Bristow Group Reports Third Quarter Fiscal Year 2017 Results

HOUSTON, Feb. 2, 2017 /PRNewswire/ -- Bristow Group Inc. (NYSE: BRS) today reported the following results for the quarter ended December 31, 2016. All amounts shown are dollar amounts in thousands unless otherwise noted:

For the December 2016 quarter, we reported a GAAP net loss of $21.9 million, or diluted loss per share of $0.62, compared to GAAP net income of $3.2 million, or diluted earnings per share of $0.09, for the December 2015 quarter. Additionally, we reported an adjusted net loss of $10.1 million, or adjusted diluted loss per share of $0.29, for the December 2016 quarter compared to adjusted net income of $23.5 million or adjusted diluted earnings per share of $0.67, for the December 2015 quarter.

Starting with the third fiscal quarter, we have revised our disclosures to present adjusted EBITDA rather than adjusted EBITDAR consistent with recent interpretations regarding Non-GAAP measures issued by the Securities and Exchange Commission.

BUSINESS AND FINANCIAL UPDATE

• The December 2016 quarter results reflect the continued pressure on our oil and gas operations due to the industry downturn; however, they were above our internal expectations.
• Successfully improved liquidity and pushed debt maturities out through equipment financings: $200 million funded, $200 million signed credit agreement and $230 million executed commitment letter.
• U.K. Search and Rescue (SAR) continued to perform as expected; however the post-Brexit depreciation of the British pound sterling continued to negatively impact our U.K. financial results including our U.K. oil and gas and SAR results as reported in U.S. dollars.
• Recent tender successes reflect our global competitive position, reliable operations and creative solutions in oil and gas transportation and SAR.

"Our third quarter financial performance exceeded our internal expectations," said Bristow Group President and Chief Executive Officer Jonathan Baliff. "While our results continue to be impacted by the challenging market conditions affecting the offshore oil and gas industry, we have been successful on a number of fronts, including improving our liquidity and competitive position. The funding of the Lombard equipment financing and the recent announcement of additional financings greatly improve our liquidity runway and should allow us to maintain our leadership position in this current difficult market environment.

"While our oil and gas business continues to operate along the economic bottom of this cyclical downturn, there are no doubt green shoots beginning to appear in the oil and gas industry as we have seen modest increases in flight activity in certain offshore regions. As a result, our view is that challenging market conditions for our oil and gas business likely will continue in the near term.

Mr. Baliff continues, "Our scale, reliability, modern helicopter fleet and geographic diversification, combined with our revenue diversification, are supporting us in a dynamic prolonged downturn. We recently were awarded contracts for oil and gas transportation services as well as medevac and search and rescue services.  These contracts illustrate the innovation and close coordination that our operations, commercial and finance teams bring to our clients every day, worldwide.

"The combination of our continued focus on safety, recent tender successes, cost reductions and deferral of capital expenditures should allow us to maintain our industry leadership position."

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

THIRD 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. This decline started in fiscal year 2015 and has continued into fiscal year 2017, resulting in a significant decrease in gross revenue for our oil and gas services year-over-year. In addition to reduced activity, changes in foreign currency exchange rates contributed to $25.8 million of the decrease in gross revenue year-over-year.

We reported a net loss of $21.9 million and diluted loss per share of $0.62 for the December 2016 quarter compared to net income of $3.2 million and diluted earnings per share of $0.09 for the December 2015 quarter. The year-over-year decrease in net income (loss) and diluted earnings (loss) per share was primarily due to the decline in oil and gas revenue discussed above, goodwill impairment charges recorded in the December 2016 quarter, lower earnings from unconsolidated affiliates, higher interest expense resulting from additional borrowings, and the unfavorable impact of changes in foreign currency exchange rates, partially offset by less of a loss from disposal of assets and lower depreciation and amortization expense.

The net loss for the December 2016 quarter was significantly impacted by the following items:

• Impairment charges on goodwill of $8.7 million ($7.9 million net of tax) included in loss on impairment,
• Organizational restructuring costs of $0.8 million ($0.6 million net of tax), which includes severance expense of $0.7 million and other restructuring costs of $0.1 million; $0.6 million of the restructuring costs are included in direct costs and $0.2 million are included in general and administrative expense,
• Loss on disposal of assets of $0.9 million ($1.1 million net of tax), accelerated depreciation of $1.1 million ($0.8 million net of tax), and
• A non-cash adjustment related to the valuation of deferred tax assets of $3.7 million.

Excluding these items, adjusted net loss and adjusted diluted loss per share were $10.1 million and $0.29, respectively, for the December 2016 quarter. These adjusted results compare to adjusted net income and adjusted diluted earnings per share of $23.5 million and $0.67, respectively, for the December 2015 quarter. Adjusted EBITDA, which excludes these items with the exception of accelerated depreciation and the tax adjustment, also decreased year-over-year to $22.9 million in the December 2016 quarter from $64.7 million in the December 2015 quarter.

During the December 2016 quarter, we used cash of $17.9 million for capital expenditures and had negative operating cash flow of $42.9 million primarily due to the timing of cash outflows and some of our clients holding cash payments over the calendar year-end.

LIQUIDITY AND FINANCIAL FLEXIBILITY

In November 2016, we entered into two, seven-year British pound sterling denominated secured equipment financings for an aggregate $200 million U.S. dollar equivalent with Lombard North Central Plc, part of the Royal Bank of Scotland. In December 2016, the first loan in the amount of $109.9 million (GBP 89.1 million) funded, and the borrower prepaid a portion of the scheduled principal payments totaling $4.5 million (GBP 3.7 million). In January 2017, the second loan in the amount of $90.1 million (GBP 72.4 million) funded.

In February 2017, one of our wholly-owned subsidiaries entered into a term loan credit agreement for a $200 million five-year secured equipment financing with Macquarie Bank Limited.  In conjunction with closing and funding under such term loan, we will lease five helicopters for up to five years. The financing will be secured by 20 oil and gas aircraft. We expect this financing to fund no later than March 31, 2017. The proceeds from the financing are expected to be used to repay amounts due under our existing term loans.

Also in February 2017, we executed a commitment letter for an approximate six-year, $230 million secured equipment financing with PK Transportation Finance Ireland Limited, a part of GE Capital Aviation Services ("GECAS"). As part of this financing, which is subject to entering into definitive agreements, Milestone Aviation Group Limited ("Milestone"), a GECAS company, will defer up to $25 million in lease rentals on certain Airbus H225 assets on lease to us. The financing will be secured by 20 oil and gas aircraft.  We expect this financing to fund no later than June 30, 2017. The proceeds from the financing are expected to be used to repay amounts due under our existing bank indebtedness. As part of executing the commitment letter, we will extend three Sikorsky S-92 leases by two years each with Milestone.

"Our primary financing objective over the next several quarters continues to be increasing our financial flexibility as we slowly emerge from this prolonged industry downturn," said Don Miller, Senior Vice President and Chief Financial Officer. "We have made substantial progress towards this goal."

REGIONAL PERFORMANCE

Europe Caspian

Operating revenue, operating income, adjusted EBITDA and margins decreased in the December 2016 quarter primarily due to the negative impact of changes in foreign currency exchange rates and the impact of the downturn in the oil and gas industry. Partially offsetting these decreases was an increase in operating revenue from increased activity in Norway. Eastern Airways contributed $25.1 million and $27.3 million in operating revenue and a negative $2.1 million and positive $2.7 million in adjusted EBITDA for the December 2016 and 2015 quarters, respectively.

A substantial portion of our revenue in the Europe Caspian region is contracted in British pound sterling, which depreciated significantly against the U.S. dollar in late June 2016 as a result of Brexit. Translation of results at lower pound sterling exchange rates decreased operating revenue, operating income and adjusted EBITDA by $25.9 million, $7.4 million and $7.7 million, respectively, for the December 2016 quarter compared to the December 2015 quarter. Additionally, we recorded foreign exchange losses of $10.7 million and $5.2 million primarily from the revaluation of assets and liabilities as of December 31, 2016 and 2015, respectively, which is recorded in other income (expense), net and included in adjusted EBITDA. Additionally, during the December 2016 quarter, we recorded an impairment of $8.7 million for the remaining goodwill related to Eastern Airways, which contributed to the operating loss in the December 2016 quarter, but was adjusted for in our calculation of adjusted EBITDA.

Excluding the impact of the goodwill impairment and changes in foreign currency exchange rates, operating margin would have been 5.1% and 14.0% and adjusted EBITDA margin would have been 11.4% and 19.6% for the December 2016 and 2015 quarters, respectively.

Africa

Operating revenue for Africa decreased in the December 2016 quarter primarily due to an overall decrease in activity resulting from the downturn of the oil and gas industry. The lower activity reduced revenue by $13.4 million, which was only partially offset by $0.7 million from increased activity on a contract. Additionally, we began providing fixed wing services in this region in October 2015, which generated $1.0 million of operating revenue for the December 2016 quarter. A majority of our revenue in our Africa region is contracted at fixed U.S. dollar values, resulting in minimal exposure to the devalued Nigerian naira upon translation into U.S. dollars for reporting purposes.

Operating income and operating margin increased in the December 2016 quarter primarily due to a decrease in depreciation and amortization expense and lower operating expenses. Operating expenses were $3.7 million lower in the December 2016 quarter due to the devaluation of the Nigerian naira which resulted in naira-based expenses translating into fewer U.S. dollars. Additionally, in the December 2015 quarter, we recorded $1.7 million in bad debt expense. Operating income and adjusted EBITDA in the December 2016 quarter benefited $2.4 million and $3.5 million, respectively, from changes in foreign currency exchange rates due to the combination of currencies our Nigerian operations transact in.

Excluding the impact of changes in foreign currency exchange rates, operating margin would have been 21.2% and 7.0% and adjusted EBITDA margin would have been 29.6% and 23.4% for the December 2016 and 2015 quarters, respectively.

Americas

Operating revenue decreased in the December 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 and a decrease in Brazil due to fewer aircraft leased to Líder.

Operating income, adjusted EBITDA and margins decreased primarily due to the decline in activity and reduced pre-foreign exchange earnings from our investment in Líder, but were also impacted by foreign currency exchange rate changes in the December 2016 and 2015 quarters, which reduced earnings from our investment in Líder by $1.2 million for the December 2016 quarter and increased earnings from our investment in Líder by $1.0 million for the December 2015 quarter.

Asia Pacific

Operating revenue, operating income, adjusted EBITDA and margins in Australia decreased in the December 2016 quarter primarily due to the ending of short-term oil and gas contracts, partially offset by an increase in operating revenue from Airnorth. A significant portion of our revenue in the Asia Pacific region is contracted in the Australian dollar, which strengthened against the U.S. dollar in the December 2016 quarter.  Foreign currency exchange rate changes resulted in an increase in revenue of $1.3 million for the December 2016 quarter. Airnorth contributed $18.7 million and $17.9 million in operating revenue and $1.1 million and $3.2 million in adjusted EBITDA for the December 2016 and 2015 quarters, respectively.

Corporate and other

Operating revenue decreased in the December 2016 quarter primarily due to a decline in third-party part sales of $0.8 million and Bristow Academy revenue of $0.7 million. Operating loss and adjusted EBITDA improved in the December 2016 quarter primarily due to cost reduction activities that decreased salaries and benefits and other general and administrative expenses. Additionally, adjusted EBITDA in the December 2016 quarter benefited from a favorable impact of changes in foreign currency exchange rates on our Corporate results of $9.1 million compared to the December 2015 quarter.

DIVIDEND

On February 1, 2017, our Board of Directors approved a dividend of $0.07 per share to be paid on March 15, 2017 to shareholders of record on March 1, 2017. Based on shares outstanding as of December 31, 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, February 3, 2017 to review financial results for the fiscal year 2017 third quarter ended December 31, 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 Third 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 February 17, 2017 and may be accessed by calling toll free 1-877-660-6853, passcode: 13652695#

Via Telephone outside the U.S.:

• Live: Dial 1-412-902-0030
• Replay: A telephone replay will be available through February 17, 2017 and may be accessed by calling 1-201-612-7415, passcode: 13652695#

ABOUT BRISTOW GROUP INC.

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

FORWARD-LOOKING STATEMENTS DISCLOSURE

Statements contained in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements.  These forward-looking statements include statements regarding earnings guidance, expected contract revenue, capital deployment strategy, operational and capital performance, expected cost management activities, expected capital expenditure deferrals, shareholder return, liquidity, market and industry conditions.  It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements.  Risks and uncertainties include without limitation:  fluctuations in the demand for our services; fluctuations in worldwide prices of and supply and demand for oil and natural gas; fluctuations in levels of oil and natural gas production, exploration and development activities; the impact of competition; actions by clients and suppliers; the risk of reductions in spending on helicopter services by governmental agencies; changes in tax and other laws and regulations; changes in foreign exchange rates and controls; risks associated with international operations; operating risks inherent in our business, including the possibility of declining safety performance; general economic conditions including the capital and credit markets; our ability to obtain financing; the risk of grounding of segments of our fleet for extended periods of time or indefinitely; our ability to re-deploy our aircraft to regions with greater demand; our ability to acquire additional aircraft and dispose of older aircraft through sales into the aftermarket; the possibility that we do not achieve the anticipated benefit of our fleet investment program; availability of employees; and political instability, war or acts of terrorism in any of the countries where we operate.  Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including but not limited to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 2016 and annual report on Form 10-K for the fiscal year ended March 31, 2016.  Bristow Group Inc. disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

Linda McNeill
Investor Relations
(713) 267-7622

(financial tables follow)

BRISTOW GROUP INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS

These financial measures have not been prepared in accordance with generally accepted accounting principles ("GAAP") and have not been audited or reviewed by our independent registered public accounting firm.  These financial measures are therefore considered non-GAAP financial measures. Adjusted EBITDA provides us with an understanding of one aspect of earnings before the impact of investing and financing transactions and income taxes. Adjusted EBITDA should not be considered a measure of discretionary cash available to us for investing in the growth of our business. In prior periods we presented adjusted EBITDAR, which was calculated by taking our net income and adjusting for interest expense, depreciation and amortization, rent expense (included as a component of direct cost and general and administrative expense), provision for income taxes, gain (loss) on disposal of assets and any special items during the reported periods. We believed that adjusted EBITDAR provided us with a useful supplemental measure of our operational performance by excluding the financing decisions we make regarding aircraft purchases or leasing. However, we have revised our disclosures to present adjusted EBITDA rather than adjusted EBITDAR consistent with recent interpretations regarding Non-GAAP measures issued by the Securities and Exchange Commission. A description of the adjustments to and reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures is as follows:

The following tables present special items for the three and nine months ended December 31, 2016 and 2015:

SOURCE Bristow Group Inc.