Company Quick10K Filing
Quick10K
Bristow Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.62 36 $22
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-K 2014-03-31 Annual: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-04-15 Other Events, Exhibits
8-K 2019-04-10 Officers
8-K 2019-03-14 Other Events, Exhibits
8-K 2019-02-20
8-K 2019-02-18 Officers, Other Events, Exhibits
8-K 2019-02-11 Earnings, Other Events, Exhibits
8-K 2019-02-11 Enter Agreement, Leave Agreement, Officers, Other Events, Exhibits
8-K 2018-12-19 Officers, Exhibits
8-K 2018-12-17 Other Events
8-K 2018-12-10 Regulation FD
8-K 2018-11-27 Enter Agreement, Exhibits
8-K 2018-11-21 Enter Agreement, Exhibits
8-K 2018-11-09 Earnings, Exhibits
8-K 2018-11-09 Officers, Regulation FD, Exhibits
8-K 2018-11-09 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-11-09 Regulation FD
8-K 2018-11-08 Regulation FD, Other Events, Exhibits
8-K 2018-09-12 Regulation FD, Exhibits
8-K 2018-08-03 Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-07-31 Shareholder Vote
8-K 2018-06-05 Officers, Exhibits
8-K 2018-05-24 Regulation FD, Exhibits
8-K 2018-04-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-06 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-02-09 Regulation FD, Exhibits
NVO Novo Nordisk 117,920
STX Seagate Technology 14,140
CHRW CH Robinson Worldwide 12,300
CW Curtiss Wright 4,830
WABC Westamerica Bancorporation 1,720
KNOP Knot Offshore Partners 653
TNK Teekay Tankers 287
ICD Independence Contract Drilling 219
ASUR Asure Software 127
CLSN Celsion 43
BRS 2018-09-30
Part I - Financial Information
Item 1. Financial Statements.
Note 1 - Basis of Presentation, Consolidation and Summary of Significant Accounting Policies
Note 2 - Revenue Recognition
Note 3 - Variable Interest Entities
Note 4 - Debt
Note 5 - Fair Value Disclosures
Note 6 - Derivative Financial Instruments and Hedging Activities
Note 7 - Commitments and Contingencies
Note 8 - Taxes
Note 9 - Employee Benefit Plans
Note 10 - Earnings per Share and Accumulated Other Comprehensive Income
Note 11 - Segment Information
Note 12 - Supplemental Condensed Consolidating Financial Information
Note 13 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 deferredcompensationplando.htm
EX-15.1 fy2019q210-q09302018ex151.htm
EX-31.1 fy2019q210-q09302018ex311.htm
EX-31.2 fy2019q210-q09302018ex312.htm
EX-32.1 fy2019q210-q09302018ex321.htm
EX-32.2 fy2019q210-q09302018ex322.htm

Bristow Group Earnings 2018-09-30

BRS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 fy2019q210-q09302018.htm 10-Q Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 10-Q
 
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to      
 
Commission File Number 001-31617
 
 
Bristow Group Inc.
 
 
(Exact name of registrant as specified in its charter)
 

Delaware
 
72-0679819
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification Number)
 
 
2103 City West Blvd.,
4th Floor
Houston, Texas
 
77042
(Zip Code)
(Address of principal executive offices)
 
 
Registrant’s telephone number, including area code:
(713) 267-7600
 
 
None 
 
 
 
 
 
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o  Yes    þ  No
Indicate the number shares outstanding of each of the issuer’s classes of Common Stock, as of November 2, 2018.
35,798,185 shares of Common Stock, $.01 par value
 




BRISTOW GROUP INC.
INDEX — FORM 10-Q
 



PART I — FINANCIAL INFORMATION
 
Item 1.     Financial Statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
  
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
(In thousands, except per share amounts)
Revenue:
 
 
 
 
 
 
 
 
Operating revenue from non-affiliates
 
$
321,580

 
$
340,593

 
$
660,046

 
$
662,711

Operating revenue from affiliates
 
13,131

 
17,399

 
25,652

 
35,010

Reimbursable revenue from non-affiliates
 
15,946

 
15,684

 
32,853

 
28,064

 
 
350,657

 
373,676

 
718,551

 
725,785

Operating expense:
 
 
 
 
 
 
 
 
Direct cost
 
277,217

 
284,742

 
557,268

 
570,322

Reimbursable expense
 
15,194

 
15,414

 
31,098

 
27,640

Depreciation and amortization
 
30,489

 
31,381

 
61,430

 
62,437

General and administrative
 
38,839

 
48,622

 
78,940

 
95,329

 
 
361,739

 
380,159

 
728,736

 
755,728

 
 
 
 
 
 
 
 
 
Loss on impairment
 
(117,220
)
 

 
(117,220
)
 
(1,192
)
Loss on disposal of assets
 
(1,293
)
 
(8,526
)
 
(2,971
)
 
(7,827
)
Earnings (losses) from unconsolidated affiliates, net
 
(96
)
 
2,063

 
(3,113
)
 
1,398

Operating loss
 
(129,691
)
 
(12,946
)
 
(133,489
)
 
(37,564
)
 
 
 
 
 
 
 
 
 
Interest expense, net
 
(26,433
)
 
(18,563
)
 
(53,577
)
 
(34,584
)
Other income (expense), net
 
(3,204
)
 
2,587

 
(7,154
)
 
971

Loss before benefit (provision) for income taxes
 
(159,328
)
 
(28,922
)
 
(194,220
)
 
(71,177
)
Benefit (provision) for income taxes
 
15,655

 
(2,474
)
 
18,506

 
(15,965
)
Net loss
 
(143,673
)
 
(31,396
)
 
(175,714
)
 
(87,142
)
Net (income) loss attributable to noncontrolling interests
 
(517
)
 
187

 
(584
)
 
658

Net loss attributable to Bristow Group
 
$
(144,190
)
 
$
(31,209
)
 
$
(176,298
)
 
$
(86,484
)
 
 
 
 
 
 
 
 
 
Loss per common share:
 
 
 
 
 
 
 
 
Basic
 
$
(4.03
)
 
$
(0.88
)
 
$
(4.94
)
 
$
(2.45
)
Diluted
 
$
(4.03
)
 
$
(0.88
)
 
$
(4.94
)
 
$
(2.45
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

1


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
  
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
(In thousands)
Net loss
 
$
(143,673
)
 
$
(31,396
)
 
$
(175,714
)
 
$
(87,142
)
Other comprehensive loss:
 
 
 
 
 
 
 
 
Currency translation adjustments
 
(7,967
)
 
10,691

 
(37,000
)
 
20,451

Unrealized gain (loss) on cash flow hedges, net of tax benefit (provision) of $(0.1) million, zero, $0.2 million and zero, respectively
 
(98
)
 

 
1,250

 

Total comprehensive loss
 
(151,738
)
 
(20,705
)
 
(211,464
)
 
(66,691
)
 
 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interests
 
(517
)
 
187

 
(584
)
 
658

Currency translation adjustments attributable to noncontrolling interests
 
(32
)
 
237

 
(171
)
 
547

Total comprehensive (income) loss attributable to noncontrolling interests
 
(549
)
 
424

 
(755
)
 
1,205

Total comprehensive loss attributable to Bristow Group
 
$
(152,287
)
 
$
(20,281
)
 
$
(212,219
)
 
$
(65,486
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

2


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 
 
September 30, 
 2018
 
March 31,  
 2018
 
 
(Unaudited)
 
 
 
 
(In thousands)
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
307,791

 
$
380,223

Accounts receivable from non-affiliates
 
218,792

 
233,386

Accounts receivable from affiliates
 
13,029

 
13,594

Inventories
 
117,706

 
129,614

Assets held for sale
 
24,176

 
30,348

Prepaid expenses and other current assets
 
46,603

 
47,234

Total current assets
 
728,097

 
834,399

Investment in unconsolidated affiliates
 
110,637

 
126,170

Property and equipment – at cost:
 
 
 
 
Land and buildings
 
243,245

 
250,040

Aircraft and equipment
 
2,491,291

 
2,511,131

 
 
2,734,536

 
2,761,171

Less – Accumulated depreciation and amortization
 
(848,271
)
 
(693,151
)
 
 
1,886,265

 
2,068,020

Goodwill
 
18,778

 
19,907

Other assets
 
117,027

 
116,506

Total assets
 
$
2,860,804

 
$
3,165,002

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
 
 
 
 
Accounts payable
 
$
103,510

 
$
101,270

Accrued wages, benefits and related taxes
 
47,011

 
62,385

Income taxes payable
 
6,809

 
8,453

Other accrued taxes
 
9,095

 
7,378

Deferred revenue
 
13,733

 
15,833

Accrued maintenance and repairs
 
28,372

 
28,555

Accrued interest
 
17,154

 
16,345

Other accrued liabilities
 
52,735

 
65,978

Short-term borrowings and current maturities of long-term debt
 
50,798

 
56,700

Total current liabilities
 
329,217

 
362,897

Long-term debt, less current maturities
 
1,398,911

 
1,429,834

Accrued pension liabilities
 
28,484

 
37,034

Other liabilities and deferred credits
 
31,639

 
36,952

Deferred taxes
 
97,372

 
115,192

Commitments and contingencies (Note 7)
 


 

Stockholders’ investment:
 
 
 
 
Common stock, $.01 par value, authorized 90,000,000; outstanding: 35,798,185 as of September 30, 2018 and 35,526,625 as of March 31, 2018 (exclusive of 1,291,441 treasury shares)
 
385

 
382

Additional paid-in capital
 
858,809

 
852,565

Retained earnings
 
615,739

 
793,783

Accumulated other comprehensive loss
 
(322,015
)
 
(286,094
)
Treasury shares, at cost (2,756,419 shares)
 
(184,796
)
 
(184,796
)
Total Bristow Group stockholders’ investment
 
968,122

 
1,175,840

Noncontrolling interests
 
7,059

 
7,253

Total stockholders’ investment
 
975,181

 
1,183,093

Total liabilities and stockholders’ investment
 
$
2,860,804

 
$
3,165,002

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
  
 
Six Months Ended 
 September 30,
 
 
2018
 
2017
 
 
 
 
 
 
 
(Unaudited)
(In thousands)
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(175,714
)
 
$
(87,142
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
61,430

 
62,437

Deferred income taxes
 
(27,651
)
 
1,197

Write-off of deferred financing fees
 

 
621

Discount amortization on long-term debt
 
3,101

 
101

Loss on disposal of assets
 
2,971

 
7,827

Loss on impairment
 
117,220

 
1,192

Deferral of lease payments
 
2,841

 

Stock-based compensation
 
3,714

 
6,542

Equity in earnings from unconsolidated affiliates less than (in excess of) dividends received
 
3,299

 
(1,190
)
Increase (decrease) in cash resulting from changes in:
 
 
 
 
Accounts receivable
 
6,792

 
(25,222
)
Inventories
 
(3,785
)
 
(1,848
)
Prepaid expenses and other assets
 
2,980

 
7,320

Accounts payable
 
7,651

 
(4,581
)
Accrued liabilities
 
(26,703
)
 
(2,635
)
Other liabilities and deferred credits
 
(5,048
)
 
47

Net cash used in operating activities
 
(26,902
)
 
(35,334
)
Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(17,302
)
 
(24,317
)
Proceeds from asset dispositions
 
8,462

 
42,244

Net cash provided by (used in) investing activities
 
(8,840
)
 
17,927

Cash flows from financing activities:
 
 
 
 
Proceeds from borrowings
 
387

 
338,018

Debt issuance costs
 
(2,554
)
 
(6,695
)
Repayment of debt
 
(29,970
)
 
(318,130
)
Partial prepayment of put/call obligation
 
(27
)
 
(23
)
Dividends paid to noncontrolling interest
 
(580
)
 

Common stock dividends paid
 

 
(2,465
)
Issuance of common stock
 
2,830

 

Repurchases for tax withholdings on vesting of equity awards
 
(1,504
)
 
(548
)
Net cash provided by (used in) financing activities
 
(31,418
)
 
10,157

Effect of exchange rate changes on cash and cash equivalents
 
(5,272
)
 
7,937

Net increase (decrease) in cash and cash equivalents
 
(72,432
)
 
687

Cash and cash equivalents at beginning of period
 
380,223

 
96,656

Cash and cash equivalents at end of period
 
$
307,791

 
$
97,343

Cash paid during the period for:
 
 
 
 
Interest
 
$
48,555

 
$
33,669

Income taxes
 
$
9,919

 
$
13,237

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Investment
(Unaudited)
(In thousands, except share amounts)
 
Total Bristow Group Stockholders’ Investment
 
 
 
 
 
Common
Stock
 
Common
Stock
(Shares)
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Stockholders’
Investment
March 31, 2018
$
382

 
35,526,625

 
$
852,565

 
$
793,783

 
$
(286,094
)
 
$
(184,796
)
 
$
7,253

 
$
1,183,093

Adoption of new accounting guidance (1)

 

 

 
(1,746
)
 

 

 

 
(1,746
)
Issuance of common stock
3

 
238,650

 
4,261

 

 

 

 

 
4,264

Distributions paid to noncontrolling interests

 

 

 

 

 

 
(14
)
 
(14
)
Currency translation adjustments

 

 

 

 

 

 
(139
)
 
(139
)
Net income (loss)

 

 

 
(32,108
)
 

 

 
67

 
(32,041
)
Other comprehensive loss

 

 

 

 
(27,824
)
 

 

 
(27,824
)
June 30, 2018
$
385

 
35,765,275

 
$
856,826

 
$
759,929

 
$
(313,918
)
 
$
(184,796
)
 
$
7,167

 
$
1,125,593

Issuance of common stock

 
32,910

 
1,983

 

 

 

 

 
1,983

Distributions paid to noncontrolling interests

 

 

 

 

 

 
(13
)
 
(13
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(580
)
 
(580
)
Currency translation adjustments

 

 

 

 

 

 
(32
)
 
(32
)
Net income (loss)

 

 

 
(144,190
)
 

 

 
517

 
(143,673
)
Other comprehensive loss

 

 

 

 
(8,097
)
 

 

 
(8,097
)
September 30, 2018
$
385

 
35,798,185

 
$
858,809

 
$
615,739

 
$
(322,015
)
 
$
(184,796
)
 
$
7,059

 
$
975,181

_____________ 
(1) 
Cumulative-effect adjustment upon the adoption of new accounting guidance related to current and deferred income taxes for intra-entity transfer of assets other than inventory. For further details, see Note 1.


5


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Investment— (Continued)
(Unaudited)
(In thousands, except share amounts)
 
 
 
Total Bristow Group Stockholders’ Investment
 
 
 
 
 
Redeemable Noncontrolling Interest
 
Common
Stock
 
Common
Stock
(Shares)
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Stockholders’
Investment
March 31, 2017
$
6,886

 
$
379

 
35,213,991

 
$
809,995

 
$
991,906

 
$
(328,277
)
 
$
(184,796
)
 
$
5,025

 
$
1,294,232

Issuance of common stock

 
1

 
89,849

 
3,862

 

 

 

 

 
3,863

Distributions paid to noncontrolling interests

 

 

 

 

 

 

 
(12
)
 
(12
)
Common stock dividends ($0.07 per share)

 

 

 

 
(2,465
)
 

 

 

 
(2,465
)
Currency translation adjustments
258

 

 

 

 

 

 

 
52

 
52

Net income (loss)
(795
)
 

 

 

 
(55,275
)
 

 

 
325

 
(54,950
)
Other comprehensive loss

 

 

 

 

 
10,070

 

 

 
10,070

June 30, 2017
$
6,349

 
$
380

 
35,303,840

 
$
813,857

 
$
934,166

 
$
(318,207
)
 
$
(184,796
)
 
$
5,390

 
$
1,250,790

Issuance of common stock

 
1

 
57,696

 
2,133

 

 

 

 

 
2,134

Distributions paid to noncontrolling interests

 

 

 

 

 

 

 
(11
)
 
(11
)
Currency translation adjustments
194

 

 

 

 

 

 

 
43

 
43

Net income (loss)
(541
)
 

 

 

 
(31,209
)
 

 

 
353

 
(30,856
)
Other comprehensive loss

 

 

 

 

 
10,928

 

 

 
10,928

September 30, 2017
$
6,002

 
$
381


35,361,536

 
$
815,990

 
$
902,957

 
$
(307,279
)
 
$
(184,796
)
 
$
5,775

 
$
1,233,028


The accompanying notes are an integral part of these condensed consolidated financial statements.

6

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 — BASIS OF PRESENTATION, CONSOLIDATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements include the accounts of Bristow Group Inc. and its consolidated entities (“Bristow Group”, the “Company”, “we”, “us”, or “our”) after elimination of all significant intercompany accounts and transactions. 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, 2019 is referred to as “fiscal year 2019”. Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission, the information contained in the following notes to condensed consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and related notes thereto contained in our fiscal year 2018 Annual Report (the “fiscal year 2018 Financial Statements”). 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 statements included herein are unaudited; however, they include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the consolidated balance sheet of the Company as of September 30, 2018, the consolidated statements of operations and comprehensive loss for the three and six months ended September 30, 2018 and 2017, the consolidated cash flows for the six months ended September 30, 2018 and 2017, and the consolidated statements of changes in stockholders’ investment for the three and six months ended September 30, 2018.
Loss on Impairment
Loss on impairment includes the following (in thousands):
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Impairment of inventories
$
9,276

 
$

 
$
9,276

 
$
1,192

Impairment of property and equipment (1)
104,939

 

 
104,939

 

Impairment of intangible assets
3,005

 

 
3,005

 

 
$
117,220

 
$

 
$
117,220

 
$
1,192

_____________ 
(1) 
Includes impairment of $87.5 million for H225 aircraft and $17.5 million for Eastern Airways International Limited (“Eastern Airways”) aircraft and equipment.
Prior to the three months ended September 30, 2018, we had been actively marketing our H225 aircraft with the expectation of a substantial return of the aircraft to oil and gas service. However, market conditions and more significantly, the recent development of alternative opportunities outside of our traditional oil and gas service for our H225 aircraft and our decision to pursue those opportunities during the three months ended September 30, 2018, indicate a substantial return to oil and gas service within our operations is not likely. Therefore, during the three months ended September 30, 2018, we concluded that cash flows associated with our H225 helicopters are largely independent from the cash flows associated with the remainder of our oil and gas related property and equipment (“oil and gas asset group”) and should be tested for impairment as a stand-alone asset group. In accordance with Accounting Standard Codification 360-10, we performed an impairment analysis for our stand-alone H225 asset group and determined that the forecasted cash flows over the remaining useful life of the asset group were insufficient to recover the carrying value of the asset group. We determined the fair value of the H225 asset group to be $116.4 million and recorded an impairment charge of $87.5 million. In addition, we performed a review of our H225 aircraft related inventory and recorded an impairment charge of $8.9 million to record the inventory at the lower of cost or net realizable value. These impairments are included in our Corporate and other region in Note 11. The inputs used in our fair value estimates were from Level 3 of the fair value hierarchy discussed in Note 5.
 The removal of the H225 aircraft from our oil and gas asset group and changes in our forecasted cash flows for that asset group during the three months ended September 30, 2018 indicated the need for the performance of a recoverability analysis of the oil and gas asset group. In accordance with Accounting Standard Codification 360-10, we estimate future undiscounted cash flows to test the recoverability of our oil and gas asset group, which largely consists of our oil and gas related held for use aircraft. The determination of estimated future undiscounted cash flows required us to use significant unobservable inputs including

7

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


assumptions related to projected demand for services, rates and anticipated aircraft disposal values. We determined that the estimated future undiscounted cash flows exceeded the carrying value for our oil and gas asset group as of September 30, 2018, and no impairment was recorded on these assets. Future declines in operating performance, aircraft disposal values, anticipated business outlook, or projected aircraft deliveries currently accounted for as construction in progress may reduce our estimated future undiscounted cash flows and result in impairment of our oil and gas asset group.
 In addition, changes in our forecasted cash flows during the three months ended September 30, 2018 indicated the need for the performance of a recoverability analysis for the airline related assets of Eastern Airways. In accordance with Accounting Standard Codification 360-10, we estimate future undiscounted cash flows to test the recoverability of the airline related assets of Eastern Airways for potential impairment. The determination of estimated future undiscounted cash flows required us to use significant unobservable inputs including assumptions related to projected demand for services and rates. We determined that the estimated future undiscounted cash flows were below the carrying value for our airline related assets of Eastern Airways as of September 30, 2018.  We determined the fair value of the asset group to be $20.5 million and recorded an impairment charge of $17.5 million.  As part of our impairment review of the airline assets of Eastern Airways, we also recorded impairments of $3.0 million related to the remaining intangible assets and $0.3 million related to inventory. These impairments are included in our Europe and Caspian region in Note 11. The inputs used in our fair value estimates were from Level 3 of the fair value hierarchy discussed in Note 5.
During the six months ended September 30, 2017, as a result of changes in expected future utilization of aircraft within our training fleet we recorded a $1.2 million charge to impair inventory used on our training fleet, which is included in loss on impairment on our condensed consolidated statement of operations. This impairment is included in our Corporate and other region in Note 11.

8

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Foreign Currency
During the three and six months ended September 30, 2018 and 2017, our primary foreign currency exposure was to the British pound sterling, the euro, the Australian dollar, the Norwegian kroner and the Nigerian naira. The value of these currencies has fluctuated relative to the U.S. dollar as indicated in the following table:
 
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
 
2018
 
2017
 
2018
 
2017
One British pound sterling into U.S. dollars
 
 
 
 
 
 
 
 
High
 
1.33

 
1.36

 
1.43

 
1.36

Average
 
1.30

 
1.31

 
1.33

 
1.29

Low
 
1.27

 
1.28

 
1.27

 
1.24

At period-end
 
1.30

 
1.34

 
1.30

 
1.34

One euro into U.S. dollars
 
 
 
 
 
 
 
 
High
 
1.18

 
1.20

 
1.24

 
1.20

Average
 
1.16

 
1.17

 
1.18

 
1.14

Low
 
1.13

 
1.13

 
1.13

 
1.06

At period-end
 
1.16

 
1.18

 
1.16

 
1.18

One Australian dollar into U.S. dollars
 
 
 
 
 
 
 
 
High
 
0.75

 
0.81

 
0.78

 
0.81

Average
 
0.73

 
0.79

 
0.74

 
0.77

Low
 
0.71

 
0.76

 
0.71

 
0.74

At period-end
 
0.72

 
0.78

 
0.72

 
0.78

One Norwegian kroner into U.S. dollars
 
 
 
 
 
 
 
 
High
 
0.1249

 
0.1294

 
0.1290

 
0.1294

Average
 
0.1214

 
0.1257

 
0.1230

 
0.1216

Low
 
0.1179

 
0.1190

 
0.1179

 
0.1152

At period-end
 
0.1228

 
0.1256

 
0.1228

 
0.1256

One Nigerian naira into U.S. dollars
 
 
 
 
 
 
 
 
High
 
0.0028

 
0.0032

 
0.0028

 
0.0033

Average
 
0.0028

 
0.0029

 
0.0028

 
0.0031

Low
 
0.0027

 
0.0027

 
0.0027

 
0.0027

At period-end
 
0.0027

 
0.0028

 
0.0027

 
0.0028

_____________ 
Source: FactSet
Other income (expense), net, in our condensed consolidated statements of operations includes foreign currency transaction losses of $2.3 million and gains of $2.5 million for the three months ended September 30, 2018 and 2017, respectively, and foreign currency transaction losses of $5.3 million and gains of $0.8 million for the six months ended September 30, 2018 and 2017, respectively. 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, Australian dollar 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.

9

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Our earnings (losses) from unconsolidated affiliates, net are also affected by the impact of changes in foreign currency exchange rates on the reported results of our unconsolidated affiliates. During the three months ended September 30, 2018 and 2017, earnings (losses) from unconsolidated affiliates, net decreased by $1.0 million and increased by $0.3 million, respectively, and during the six months ended September 30, 2018 and 2017, earnings (losses) from unconsolidated affiliates, net decreased by $3.6 million and $0.9 million, respectively, as a result of the impact of changes in foreign currency exchange rates on the earnings of our unconsolidated affiliates, primarily the impact of changes in the Brazilian real to U.S. dollar exchange rate on earnings for our affiliate in Brazil. The value of the Brazilian real has fluctuated relative to the U.S. dollar as indicated in the following table:
 
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
 
2018
 
2017
 
2018
 
2017
One Brazilian real into U.S. dollars
 
 
 
 
 
 
 
 
High
 
0.2699

 
0.3244

 
0.3020

 
0.3244

Average
 
0.2537

 
0.3162

 
0.2657

 
0.3138

Low
 
0.2390

 
0.3009

 
0.2390

 
0.2995

At period-end
 
0.2504

 
0.3161

 
0.2504

 
0.3161

_____________ 
Source: FactSet
We estimate that the fluctuation of currencies versus the same period in the prior fiscal year had the following effect on our financial condition and results of operations (in thousands):
 
 
Three Months Ended 
 September 30, 2018
 
Six Months Ended 
 September 30, 2018
Revenue
 
$
(5,257
)
 
$
5,192

Operating expense
 
4,913

 
(273
)
Earnings (losses) from unconsolidated affiliates, net
 
(1,278
)
 
(2,718
)
Non-operating expense
 
(4,831
)
 
(6,182
)
Loss before provision for income taxes
 
(6,453
)
 
(3,981
)
Benefit for income taxes
 
1,280

 
1,193

Net loss
 
(5,173
)
 
(2,788
)
Cumulative translation adjustment
 
(7,999
)
 
(37,171
)
Total stockholders’ investment
 
$
(13,172
)
 
$
(39,959
)
Interest Expense, Net
During the three and six months ended September 30, 2018 and 2017, interest expense, net consisted of the following (in thousands):
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Interest income
$
1,229

 
$
154

 
$
1,408

 
$
368

Interest expense
(27,662
)
 
(18,717
)
 
(54,985
)
 
(34,952
)
Interest expense, net
$
(26,433
)
 
$
(18,563
)
 
$
(53,577
)
 
$
(34,584
)
Accounts Receivable
As of September 30 and March 31, 2018, the allowance for doubtful accounts for non-affiliates was $0.6 million and $3.3 million, respectively. There were no allowances for doubtful accounts related to accounts receivable due from affiliates as of September 30 and March 31, 2018. The allowance for doubtful accounts for non-affiliates as of September 30, 2018 primarily relates to various customers of Eastern Airways. The allowance for doubtful accounts for non-affiliates as of March 31, 2018 primarily relates to amounts due from a customer in Nigeria for which we no longer believed collection was probable. During the three months ended September 30, 2018, we wrote-off $2.3 million of accounts receivable previously reserved for from a customer in Nigeria as no collection is expected.

10

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Inventories
As of September 30 and March 31, 2018, inventories were net of allowances of $22.4 million and $26.0 million, respectively. As discussed above in Loss on Impairment, we performed a review of our H225 aircraft related inventory and Eastern Airways inventory and recorded impairment charges of $8.9 million and $0.3 million, respectively, to record the inventories at the lower of cost or net realizable value during the three months ended September 30, 2018. During the six months ended September 30, 2017, as a result of changes in expected future utilization of aircraft within our training fleet, we recorded a $1.2 million charge to impair inventory used on our training fleet, which is included in loss on impairment on our condensed consolidated statement of operations. These impairment charges are not reflected in the allowances above.
Prepaid Expenses and Other Current Assets
As of September 30 and March 31, 2018, prepaid expenses and other current assets included the short-term portion of contract acquisition and pre-operating costs totaling $9.9 million and $10.8 million, respectively, related to the search and rescue (“SAR”) contracts in the U.K. and two customer contracts in Norway, which are recoverable under the contracts and will be expensed over the terms of the contracts. For the three months ended September 30, 2018 and 2017, we expensed $2.5 million and $2.8 million, respectively, and for the six months ended September 30, 2018 and 2017, we expensed $5.2 million and $5.7 million, respectively, related to these contracts.
Goodwill
Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill has an indefinite useful life and is not amortized, but is assessed for impairment annually or when events or changes in circumstances indicate that a potential impairment exists.
Goodwill of $18.8 million and $19.9 million as of September 30 and March 31, 2018, respectively, related to our Asia Pacific reporting unit was as follows (in thousands):
March 31, 2018
$
19,907

Foreign currency translation
(1,129
)
September 30, 2018
$
18,778

Accumulated goodwill impairment of $50.9 million as of both September 30 and March 31, 2018 related to our reporting units were as follows (in thousands):
Europe Caspian
$
(33,883
)
Africa
(6,179
)
Americas
(576
)
Corporate and other
(10,223
)
Total accumulated goodwill impairment
$
(50,861
)

11

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Other Intangible Assets
Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values. Intangible assets by type were as follows (in thousands):
 
Customer
contracts
 
Customer
relationships
 
Trade name and trademarks
 
Internally developed software
 
Licenses
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Carrying Amount
March 31, 2018
$
8,169

 
$
12,777

 
$
4,878

 
$
1,107

 
$
755

 
$
27,686

Foreign currency translation

 
(78
)
 
(253
)
 
(14
)
 
(1
)
 
(346
)
September 30, 2018
$
8,169

 
$
12,699

 
$
4,625

 
$
1,093

 
$
754

 
$
27,340

 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Amortization
March 31, 2018
$
(8,169
)
 
$
(11,372
)
 
$
(1,213
)
 
$
(915
)
 
$
(719
)
 
$
(22,388
)
Impairments

 

 
(2,933
)
 
(72
)
 

 
(3,005
)
Amortization expense

 
(143
)
 
(142
)
 
(107
)
 
(30
)
 
(422
)
September 30, 2018
$
(8,169
)
 
$
(11,515
)
 
$
(4,288
)
 
$
(1,094
)
 
$
(749
)
 
$
(25,815
)
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining contractual life, in years
0.0

 
4.1

 
1.2

 
0.0

 
0.1

 
5.4

Future amortization expense of intangible assets for each of the years ending March 31 is as follows (in thousands):
                 
2019
$
96

2020
161

2021
161

2022
161

2023
161

Thereafter
785

 
$
1,525

The Bristow Norway AS and Eastern Airways acquisitions, included in our Europe Caspian region, resulted in intangible assets for customer contracts, customer relationships, trade names and trademarks, internally developed software and licenses. The Capiteq Limited, operating under the name Airnorth, acquisition included in our Asia Pacific region, resulted in intangible assets for customer contracts, customer relationships and trade name and trademarks. As discussed above in Loss on Impairment, during the three months ended September 30, 2018, we recorded an impairment of $3.0 million related to Eastern Airways intangible assets. As of September 30, 2018, Eastern Airways has no remaining intangible assets.
Other Assets
In addition to the other intangible assets described above, other assets included the long-term portion of contract acquisition and pre-operating costs totaling $42.2 million and $50.6 million, respectively, as of September 30 and March 31, 2018, related to the SAR contracts in the U.K. and two customer contracts in Norway, which are recoverable under the contracts and will be expensed over the terms of the contracts.

12

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Property and Equipment, Assets Held for Sale and OEM Cost Recoveries
During the three and six months ended September 30, 2018 and 2017, we took delivery of aircraft and made capital expenditures as follows:
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
2018

2017
 
2018

2017
 
(In thousands, except for number of aircraft)
Number of aircraft delivered:
 
 
 
 
 
 
 
Medium

 
2

 

 
5

Total aircraft

 
2

 

 
5

Capital expenditures (in thousands):
 
 
 
 
 
 
 
Aircraft and equipment (1)
$
4,394

 
$
5,679

 
$
12,731

 
$
16,489

Land and buildings
4,013

 
6,085

 
4,571

 
7,828

Total capital expenditures
$
8,407

 
$
11,764

 
$
17,302

 
$
24,317

_____________ 
(1)
During the three and six months ended September 30, 2017, we spent $1.0 million and $2.3 million, respectively, on progress payments for aircraft to be delivered in future periods. During the three and six months ended September 30, 2018, we made no progress payments for aircraft to be delivered in future periods.
The following table presents details on the aircraft sold or disposed of and impairment charges on assets held for sale and property and equipment during the three and six months ended September 30, 2018 and 2017:
 
Three Months Ended 
 September 30,
 
Six Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(In thousands, except for number of aircraft)
Number of aircraft sold or disposed of

 

 
3

 
6
Proceeds from sale or disposal of assets
$
688

 
$
269

 
$
8,462

 
$
42,244

Gain (loss) from sale or disposal of assets (1)
$
(1,293
)
 
$
(343
)
 
$
(2,971
)
 
$
1,920

 
 
 
 
 
 
 
 
Number of held for sale aircraft impaired

 
2

 

 
4
Impairment charges on assets held for sale (1)(2)
$

 
$
8,183

 
$

 
$
9,747

Impairment charges on property and equipment (3)
$
104,939

 
$

 
$
104,939

 
$

_____________ 
(1) 
Included in loss on disposal of assets on our condensed consolidated statements of operations.
(2) 
Includes a $6.5 million impairment of the Bristow Academy disposal group for the three and six months ended September 30, 2017.
(3) 
Includes $87.5 million impairment related to H225s and $17.5 million related to Eastern Airways assets for the three and six months ended September 30, 2018, included in loss on impairment on our condensed consolidated statement of operations. See Loss on Impairment above for further details.
During fiscal year 2018, we reached agreements with original equipment manufacturers (“OEM”) to recover approximately $136.0 million related to ongoing aircraft issues, of which $125.0 million was realized during fiscal year 2018 and $11.0 million was recovered during the six months ended September 30, 2018. To reflect the amount realized from these OEM cost recoveries during fiscal year 2018, we recorded a $94.5 million decrease in the carrying value of certain aircraft in our fleet through a decrease in property and equipment – at cost, reduced rent expense by $16.6 million and recorded a deferred liability of $13.9 million, included in other accrued liabilities and other liabilities and deferred credits, related to a reduction in rent expense to be recorded in future periods, of which $2.4 million and $5.9 million was recognized during the three and six months ended September 30, 2018, respectively. We determined the realized portion of the cost recoveries related to a long-term performance issue with the aircraft, requiring a reduction of carrying value for owned aircraft and a reduction in rent expense for leased aircraft. For the owned aircraft, we allocated the $94.5 million as a reduction in carrying value by reducing the historical acquisition value of each affected

13

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


aircraft on a pro-rata basis utilizing the historical acquisition value of the aircraft. For the leased aircraft, we will recognize the remaining deferred liability of $8.0 million as a reduction in rent expense prospectively on a straight-line basis over the remaining lease terms. This will result in a reduction to rent expense of $2.0 million during the remainder of fiscal year 2019, $4.0 million during fiscal year 2020 and $2.0 million during fiscal year 2021.
During the six months ended September 30, 2018, we recovered the remaining $11.0 million in OEM cost recoveries by agreeing to net certain amounts previously accrued for aircraft leases and capital expenditures against those recoveries. During the six months ended September 30, 2018, we recorded a $7.6 million increase in revenue and a $2.1 million decrease in direct cost. We expect to realize the remaining $1.3 million recovery during fiscal year 2019 as follows: $1.0 million decrease in direct cost in the three months ended December 31, 2018, and $0.3 million decrease in direct cost in the three months ended March 31, 2019. The increase in revenue relates to compensation for lost revenue in prior periods from the late delivery of aircraft and the decreases in direct cost over fiscal year 2019 relate to prior costs we have incurred and future costs we expect to incur.
In connection with the $87.5 million impairment of our H225 aircraft, we revised our salvage values for each H225 aircraft.  In accordance with accounting standards, we will recognize the change in depreciation due to the reduction in carrying value and revision of salvage values on a prospective basis over the remaining life of the aircraft. This will result in an increase of depreciation expense of $3.0 million during the remainder of fiscal year 2019, $5.9 million during fiscal year 2020, $1.9 million during fiscal year 2021 and a reduction of $10.3 million during fiscal year 2022 and beyond.
On November 1, 2017, we sold our 100% interest in Bristow Academy. As of September 30, 2017, we concluded the disposal group, comprised of the Bristow Academy assets and liabilities met the assets held for sale criteria under ASC 360, but did not meet the requirements for classification as discontinued operations. We evaluated the carrying value of the Bristow Academy disposal group and determined an impairment of $6.5 million, recorded within loss on disposal of assets on our condensed consolidated statement of operations, was necessary to record the disposal group at fair value based on the terms of the sale. The Bristow Academy disposal group is included in Corporate and other in Note 9 — Segment Information.
Other Accrued Liabilities
Other accrued liabilities of $52.7 million and $66.0 million as of September 30 and March 31, 2018, respectively, includes the following:
 
September 30, 
 2018
 
March 31,  
 2018
 
 
 
 
 
(In thousands)
Accrued lease costs
$
8,431

 
$
11,708

Deferred OEM cost recovery
3,997

 
8,082

Eastern Airways overdraft liability
6,718

 
8,989

Accrued property and equipment
640

 
4,874

Deferred gain on sale leasebacks
1,305

 
1,305

Other operating accruals
31,644

 
31,020

 
$
52,735

 
$
65,978

Recent Accounting Pronouncements
We consider 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 our consolidated financial position or results of operations.
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance on revenue recognition replacing the existing accounting standard and industry-specific guidance for revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The underlying principle of the new standard is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. This new standard is effective for annual reporting periods beginning after December 15, 2017. We adopted the standard as of April 1, 2018 using the modified retrospective method applied to open contracts and only to the version of the contracts in effect as of April 1, 2018. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting policy. There was no impact on our condensed consolidated financial statements and no cumulative effect adjustment was recognized. For further details, see Note 2.

14

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


In February 2016, the FASB issued accounting guidance which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. Additionally, this accounting guidance requires a modified retrospective transition approach for all leases existing at, or entered into after the date of initial application, with an option to use certain transition relief. In July 2018, the FASB issued a practical expedient that would allow entities the option to apply the provisions of the new lease guidance at the effective date of adoption without adjusting the comparative periods presented. We have not yet adopted this standard and are currently evaluating the effect this standard will have on our financial statements.
In October 2016, the FASB issued accounting guidance related to current and deferred income taxes for intra-entity transfer of assets other than inventory. This accounting guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. We adopted this accounting guidance effective April 1, 2018 using the modified retrospective method, through a cumulative-effect adjustment directly to retained earnings. Upon adoption, we increased deferred tax liabilities by approximately $1.7 million and recognized an offsetting decrease to retained earnings.
In January 2017, the FASB issued accounting guidance which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides criteria for determining when a transaction involves the acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction does not involve the acquisition of a business. If the criteria are not met, then the amendment requires that to be considered a business, the operation must include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We adopted this accounting guidance effective April 1, 2018. This accounting guidance has had no impact on our financial statements since adoption as we have not entered into any transactions during this period.
In March 2017, the FASB issued accounting guidance related to the presentation of net periodic pension cost and net periodic post-retirement benefit cost. The accounting guidance requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose the amount of net benefit cost that is included in the statement of operations or capitalized in assets, by line item. The accounting guidance requires employers to report the service cost component in the same line item(s) as other compensation costs and to report other pension-related costs (which include interest costs, amortization of pension-related costs from prior periods, and the gains or losses on plan assets) separately and exclude them from the subtotal of operating income. The accounting guidance also allows only the service cost component to be eligible for capitalization when applicable. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted as of the first interim period of an annual period for which interim or annual financial statements have not been issued. The accounting guidance requires application on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the statement of operations and on a prospective basis for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets. We adopted this accounting guidance effective April 1, 2018, and our statement of operations was retrospectively adjusted by $0.1 million and $0.1 million with an increase in direct cost and a corresponding credit in other income (expense), net for the three and six months ended September 30, 2017, respectively.
In May 2017, the FASB issued accounting guidance on determining which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted, and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date. We have adopted this accounting guidance effective April 1, 2018, with no impact on our financial statements as there were no changes to the terms or conditions of share-based payment awards.
In February 2018, the FASB issued new accounting guidance on income statement reporting of comprehensive income, specifically pertaining to reclassification of certain tax effects from accumulated other comprehensive income. This pronouncement is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2018, with early adoption permitted, and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date. We

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BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.
In June 2018, the FASB issued an amendment to the accounting guidance related to accounting for employee share-based payments which clarifies that an entity should recognize excess tax benefits in the period in which the amount of the deduction is determined. This amendment is effective for annual periods beginning after December 15, 2018. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.
In August 2018, the FASB modified disclosure requirements for employers that sponsor defined benefit pension plans. Certain disclosure requirements were removed and certain disclosure requirements were added. The amendment also clarifies disclosure requirements for projected benefit obligation (“PBO”) and accumulated benefit obligation (“ABO”) in excess of respective plan assets. The amendment is effective for fiscal years ending after December 15, 2020 for public business entities and early adoption is permitted. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our disclosure requirements.
In August 2018, the FASB issued new accounting guidance that addresses the accounting for implementation costs associated with a hosted service. The guidance provides that implementation costs be evaluated for capitalization using the same criteria as that used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement. This guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The guidance will be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.


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BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 2 — REVENUE RECOGNITION
Revenue Recognition
In general, we recognize revenue when a service is provided or a good is sold to a customer and there is a contract. At contract inception, we assess the goods and services promised in our contracts with customers and identify all performance obligations for each distinct promise that transfers a good or service (or bundle of goods or services) to the customer. To identify the performance obligations, we consider all goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. Revenue is recognized when control of the identified distinct goods or services have been transferred to the customer, the transaction price is determined and allocated to the performed performance obligations and we have determined that collection has occurred or is probable of occurring.
A majority of our revenue from contracts with customers is currently generated through two types of contracts: helicopter services and fixed wing services. Each contract type has a single distinct performance obligation as described below.
Helicopter services Our customers major integrated, national and independent offshore energy companies charter our helicopters primarily to transport personnel 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. The customers for SAR services include both the oil and gas industry and governmental agencies. Revenue from helicopter services is recognized when the performance obligation is satisfied over time based on contractual rates as the related services are performed.
A performance obligation arises under contracts with customers to render services and is the unit of account under the accounting guidance for revenue. Operating revenue from our oil and gas segment is derived mainly from fixed-term contracts with our customers, a substantial portion of which is competitively bid. A small portion of our oil and gas customer revenue is derived from providing services on an "ad-hoc" basis. Our fixed-term contracts typically have original terms of one year to seven years (subject to provisions permitting early termination by our customers). We account for services rendered separately if they are distinct and the service is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered on its own or with other resources that are readily available to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Within this contract type for helicopter services, we determined that each contract has a single distinct performance obligation. These services include a fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. Variable charges within our flight services contracts are not effective until a customer-initiated flight order is received and the actual hours flown are determined; therefore, the associated flight revenue generally cannot be reasonably and reliably estimated beforehand. A contract’s standalone selling prices are determined based upon the prices that we charge for our services rendered. Revenue is recognized as performance obligations are satisfied over time, by measuring progress towards satisfying the contracted services in a manner that best depicts the transfer of services to the customer, which is generally represented by a period of 30 days or less. We typically invoice customers on a monthly basis and the term between invoicing and when the payment is due is typically between 30 and 60 days. In order to offset potential increases in operating costs, our long-term contracts may provide for periodic increases in the contractual rates charged for our services. We recognize the impact of these rates when estimable and applicable, which generally includes written acknowledgment from the customers that they are in agreement with the amount of the rate escalation. Cost reimbursements from customers are recorded as reimbursable revenue with the related reimbursed costs recorded as reimbursable expense on our condensed consolidated statements of operations.
Taxes collected from customers and remitted to governmental authorities and revenue are reported on a net basis in our financial statements. Thus, we exclude taxes imposed on the customer and collected on behalf of governmental agencies to be remitted to these agencies from the transaction price in determining the revenue related to contracts with a customer.
Fixed wing services Eastern Airways and Airnorth provide fixed wing transportation services through regular passenger transport (scheduled airline service with individual ticket sales) and charter services. A performance obligation arises under contracts with customers to render services and is the unit of account under the new accounting guidance for revenue. Within fixed wing services, we determined that each contract has a single distinct performance obligation. Revenue is recognized over time at the earlier of the period in which the service is provided or the period in which the right to travel expires, which is determined by the terms and conditions of the ticket. Ticket sales are recorded within deferred revenue in accordance with the above policy. Both chartered and scheduled airline service revenue is recognized net of passenger taxes and discounts.

17

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Contract Assets, Liabilities and Receivables
We generally satisfy performance of contract obligations by providing helicopter and fixed wing services to our 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 we have 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 revenue in which advance consideration is received from customers for contracts where revenue is recognized on future performance of services.
As of September 30 and March 31, 2018, receivables related to services performed under contracts with customers were $180.0 million and $176.5 million, respectively. All receivables from non-affiliates and affiliates are broken out further in our condensed consolidated balance sheets. During the six months ended September 30, 2018, we recognized $10.1 million of revenue from outstanding contract liabilities as of March 31, 2018. Contract liabilities related to services performed under contracts with customers was $9.8 million and $13.3 million as of September 30 and March 31, 2018, respectively. Contract liabilities are primarily generated by our fixed wing services where customers pay for tickets in advance of receiving our services and advanced payments from helicopter services customers. There were no contract assets as of September 30 and March 31, 2018.
For the three and six months ended September 30, 2018, there was zero and $1.0 million, respectively, of revenue recognized from satisfied performance obligations related to prior periods (for example, due to changes in transaction price).
Adoption Impact
In accordance with the new revenue standard requirements discussed in Note 1, the disclosure of the impact of adoption on our condensed consolidated financial statements for the three and six months ended September 30, 2018 follows (in thousands):
 
 
Three Months Ended 
 September 30, 2018
 
Six Months Ended 
 September 30, 2018
 
 
Balances After Adoption
 
Balances without Adoption
 
Effect of change
 
Balances After Adoption
 
Balances without Adoption
 
Effect of change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Operating revenue from non-affiliates
 
$
317,369

 
$
321,580

 
$
(4,211
)
 
$
642,725

 
$
660,046

 
$
(17,321
)
Operating revenue from affiliates
 
5,133

 
13,131

 
(7,998
)
 
10,927

 
25,652

 
(14,725
)
Reimbursable revenue from
  non-affiliates
 
15,946

 
15,946

 

 
32,853

 
32,853

 

Revenue from Contracts with Customers
 
338,448

 
350,657

 
(12,209
)
 
686,505

 
718,551

 
(32,046
)
Other revenue from non-affiliates
 
4,211

 

 
4,211

 
17,321

 

 
17,321

Other revenue from affiliates
 
7,998

 

 
7,998

 
14,725

 

 
14,725

Total Revenue
 
$
350,657

 
$
350,657

 
$

 
$
718,551

 
$
718,551

 
$

No cumulative effect adjustment to retained earnings was required upon adoption on April 1, 2018.

18

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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
 
 
Six Months Ending March 31, 2019
 
Fiscal Year Ending March 31,
 
Total
 
 
 
2020
 
2021
 
2022
 
2023 and thereafter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding Service Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Helicopter contracts
 
$
217,866

 
$
245,032

 
$
200,077

 
$
189,496

 
$
479,896

 
$
1,332,367

Fixed-wing contracts
 
2,934

 
355

 

 

 

 
3,289

Total remaining performance obligation revenue
 
$
220,800

 
$
245,387

 
$
200,077

 
$
189,496

 
$
479,896

 
$
1,335,656

Although substantially all of our revenue is under contract, due to the nature of our business we do not have significant remaining performance obligations as our contracts typically include unilateral termination clauses that allow our customers to terminate existing contracts with a notice period of 30 to 180 days. The table above includes performance obligations up to the point where the parties can cancel existing contracts. Any applicable cancellation penalties have been excluded. As such, our actual remaining performance obligation revenue is expected to be greater than what is reflected 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.
Other Considerations and Practical Expedients
We were awarded a government contract to provide SAR services for all of the U.K., which commenced in April 2015. We previously incurred costs related to this contract that generate or enhance the resources used to fulfill the performance obligation within the contract and the costs are expected to be recoverable. These contract acquisition and pre-operating costs qualify for capitalization. We amortize these capitalized contract acquisition and pre-operating costs related to the UK SAR contract and two customer contracts in Norway. We determined that an amortization method that allocates the capitalized costs on a relative basis to the revenue recognized is a reasonable and systematic basis for the amortization of the pre-operating costs asset. For further details on the short and long-term pre-operating cost balances, see Note 1.
We incur incremental direct costs for obtaining contracts through sales commissions paid to ticket agents to sell seats on regular public transportation flights for our fixed-wing services only. We utilize the practical expedient allowed by the FASB that permits us to expense the incremental costs of obtaining a contract when incurred, if the amortization period of the contract asset that we otherwise would have recognized is one year or less.
In addition, we have applied the tax practical expedient to exclude all taxes in the scope of the election from the transaction price and the invoice practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice the customer and corresponds directly with the value to the customer of our performance completed to date.
Note 3 — VARIABLE INTEREST ENTITIES
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 we determine that we have operating power and the obligation to absorb losses or receive benefits, we consolidate the VIE as the primary beneficiary, and if not, we do not consolidate.
As of September 30, 2018, we had interests in four VIEs of which we were the primary beneficiary, which are described below, and had no interests in VIEs of which we were not the primary beneficiary. See Note 2 to the fiscal year 2018 Financial Statements for a description of other investments in significant affiliates.

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BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Bristow Aviation Holdings Limited — We own 49% of Bristow Aviation Holdings Limited’s (“Bristow Aviation”) common stock and a significant amount of its subordinated debt. Bristow Aviation is incorporated in England and holds all of the outstanding shares in Bristow Helicopters Limited (“Bristow Helicopters”). Bristow Aviation’s subsidiaries provide industrial aviation services to customers primarily in the U.K., Norway, Australia, Nigeria and Trinidad and fixed wing services primarily in the U.K. and Australia. Bristow Aviation is organized with three different classes of ordinary shares having disproportionate voting rights. The Company, Caledonia Investments plc (“Caledonia”) and a European Union investor (the “E.U. Investor”) own 49%, 46% and 5%, respectively, of Bristow Aviation’s total outstanding ordinary shares, although Caledonia has voting control over the E.U. Investor’s shares.
In addition to our ownership of 49% of Bristow Aviation’s outstanding ordinary shares, in May 2004, we acquired eight million shares of deferred stock, essentially a subordinated class of stock with no voting rights, from Bristow Aviation for £1 per share ($14.4 million in total). We also have £91.0 million ($118.7 million) principal amount of subordinated unsecured loan stock (debt) of Bristow Aviation bearing interest at an annual rate of 13.5% and payable semi-annually. Payment of interest on such debt has been deferred since its incurrence in 1996. Deferred interest accrues at an annual rate of 13.5% and aggregated $2.3 billion as of September 30, 2018.
The Company, Caledonia, the E.U. Investor and Bristow Aviation have entered into a shareholder agreement respecting, among other things, the composition of the board of directors of Bristow Aviation. On matters coming before Bristow Aviation’s board, Caledonia’s representatives have a total of three votes and the two other directors have one vote each. In addition, Caledonia has the right to nominate two persons to our board of directors and to replace any such directors so nominated, provided that Caledonia owned (1) at least 1,000,000 shares of common stock of the Company or (2) at least 49% of the total outstanding shares of Bristow Aviation. According to Caledonia’s most recent Form 13F filed with the SEC on October 10, 2018, Caledonia was no longer the direct beneficial owner of any shares of our common stock as of September 30, 2018. Accordingly, pursuant to the terms of the Master Agreement dated December 12, 1996 among Caledonia and the Company, Caledonia does not currently satisfy the requirements to designate directors for nomination to our board of directors.
Caledonia, the Company and the E.U. Investor also have entered into a put/call agreement under which, upon giving specified prior notice, we have the right to buy all the Bristow Aviation shares held by Caledonia and the E.U. Investor, who, in turn, each have the right to require us to purchase such shares. Under current English law, we would be required, in order for Bristow Aviation to retain its operating license, to find a qualified E.U. investor to own any Bristow Aviation shares we have the right to acquire under the put/call agreement. The only restriction under the put/call agreement limiting our ability to exercise the put/call option is a requirement to consult with the Civil Aviation Authority (the “CAA”) in the U.K. regarding the suitability of the new holder of the Bristow Aviation shares. The put/call agreement does not contain any provisions should the CAA not approve the new E.U. investor. However, we would work diligently to find an E.U. investor suitable to the CAA. The amount by which we could purchase the shares of the other investors holding 51% of the equity of Bristow Aviation is fixed under the terms of the call option, and we have reflected this amount on our condensed consolidated balance sheets as noncontrolling interest.
Furthermore, the call option provides a mechanism whereby the economic risk for the other investors is limited should the financial condition of Bristow Aviation deteriorate. The call option price is the nominal value of the ordinary shares held by the noncontrolling shareholders (£1.0 million as of September 30, 2018) plus an annual guaranteed rate of return less any prepayments of such call option price and any dividends paid on the shares concerned. We can elect to pre-pay the guaranteed return element of the call option price wholly or in part without exercising the call option. No dividends have been paid by Bristow Aviation. We have accrued the annual return due to the other shareholders at a rate of sterling LIBOR plus 3% (prior to May 2004, the rate was fixed at 12%) by recognizing noncontrolling interest expense on our condensed consolidated statements of operations, with a corresponding increase in noncontrolling interest on our condensed consolidated balance sheets. Prepayments of the guaranteed return element of the call option are reflected as a reduction in noncontrolling interest on our condensed consolidated balance sheets. The other investors have an option to put their shares in Bristow Aviation to us. The put option price is calculated in the same way as the call option price except that the guaranteed rate for the period to April 2004 was 10% per annum. If the put option is exercised, any pre-payments of the call option price are set off against the put option price.

20

BRISTOW GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Bristow Aviation and its subsidiaries are exposed to similar operational risks and are therefore monitored and evaluated on a similar basis by management. Accordingly, the financial information reflected on our condensed consolidated balance sheets and statements of operations for Bristow Aviation and subsidiaries is presented in the aggregate, including intercompany amounts with other consolidated entities, as follows (in thousands):
 
 
 
September 30, 
 2018
 
March 31,  
 2018
 
Assets
 
 
 
 
 
Cash and cash equivalents
 
$
69,468

 
$
90,788

 
Accounts receivable
 
310,999

 
256,735

 
Inventories
 
81,069

 
98,314

 
Prepaid expenses and other current assets
 
38,594

 
38,665

 
Total current assets
 
500,130

 
484,502

 
Investment in unconsolidated affiliates
 
3,113

 
3,608

 
Property and equipment, net
 
287,817

 
327,440

 
Goodwill
 
18,778

 
19,907

 
Other assets
 
226,612

 
231,884

 
Total assets
 
$
1,036,450

 
$
1,067,341

 
Liabilities
 
 
 
 
 
Accounts payable
 
$
370,564

 
$
292,893

 
Accrued liabilities
 
129,011

 
140,733

 
Accrued interest
 
2,262,962

 
2,130,433

 
Current maturities of long-term debt
 
15,715

 
23,125

 
Total current liabilities
 
2,778,252

 
2,587,184

 
Long-term debt, less current maturities
 
464,322