million in the June 2015quarter compared to $39.1 million in the March 2015 quarter as a result of a decline in activity from the downturn.
A decrease in revenue generated from our small and medium aircraft operating in the U.S. Gulf of Mexico and a decline in revenue in Trinidad due to the end of a contract drove a decrease in operating revenue in our Americas region year over year. This decrease was partially offset by an increase in the number of large aircraft on contract in the U.S. Gulf of Mexico and a new contract in Suriname. Adjusted EBITDAR and adjusted EBITDAR margin decreased to $33.4 million and 41.8%, respectively, in theJune 2015 quarter compared to $40.1 million and 44.7%, respectively, in the June 2014quarter, partially driven by reversal recovery of $4.4 million of bad debt expense in theJune 2014 quarter. Sequential, quarterly adjusted EBITDAR decreased slightly to $33.4 million in the June 2015 quarter compared to $34.8 million in the March 2015 quarter while EBITDAR margins remained strong at 41.8% in June 2015 quarter compared to 40.8% in the March 2015 quarter.
Asia Pacific Region
Operating revenue for our Asia Pacific region increased 37.2% to $74.7 million in theJune 2015 quarter from $54.5 million in the June 2014 quarter due to the acquisition of Airnorth in January 2015 and startup of new contracts in Australia, including the INPEXcontract. These items were partially offset by the end of contracts in Australia andMalaysia and an unfavorable impact from changes in foreign currency exchange rates. Primarily as a result of the Airnorth acquisition, adjusted EBITDAR increased in the June 2015 quarter to $17.1 million from $12.8 million in the June 2014 quarter. During theJune 2014 quarter, we recovered $2.0 million in maintenance credits for maintenance from an OEM as settlements for aircraft performance and transportation costs. As a result of these maintenance credits utilized during the June 2014 quarter, adjusted EBITDAR margin declined from 23.5% in the June 2014 quarter to 22.8% in the June 2015 quarter. Sequential quarterly adjusted EBITDAR decreased to $17.1 million in theJune 2015 quarter compared to $20.1 million in the March 2015 quarter and EBITDAR margins declined to 22.8% in June 2015 quarter compared to 29.2% in the March 2015quarter.
We are lowering our adjusted diluted earnings per share guidance for the full fiscal year 2016 to $3.10 to $3.75, reflecting the increasing impact to Bristow of the current oil and gas downturn that has resulted in lower activity levels and a deeper downturn with the recent decline in oil prices.
“Due to the current environment and as the downturn has developed more rapidly than originally expected, our recent performance has fallen below our prior expectations and has significantly impacted our fiscal 2016 outlook,” said John H. Briscoe, Senior Vice President and Chief Financial Officer of Bristow Group. “The downturn is deeper and our clients’ restructuring of their costs has resulted in a more negative impact to Bristow and our previously announced cost cutting measures were not sufficient. Decreases in global activity levels are affecting our fiscal year 2016 performance and future expectations. We will pursue new and more aggressive restructuring measures to help mitigate the severity of the downturn. However, we are realizing the positive contributions from theU.K. SAR contract, which continues to ramp up and offset some of the declines and volatility in the current oil and gas market.”
As a reminder, our adjusted diluted earnings per share guidance excludes the effect of special items and asset dispositions because their timing and amounts are more variable and less predictable. Further, this guidance is based on foreign exchange rates as ofJune 30, 2015 and assumes the rates will remain unchanged from these levels. In providing this guidance, we have not included the impact of any changes in accounting standards or significant acquisitions and divestitures. Events or other circumstances that we do not currently anticipate or cannot predict, including changes in the market and industry, could result in earnings per share for fiscal year 2016 that are significantly above or below this guidance. Factors that could cause such changes are described below under the Forward-Looking Statements Disclosure and the Risk Factors in our quarterly report on Form 10-Q for the quarter ended June 30, 2015 and annual report on Form 10-K for the fiscal year ended March 31, 2015.
LIQUIDITY AND CASH FLOW
Cash as of June 30, 2015 totaled $120.4 million compared to $104.1 million as of March 31, 2015. Our total liquidity, including cash on hand and availability on our revolving credit facility, was $364.9 million as of June 30, 2015 compared to $369.9 million as of March 31, 2015. This strong liquidity position resulted from continued positive operating cash flow generation of $15.9 million in the June 2015 quarter and$57.6 million in cash generated from financing activities, including the up-sizing of our term loan and borrowings under our revolving credit facility. We invested $67.8 million in cash in our business primarily through the addition of new aircraft.
Financial statements can be found here
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