EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Bristow Group Inc. Employee Savings and Retirement Plan (the “Bristow Plan”) covers certain of our U.S. employees. Under the Bristow Plan, we match each participant’s contributions up to 3% of the employee’s compensation. In addition, under the Bristow Plan, we contribute an additional 3% of the employee’s compensation at the end of each calendar year.

Bristow Helicopters and Bristow International Aviation (Guernsey) Limited (“BIAGL”) have a defined contribution plan. This defined contribution plan replaced the defined benefit pension plans described below for future accrual.

On March 1, 2016, the defined benefit pension plan in Norway was closed and replaced with a defined contribution plan.

Our contributions to our defined contribution plans were $22.0 million, $21.8 million and $14.4 million for fiscal years 2018, 2017 and 2016, respectively.

Defined Benefit Plans

The defined benefit pension plans of Bristow Helicopters and BIAGL replaced by the defined contribution plans described above covered all full-time employees of Bristow Aviation and BIAGL employed on or before December 31, 1997. Both plans were closed to future accrual as of February 1, 2004. The defined benefits for employee members were based on the employee’s annualized average last three years’ pensionable salaries up to February 1, 2004, increasing thereafter in line with retail price inflation (prior to 2011) and consumer price inflation (from 2011 onwards), and subject to maximum increases of 5% per year over the period to retirement. Any valuation deficits are funded by contributions by Bristow Helicopters and BIAGL. Plan assets are held in separate funds administered by the plans’ trustee (the “Plan Trustee”), which are primarily invested in equities and debt securities. For members of the two closed defined benefit pension plans, since January 2005, Bristow Helicopters contributes a maximum of 7% of a participant’s non-variable salary, and since April 2006, the maximum employer contribution into the plan has been 7.35% for pilots. Each member is required to contribute a minimum of 5% of non-variable salary for Bristow Helicopters to match the contribution. In addition, there are three defined contribution plans for staff who were not members of the original defined benefit plans, two of which are closed to new members.

The following tables provide a rollforward of the projected benefit obligation and the fair value of plan assets, set forth the defined benefit retirement plans’ funded status and provide detail of the components of net periodic pension cost calculated for the U.K. pension plans. The measurement date adopted is March 31. For the purposes of amortizing gains and losses, the 10% corridor approach has been adopted and assets are taken at fair market value. Any such gains or losses are amortized over the average remaining life expectancy of the plan members.



	Fiscal Year Ended March 31,
	2018			2017

	(In thousands)
Change in benefit obligation:
Projected benefit obligation (PBO) at beginning of period	$	517,186		$	525,053
Service cost	856			627
Interest cost	12,914			15,330
Actuarial loss (gain)	(19,930		)	73,622
Benefit payments and expenses	(27,002		)	(26,456		)
Effect of exchange rate changes	61,104			(70,990		)
Projected benefit obligation (PBO) at end of period	$	545,128		$	517,186
Change in plan assets:
Market value of assets at beginning of period	$	455,539		$	454,946
Actual return on assets	7,480			71,873
Employer contributions	17,001			16,530
Benefit payments and expenses	(27,002		)	(26,456		)
Effect of exchange rate changes	55,357			(61,354		)
Market value of assets at end of period	$	508,375		$	455,539
Reconciliation of funded status:
Accumulated benefit obligation (ABO)	$	545,128		$	517,186
Projected benefit obligation (PBO)	$	545,128		$	517,186
Fair value of assets	(508,375		)	(455,539		)
Net recognized pension liability	$	36,753		$	61,647
Amounts recognized in accumulated other comprehensive loss	$	232,043		$	220,396



	Fiscal Year Ended March 31,
	2018			2017			2016 ⁽¹⁾

	(In thousands)
Components of net periodic pension cost:
Service cost for benefits earned during the period	$	856		$	627		$	8,243
Interest cost on PBO	12,914			15,330			20,108
Expected return on assets	(21,184		)	(21,697		)	(27,208		)
Amortization of unrecognized losses	8,151			7,266			8,246
Net periodic pension cost	$	737		$	1,526		$	9,389

_______________


⁽¹⁾	Bristow Norway had a final salary defined benefit plan prior to its closing on March 1, 2016, which led to a curtailment and settlement of the projected benefit obligations.

The amount in accumulated other comprehensive loss as of March 31, 2018 expected to be recognized as a component of net periodic pension cost in fiscal year 2019 is $6.5 million, net of tax, and represents amortization of the net actuarial losses.

Actuarial assumptions used to develop the components of the U.K. plans were as follows:



	Fiscal Year Ended March 31,
	2018		2017		2016
Discount rate	2.40	%	3.30	%	3.30	%
Expected long-term rate of return on assets	4.41	%	5.30	%	5.40	%
Pension increase rate	3.00	%	2.80	%	2.80	%

Actuarial assumptions used to develop the components of the Norway plan were as follows:



	Fiscal Year Ended March 31, 2016
Discount rate	2.50	%
Rate of compensation increase	3.50	%
Social Security increase amount	3.25	%
Expected return on plan assets	1.50	%
Pension increase rate	—	%

We utilize a British pound sterling denominated AA corporate bond index as a basis for determining the discount rate for our U.K. plans. The expected rate of return assumptions have been determined following consultation with our actuarial advisors. In the case of bond investments, the rates assumed have been directly based on market redemption yields at the measurement date, and those on other asset classes represent forward-looking rates that have typically been based on other independent research by investment specialists.

Under U.K. and Guernsey legislation, it is the Plan Trustee who is responsible for the investment strategy of the plans, although day-to-day management of the assets is delegated to a team of regulated investment fund managers. The Plan Trustee of the Bristow Staff Pension Scheme (the “Scheme”) has the following three stated primary objectives when determining investment strategy:


(i)	“funding objective” - to ensure that the Scheme is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place which will take into account the financial covenant to the employer;


(ii)	“stability objective” - to have due regard to the likely level and volatility of required contributions when setting the Scheme’s investment strategy; and


(iii)	“security objective” - to ensure that the solvency position of the Scheme (as assessed on a gilt basis) is expected to improve. The Plan Trustee will take into account the strength of the employer’s covenant when determining the expected improvement in the solvency position of the Scheme.

The types of investments are held, and the relative allocation of assets to investments is selected, in light of the liability profile of the Scheme, its cash flow requirements, the funding level and the Plan Trustee’s stated objectives. In addition, in order to avoid an undue concentration of risk, assets are diversified within and across asset classes.

In determining the overall investment strategy for the plans, the Plan Trustee undertakes regular asset and liability modeling (the “ALM”) with the assistance of their U.K. actuary. The ALM looks at a number of different investment scenarios and projects both a range and a best estimate of likely return from each one. Based on these analyses, and following consultation with us, the Trustee determines the benchmark allocation for the plans’ assets.

The market value of the plan’s assets as of March 31, 2018 and 2017 was allocated between asset classes as follows. Details of target allocation percentages under the Plan Trustee’s investment strategies as of the same dates are also included.



	Target Allocation as of March 31,				Actual Allocation as of March 31,
Asset Category	2018		2017		2018		2017
Equity securities	25.4	%	64.8	%	30.2	%	51.1	%
Debt securities	34.8	%	34.8	%	40.5	%	33.4	%
Property	7.4	%	—	%	3.1	%	—	%
Other assets	32.4	%	0.4	%	26.2	%	15.5	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

The following table summarizes, by level within the fair value hierarchy, the plan assets we had as of March 31, 2018, which are valued at fair value (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2018
Cash and cash equivalents	$	26,373	$	—	$	—	$	26,373
Cash plus	—		105,070		—		105,070
Equity investments - U.K.	—		1,683		—		1,683
Equity investments - Non-U.K.	—		151,923		—		151,923
Property	—		15,852		—		15,852
Diversified growth (absolute return) funds	—		1,824		—		1,824
Government debt securities	—		124,428		—		124,428
Corporate debt securities	—		81,222		—		81,222
Total investments	$	26,373	$	482,002	$	—	$	508,375

The following table summarizes, by level within the fair value hierarchy, the plan assets we had as of March 31, 2017, which are valued at fair value (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2017
Cash and cash equivalents	$	70,650	$	—	$	—	$	70,650
Equity investments - U.K.	—		47,392		—		47,392
Equity investments - Non-U.K.	—		185,567		—		185,567
Government debt securities	—		80,654		—		80,654
Corporate debt securities	—		71,276		—		71,276
Total investments	$	70,650	$	384,889	$	—	$	455,539

The investments’ fair value measurement level within the fair value hierarchy is classified in its entirety based on the lowest level of input that is significant to the measurement. The fair value of assets using Level 2 inputs is determined based on the fair value of the underlying investment using quoted prices in active markets or other significant inputs that are deemed observable.

Estimated future benefit payments over each of the next five fiscal years from March 31, 2018 and in aggregate for the following five fiscal years after fiscal year 2023 are as follows (in thousands):



Projected Benefit Payments by the Plans for Fiscal Years Ending March 31,	Payments
2019	$	23,146
2020	23,567
2021	24,268
2022	24,830
2023	25,531
Aggregate 2024 - 2028	133,687

We expect to fund these payments with our cash contributions to the plans, plan assets and earnings on plan assets. The current estimates of our cash contributions for our pension plans required for fiscal year 2019 are expected to be $18.0 million.

Incentive Compensation

Incentive and Stock Option Plans — Stock–based awards are currently made under the Bristow Group Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”). As of March 31, 2018, a maximum of 10,646,729 shares of common stock are reserved, including 2,508,134 shares available for incentive awards under the 2007 Plan. Awards granted under the 2007 Plan may be in the form of stock options, stock appreciation rights, shares of restricted stock, other stock-based awards (payable in cash or our common stock) or performance awards, or any combination thereof, and may be made to outside directors, employees or consultants.

In addition, we have the following incentive and stock plans which have awards outstanding as of March 31, 2018, but under which we no longer make grants:


•	The 2004 Stock Incentive Plan (the “2004 Plan”), which provided for awards to officers and key employees in the form of stock options, stock appreciation rights, restricted stock, other stock-based awards or any combination thereof. Options become exercisable at such time or times as determined at the date of grant and expire no more than 10 years after the date of grant.

•

The 2003 Non-qualified Stock Option Plan for Non-employee Directors (the “2003 Director Plan”), which provided for a maximum of 250,000 shares of our common stock to be issued pursuant to such plan. As of the date of each annual meeting, each non-employee director who met certain attendance criteria was automatically granted an option to purchase 5,000 shares of our common stock. The exercise price of the options granted was equal to the fair market value of our common stock on the date of grant, and the options were exercisable not earlier than six months after the date of grant and expire no more than ten years after the date of grant.

In June 2017, June 2016 and June 2015, the Compensation Committee of our board of directors authorized the grant of stock options, time vested restricted stock and long-term performance cash awards to participating employees. Each of the stock options has a ten-year term and has an exercise price equal to the fair market value (as defined in the 2007 Plan) of our common stock on the grant date. The options will vest in annual installments of one-third each, beginning on the first anniversary of the grant date. Restricted stock grants vest at the end of three years. Performance cash awards granted in June 2017 have two components. One half of each performance cash award will vest and pay out in cash three years after the date of grant at varying levels depending on our performance in total shareholder return against a peer group of companies. The other half of each performance cash award will be earned based on absolute performance in respect of improved average adjusted earnings per share for the Company over the three-year performance period beginning on April 1, 2017. Performance cash awards granted in June 2015 and June 2016 allow the recipient to receive from 0 to 200% of the target amount at the end of three years depending on how our total shareholder return ranks among a peer group over the performance period. The value of the performance cash awards is calculated on a quarterly basis by comparing the performance of our common stock, including any dividends paid since the award date, against the peer group and has a maximum potential payout of $15.7 million, $7.9 million and $7.4 million for the June 2017, June 2016 and June 2015 awards, respectively. The total value of the awards is recognized as compensation expense over a three-year vesting period with the recognition amount being adjusted quarterly. Compensation expense related to the performance cash awards during fiscal years 2018, 2017 and 2016 was $1.5 million, $7.0 million and $1.4 million, respectively. Performance cash compensation expense has been allocated to our various regions.

Total share-based compensation expense, which includes stock options and restricted stock, was $10.4 million, $12.4 million and $21.2 million for fiscal years 2018, 2017 and 2016, respectively. Stock-based compensation expense is included in general and administrative expense in the consolidated statements of operations and has been allocated to our various regions.

On May 23, 2016, our board of directors approved an amendment and restatement of the 2007 Plan, which was approved by our stockholders on August 3, 2016, that effected each of the following changes: (i) reserved an additional 5,250,000 “shares” (or 2,625,000 full value shares) that, when combined with “shares” remaining available for issuance under the 2007 plan resulted in a total of approximately 6,400,000 “shares” (or approximately 3,200,000 full value shares) available for issuance under the amended and restated 2007 plan, with each option and stock appreciation right granted under the amended and restated 2007 plan counting as one “shares” against such total and with each incentive award that may be settled in common stock counting as two “shares” (or one full value share) against such total; (ii) increased the maximum share-based employee award under the amended and restated 2007 plan from 500,000 full value shares to 1,000,000 full value shares; (iii) set the maximum aggregate compensation and incentive awards that may be provided by the Company in any calendar year to any non-employee member of the board of directors at $1,125,000; and (iv) made other administrative and updating changes.

A summary of our stock option activity for fiscal year 2018 is presented below:



	Weighted Average Exercise Prices		Number of Shares		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
						(in thousands)
Outstanding at March 31, 2017	$	42.78	2,843,608
Granted	7.03		1,256,043
Expired or forfeited	44.95		(525,873	)
Outstanding at March 31, 2018	29.90		3,573,778		6.38	$	7,031
Exercisable at March 31, 2018	46.49		1,812,825		4.00	$	—

Stock options granted to employees under the 2004 and 2007 Plans vest ratably over three years on each anniversary from the date of grant and expire 10 years from the date of grant.

We use a Black-Scholes option pricing model to estimate the fair value of share-based awards. The Black-Scholes option pricing model incorporates various assumptions, including the risk-free interest rate, volatility, dividend yield and the expected term of the options.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equal to the expected term of the option. Expected volatilities are based on the historical volatility of shares of our common stock, which has not been adjusted for any expectation of future volatility given uncertainty related to the future performance of our common stock at this time. We also use historical data to estimate the expected term of the options within the option pricing model and groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of the options represents the period of time that the options granted are expected to be outstanding. Additionally, we record forfeitures based on actual forfeitures.

The following table shows the assumptions we used to compute the stock-based compensation expense for stock option grants issued during fiscal years 2018, 2017 and 2016.



	Fiscal Year Ended March 31,
	2018			2017			2016
Risk free interest rate	1.78		%	1.07		%	1.62		%
Expected life (years)	5			5			5
Volatility	56.1		%	46.8		%	28.1		%
Dividend yield	3.98		%	2.74		%	3.14		%
Weighted average grant-date fair value of options granted	$	2.53		$	2.16		$	10.71

Unrecognized stock-based compensation expense related to nonvested stock options was approximately $2.9 million as of March 31, 2018, relating to a total of 1,760,953 unvested stock options. We recognize compensation expense on a straight-line basis over the requisite service period for the entire award. We expect to recognize this stock-based compensation expense over a weighted average period of approximately 1.8 years. The total fair value of options vested during fiscal years 2018, 2017 and 2016 was approximately $4.7 million, $7.8 million and $7.4 million, respectively.

There were no stock options exercised during fiscal years 2018, 2017 and 2016. Therefore, the total intrinsic value, determined as of the date of exercise, total amount of cash we received from option exercises and total tax benefit attributable to options exercised were all zero for fiscal years 2018, 2017 and 2016.

We have restricted stock awards that cliff vest on the third anniversary from the date of grant provided the grantee is still employed by the Company, subject to our retirement policy. Restricted stock granted to non-employee directors under the 2003 Director Plan vest after six months.

We record compensation expense for restricted stock awards based on an estimate of the service period related to the awards, which is tied to the future performance of our stock over certain time periods under the terms of the award agreements. The estimated service period is reassessed quarterly. Changes in this estimate may cause the timing of expense recognized in future periods to accelerate. Compensation expense related to awards of restricted stock for fiscal years 2018, 2017 and 2016 was $6.7 million, $8.0 million and $12.9 million, respectively.

The following is a summary of non-vested restricted stock as of March 31, 2018 and 2017 and changes during fiscal year 2018:



	Units		Weighted Average Grant Date Fair Value per Unit
Non-vested as of March 31, 2017	739,493		$	26.97
Granted	622,652		7.35
Forfeited	(72,075	)	14.78
Vested	(391,901	)	28.48
Non-vested as of March 31, 2018	898,169		13.69

Unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $6.4 million as of March 31, 2018, relating to a total of 898,169 unvested restricted stock. We expect to recognize this stock-based compensation expense over a weighted average period of approximately 1.6 years.

During June 2017, we awarded certain members of management phantom restricted stock, which will be paid out in cash after three years. Additionally, during March 2018, we awarded 22,034 shares of restricted stock to a consultant, which will be paid out in shares after six months. We account for these awards as liability awards. As of March 31, 2018, we had $0.1 million in other accrued liabilities and $1.0 million in other liabilities and deferred credits on our consolidated balance sheet and recognized $1.1 million in general and administrative expense on our consolidated statement of operations for fiscal year 2018 related to these awards.

The Annual Incentive Compensation Plan provides for an annual award of cash bonuses to key employees based primarily on pre-established objective measures of performance. The bonuses related to this plan were $10.1 million and $5.0 million for fiscal years 2018 and 2017, respectively. There were no bonuses awarded related to this plan during fiscal year 2016.

Additionally, we have a non-qualified deferred compensation plan for our senior executives. Under the terms of the plan, participants can elect to defer a portion of their compensation for distribution at a later date. In addition, we have the discretion to make annual tax deferred contributions to the plan on the participants’ behalf. We contributed $0.1 million, $0.6 million and $1.3 million to this plan in each of fiscal years 2018, 2017 and 2016, respectively. The assets of the plan are held in a rabbi trust and are subject to our general creditors. As of March 31, 2018, the amount held in trust was $2.3 million.

Separation Agreements — In March 2015, May 2016 and February 2018, we offered voluntary separation programs (“VSPs”) to certain employees as part of our ongoing efforts to improve efficiencies and reduce costs. Additionally, beginning in March 2015, we initiated involuntary separation programs (“ISPs”) in certain regions. The expense related to the VSPs and ISPs for the fiscal years 2018, 2017 and 2016 is as follows (in thousands):



	Fiscal Year Ended March 31,
	2018		2017		2016

VSP:
Direct cost	$	105	$	1,663	$	7,664
General and administrative	1,017		23		886
Total	$	1,122	$	1,686	$	8,550

ISP:
Direct cost	$	11,538	$	5,938	$	5,162
General and administrative	9,676		9,238		8,788
Total	$	21,214	$	15,176	$	13,950