ACQUISITIONS

We apply the provisions of Accounting Standards Codification 805, Business Combinations (“ASC 805”), in the accounting for our business acquisitions. ASC 805 requires companies to separately recognize goodwill from the assets acquired and liabilities assumed, which are at their acquisition date fair values. Goodwill as of the acquisition date represents the excess of the purchase price over the fair values of the assets acquired and the liabilities assumed. We recognized $24.3 million and $26.5 million of goodwill as a result of the Airnorth acquisition and Eastern Airways acquisition, respectively. The goodwill recorded as part of these acquisitions primarily reflects the value of offering a complete suite of point to point transportation services for our clients, synergies expected to arise from the combined entities, as well as any intangible assets that do not qualify for separate recognition.

We use significant estimates and assumptions, including fair value estimates, to determine fair value of assets acquired and liabilities assumed and, when applicable, the related useful lives of the acquired assets as of the business combination date. The fair value measurements were primarily based on significant inputs that are not observable in the market, other than certain financial assets and liabilities that were acquired or assumed in the acquisitions. The market approach, which indicates value for a subject asset based on available market pricing for comparable assets, was utilized to estimate the fair value for land and buildings, aircraft and spare parts inventory. The market approach used includes prices and other relevant information generated by market transactions involving comparable assets, as well as pricing guides and other sources. We considered the current market for the assets, the maintenance condition of the assets and the expected proceeds from the sale of the assets, among other factors. As a result we have classified these assets in Level 3 in the fair value hierarchy. For those financial assets and liabilities which utilized observable inputs we have classified these amounts in Level 2.

The income approach was primarily used to value intangible assets, including client relationships, certain internally used software, and trade names, as well as noncontrolling interest. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The fair values associated with these assets and liabilities have been classified in Level 3 in the fair value hierarchy.

The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for certain assets for which the market and income approaches could not be applied due to the nature of the asset. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation. Assets valued using the cost approach have been classified in Level 3 in the fair value hierarchy.

See Note 6 for additional description of the fair value measurement.

Airnorth Acquisition

On January 29, 2015, Bristow Helicopters Australia Pty Ltd. (“Bristow Helicopters Australia”) acquired an 85% interest in Capiteq Limited, operating under the name Airnorth, for cash of A$30.3 million ($24.0 million) with possible earn out consideration of up to A$17.0 million ($13.0 million) to be paid over four years based on the achievement in part on the achievement of specified financial performance thresholds and continued employment by the selling shareholders. We entered into an agreement with the other stockholder of Capiteq Limited that grants us the right after six months to buy all of their shares (and grants them the right after three years to require us to buy all of their shares) and includes transfer restrictions and other customary provisions. Airnorth is Northern Australia’s largest regional fixed wing operator based in Darwin, Northern Territory, Australia with both scheduled and charter services which focus primarily on the energy and mining industries in northern and western Australia as well as international service to Dili, Timor-Leste. Airnorth’s fleet consists of thirteen aircraft (nine turboprop and four new technology regional jets) and its customer base includes many energy companies to which Bristow Group already provides helicopter service. We believe this investment will strengthen our ability to provide point to point transportation services for existing Australian based passengers, expand helicopter services in certain areas in Southeast Asian markets and create a more integrated logistics solution for global clients.

The following table summarizes the consolidated assets and liabilities of Airnorth as of January 29, 2015 (in thousands):




Current assets	$	15,188
Property and equipment	39,822
Goodwill	24,252
Prepaid expenses and other assets	4,403
Total assets	83,665

Current liabilities, including debt	(20,104		)
Long-term debt, less current maturities	(20,606		)
Other long-term liabilities	(9,441		)
Total liabilities	(50,151		)
Temporary equity	(3,427		)
Net assets	$	30,087

Airnorth contributed $11.4 million of operating revenue during fiscal year 2015 and is included in our Australia business unit.

Temporary equity includes the third-party noncontrolling interests in Airnorth. The third-party noncontrolling interest holders hold a written put option, which will allow them to sell their noncontrolling interest to Bristow Helicopters Australia at any time after the end of the third year after acquisition. In addition to the written put option, Bristow Helicopters Australia holds a perpetual call option to acquire the noncontrolling interest after six months. Under each of these alternatives, the exercise price will be based on a contractually defined multiple of cash flows formula (the “Redemption Value”), which is not a fair value measurement, and is payable in cash. As the written put option is redeemable at the option of the noncontrolling interest holders, and not solely within Bristow Helicopters Australia’s control, the noncontrolling interest in Airnorth is classified as temporary equity between the stockholders’ investment and liabilities sections of the consolidated balance sheets. The initial carrying amount of the noncontrolling interest is the fair value of the noncontrolling interest as of the acquisition date.

The noncontrolling interest is adjusted each period for comprehensive income and dividends attributable to the noncontrolling interest and changes in Bristow Helicopters Australia’s ownership interest in Airnorth, if any. An additional adjustment to the carrying value of the noncontrolling interest may be required if the Redemption Value exceeds the current carrying value. Changes in the carrying value of the noncontrolling interest related to a change in the Redemption Value will be recorded against permanent equity and will not affect net income. While there is no impact on net income, the redeemable noncontrolling interest will impact our calculation of earnings per share. Utilizing the two-class method, we will adjust the numerator of the earnings per share calculation to reflect the changes in the excess, if any, of the noncontrolling interest’s Redemption Value over the greater of (1) the noncontrolling interest carrying amount or (2) the fair value of the noncontrolling interest on a quarterly basis.

The following is a rollforward of the temporary equity related to Airnorth for the fiscal year ended March 31, 2015 (in thousands):




Acquisition of Airnorth on January 29, 2015	$	3,427
Noncontrolling interest expense	(39		)
Currency translation	(49		)
Balance – end of fiscal year	$	3,339

The summary pro forma condensed consolidated financial information presented below for the fiscal years ended March 31, 2015 and 2014 give effect to the acquisition of Airnorth as if it had occurred at the beginning of the periods presented. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The pro forma net income has been adjusted to reflect depreciation and amortization expense as if those adjustments had been applied on April 1, 2013. The summary pro forma condensed consolidated financial information is for informational purposes only and does not purport to represent what our consolidated results of operations actually would have been if the acquisition of Airnorth had occurred at any date, and such data does not purport to project our results of operations for any future period.



	Fiscal Year Ended March 31,
	2015		2014
	(In thousands) (Unaudited)
Gross revenue	$	1,927,680	$	1,734,911
Net income	87,902		187,785

Eastern Airways Acquisition

On February 6, 2014, Bristow Helicopters Limited (“Bristow Helicopters”) acquired a 60% interest in the privately owned Eastern Airways for cash of £27 million ($44 million) with possible earn out consideration of up to £6 million ($10 million) to be paid over a three year period based on the achievement of specified financial performance thresholds. The first year earn-out payment was not achieved. In addition, Bristow Helicopters entered into agreements with the other stockholders of Eastern Airways that grant Bristow Helicopters the right to buy all of their Eastern Airways shares (and grant them the right after seven years to require Bristow Helicopters to buy all of their shares) and include transfer restrictions and other customary provisions. Eastern Airways is a regional fixed wing operator based at Humberside Airport located in North Lincolnshire, England with both charter and scheduled services targeting U.K. oil and gas industry transportation. We believe this investment strengthens Bristow Helicopters’ ability to provide a complete suite of point to point transportation services for existing European based passengers, expands helicopter services in certain areas like the Shetland Islands and creates a more integrated logistics solution for global clients.

The following table summarizes the consolidated assets and liabilities of Eastern Airways as of February 6, 2014 (in thousands):




Current assets	$	21,117
Property and equipment	63,391
Goodwill	26,479
Prepaid expenses and other assets	20,474
Total assets	131,461

Current liabilities, including debt	(37,644		)
Long-term debt, less current maturities	(20,400		)
Other long-term liabilities	(8,239		)
Total liabilities	(66,283		)
Temporary equity	(21,139		)
Net assets	$	44,039

Eastern Airways contributed $144.8 million and $21.2 million of operating revenue during fiscal years 2015 and 2014, respectively, and is included in our Europe business unit. The earn-out consideration will be included as general and administrative expense in our consolidated statements of income as earned.

Temporary equity represents the third-party noncontrolling interests in Eastern Airways. The third-party noncontrolling interest holders hold a written put option, which will allow them to sell their noncontrolling interest to Bristow Helicopters at any time after the end of the seventh year after acquisition. In addition to the written put option, Bristow Helicopters holds a perpetual call option to acquire the noncontrolling interest at any time. Under each of these alternatives, the exercise price will be based on a contractually defined multiple of cash flows formula (“Redemption Value”), which is not a fair value measurement, and is payable in cash. As the written put option is redeemable at the option of the noncontrolling interest holders, and not solely within Bristow Helicopters control, the noncontrolling interest in Eastern Airways is classified as temporary equity between the stockholders’ investment and liabilities sections of the consolidated balance sheets. The initial carrying amount of the noncontrolling interest is the fair value of the noncontrolling interest as of the acquisition date.

The noncontrolling interest is adjusted each period for comprehensive income and dividends attributable to the noncontrolling interest and changes in Bristow Helicopters’ ownership interest in Eastern Airways, if any. An additional adjustment to the carrying value of the noncontrolling interest may be required if the Redemption Value exceeds the current carrying value. Changes in the carrying value of the noncontrolling interest related to a change in the Redemption Value will be recorded against permanent equity and will not affect net income. While there is no impact on net income, the redeemable noncontrolling interest will impact our calculation of earnings per share. Utilizing the two-class method, we will adjust the numerator of the earnings per share calculation to reflect the changes in the excess, if any, of the noncontrolling interest’s Redemption Value over the greater of (1) the noncontrolling interest carrying amount or (2) the fair value of the noncontrolling interest on a quarterly basis.

Changes in the balance for the temporary equity related to Eastern Airways are as follows (in thousands):



Acquisition of Eastern Airways on February 6, 2014	$	21,139
Noncontrolling interest expense	671
Currency translation	473
Balance as of March 31, 2014	$	22,283
Noncontrolling interest expense	3,389
Currency translation	(2,787		)
Balance as of March 31, 2015	$	22,885

The summary pro forma condensed consolidated financial information presented below for the fiscal years ended March 31, 2014 and 2013 give effect to the acquisition of Eastern Airways as if it had occurred at the beginning of the periods presented. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The pro forma net income has been adjusted to reflect depreciation and amortization expense as if those adjustments had been applied on April 1, 2012. The summary pro forma condensed consolidated financial information is for informational purposes only and does not purport to represent what our consolidated results of operation actually would have been if the acquisition of Eastern Airways had occurred at any date, and such data does not purport to project our results of operations for any future period.



	Fiscal Year Ended March 31,
	2014		2013
	(In thousands) (Unaudited)
Gross revenue	$	1,761,390	$	1,625,832
Net income	188,921		144,136