Revenues Increase 17% for Bristow Group

Bristow Group has reported financial results for the three months ended September 30, 2008, which is the Company's fiscal 2009 second quarter.

Highlights include:

For the September 2008 quarter:
  • Revenue increased 12% versus the September 2007 quarter to $291.7 million. Revenue gains occurred across all of our business units, but most significantly in our U.S. Gulf of Mexico, Europe and Southeast Asia business units. Revenue gains were driven in large part by the addition of new aircraft and improved pricing.
  • Operating income decreased 19% to $40.4 million from $49.7 million in the September 2007 quarter primarily as a result of the items discussed below.
  • Income from continuing operations decreased 16% to $28.0 million from $33.3 million in the September 2007 quarter primarily as a result of the items discussed below, but also as a result of decreased earnings from unconsolidated affiliates and an increase in net interest expense which resulted from debt offerings in November 2007 and June 2008. These items were partially offset by gains on disposal of assets and an increase in other income (expense), net which primarily related to foreign currency exchange gains driven by a strengthening U.S. dollar.
  • Diluted earnings per share decreased to $0.78 from $1.12 in the September 2007 quarter primarily as a result of the decrease in income from continuing operations and the June 2008 equity offering, which reduced diluted earnings per share in the September 2008 quarter by $0.13.
  • The largest factors affecting operating results for the September 2008 quarter were:
    • Hurricanes in the U.S. Gulf of Mexico during the September 2008 quarter, which resulted in a decrease in flight activity and an increase in costs, reducing operating income by $2.1 million, income from continuing operations by $1.5 million and diluted earnings per share by $0.04.
    • Revenue recognized in the September 2008 quarter related to contractual rate escalations and retroactive rate adjustments applicable to services performed in prior quarters in Europe, which increased operating income by $4.5 million, income from continuing operations by $3.2 million and diluted earnings per share by $0.09.
    • Decreases in operating results in Australia -- part of our Southeast Asia business unit -- which reduced operating income by $5.9 million, income from continuing operations by $4.2 million and diluted earnings per share by $0.12. Operating results in Australia were lower than expected as a result of delays in planned contracts, increased compensation costs, unscheduled line maintenance and re-positioning of aircraft.
    • As in the June 2008 quarter and as was anticipated for the September 2008 quarter, Eastern Hemisphere Centralized Operations experienced higher maintenance expense (primarily due to foreign currency movements related to the portion of our third party maintenance contracts denominated in euros and an increase in heavy maintenance activities) which reduced operating income by $2.7 million, income from continuing operations by $1.9 million and diluted earnings per share by $0.05.
    • Earnings for the September 2007 quarter benefited from the reversal of $1 million of accrued costs associated with the settlement of the U.S. Securities and Exchange Commission ("SEC") investigation, items in Nigeria, including $2.1 million of retroactive rate increases related to services rendered in a prior quarter and the reversal of $5.4 million in sales tax contingency, and $2.4 million of contractual rate escalations on services performed in prior quarters under contracts with our customers in Europe, which collectively increased operating income by $10.9 million, income from continuing operations by $7.3 million and diluted earnings per share by $0.24 in the September 2007 quarter.
    •  

For the six months ended September 30, 2008:

  • Revenue increased 17% versus the six months ended September 30, 2007 to $575.8 million. Revenue gains occurred across all of our business units, but most significantly in our U.S. Gulf of Mexico, Europe, West Africa and Southeast Asia business units. Revenue gains were driven in large part by the addition of new aircraft and improved pricing.
  • Operating income decreased 8% to $72.0 million from $78.5 million for the six months ended September 30, 2007 primarily as a result of the items discussed below.
  • Income from continuing operations decreased 8% to $50.7 million from $55.2 million for the six months ended September 30, 2007 as a result of decreased operating income and an increase in net interest expense which resulted from debt offerings in June and November 2007 and June 2008. These items were partially offset by gains on disposal of assets for the six months ended September 30, 2008 - compared to losses in the same period a year ago -- along with an increase in other income (expense), net, which primarily related to foreign currency exchange gains driven by a strengthening U.S. dollar, and an increase in earnings from unconsolidated affiliates.
  • Diluted earnings per share decreased to $1.50 from $1.87 for the six months ended September 30, 2007 primarily as a result of the decrease in income from continuing operations and the June 2008 equity offering, which reduced diluted earnings per share for the six months ended September 30, 2008 by $0.15.
  • The largest factors affecting operating results for the six months ended September 30, 2008 were:
    • Hurricanes in the U.S. Gulf of Mexico during the September 2008 quarter, which resulted in a decrease in flight activity and an increase in costs, reducing operating income by $2.1 million, income from continuing operations by $1.5 million and diluted earnings per share by $0.05.
    • Revenue recognized during the six months ended September 30, 2008 related to contractual rate escalations and retroactive rate adjustments applicable to services performed in prior periods in Europe of $2.9 million and Russia -- part of our Other International business unit -- of $1.2 million, which increased operating income by $4.1 million, income from continuing operations by $2.9 million and diluted earnings per share by $0.09.
    • Decreases in operating results in Australia, part of our Southeast Asia business unit -- which reduced operating income by $8.5 million -- income from continuing operations by $6.1 million and diluted earnings per share by $0.18. Operating results in Australia were lower than expected as a result of delays in planned contracts, increased compensation costs, unscheduled line maintenance and re-positioning of aircraft.
    • Higher maintenance expense in Eastern Hemisphere Centralized Operations (primarily due to foreign currency movements related to the portion of our third party maintenance contracts denominated in euros and an increase in heavy maintenance activities) which reduced operating income by $9.6 million, income from continuing operations by $6.9 million and diluted earnings per share by $0.20.
    • The restructuring of our ownership interests in affiliates in Mexico -- part of our Latin America business unit -- which resulted in several changes effective April 1, 2008, which increased operating income by $0.8 million, income from continuing operations by $3.7 million and diluted earnings per share by $0.11.
  • Financial results for the six months ended September 30, 2007 included a reversal of accrued costs of $1 million associated with the settlement of the SEC investigation, the reversal of $5.4 million in sales tax contingency in Nigeria and $1.9 million of contractual rate escalations on services performed in prior periods under contracts with our customers in Europe, which collectively increased operating income by $8.3 million, income from continuing operations by $5.5 million and diluted earnings per share by $0.18.
 
Sale of Certain Single-Engine Aircraft
 
As previously announced, on October 30, 2008, we closed the sale of 53 single-engine aircraft and related assets operating in the U.S. Gulf of Mexico for approximately $65 million, 20% of which was received at closing, with the remainder to be paid to us from escrow as the titles to the aircraft are processed by the U.S. Federal Aviation Administration. The sale is expected to result in a pre-tax gain of approximately $40 million, or $0.72 per diluted share after tax, in the December 2008 quarter.
 
Acquisition of Additional Interest in Norsk Helikopter
 
Also as previously announced, on October 31, 2008, we acquired the remaining interest in Norsk Helikopter AS, our affiliate in Norway of which we previously owned 49%. Our partner in Norsk received approximately $5.1 in cash and all of Lufttransport AS, an air ambulance subsidiary of Norsk. We now own 100% of Norsk and will consolidate this entity effective October 31, 2008, including approximately $22 million in debt. Norsk, excluding Lufttransport, generated $133.9 million of revenue, $4.8 million of operating income and $3.1 million of net income for the year ended December 31, 2007. Our Europe operations for our fiscal year ended March 31, 2008 generated $13.5 million in revenue from leasing aircraft to Norsk, which will be eliminated in consolidation in future periods.
 
Capital and Liquidity
  • At September 30, 2008 we continued to have a strong balance sheet, which allows us the financial flexibility to take advantage of growth opportunities:
    • $1.2 billion in stockholders' investment and $730.9 million of indebtedness
    • $399.1 million in cash and $100 million undrawn revolving credit facility
    • Aircraft purchase commitments totaled $379.9 million for 42 aircraft, with options totaling $806.3 million for 47 aircraft
  • During the six months ended September 30, 2008, we generated strong cash flows, including:
  • $55.5 million of cash from operating activities
  • $62.2 million of EBITDA
  • $336.6 million in net proceeds from the sale of convertible senior notes and common stock
  • We used $278.5 million for capital expenditures -- primarily for aircraft
"We are pleased with our continued growth, which was driven by the addition of new aircraft and improved pricing. Excluding the previously disclosed impact of the worse than usual hurricane season in the U.S. Gulf of Mexico and the increased Eastern Hemisphere maintenance costs, our consolidated operating results were in line with our expectations with better than expected results in Europe being offset by lower than expected results in Australia. Some of these items are not expected to recur (e.g. extent of hurricanes and portion of costs in Australia), and we have taken actions to address and mitigate the portion of the costs expected to continue," said William E. Chiles, President and Chief Executive Officer of Bristow Group Inc.
 
"Over the past three years we have raised approximately $1.1 billion of capital in a mix of debt and equity through public and private financings. We expect that our September 30, 2008 cash balance of $399 million will be sufficient to satisfy our remaining aircraft purchase commitments of $380 million, 61% of which are payable after March 31, 2009.
 
"The cash we expect to generate from future operations, along with the sales of aircraft and the $100 million borrowing capacity under our revolving credit facility, should provide us with additional uncommitted liquidity. We remain disciplined in our capital program. In addition, we are taking proactive measures to protect the Company's liquidity during this period of disruption in the financial markets, including seeking secure investments for our cash and monitoring the ability of our business counterparties to fulfill their obligations to us.

"We remain in close contact with our customers to understand their plans for future operating expenditures, which are the primary source of our revenue, as well as their capital expenditures, which fund a smaller portion of our income. At this time, we have not experienced a decline in customer demand for our services. Most of our pending business is production based and therefore less likely to be curtailed as a result of lower oil and gas prices. We expect the aircraft on order and the available uncommitted liquidity to allow us deliver on our growth plans."

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