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, 2018 is referred to as “fiscal year 2018”. 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 2017 Annual Report (the “fiscal year 2017 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, 2017, the consolidated statements of operations and comprehensive loss for the three and six months ended September 30, 2017 and 2016, the consolidated cash flows for the six months ended September 30, 2017 and 2016, and the consolidated statements of changes in equity and redeemable noncontrolling interest for the six months ended September 30, 2017.

Foreign Currency

During the three and six months ended September 30, 2017 and 2016, 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,
	2017	2016	2017	2016
One British pound sterling into U.S. dollars
High	1.36	1.34	1.36	1.48
Average	1.31	1.31	1.29	1.37
Low	1.28	1.29	1.24	1.29
At period-end	1.34	1.30	1.34	1.30
One euro into U.S. dollars
High	1.20	1.13	1.20	1.15
Average	1.17	1.12	1.14	1.12
Low	1.13	1.10	1.06	1.10
At period-end	1.18	1.12	1.18	1.12
One Australian dollar into U.S. dollars
High	0.81	0.77	0.81	0.78
Average	0.79	0.76	0.77	0.75
Low	0.76	0.74	0.74	0.72
At period-end	0.78	0.77	0.78	0.77
One Norwegian kroner into U.S. dollars
High	0.1294	0.1251	0.1294	0.1251
Average	0.1257	0.1201	0.1216	0.1206
Low	0.1190	0.1163	0.1152	0.1163
At period-end	0.1256	0.1251	0.1256	0.1251
One Nigerian naira into U.S. dollars
High	0.0032	0.0036	0.0033	0.0050
Average	0.0029	0.0032	0.0031	0.0040
Low	0.0027	0.0029	0.0027	0.0029
At period-end	0.0028	0.0032	0.0028	0.0032

_____________

Source: FactSet

Other income (expense), net, in our condensed consolidated statements of operations includes foreign currency transaction gains of $2.5 million and $2.9 million for the three months ended September 30, 2017 and 2016, respectively, and foreign currency transaction gains of $0.8 million and foreign currency transaction losses of $3.4 million for the six months ended September 30, 2017 and 2016, 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 gains for the three and six months ended September 30, 2017 were primarily driven by U.S. dollar net assets on Nigerian naira legal entities while the naira weakened against the U.S. dollar. The gains recorded for the three months ended September 30, 2016 were primarily driven by amounts owed in British pound sterling on U.S. dollar legal entities while the pound sterling depreciated against the U.S. dollar, which was in excess of U.S. dollar liabilities revalued on pound sterling legal entities. The losses for the six months ended September 30, 2016 were primarily driven by U.S. dollar net liabilities on Nigerian naira legal entities while the naira devalued against the U.S. dollar.

Our earnings from unconsolidated affiliates, net of losses, 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, 2017 and 2016, earnings from unconsolidated affiliates, net of losses, increased $0.3 million and decreased $1.3 million, respectively, and during the six months ended September 30, 2017 and 2016, earnings from unconsolidated affiliates, net of losses, decreased by $0.9 million and $1.3 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,
	2017	2016	2017	2016
One Brazilian real into U.S. dollars
High	0.3244	0.3191	0.3244	0.3191
Average	0.3162	0.3083	0.3138	0.2966
Low	0.3009	0.2991	0.2995	0.2702
At period-end	0.3161	0.3078	0.3161	0.3078

_____________

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, 2017			Six Months Ended September 30, 2017
Revenue	$	3,129		$	(15,675	)
Operating expense	(4,090		)	9,621
Earnings from unconsolidated affiliates, net of losses	1,514			424
Non-operating expense	(332		)	4,247
Income before provision for income taxes	221			(1,383		)
Provision for income taxes	673			1,874
Net income	894			491
Cumulative translation adjustment	10,928			20,998
Total stockholders’ investment	$	11,822		$	21,489

Revenue Recognition

In general, we recognize revenue when it is both realized or realizable and earned. We consider revenue to be realized or realizable and earned when the following conditions exist: there is persuasive evidence of an arrangement (generally a client contract exists); the services or products have been performed or delivered to the client; the sales price is fixed or determinable; and collection has occurred or is probable.

Revenue from helicopter services, including search and rescue (“SAR”) services, is recognized based on contractual rates as the related services are performed. The charges under these contracts are generally based on a two-tier rate structure consisting of a daily or monthly fixed fee plus additional fees for each hour flown. These contracts are for varying periods and generally permit the client to cancel the contract before the end of the term. We also provide services to clients on an “ad hoc” basis, which usually entails a shorter contract notice period and duration. The charges for ad hoc services are based on an hourly rate or a daily or monthly fixed fee plus additional fees for each hour flown. 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 rate increases when the criteria outlined above have been met. This generally includes written recognition from the clients that they are in agreement with the amount of the rate escalation. Cost reimbursements from clients are recorded as reimbursable revenue with the related reimbursed costs recorded as reimbursable expense on our condensed consolidated statements of operations.

Eastern Airways International Limited (“Eastern Airways”) and Capiteq Limited, operating under the name Airnorth, primarily earn revenue through charter and scheduled airline services and provision of airport services (Eastern Airways only). Both chartered and scheduled airline service revenue is recognized net of passenger taxes and discounts. Revenue is recognized 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. Airport services revenue is recognized when earned.

Bristow Academy, our helicopter training unit, primarily earns revenue from military training, flight training provided to individual students and ground school courses. We recognize revenue from these sources using the same revenue recognition principles described above as services are provided.

Interest Expense, Net

During the three and six months ended September 30, 2017 and 2016, interest expense, net consisted of the following (in thousands):



	Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017			2016
Interest income	$	154		$	235		$	368		$	469
Interest expense	(18,717		)	(11,703		)	(34,952		)	(22,823		)
Interest expense, net	$	(18,563	)	$	(11,468	)	$	(34,584	)	$	(22,354	)

Accounts Receivable

As of both September 30 and March 31, 2017, the allowance for doubtful accounts for non-affiliates was $4.5 million. There were no allowances for doubtful accounts related to accounts receivable due from affiliates as of September 30 and March 31, 2017. The allowance for doubtful accounts for non-affiliates as of September 30, 2017 primarily relates to amounts due from clients in Nigeria for which we no longer believe collection is probable.

Inventories

As of September 30 and March 31, 2017, inventories were net of allowances of $22.8 million and $21.5 million, respectively. 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.

Prepaid Expenses and Other Current Assets

As of September 30 and March 31, 2017, prepaid expenses and other current assets included the short-term portion of contract acquisition and pre-operating costs totaling $11.3 million and $9.7 million, respectively, related to the SAR contracts in the U.K. and two client 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, 2017 and 2016, we expensed $2.8 million and $3.5 million, respectively, and for both the six months ended September 30, 2017 and 2016, we expensed $5.7 million, 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 $20.4 million and $19.8 million as of September 30 and March 31, 2017, respectively, related to our Asia Pacific reporting unit was as follows (in thousands):



	Asia Pacific		Total
March 31, 2017	$	19,798	$	19,798
Foreign currency translation	566		566
September 30, 2017	$	20,364	$	20,364

Accumulated goodwill impairment of $50.9 million as of both September 30 and March 31, 2017 related to our reporting units were as follows (in thousands):



	Europe Caspian			Africa			Americas			Corporate and other			Total
March 31, 2017	$	(33,883	)	$	(6,179	)	$	(576	)	$	(10,223	)	$	(50,861	)
Impairments	—			—			—			—			—
September 30, 2017	$	(33,883	)	$	(6,179	)	$	(576	)	$	(10,223	)	$	(50,861	)

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):



	Client contracts			Client relationships			Trade name and trademarks			Internally developed software			Licenses			Total

	Gross Carrying Amount
March 31, 2017	$	8,169		$	12,752		$	4,483		$	1,062		$	746		$	27,212
Foreign currency translation	1			56			245			28			7			337
September 30, 2017	$	8,170		$	12,808		$	4,728		$	1,090		$	753		$	27,549

	Accumulated Amortization
March 31, 2017	$	(8,155	)	$	(11,071	)	$	(908	)	$	(685	)	$	(657	)	$	(21,476	)
Amortization expense	(10		)	(152		)	(146		)	(110		)	(30		)	(448		)
September 30, 2017	$	(8,165	)	$	(11,223	)	$	(1,054	)	$	(795	)	$	(687	)	$	(21,924	)

Weighted average remaining contractual life, in years	0.1			3.6			13.1			1.8			1.6			5.2

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



2018	$	440
2019	762
2020	467
2021	467
2022	467
Thereafter	3,022
	$	5,625

The Bristow Norway AS and Eastern Airways acquisitions, included in our Europe Caspian region, resulted in intangible assets for client contracts, client relationships, trade names and trademarks, internally developed software and licenses. The Airnorth acquisition, included in our Asia Pacific region, resulted in intangible assets for client contracts, client relationships and trade name and trademarks.

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 $53.5 million and $51.1 million, respectively, as of September 30 and March 31, 2017, related to the SAR contracts in the U.K. and two client contracts in Norway, which are recoverable under the contracts and will be expensed over the terms of the contracts.

Property and Equipment and Assets Held for Sale

During the three and six months ended September 30, 2017 and 2016, we made capital expenditures as follows:



	Three Months Ended September 30,				Six Months Ended September 30,
	2017		2016		2017		2016
Number of aircraft delivered:
Medium	2		5		5		5
SAR aircraft	—		1		—		1
Total aircraft	2		6		5		6
Capital expenditures (in thousands):
Aircraft and equipment ⁽¹⁾	$	5,679	$	78,087	$	16,489	$	95,574
Land and buildings	6,085		2,716		7,828		6,292
Total capital expenditures	$	11,764	$	80,803	$	24,317	$	101,866

_____________


⁽¹⁾	During the three months ended September 30, 2017 and 2016, we spent $1.0 million and $63.7 million, respectively, and during the six months ended September 30, 2017 and 2016, we spent $2.3 million and $66.8 million, respectively, on progress payments for aircraft to be delivered in future periods.

The following table presents details on the aircraft sold or disposed of and impairments on assets held for sale during the three and six months ended September 30, 2017 and 2016:



	Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017		2016

	(In thousands, except for number of aircraft)
Number of aircraft sold or disposed of	—			—			6		6
Proceeds from sale or disposal of assets	$	269		$	329		$	42,244	$	11,819
Gain (loss) from sale or disposal of assets ⁽¹⁾	$	(343	)	$	(1,175	)	$	1,920	$	(1,043	)

Number of aircraft impaired	2			6			4		13
Impairment charges on assets held for sale ⁽¹⁾⁽²⁾	$	8,183		$	1,011		$	9,747	$	11,160

_____________


⁽¹⁾	Included in gain (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.

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 condensed consolidated balance sheet as of September 30, 2017, includes amounts attributable to the Bristow Academy disposal group of current assets of $1.4 million, $1.2 million and $0.3 million included within Accounts Receivable from non-affiliates, Inventories, and Prepaid expenses and other current assets, respectively, and $1.4 million and $0.4 million included within Other accrued liabilities and Accounts payable, respectively. The Bristow Academy disposal group is included in Corporate and other in Note 9 - Segment Information.

During the three and six months ended September 30, 2016, we recorded accelerated depreciation of $1.3 million and $8.2 million on six and 11 aircraft, respectively, as our management decided to exit these model types earlier than originally anticipated.

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 for revenue from contracts with customers. This accounting guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers and will replace most existing revenue recognition guidance when it becomes effective. This new standard is effective for annual reporting periods beginning after December 15, 2016. However, in July 2015, the FASB approved the deferral of the effective date of the revenue recognition standard permitting public entities to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Early application is permitted, but not before the original effective date of December 15, 2016. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the balance sheet. We have not adopted this standard yet but expect to adopt the new revenue standard using the modified retrospective transition approach. We are continuing to evaluate the effect this accounting guidance will have on our financial statements and related disclosures and are still assessing the differences between the new revenue standard and current accounting practices.

In November 2015, the FASB issued accounting guidance that changed how deferred taxes are classified on an entity’s balance sheet. The accounting guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and early adoption is permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively. If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. We adopted this accounting guidance using the prospective adjustment option effective April 1, 2017 and prior periods were not retrospectively adjusted. As of March 31, 2017, we had $0.1 million in current deferred tax assets and $0.8 million in current deferred tax liabilities. As a result of this adoption, as of April 1, 2017 and going forward we will classify all current deferred taxes as non-current.

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. We have not yet adopted this standard and are currently evaluating the effect this standard will have on our financial statements.

In March 2016, the FASB issued accounting guidance related to accounting for employee share-based payments. The accounting guidance is intended to simplify several aspects of accounting for share-based payment award transactions including income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and early adoption is permitted. We adopted this standard effective April 1, 2017. The requirements related to the tax consequences of share-based payments were applied prospectively and resulted in $2.2 million recorded as an increase to the income tax provision during the six months ended September 30, 2017. We elected to record forfeitures of share-based awards based on actual forfeitures which did not have a material effect on our financial statements. The provisions related to the presentation of excess tax benefits on the condensed consolidated statements of cash flows did not impact our financial statements as there was no excess tax benefit recorded for the periods presented. The provisions related to employee taxes paid for withheld shares are presented as a cash flow financing activity required us to revise our prior period condensed consolidated statement of cash flows by $0.8 million as a decrease in net cash used in operating activities and a corresponding decrease in net cash provided by financing activities for the six months ended September 30, 2016. None of the other provisions of the pronouncement had a material effect on our consolidated 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 have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.

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 have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.

In March 2017, the FASB issued accounting guidance related to the presentation of net periodic pension cost and net periodic postretirement 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 postretirement 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 postretirement benefit in assets. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.

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 not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.

In August 2017, the FASB issued new accounting guidance on derivatives and hedging, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. This accounting guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and earlier adoption is permitted. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.