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 June 30, 2019
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)
 
 
3151 Briarpark Drive,
Suite 700
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)
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
 
 
None
None
None
 
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 by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
þ  Yes    o  No
Pursuant to an Amended Joint Plan of Reorganization (as modified, the “Plan”), Bristow Group Inc.’s existing common stock, par value $0.01 (the “Existing Common Stock”) was cancelled as of October 31, 2019. On October 31, 2019, Bristow Group Inc. issued common stock, par value $0.0001 (the “New Common Stock”), and preferred stock, par value $0.0001 (the “New Preferred Stock”), under the Plan pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended, under Section 1145 of Chapter 11 of Title 11 of the United States Code and Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder. As of November 30, 2019, there were 11,235,535 shares of New Common Stock outstanding and 6,824,582 shares of New Preferred Stock outstanding.
 




BRISTOW GROUP INC.
INDEX — FORM 10-Q
 
 
 
Page
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


Table of Contents

PART I — FINANCIAL INFORMATION
 
Item 1.     Financial Statements.
BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
  
 
Three Months Ended
 June 30,
 
 
2019
 
2018
 
 
 
 
 
 
 
(Unaudited)
(In thousands, except per share amounts)
Revenue:
 
 
 
 
Operating revenue from non-affiliates
 
$
304,130

 
$
338,466

Operating revenue from affiliates
 
12,446

 
11,295

Reimbursable revenue from non-affiliates
 
16,600

 
16,907

 
 
333,176

 
366,668

Operating expense:
 
 
 
 
Direct cost
 
257,759

 
280,051

Reimbursable expense
 
16,134

 
15,904

Prepetition restructuring charges
 
13,476

 

Depreciation and amortization
 
31,339

 
30,941

General and administrative
 
34,770

 
40,101

 
 
353,478

 
366,997

 
 
 
 
 
Loss on disposal of assets
 
(3,787
)
 
(1,678
)
Earnings from unconsolidated affiliates, net of losses
 
2,347

 
(1,547
)
Operating loss
 
(21,742
)
 
(3,554
)
 
 
 
 
 
Interest expense, net
 
(26,321
)
 
(27,144
)
Reorganization items
 
(76,356
)
 

Loss on sale of subsidiaries
 
(56,303
)
 

Other expense, net
 
(3,873
)
 
(3,950
)
Loss before benefit for income taxes
 
(184,595
)
 
(34,648
)
Benefit for income taxes
 
15,507

 
2,851

Net loss
 
(169,088
)
 
(31,797
)
Net income attributable to noncontrolling interests
 
(158
)
 
(67
)
Net loss attributable to Bristow Group
 
$
(169,246
)
 
$
(31,864
)
 
 
 
 
 
Loss per common share:
 
 
 
 
Basic
 
$
(4.71
)
 
$
(0.89
)
Diluted
 
$
(4.71
)
 
$
(0.89
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents

BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
  
 
Three Months Ended
 June 30,
 
 
2019
 
2018
 
 
 
 
 
 
 
(Unaudited)
(In thousands)
Net loss
 
$
(169,088
)
 
$
(31,797
)
Other comprehensive loss:
 
 
 
 
Currency translation adjustments
 
16,899

 
(29,033
)
Unrealized gain on cash flow hedges, net of tax benefit of zero and $0.3 million, respectively
 
474

 
1,348

Total comprehensive loss
 
(151,715
)
 
(59,482
)
 
 
 
 
 
Net income attributable to noncontrolling interests
 
(158
)
 
(67
)
Currency translation adjustments attributable to noncontrolling interests
 
(11
)
 
(139
)
Total comprehensive income attributable to noncontrolling interests
 
(169
)
 
(206
)
Total comprehensive loss attributable to Bristow Group
 
$
(151,884
)
 
$
(59,688
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 
 
June 30,
 2019
 
March 31,
 2019
 
 
(Unaudited)
 
 
(In thousands)
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
172,534

 
$
178,055

Restricted cash
 
3,234

 

Accounts receivable from non-affiliates
 
213,515

 
203,631

Accounts receivable from affiliates
 
13,558

 
13,160

Inventories
 
114,997

 
121,308

Assets held for sale
 
1,675

 
5,350

Prepaid expenses and other current assets
 
42,803

 
44,009

Total current assets
 
562,316

 
565,513

Investment in unconsolidated affiliates
 
120,494

 
118,203

Property and equipment – at cost:
 
 
 
 
Land and buildings
 
241,737

 
244,273

Aircraft and equipment
 
2,427,435

 
2,497,622

 
 
2,669,172

 
2,741,895

Less – Accumulated depreciation and amortization
 
(894,350
)
 
(907,715
)
 
 
1,774,822

 
1,834,180

Right-of-use assets
 
187,961

 

Goodwill
 
18,212

 
18,436

Other assets
 
104,150

 
116,267

Total assets
 
$
2,767,955

 
$
2,652,599

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
 
 
 
 
Accounts payable
 
$
85,894

 
$
99,573

Accrued wages, benefits and related taxes
 
34,834

 
48,151

Income taxes payable
 
11,762

 
3,646

Other accrued taxes
 
6,932

 
6,729

Deferred revenue
 
7,917

 
11,932

Accrued maintenance and repairs
 
25,788

 
24,337

Accrued interest
 
11,201

 
17,174

Current portion of operating lease liabilities
 
90,946

 

Other accrued liabilities
 
32,773

 
38,679

Short-term borrowings and current maturities of long-term debt
 
892,092

 
1,418,630

Total current liabilities
 
1,200,139

 
1,668,851

Long-term debt, less current maturities
 
75,789

 
8,223

Accrued pension liabilities
 
22,472

 
25,726

Other liabilities and deferred credits
 
8,080

 
26,229

Deferred taxes
 
84,075

 
111,203

Long-term operating lease liabilities
 
103,567

 

Total liabilities not subject to compromise
 
1,494,122

 
1,840,232

Liabilities subject to compromise
 
617,991

 

Total liabilities
 
2,112,113

 
1,840,232

Commitments and contingencies (Note 8)
 


 

Stockholders’ investment:
 
 
 
 
Common stock, $.01 par value, authorized 90,000,000; outstanding: 35,918,916 as of June 30 and March 31 (exclusive of 1,291,441 treasury shares)
 
386

 
386

Additional paid-in capital
 
862,844

 
862,020

Retained earnings
 
286,352

 
455,598

Accumulated other comprehensive loss
 
(310,627
)
 
(327,989
)
Treasury shares, at cost (2,756,419 shares)
 
(184,796
)
 
(184,796
)
Total Bristow Group stockholders’ investment
 
654,159

 
805,219

Noncontrolling interests
 
1,683

 
7,148

Total stockholders’ investment
 
655,842

 
812,367

Total liabilities and stockholders’ investment
 
$
2,767,955

 
$
2,652,599

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

3

Table of Contents

BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
  
 
Three Months Ended
 June 30,
 
 
2019
 
2018
 
 
 
 
 
 
 
(Unaudited)
(In thousands)
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(169,088
)
 
$
(31,797
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
31,339

 
30,941

Deferred income taxes
 
(19,115
)
 
(6,776
)
Write-off of deferred financing fees
 
2,625

 

Discount amortization on long-term debt
 
850

 
1,510

Reorganization items
 
60,853

 

Loss on disposal of assets
 
3,787

 
1,678

Loss on sale of subsidiaries
 
56,303



Deferral of lease payments
 
285

 
1,568

Stock-based compensation
 
824

 
1,692

Equity in earnings from unconsolidated affiliates less than (in excess of) dividends received
 
(697
)
 
2,957

Increase (decrease) in cash resulting from changes in:
 
 
 
 
Accounts receivable
 
(19,856
)
 
(19,833
)
Inventories
 
968

 
(1,496
)
Prepaid expenses and other assets
 
(4,720
)
 
(1,729
)
Accounts payable
 
2,621

 
3,385

Accrued liabilities
 
26,394

 
(21,845
)
Other liabilities and deferred credits
 
(10,135
)
 
(4,374
)
Net cash used in operating activities
 
(36,762
)
 
(44,119
)
Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(7,439
)
 
(8,895
)
Proceeds from asset dispositions
 
3,204

 
7,774

Cash transferred in sale of subsidiaries, net of cash received
 
(22,878
)
 

Net cash used in investing activities
 
(27,113
)
 
(1,121
)
Cash flows from financing activities:
 
 
 
 
Proceeds from borrowings
 
75,585

 
387

Debt issuance costs
 
(10,016
)
 
(2,378
)
Repayment of debt
 
(5,821
)
 
(14,194
)
Partial prepayment of put/call obligation
 

 
(14
)
Issuance of common stock
 

 
2,830

Repurchases for tax withholdings on vesting of equity awards
 

 
(1,484
)
Net cash provided by (used in) financing activities
 
59,748

 
(14,853
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
1,840

 
(3,580
)
Net decrease in cash, cash equivalents and restricted cash
 
(2,287
)
 
(63,673
)
Cash, cash equivalents and restricted cash at beginning of period
 
178,055

 
380,223

Cash, cash equivalents and restricted cash at end of period
 
$
175,768

 
$
316,550

Cash paid during the period for:
 
 
 
 
Interest
 
$
9,939

 
$
24,628

Income taxes
 
$
4,413

 
$
5,648

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

4

Table of Contents

BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) 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, 2019
$
386

 
35,918,916

 
$
862,020

 
$
455,598

 
$
(327,989
)
 
$
(184,796
)
 
$
7,148

 
$
812,367

Issuance of common stock

 

 
824

 

 

 

 

 
824

Sale of subsidiaries

 

 

 

 

 

 
(5,612
)
 
(5,612
)
Currency translation adjustments

 

 

 

 

 

 
(11
)
 
(11
)
Net income (loss)

 

 

 
(169,246
)
 

 

 
158

 
(169,088
)
Other comprehensive income

 

 

 

 
17,362

 

 

 
17,362

June 30, 2019
$
386

 
35,918,916

 
$
862,844

 
$
286,352

 
$
(310,627
)
 
$
(184,796
)
 
$
1,683

 
$
655,842


 
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

 
$
794,191

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

 
$
1,183,501

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)

 

 

 
(31,864
)
 

 

 
67

 
(31,797
)
Other comprehensive loss

 

 

 

 
(27,824
)
 

 

 
(27,824
)
June 30, 2018
$
385

 
35,765,275

 
$
856,826

 
$
760,581

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

 
$
1,126,245

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

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Table of Contents
BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) 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, 2020 is referred to as “fiscal year 2020”. Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), 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 the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 (the “fiscal year 2019 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 June 30, 2019, the consolidated statements of operations and comprehensive loss for the three months ended June 30, 2019 and 2018, the consolidated cash flows for the three months ended June 30, 2019 and 2018, and the consolidated statements of changes in stockholders’ investment for the three months ended June 30, 2019 and 2018.
Bankruptcy and Restructuring Support Agreement
On May 11, 2019 (the “Petition Date”), Bristow Group Inc. and certain of its subsidiaries: BHNA Holdings Inc., Bristow Alaska Inc., Bristow Helicopters Inc., Bristow U.S. Leasing LLC, Bristow U.S. LLC, BriLog Leasing Ltd. and Bristow Equipment Leasing Ltd. (together, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Debtors’ Chapter 11 Cases were jointly administered under the caption In re: Bristow Group Inc., et al., Main Case No. 19-32713. During the pendency of the Chapter 11 Cases, the Debtors continued to operate their businesses and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On May 10, 2019, we entered into a restructuring support agreement (the “Initial RSA”) with (i) certain holders of the Company’s 8.75% Senior Secured Notes due 2023 (the “8.75% Senior Secured Notes”) and (ii) the guarantors of the 8.75% Senior Secured Notes (the “Secured Guarantors”), to support a restructuring of the Company (the “Restructuring”). On June 27, 2019, we entered into an amendment and restatement of the Initial RSA and on July 24, 2019, we entered into a second amendment and restatement thereof (as so amended and restated, the “Second Amended RSA”), with a group of holders representing approximately 99.3% of the 8.75% Senior Secured Notes (the “Supporting Secured Noteholders”), the Secured Guarantors and a group of holders representing approximately 73.6% (together with the Supporting Secured Noteholders, the “Supporting Noteholders”) of the 6¼% Senior Notes due 2022 (the “6¼% Senior Notes”) and the 4½% Convertible Senior Notes due 2023 (the “4½% Convertible Senior Notes”) combined (together, the “Unsecured Notes”). The Second Amended RSA contemplated implementation of the Restructuring on the amended terms set forth in the term sheet contained in an exhibit to the Second Amended RSA (the “Restructuring Term Sheet”) pursuant to a Chapter 11 plan of reorganization and the various related transactions set forth in or contemplated by the Restructuring Term Sheet, the term sheet for the DIP Credit Agreement (as defined herein) and the other restructuring documents attached to the Second Amended RSA.
On August 1, 2019, the Debtors filed with the Bankruptcy Court the Joint Chapter 11 Plan of Reorganization of Bristow Group Inc. and its Debtor Affiliates and the Disclosure Statement related thereto. On August 20, 2019, the Debtors filed with the Bankruptcy Court the Amended Joint Chapter 11 Plan of Reorganization of Bristow Group Inc. and its Debtor Affiliates (as further modified on August 22, 2019, the “Amended Plan”) and the Disclosure Statement related thereto (as further modified on August 22, 2019, the “Amended Disclosure Statement”). On October 4, 2019, the Bankruptcy Court approved the Amended Disclosure Statement and indicated that it would confirm the Amended Plan. On October 8, 2019, the Bankruptcy Court entered an order approving the Amended Disclosure Statement and confirming the Amended Plan.
The effective date of the Amended Plan (the “Effective Date”) occurred on October 31, 2019.

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


Bankruptcy Accounting
The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business and reflect the application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to the filing of the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in reorganization items on our condensed consolidated statements of operations. In addition, prepetition unsecured and under-secured obligations that may be impacted by the bankruptcy reorganization process have been classified as liabilities subject to compromise on our condensed consolidated balance sheet as of June 30, 2019. As of June 30, 2019, these liabilities were reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although some were subsequently settled for less. Where there was uncertainty about whether a secured claim would be paid or impaired pursuant to the Chapter 11 Cases, we classified the entire amount of the claim as an outstanding liability subject to compromise as of June 30, 2019. For specific discussion on balances of liabilities subject to compromise and reorganization items, see Note 2.
The accompanying condensed consolidated financial statements do not purport to reflect or provide for the consequences of the Chapter 11 Cases. In particular, the condensed consolidated financial statements do not purport to show: (i) the realizable value of assets on a liquidation basis or their availability to satisfy liabilities; (ii) the full amount of prepetition liabilities that may be allowed for claims or contingencies, or the status and priority thereof; (iii) the effect on stockholders’ investment accounts of any changes that may be made to our capitalization; or (iv) the effect on operations of any changes that may be made to our business.
Going Concern
The significant risks and uncertainties related to the Chapter 11 Cases raise substantial doubt about the Company’s ability to continue as a going concern. In addition, each of the commencement of the Chapter 11 Cases and the delivery of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, as amended by the amendment thereto (the “Amended 10-K”), with a going concern qualification or explanation constituted an event of default under certain of our secured equipment financings, giving those secured equipment lenders the right to accelerate repayment of the applicable debt, subject to Chapter 11 protections, and triggering cross-default and/or cross-acceleration provisions in substantially all of our other debt instruments should that right to accelerate repayment be exercised. The condensed consolidated financial statements included herein have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.


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


Foreign Currency
During the three months ended June 30, 2019 and 2018, 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
 June 30,
 
 
2019
 
2018
One British pound sterling into U.S. dollars
 
 
 
 
High
 
1.32

 
1.43

Average
 
1.29

 
1.36

Low
 
1.25

 
1.31

At period-end
 
1.27

 
1.32

One euro into U.S. dollars
 
 
 
 
High
 
1.14

 
1.24

Average
 
1.12

 
1.19

Low
 
1.11

 
1.16

At period-end
 
1.14

 
1.17

One Australian dollar into U.S. dollars
 
 
 
 
High
 
0.72

 
0.78

Average
 
0.70

 
0.76

Low
 
0.69

 
0.73

At period-end
 
0.70

 
0.74

One Norwegian kroner into U.S. dollars
 
 
 
 
High
 
0.1179

 
0.1290

Average
 
0.1157

 
0.1247

Low
 
0.1139

 
0.1209

At period-end
 
0.1173

 
0.1227

One Nigerian naira into U.S. dollars
 
 
 
 
High
 
0.0028

 
0.0028

Average
 
0.0028

 
0.0028

Low
 
0.0028

 
0.0028

At period-end
 
0.0028

 
0.0028

_____________ 
Source: FactSet
Other income (expense), net, in our condensed consolidated statements of operations includes foreign currency transaction losses of $2.9 million and $3.0 million for the three months ended June 30, 2019 and 2018, 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 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


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 June 30, 2019 and 2018, earnings from unconsolidated affiliates, net of losses, decreased by $0.1 million and $2.6 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
 June 30,
 
 
2019
 
2018
One Brazilian real into U.S. dollars
 
 
 
 
High
 
0.2620

 
0.3020

Average
 
0.2552

 
0.2778

Low
 
0.2434

 
0.2571

At period-end
 
0.2609

 
0.2599

_____________ 
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
 June 30, 2019
Revenue
 
$
(12,603
)
Operating expense
 
10,830

Earnings from unconsolidated affiliates, net of losses
 
2,478

Other income (expense), net
 
99

Income before provision for income taxes
 
804

Provision for income taxes
 
(630
)
Net income
 
174

Cumulative translation adjustment
 
16,888

Total stockholders’ investment
 
$
17,062

Interest Expense, Net
During the three months ended June 30, 2019 and 2018, interest expense, net consisted of the following (in thousands):
 
 
Three Months Ended
 June 30,
 
 
2019
 
2018
Interest income
 
$
387

 
$
179

Interest expense
 
(26,708
)
 
(27,323
)
Interest expense, net
 
$
(26,321
)
 
$
(27,144
)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Restricted Cash
As of June 30, 2019, restricted cash consisted of $3.2 million related to Norway withholding taxes.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.
 
 
June 30,
 2019
 
March 31,
 2019
 
 
 
 
 
 
 
(In thousands)
Reconciliation of cash, cash equivalents and restricted cash as shown in the statements of cash flows:
 
 
Cash and cash equivalents
 
$
172,534

 
$
178,055

Restricted cash
 
3,234

 

Total cash, cash equivalents and restricted cash
 
$
175,768

 
$
178,055

Accounts Receivable
As of June 30 and March 31, 2019, the allowance for doubtful accounts for non-affiliates was $0.8 million and $1.6 million, respectively. There were no allowances for doubtful accounts related to accounts receivable due from affiliates as of June 30 and March 31, 2019. The allowance for doubtful accounts for non-affiliates as of June 30, 2019 and March 31, 2019 primarily relates to amounts due from a customer in Australia.
Inventories
As of June 30 and March 31, 2019, inventories were net of allowances of $19.1 million and $19.4 million, respectively.
Prepaid Expenses and Other Current Assets
As of June 30 and March 31, 2019, prepaid expenses and other current assets included the short-term portion of contract acquisition and pre-operating costs totaling $9.6 million and $9.8 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 June 30, 2019 and 2018, we expensed $2.4 million and $2.7 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 $18.2 million and $18.4 million as of June 30 and March 31, 2019, respectively, related to our Asia Pacific reporting unit was as follows (in thousands):
March 31, 2019
$
18,436

Foreign currency translation
(224
)
June 30, 2019
$
18,212


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Other Assets
The long-term portion of intangible assets and intangible assets with indefinite lives are included within other assets. Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values. The Capiteq Limited, operating under the name Airnorth, acquisition included in our Asia Pacific region, resulted in intangible assets for customer relationships and trade name and trademarks. Intangible assets by type not fully amortized were as follows (in thousands):
 
Customer
relationships
 
Trade name and trademarks
 
Total
 
 
 
 
 
 
 
Gross Carrying Amount
March 31, 2019
$
2,143

 
$
331

 
$
2,474

Foreign currency translation
(15
)
 
(4
)
 
(19
)
June 30, 2019
$
2,128

 
$
327

 
$
2,455

 
 
 
 
 
 
 
Accumulated Amortization
March 31, 2019
$
(1,070
)
 
$

 
$
(1,070
)
Amortization expense
(39
)
 

 
(39
)
June 30, 2019
$
(1,109
)
 
$

 
$
(1,109
)
 
 
 
 
 
 
Weighted average remaining contractual life, in years
6.5

 
*

 
6.5

_____________ 
*
Trade name and trademarks relating to Airnorth were determined to have indefinite useful lives and therefore were not amortized, but instead are tested for impairment on an annual basis.
Future amortization expense of intangible assets for each of the years ending March 31 is as follows (in thousands):
                 
2020
$
117

2021
156

2022
156

2023
156

2024
156

Thereafter
605

 
$
1,346

In addition to the other intangible assets described above, other assets included the long-term portion of contract acquisition and pre-operating costs totaling $34.0 million and $37.1 million, respectively, as of June 30 and March 31, 2019, 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.
Property and Equipment
During the three months ended June 30, 2019 and 2018, we made capital expenditures as follows:
 
 
Three Months Ended
 June 30,
 
 
2019

2018
 
 
 
Capital expenditures (in thousands):
 
 
 
 
Aircraft and equipment
 
$
6,688

 
$
8,337

Land and buildings
 
751

 
558

Total capital expenditures
 
$
7,439

 
$
8,895


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


As of December 31, 2018, we revised the salvage values of certain aircraft to reflect our expectation of future sales values given our disposal plans for those aircraft. We recorded additional depreciation expense of $1.4 million during the three months ended June 30, 2019 and expect to record additional depreciation expense of $1.4 million during the remainder of fiscal year 2020.
The following table presents details on the property and equipment sold or disposed of during the three months ended June 30, 2019 and 2018:
 
 
Three Months Ended
 June 30,
 
 
2019
 
2018
 
 
 
 
 
 
 
(In thousands, except for
 number of aircraft)
Number of aircraft sold or disposed of
 
2

 
3
Proceeds from sale or disposal of assets (1)
 
$
3,204

 
$
7,774

Loss from sale or disposal of assets (2)
 
$
3,787

 
$
1,678

_____________ 
(1) 
Includes proceeds received for sale of property and equipment (including aircraft) during each period.
(2) 
Included in loss on disposal of assets on our condensed consolidated statements of operations. Includes gain (loss) for sale or disposal of property and equipment (including aircraft) during each period.
OEM Cost Recoveries
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 three months ended June 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 $1.0 million and $3.5 million was recognized during the three months ended June 30, 2019 and 2018 and $3.4 million was recognized during the nine months ended March 31, 2019. 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. During the three months ended June 30, 2019, we returned the remaining four leased aircraft and recognized all of the remaining deferred liability related to the leased aircraft of $6.0 million as a reduction in rent expense. 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 aircraft on a pro-rata basis utilizing the historical acquisition value of the aircraft.
During the three months ended June 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 three months ended June 30, 2018, we recorded a $7.6 million increase in revenue and a $1.1 million decrease in direct cost. We realized the remaining $2.3 million recovery during fiscal year 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Other Accrued Liabilities
Other accrued liabilities of $32.8 million and $38.7 million as of June 30 and March 31, 2019, respectively, includes the following:
 
June 30,
 2019
 
March 31,
 2019
 
 
 
 
 
(In thousands)
Accrued lease costs
$
1,291

 
$
6,017

Deferred OEM cost recovery

 
3,997

Accrued legal and professional fees
10,054

 
3,070

Accrued property and equipment
709

 
997

Deferred gain on sale leasebacks
919

 
1,305

Other operating accruals
19,800

 
14,437

Eastern Airways other accrued liabilities(1)

 
8,856

 
$
32,773

 
$
38,679

_____________ 
(1) 
Eastern Airways was sold on May 10, 2019.
Loss on Sale of Subsidiaries
Loss on sale of subsidiaries includes the following for the three months ended June 30, 2019 (in thousands):
Sale of Eastern Airways
$
46,852

Sale of Aviashelf and Bristow Helicopters Leasing Limited
9,451

 
$
56,303

Eastern Airways
Bristow Helicopters Limited (“Bristow Helicopters”), a subsidiary of Bristow Group, together with its legal and financial advisors, pursued various transactions to exit the Eastern Airways business, which made negative contributions to our operating income in each of the last three fiscal years, including pursuing a sales process with several third parties over an extended period. On May 10, 2019, Bristow Helicopters completed the sale of all of the shares of Eastern Airways to Orient Industrial Holdings Limited (“OIHL”), an entity affiliated with Mr. Richard Lake, a director of Bristow Helicopters, pursuant to a Sale and Purchase Agreement (the “EAIL Purchase Agreement”). Pursuant to the EAIL Purchase Agreement and related agreements, Bristow Helicopters contributed approximately £17.1 million to Eastern Airways as working capital, OIHL acquired Eastern Airways, Bristow Helicopters retained its controlling ownership of the shares in Humberside International Airport Limited that it previously held through Eastern Airways. Certain intercompany balances between Bristow Helicopters and Eastern Airways were also written off. As a result of the transaction, OIHL now owns and operates Eastern Airways, which had previously operated as a separate unit within Bristow Group, and Bristow Helicopters maintains its controlling interest in Humberside Airport, from which Bristow Helicopters provides U.K. SAR services.
The EAIL Purchase Agreement contained customary representations and warranties. OIHL agreed to certain covenants with respect to non-solicitation of directors, officers or employees of Bristow Helicopters for a period of 12 months. Pursuant to the terms of the EAIL Purchase Agreement, Bristow Helicopters has the right to appoint an observer to the board of directors of Eastern Airways for an initial period of 12 months following the sale. Eastern Airways also agreed to provide certain transition services for a minimum of 12 months from the date of the completion of the transaction.
The loss on the sale of Eastern Airways for the three months ended June 30, 2019 of $46.9 million includes the write-off of net assets of $35.0 million and write-off of cumulative translation adjustment of $11.9 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Aviashelf and Bristow Helicopters Leasing Limited
As of March 31, 2019, Bristow Aviation Holdings Limited (“Bristow Aviation”) had an indirect 48.5% interest in Aviashelf Aviation Co. (“Aviashelf”), a Russian helicopter company. Additionally, we owned 60% of two U.K. joint venture companies, Bristow Helicopters Leasing Limited (“BHLL”) and Sakhalin Bristow Air Services Ltd. These two U.K. companies lease aircraft to Aviashelf which held the client contracts for our Russian operations. Aviashelf was consolidated based on the ability of certain consolidated subsidiaries of Bristow Aviation to control the vote on a majority of the shares of Aviashelf, rights to manage the day-to-day operations of the company which were granted under a shareholders’ agreement, and our ability to acquire an additional 8.5% interest in Aviashelf under a put/call option agreement. In April 2019, we sold our 60% ownership interest in BHLL for $1.4 million. In June 2019, we sold our 48.5% ownership interest in Aviashelf for $2.6 million. The loss on the sale of Aviashelf and BHLL for the three months ended June 30, 2019 of $9.5 million includes the loss on sale of net assets of $2.3 million and write-off of cumulative translation adjustment of $7.2 million.
In August 2019, we exercised our call option to acquire an 8.5% interest in Aviashelf and subsequently sold that interest for $0.4 million.
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.
Adopted
In February 2016, the FASB issued accounting guidance Accounting Standard Codification (“ASC”) 842 which amends ASC 840 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. Additionally, ASC 842 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. The guidance was updated in March 2018 to include an amendment that would allow us to consider the beginning of the period of adoption as the effective date of initial application of the standard. We implemented this accounting standard with an effective date of April 1, 2019. Based on the FASB transition guidance, we do not have to apply the disclosure requirement to periods prior to adoption. We elected the package of practical expedients to not re-evaluate existing lease contracts or lease classifications and therefore will not make changes to those leases already recognized on the consolidated balance sheet under ASC 840 until the leases are fully amortized, amended, or modified. In addition, we did not reassess initial direct costs for any existing leases and elected the short-term lease exception provided for in the standard and therefore will only recognize right-of-use assets and lease liabilities for leases with a term greater than one year.  We elected the practical expedient to not separate lease and non-lease components for all asset classes.
We completed a system implementation and have updated our accounting policies to meet the standard’s requirements. On April 1, 2019, our adoption of this accounting standard resulted in recording on our condensed consolidated balance sheet right-of-use assets of $281.0 million and an increase in lease liabilities of $285.3 million with no material impact on our consolidated statements of operations and consolidated statements of cash flows. For further information on leases, see Note 9.
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 to retained earnings. This pronouncement is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2018, with early adoption permitted. We adopted this accounting guidance on April 1, 2019. We did not elect to reclassify certain tax effects from accumulated other comprehensive income to retained earnings.
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, and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date. We adopted this accounting guidance on April 1, 2019 with no impact to our financial statements.
Not Yet Adopted
In August 2018, the FASB modified the disclosure requirements on fair value measurements. The amendment modifies, removes, and adds several disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The

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(Unaudited)


amendment is effective for fiscal years ending after December 15, 2021 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 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 and accumulated benefit obligation in excess of respective plan assets. The amendment is effective beginning in our fiscal year 2021 financial statements 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. The amendment is effective beginning in our fiscal year 2021 financial statements and early adoption is 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.
In October 2018, the FASB amended the guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in generally accepted accounting principles). Therefore, these amendments likely will result in more decision makers not consolidating VIEs. This amendment is effective beginning in our fiscal year 2021 financial statements 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 2 — BANKRUPTCY AND RELATED MATTERS
Fiscal Year 2020 Incentive Plans
Key Employee Incentive Plans
In connection with the Chapter 11 Cases, the Compensation Committee of the Board of Directors of the Company (the “Board”) adopted on behalf of the Company an Executive Key Employee Incentive Plan (the “Executive KEIP”) and a Non-Executive Key Employee Incentive Plan (“Non-Executive KEIP”), each approved by the Bankruptcy Court on August 22, 2019. The Executive KEIP is designed to incentivize ten of the Company’s senior executives by providing a total potential cash award pool of approximately $3.1 million at threshold, $6.1 million at target and up to $12.3 million for exceeding target, and is contingent upon achievement of certain financial targets and safety metrics, and the timing of confirmation of the Amended Plan by the Bankruptcy Court. The Non-Executive KEIP is designed to enhance retention of up to 183 other non-insider employees and provides a total potential cash award pool of approximately $7.7 million at threshold, $10.3 million at target and up to $15.4 million for exceeding target, with 50 percent of the payment contingent upon achievement of certain financial targets and safety metrics, and 50 percent of the payment being based on continued employment with the Company. The payments for the Executive KEIP will be made quarterly with the first payment made in October 2019. The payments for the Non-Executive KEIP will be made quarterly with the first payment made in October 2019.
Management Incentive Plan
Effective as of the Effective Date, the Compensation Committee of the Board adopted the 2019 Management Incentive Plan (the “MIP”). The MIP is an equity-based compensation plan for directors, officers and participating employees and other service providers of the Company and its affiliates, pursuant to which the Company may issue awards covering shares of the new common stock, par value $0.0001 (the “New Common Stock”), and new preferred stock, par value $0.0001 (the “New Preferred Stock” and, together with the New Common Stock, the “New Stock”), of the Company, as reorganized pursuant to the Amended Plan (the “Reorganized Company”). As adopted, the share reserve of the MIP was initially comprised of 473,218 shares of New Common Stock and 284,358 shares of New Preferred Stock, representing in the aggregate 4.0% of our outstanding New Stock on a fully diluted basis. On December 6, 2019, the Board approved an increase to the share reserve of the MIP, bringing the total share reserve to 699,890 shares of New Common Stock and 323,664 shares of New Preferred Stock, which represents in the aggregate 5.0% of our outstanding New Stock on a fully diluted basis.
Severance Plan and Participation Agreements
Effective as of the Effective Date, the Company adopted the Amended and Restated 2019 Management Severance Benefits Plan for U.S. Employees (the “Severance Plan”), which provides severance benefits to certain key employees, which are categorized into five “tiers” based on job title or job grade level, including L. Don Miller (President and Chief Executive Officer), who is a Tier 1 participant, and each of Brian J. Allman (Senior Vice President and Chief Financial Officer), Robert Phillips (Senior Vice President, Americas), Alan Corbett (Senior Vice President, EAMEA) and Victoria Lazar (Senior Vice President, General Counsel and Corporate Secretary), all of whom are Tier 2 participants (collectively, the “Specified Officers”) and those with a title of Vice President being Tier 3 participants. Each of the Tier 1, Tier 2 and Tier 3 participants will also be required to enter into a separate participation agreement to the Severance Plan (a “Participation Agreement”), which provides for certain enhanced benefits and imposes additional requirements in addition to the terms of the Severance Plan.
The Severance Plan provides participants with severance benefits in the event of a termination by the Company without Cause (as defined therein) or, in the case of Tier 1 through 3 participants, by the participant for Good Reason (as defined therein) (each, a “Qualifying Termination”), with such severance benefits consisting of the following for the Specified Officers: (i) cash severance in the form of continued base salary payments for 24 months (Tier 1 participant) or 12 months (Tier 2 participant) post-termination; (ii) subsidized COBRA coverage for 18 months post-termination (both Tier 1 and 2 participants); (iii) outplacement services for 12 months post-termination (both Tier 1 and 2 participants); and (iv) if the Qualifying Termination occurs after fiscal year 2020, a pro-rata annual bonus for the year of termination based on actual performance (both Tier 1 and 2 participants).
For Tier 1 and 2 participants (i.e., all of the Specified Officers), the Severance Plan and Participation Agreements provide for enhanced severance benefits in the event that the Qualifying Termination occurs within the two-year period following a Change in Control (as defined therein), with such enhanced severance benefits consisting of the same severance benefits as described in the preceding paragraph, subject to the following enhancements: (i) the cash severance consists of an amount equal to 2.0x (Tier 1 participant) or 1.5x (Tier 2 participants) the sum of the participant’s (x) base salary and (y) target bonus (initially 110% of base salary (Tier 1 participant) and 65% of base salary (Tier 2 participants, other than Mr. Allman, whose target bonus is initially 75%

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

of base salary)), payable in installments over the 24-month (Tier 1 participant) or 18-month (Tier 2 participants) post-termination period; and (ii) the pro-rata annual bonus is based on target (as opposed to actual) performance. If the Qualifying Termination occurs after the date that the Compensation Committee of the Board determines annual compensation for fiscal year 2021, then the amount in clause (i)(y) above will equal to the greatest of (x) the Specified Officer’s initial target bonus amount described above, (y) 100% of the Specified Officer’s target bonus for the fiscal year in which the Qualifying Termination occurs and (z) 100% of the Specified Officer’s target bonus for the prior fiscal year (excluding fiscal year 2020 and all prior years).
The Participation Agreements also subject Tier 1 through Tier 3 participants, including the Specified Officers, to restrictive covenants as a condition of participating therein, with such covenants consisting of the following: (i) 12-month (or, if longer, the length of the base salary continuation period) post-termination non-compete; (ii) 24-month post-termination non-solicitation/non-hire; (iii) assignment of inventions; and (iv) perpetual confidentiality and non-disparagement. The Participation Agreements also provide that the Severance Plan may not be amended in an adverse manner to the Tier 1 through Tier 3 participants during the three-year period following the Effective Date.
Liabilities Subject to Compromise
As a result of the Chapter 11 Cases, the payment of prepetition indebtedness was subject to compromise or other treatment under the Amended Plan. Generally, actions to enforce or otherwise effect payment of prebankruptcy filing liabilities are stayed. Although payment of prepetition claims is generally not permitted, the Bankruptcy Court granted the Debtors authority to pay certain prepetition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtor’s businesses and assets. Among other things, the Bankruptcy Court authorized the Debtors to pay certain prepetition claims relating to employee wages and benefits, customers, vendors, and suppliers in the ordinary course of business as well as certain principal and interest payments.
The Debtors have been paying and intend to continue to pay undisputed post-petition claims in the ordinary course of business. With respect to prepetition claims, the Debtors notified all known claimants of the deadline to file a proof of claim with the Bankruptcy Court. The Debtors’ liabilities subject to compromise represent the estimate as of June 30, 2019 of claims expected to be allowed under the Amended Plan. Prepetition liabilities that are subject to compromise were required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts.
Liabilities subject to compromise included in our condensed consolidated balance sheet includes the following as of June 30, 2019 (in thousands):
6¼% Senior Notes due 2022 principal and accrued interest(1)
$
415,894

4½% Convertible Senior Notes due 2023 principal and accrued interest(2)
146,627

Accrued lease termination costs (3)
30,830

Milestone Omnibus Agreement (4)
22,009

Deferred compensation plan
2,631

 
$
617,991

_____________ 
(1) 
Includes $401.5 million of principal and $14.4 million of interest accrued through May 11, 2019. See Note 5 for further details.
(2) 
Includes $143.8 million of principal and $2.9 million of interest accrued through May 11, 2019. See Note 5 for further details.
(3) 
Relates to ten aircraft leases rejected in June 2019, including nine S-76C+s and one S-76D.
(4) 
Includes costs related to the return of four leased H225s on May 6, 2019 and includes $9.7 million of lease termination costs, $9.4 million of deferred lease costs previously included as short-term debt on our condensed consolidated balance sheet, $2.8 million of additional lease return costs and $0.1 million of accrued interest.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Prepetition Restructuring Charges
Prepetition restructuring charges totaling $13.5 million for the three months ended June 30, 2019 include professional fees incurred prior to May 11, 2019 related to our Chapter 11 Cases.
Reorganization Items
Reorganization items included in our condensed consolidated income statement represent amounts incurred after May 11, 2019 or expected to be incurred directly resulting from the Chapter 11 Cases and consist of the following items for the three months ended June 30, 2019 (in thousands):
 
Professional fees
$
15,503

 
 
 
Lease termination costs (1)
26,051

 
 
 
Write-off of discount on 4½% Convertible Senior Notes due 2023
30,158

 
 
 
Write-off of deferred financing fees (2)
4,644

 
 
 
 
$
76,356

 
 
_____________ 
(1) 
Relates to ten aircraft leases rejected in June 2019, including nine S-76C+s and one S-76D.
(2) 
Includes $2.4 million related to the 6¼% Senior Notes and $2.3 million related to deferred financing fees related to the 4½% Convertible Senior Notes.
Cash paid for reorganization items during the three months ended June 30, 2019 was $1.4 million and related to professional fees.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Financial Statements of the Debtors
The financial statements below represent condensed combined financial statements of the Debtors, which excludes non-debtor entities. Intercompany transactions among the Debtors have been eliminated in the financial statements contained below. Intercompany transactions among the Debtors and the non-debtor subsidiaries have not been eliminated in the Debtors’ financial statements below.
BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION)
Unaudited Condensed Combined Statement of Operations
  
 
Three Months Ended
 June 30, 2019
 
 
 
 
 
(Unaudited)
 
 
(In thousands)
Revenue
 
$
89,712

Operating expense:
 
 
Direct cost and reimbursable expense
 
72,344

Prepetition restructuring charges
 
12,449

Depreciation and amortization
 
31,289

General and administrative
 
13,761

 
 
129,843

 
 
 
Gain on disposal of assets
 
4,575

Operating loss
 
(35,556
)
Interest expense, net
 
(21,453
)
Reorganization items
 
(75,897
)
Other income, net
 
679

Loss before benefit for income taxes
 
(132,227
)
Benefit for income taxes
 
19,059

Net loss
 
(113,168
)
Net income attributable to noncontrolling interests
 
(14
)
Net loss attributable to Bristow Group
 
$
(113,182
)

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BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION)
Unaudited Condensed Combined Balance Sheet
 
 
June 30,
 2019
 
 
(Unaudited)
 
 
(In thousands)
ASSETS
 
 
Current assets:
 
 
Cash and cash equivalents
 
$
67,024

Accounts receivable
 
31,628

Intercompany accounts receivable
 
434,501

Inventories
 
35,011

Assets held for sale
 
1,866

Prepaid expenses and other current assets
 
13,384

Total current assets
 
583,414

Intercompany investment
 
633,197

Intercompany notes receivable
 
378,986

Property and equipment, net
 
1,438,318

Right-of-use assets
 
161,454

Other assets
 
8,075

Total assets
 
$
3,203,444

 
 
 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
 
 
Current liabilities:
 
 
Accounts payable
 
$
32,326

Intercompany accounts payable
 
117,358

Accrued liabilities
 
18,636

Accrued interest
 
10,944

Intercompany accrued interest
 
3,782

Current portion of operating lease liabilities
 
101,971

Short-term borrowings and current maturities of long-term debt
 
810,388

Total current liabilities
 
1,095,405

Long-term debt, less current maturities
 
33,932

Intercompany notes payable
 
77,422

Other liabilities and deferred credits
 
4,002

Deferred taxes
 
66,351

Long-term operating lease liabilities
 
65,977

Total liabilities not subject to compromise
 
1,343,089

Liabilities subject to compromise
 
617,991

Total liabilities
 
1,961,080

Stockholders’ investment:
 
 
Total Bristow Group stockholders’ investment
 
1,241,093

Noncontrolling interests
 
1,271

Total stockholders’ investment
 
1,242,364

Total liabilities and stockholders’ investment
 
$
3,203,444



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BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION)
Unaudited Condensed Combined Statement of Cash Flows
  
 
Three Months Ended
 June 30, 2019
 
 
 
 
 
(Unaudited)
 
 
(In thousands)
Cash flows from operating activities:
 
 
Net loss
 
$
(113,168
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
 
31,289

Deferred income taxes
 
(19,219
)
Write-off of deferred financing fees
 
1,313

Discount amortization on long-term debt
 
850

Reorganization items
 
60,853

Gain on disposal of assets
 
(4,575
)
Deferral of lease payments
 
285

Stock-based compensation
 
611

Increase (decrease) in cash resulting from changes in:
 
 
Accounts receivable
 
(4,194
)
Inventories
 
319

Prepaid expenses and other assets
 
(6,713
)
Accounts payable
 
18,870

Accrued liabilities
 
23,092

Other liabilities and deferred credits, including intercompany activity
 
(46,701
)
Net cash used in operating activities
 
(57,088
)
Cash flows from investing activities:
 
 
Capital expenditures
 
(2,280
)
Proceeds from asset dispositions
 
3,175

Net cash provided by investing activities
 
895

Cash flows from financing activities:
 
 
Proceeds from borrowings
 
37,500

Debt issuance costs
 
(5,008
)
Repayment of debt
 
(3,248
)
Net cash provided by financing activities
 
29,244

Effect of exchange rate changes on cash and cash equivalents
 
(211
)
Net decrease in cash and cash equivalents
 
(27,160
)
Cash and cash equivalents at beginning of period
 
94,184

Cash and cash equivalents at end of period
 
$
67,024



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BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 3 — 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 new 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 Airnorth provides 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.

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BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) 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 June 30 and March 31, 2019, receivables related to services performed under contracts with customers were $170.3 million and $164.7 million, respectively. All receivables from non-affiliates and affiliates are broken out further in our condensed consolidated balance sheets. During the three months ended June 30, 2019, we recognized $7.4 million of revenue from outstanding contract liabilities as of March 31, 2019. Contract liabilities related to services performed under contracts with customers was $7.3 million and $10.0 million as of June 30 and March 31, 2019, 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 June 30 and March 31, 2019.
For the three months ended June 30, 2019 and 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).
Revenue from third party customers
Total revenue related to third party customers is as follows (in thousands):
 
 
Three Months Ended June 30,
 
 
2019
 
2018
Revenue:
 
 
 
 
Operating revenue from non-affiliates
 
$
303,733

 
$
325,356

Operating revenue from affiliates
 
4,475

 
4,568

Reimbursable revenue from non-affiliates
 
16,600

 
16,907

Revenue from Contracts with Customers
 
324,808

 
346,831

Other revenue from non-affiliates
 
397

 
13,110

Other revenue from affiliates
 
7,971

 
6,727

Total Revenue
 
$
333,176

 
$
366,668



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BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) 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
 
 
Nine Months Ending March 31, 2020
 
Fiscal Year Ending March 31,
 
Total
 
 
 
2021
 
2022
 
2023
 
2024 and thereafter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding Service Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Helicopter contracts
 
$
339,665

 
$
229,327

 
$
192,800

 
$
186,633

 
285,269

 
$
1,233,694

Fixed-wing contracts
 
743

 

 

 

 

 
743

Total remaining performance obligation revenue
 
$
340,408

 
$
229,327

 
$
192,800

 
$
186,633

 
285,269

 
$
1,234,437

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 U.K. 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 will 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 4 — 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 June 30, 2019, 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 3 to the fiscal year 2019 Financial Statements for a description of other investments in significant affiliates.

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


Bristow Aviation Holdings Limited — We own 49% of Bristow Aviation’s common stock and a significant amount of its subordinated debt. Bristow Aviation is incorporated in England and, through its subsidiaries, holds all the outstanding shares in 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”) owned 49%, 46% and 5%, respectively, of Bristow Aviation’s total outstanding ordinary shares as of June 30, 2019, although Caledonia had 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 ($115.8 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 $2.7 billion as of June 30, 2019.
Our operations in the U.K. are subject to the Civil Aviation Act 1982 and other similar English and E.U. statutes and regulations. We carry persons and property in our aircraft pursuant to an operating license issued by the Civil Aviation Authority (the “CAA”). The holder of an operating license must meet the ownership and control requirements of Council Regulation 2407/92. To operate under this license, the company through which we conduct operations in the U.K., Bristow Helicopters, must be owned directly or through majority ownership by E.U. nationals, and must at all times be effectively controlled by them. Our ownership of 49% of the ordinary shares of Bristow Aviation, the entity that owns Bristow Helicopters, is to comply with these restrictions. Caledonia, the Company and the E.U. Investor also entered into a put/call agreement under which, upon giving specified prior notice, we had the right to buy all the Bristow Aviation shares held by Caledonia and the E.U. Investor, who, in turn, each had the right to require us to purchase such shares. As discussed above, 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. In addition, the put/call agreement limits our ability to exercise the put/call option through a requirement to consult with 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. On March 14, 2019, the E.U. Investor provided notice of his intent to exercise his right to require us or a qualified E.U. investor to purchase his Bristow Aviation shares for £100,000. In addition, on April 29, 2019, Caledonia provided notice of its intent to exercise its right to require us or a qualified E.U. investor to purchase its Bristow Aviation shares for £920,000, under our put/call agreement with this stockholder. As a result, in September 2019 and October 2019, 5% and 46%, respectively, of such shares were purchased by Impigra Aviation Holdings Limited (“Impigra”), a qualified E.U. investor, with proceeds from two loans received from Bristow Holdings Company Ltd. III (“BHC III”), a Bristow subsidiary. Impigra, is a British company owned 100% by U.K. Bristow employees and now owns 51% of the ordinary shares of Bristow Aviation. There was no material change to the Bristow Aviation shareholders’ agreement or the put/call agreement which Impigra is now a party to. Impigra is also a VIE that we consolidate as the primary beneficiary and we eliminate the loans discussed above in consolidation. Brexit is anticipated to require a qualified U.K. investor rather than a qualified E.U. investor. Impigra is expected to meet the requirements to satisfy a qualified U.K. investor requirement.
Furthermore, the call option provides a mechanism whereby the economic risk for the other investor 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 shareholder (£1.0 million as of June 30, 2019) 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 shareholder at a rate of sterling LIBOR plus 3% 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 investor has an option to put its 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.

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BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) 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):
 
 
 
June 30,
 2019
 
March 31,
 2019
 
Assets
 
 
 
 
 
Cash and cash equivalents
 
$
69,201

 
$
83,499

 
Restricted cash
 
3,234

 

 
Accounts receivable
 
325,905

 
307,864

 
Inventories
 
80,200

 
85,977

 
Prepaid expenses and other current assets
 
29,436

 
36,646

 
Total current assets
 
507,976

 
513,986

 
Investment in unconsolidated affiliates
 
3,013

 
3,087

 
Property and equipment, net
 
248,671

 
281,944

 
Right-of-use assets
 
196,725

 

 
Goodwill
 
18,212

 
18,436

 
Other assets
 
226,115

 
229,902

 
Total assets
 
$
1,200,712

 
$
1,047,355

 
Liabilities
 
 
 
 
 
Accounts payable
 
$
455,070

 
$
442,187

 
Accrued liabilities
 
265,031

 
113,905

 
Accrued interest
 
2,707,399

 
2,399,704

 
Current maturities of long-term debt
 
81,706

 
85,287

 
Total current liabilities
 
3,509,206

 
3,041,083

 
Long-term debt, less current maturities
 
383,556

 
384,369

 
Accrued pension liabilities
 
22,472

 
25,726

 
Other liabilities and deferred credits
 
4,038

 
4,810

 
Deferred taxes
 
37,662

 
37,063

 
Long-term operating lease liabilities
 
37,591

 

 
Total liabilities
 
$
3,994,525

 
$
3,493,051

 
 
 
Three Months Ended
 June 30,
 
 
2019
 
2018
Revenue
 
$
295,155

 
$
331,469

Operating income
 
11,280

 
7,364

Net loss
 
(362,848
)
 
(69,021
)
Bristow Helicopters (Nigeria) Ltd. — Bristow Helicopters (Nigeria) Ltd. (“BHNL”) is a joint venture in Nigeria in which Bristow Helicopters owns a 48% interest, a Nigerian company owned 100% by Nigerian employees owns a 50% interest and an employee trust fund owns the remaining 2% interest as of June 30, 2019. BHNL provides industrial aviation services to customers in Nigeria.
In order to be able to bid competitively for our services in the Nigerian market, we were required to identify local citizens to participate in the ownership of entities domiciled in the region. However, these owners do not have extensive knowledge of the aviation industry and have historically deferred to our expertise in the overall management and day-to-day operation of BHNL (including the establishment of operating and capital budgets and strategic decisions regarding the potential expansion of BHNL’s operations). We have also historically provided subordinated financial support to BHNL and will need to continue to do so unless and until BHNL acquires sufficient equity to permit itself to finance its activities without that additional support from us. As we have the power to direct the most significant activities affecting the economic performance and ongoing success of BHNL and hold a variable interest in the entity in the form of our equity investment and working capital infusions, we consolidate BHNL as the primary beneficiary. The employee-owned Nigerian entity referenced above purchased a 19% interest in BHNL in December 2013 with proceeds from a loan received from BGI Aviation Technical Services Nigeria Limited (“BATS”). In July 2014, the employee-owned Nigerian entity purchased an additional 29% interest with proceeds from a loan received from Bristow Helicopters (International) Limited (“BHIL”). In April 2015, Bristow Helicopters purchased an additional 8% interest in BHNL and the

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


employee-owned Nigerian entity purchased an additional 2% interest with proceeds from a loan received from BHIL. Both BATS and BHIL are wholly-owned subsidiaries of Bristow Aviation. The employee-owned Nigerian entity is also a VIE that we consolidate as the primary beneficiary and we eliminate the loans discussed above in consolidation.
BHNL is an indirect subsidiary of Bristow Aviation; therefore, financial information for this entity is included within the amounts for Bristow Aviation and its subsidiaries presented above.
Pan African Airlines (Nigeria) Ltd. — Pan African Airlines (Nigeria) Ltd. (“PAAN”) is a joint venture in Nigeria with local partners in which we own a 50.17% interest. PAAN provides industrial aviation services to customers in Nigeria.
The activities that most significantly impact PAAN’s economic performance relate to the day-to-day operation of PAAN, setting the operating and capital budgets and strategic decisions regarding the potential expansion of PAAN’s operations. Throughout the history of PAAN, our representation on the board and our secondment to PAAN of its managing director has enabled us to direct the key operational decisions of PAAN (without objection from the other board members). We have also historically provided subordinated financial support to PAAN. As we have the power to direct the most significant activities affecting the economic performance and ongoing success of PAAN and hold a variable interest in the form of our equity investment and working capital infusions, we consolidate PAAN as the primary beneficiary. However, as long as we own a majority interest in PAAN, the separate presentation of financial information in a tabular format for PAAN is not required.
Note 5 — DEBT
Debt as of June 30 and March 31, 2019 consisted of the following (in thousands):
 
 
June 30,
 2019
 
March 31,
 2019
8.75% Senior Secured Notes due 2023 (1)
 
$
347,597

 
$
347,400

4½% Convertible Senior Notes due 2023 (1)(2)
 
143,750

 
112,944

6¼% Senior Notes due 2022 (1)(2)
 
401,535

 
401,535

Term Loan (1)
 
75,000

 

Lombard Debt
 
176,094

 
183,450

Macquarie Debt
 
171,028

 
171,028

PK Air Debt
 
210,494

 
212,041

Airnorth Debt
 
10,146

 
11,058

Humberside Debt
 
382

 

Other Debt (2)
 
9,370

 
9,168

Unamortized debt issuance costs
 
(22,860
)
 
(21,771
)
Total debt
 
1,522,536

 
1,426,853

Less amounts included in liabilities subject to compromise
 
(554,655
)
 

Less short-term borrowings and current maturities of long-term debt
 
(892,092
)
 
(1,418,630
)
Total long-term debt
 
$
75,789

 
$
8,223

_____________ 
(1) These notes were settled in accordance with the Amended Plan.
(2) Reclassified to liabilities subject to compromise on our condensed consolidated balance sheet as of June 30, 2019. See Note 2 and “—4½% Convertible Senior Notes due 2023” and “—6¼% Convertible Senior Notes due 2023” below for further details.
(3) Unamortized debt issuance costs as of June 30, 2019 relate to 8.75% Senior Secured Notes due 2023, Term Loan, Lombard Debt, Macquarie Debt and PK Air Debt. Unamortized debt issuance costs as of March 31, 2019 relate to 8.75% Senior Secured Notes due 2023, 4½% Convertible Senior Notes due 2023, 6¼% Senior Notes due 2022 Term Loan, Lombard Debt, Macquarie Debt and PK Air Debt.
Classification of Debt As discussed in Note 1, on the Petition Date, the Debtors filed the Chapter 11 Cases in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code. The Debtors’ Chapter 11 Cases were jointly administered under the caption In re: Bristow Group Inc., et al., Main Case No. 19-32713. During the pendency of the Chapter 11 Cases, the Debtors continued to operate their businesses and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. The significant risks and uncertainties related to the Chapter 11 Cases raise substantial doubt about the Company’s ability to continue as a going

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concern. In addition, each of the commencement of the Chapter 11 Cases and the delivery of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, as amended by the amendment thereto, with a going concern qualification or explanation constituted an event of default under certain of our secured equipment financings, giving those secured equipment lenders the right to accelerate repayment of the applicable debt, subject to Chapter 11 protections, and triggering cross-default and/or cross-acceleration provisions in substantially all of our other debt instruments should that right to accelerate repayment be exercised. As a result of the facts and circumstances discussed above, the Company has classified debt balances of approximately $892.1 million and $1.4 billion as of June 30 and March 31, 2019, respectively, as short-term borrowings and current maturities of long-term debt on our condensed consolidated balance sheet. If not classified separately as liabilities subject to compromise as of June 30, 2019, the additional $554.7 million would have been classified as current maturities of long-term debt on our condensed consolidated balance sheet as a result of the same facts and circumstances.
Waiver of Defaults Prior to the Petition Date, we entered into waiver letters with respect to certain of our debt agreements, including the credit agreement, dated as of July 17, 2017, among Bristow Equipment Leasing Ltd., the several banks, other financial institutions and other lenders from time to time party thereto and PK AirFinance S.à r.l. (“PK AirFinance”), as agent and as security trustee (as amended, the “PK Credit Agreement”); the term loan credit agreement, dated as of February 1, 2017, among Bristow U.S. LLC, the several banks, other financial institutions and other lenders from time to time party thereto and Macquarie Bank Limited, as administrative agent and as security agent (as amended, the “Macquarie Credit Agreement”); the ABL Facility (as defined below); and certain other secured equipment financings and leases. Pursuant to such waiver letters, we received waivers of breaches, defaults or events of default under such debt agreements arising from the Company’s failure to timely provide its unaudited consolidated financial statements for the quarter ended December 31, 2018 and/or the failure to make the April 15, 2019 interest payment due on the 6¼% Senior Notes by May 15, 2019, and certain other related events of default and cross-defaults. As discussed below under “— Events of Default,” the filing of the Chapter 11 Cases constituted an event of default that accelerated the obligations under the PK Credit Agreement, the BALL Lombard Credit Agreement (as defined below) and the Macquarie Credit Agreement.
On May 10, 2019, Bristow Norway AS and Bristow Helicopters, as borrowers and guarantors, and the Company, as guarantor, entered into a waiver letter (the “First ABL Waiver”) with Barclays Bank PLC, as agent, and Credit Suisse AG, Cayman Islands Branch, as lender, with respect to the ABL Facility. The First ABL Waiver waived, subject to certain conditions, any Default (as defined in the ABL Facility) or cross-defaults that would otherwise exist or occur under the ABL Facility as a result of, among other things, (i) the Company’s failure to timely provide its unaudited consolidated financial statements for the quarters ended December 31, 2018 and March 31, 2019, (ii) the amendment of the Company’s periodic reports for fiscal year 2018 as previously disclosed, (iii) the failure to make the April 15, 2019 interest payment due on the 6¼% Senior Notes, (iv) potential cross defaults under the 4½% Convertible Senior Notes and 8.75% Senior Secured Notes, (v) other events related to the Chapter 11 Cases, potential insolvency issues or possible failure to comply with certain financial covenants or (vi) certain representations and warranties not being correct when made. Such Defaults were waived until the date (the “ABL Waiver Termination Date”) on which the Company or its subsidiaries enter into or modify debt agreements that would materially adversely impact the ability to perform obligations under the ABL Facility, any security that is not permitted security is granted over the share capital or assets of either borrower or the Chapter 11 Cases are dismissed or converted to a case under Chapter 7 of the Bankruptcy Code, subject to certain conditions as specified in the First ABL Waiver. The First ABL Waiver contains certain amendments to the ABL Facility, including (i) expanding the definition of Change of Control to include the consummation of a plan of reorganization in connection with the commencement of a bankruptcy proceeding and (ii) providing that the maturity date of December 14, 2021 shall be subject to certain early maturity triggers related to a Change of Control of the Company (as such definition has been amended by the First ABL Waiver) or the ABL Waiver Termination Date.
On September 30, 2019, Bristow Norway AS and Bristow Helicopters, as borrowers and guarantors, and the Company, as guarantor, entered into a waiver letter (the “Second ABL Waiver”) with Barclays Bank PLC, as agent, and Credit Suisse AG, Cayman Islands Branch, as lender, with respect to the ABL Facility. The Second ABL Waiver further extended the delivery dates (i) for the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2019 until October 31, 2019 and (ii) for the Company’s unaudited consolidated financial statements for each of the fiscal quarters ended June 30, 2019 and September 30, 2019 until December 31, 2019.
On May 10, 2019, Bristow Aircraft Leasing Limited (“BALL”), as borrower, entered into a waiver letter (the “First BALL Lombard Waiver”) with Lombard North Central Plc, as administrative agent and as security trustee, with respect to the term loan credit agreement, dated as of November 11, 2016 (the “BALL Lombard Credit Agreement”). Because an Insolvency Proceeding (as defined in the First BALL Lombard Waiver) was commenced on or before May 15, 2019, the First BALL Lombard Waiver extended, subject to certain conditions, the waivers received under the previous waiver letter (as described in our Current Report on Form 8-K filed with the SEC on April 15, 2019), until the earlier of (a) certain events related to a plan of reorganization or

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liquidation of the Company, Insolvency Proceeding or debtor-in-possession financing or (b) December 15, 2019 (the “Lombard Waiver Termination Date”). In addition, the First BALL Lombard Waiver waived, until the Lombard Waiver Termination Date, any Default or Event of Default (each as defined in the BALL Lombard Credit Agreement) as a result of (i) the amendment of the Company’s periodic reports for fiscal year 2018, (ii) the possible commencement of an Insolvency Proceeding or any related acceleration of other material indebtedness and (iii) the possible occurrence of an Event of Default under the term loan credit agreement, dated as of November 11, 2016, among Bristow U.S. Leasing LLC, as borrower, the lenders from time to time party thereto and Lombard North Central plc, as administrative agent and as security trustee (the “BULL Lombard Credit Agreement”), subject to certain conditions.
On September 30, 2019, BALL, as borrower, entered into a waiver letter (the “Second BALL Lombard Waiver”) with Lombard North Central Plc, as administrative agent and as security trustee, with respect to the BALL Lombard Credit Agreement. In addition, BULL, as borrower, entered into a waiver letter (the “BULL Lombard Waiver”) with Lombard North Central Plc, as administrative agent and as security trustee, with respect to the BULL Lombard Credit Agreement. The Second BALL Lombard Waiver and the BULL Lombard Waiver both extended the delivery dates (i) for the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2019 until October 31, 2019 and (ii) for the Company’s unaudited consolidated financial statements for each of the fiscal quarters ended June 30, 2019 and September 30, 2019 until December 31, 2019.
Events of Default The filing of the Chapter 11 Cases constituted an event of default that accelerated the obligations under the following instruments and agreements:
the Third Supplemental Indenture, dated as of October 12, 2012, to the Indenture, dated as of June 17, 2008 (the “Base Indenture”), among the Company, the guarantors named therein and Wilmington Trust, National Association, as successor trustee to U.S. Bank National Association (“U.S. Bank”), and our 6¼% Senior Notes issued thereunder;
the Sixth Supplemental Indenture to the Base Indenture, dated as of December 18, 2017, among the Company, the guarantors named therein and Delaware Trust Company, as successor trustee to U.S. Bank, and our 4½% Convertible Senior Notes issued thereunder;
the Indenture, dated as of March 6, 2018, among the Company, the guarantors named therein and U.S. Bank, as trustee and collateral agent (the “Secured Indenture”), and our 8.75% Senior Secured Notes issued thereunder;
the PK Credit Agreement;
the Macquarie Credit Agreement;
the BULL Lombard Credit Agreement; and
various aircraft operating leases and real estate leases.
The instruments and agreements described above provide that, as a result of the commencement of the Chapter 11 Cases, the financial obligations thereunder, including for the debt instruments any principal amount, together with accrued interest thereon, are immediately due and payable. However, any efforts to enforce payment of such financial obligations under such instruments and agreements were automatically stayed as a result of the filing of the Chapter 11 Cases and the holders’ rights of enforcement in respect of such financial obligations were subject to the applicable provisions of the Bankruptcy Code.
Term Loan Agreement On May 10, 2019, the Company entered into a Term Loan Credit Agreement, dated the same date (the “Term Loan Agreement”), by and among the Company and BHC III, as borrowers, certain subsidiaries of the Company as guarantors party thereto, the lenders from time to time party thereto (initially, certain holders of the 8.75% Senior Secured Notes), and Ankura Trust Company, LLC, as administrative agent (the “Term Loan Agent”), for a senior secured term loan of $75 million (the “2019 Term Loan”). Immediately upon entering into the Term Loan Agreement, and prior to the Petition Date, the Company and BHC III borrowed the full amount thereunder, the net proceeds of which were used for general corporate purposes, including to fund the working capital and liquidity requirements of the Company during the pendency of the Chapter 11 Cases. The full principal amount of the 2019 Term Loan is due May 10, 2022. At the Company’s election, borrowings under the 2019 Term Loan will bear interest at either (x) the Eurodollar Rate (as defined in the Term Loan Agreement) plus 7% or (y) the Base Rate (as defined in the Term Loan Agreement) plus 6%. The initial borrowings under the 2019 Term Loan will be Eurodollar Rate loans with monthly interest payments. The 2019 Term Loan is secured by a first lien on certain specified collateral, including, among other things, equity pledges of 35% of the equity interests in certain of the Company’s first-tier foreign subsidiaries (the remaining 65% of such entities have been previously pledged under the 8.75% Senior Secured Notes), 100% of the equity of BHC III, Bristow

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(Unaudited)


International Panama S. de RL, and two newly formed special-purpose vehicles, as well as a junior lien on certain collateral securing the 8.75% Senior Secured Notes. The borrowers have the option in connection with the consummation of a Reorganization Plan (as defined in the Term Loan Agreement) that is satisfactory to the lenders to require that the 2019 Term Loan be converted into equity of the Company upon consummation of such Reorganization Plan, subject to certain conditions. The Term Loan Agreement contains customary pre-payment requirements.
The Term Loan Agreement contains certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s and its subsidiaries’ incurrence of additional indebtedness or liens, mergers, dispositions of assets, investments, restricted payments, modifications to material agreements, transactions with affiliates and fundamental changes. In addition, the Term Loan Agreement required that, on the delivery of each Variance Report (as defined in the Term Loan Agreement), total operating disbursements and total receipts of the Company and its subsidiaries for certain specified periods shall not exceed (with respect to disbursements) or be less than (with respect to total receipts) the aggregate amount forecasted therefor for such period by more (with respect to disbursements) or less (with respect to total receipts) than a specified percentage of the forecasted amount. The Term Loan Agreement also contains customary affirmative covenants and customary representations and warranties.
The Term Loan Agreement specifies certain customary events of default, including, among others, failure to pay principal or interest on the 2019 Term Loan when due, the breach of representations or warranties in any material respect, non-performance of other covenants and obligations, judgments, the occurrence of certain ERISA events and certain change of control events. The filing of the Chapter 11 Cases neither constitutes an event of default nor accelerates the maturity of the Company’s indebtedness under the Term Loan Agreement.
On June 6, 2019, we entered into Amendment No. 1 to the Term Loan Agreement (the “First Term Loan Amendment”), dated the same date, by and among the Company, BHC III and the lenders party thereto. Among other things, the First Term Loan Amendment extended the deadline for delivery to the administrative agent and the lenders of (i) the annual audit report of the borrower and its subsidiaries for the fiscal year ended March 31, 2019 from 90 days to 120 days after the end of such fiscal year and (ii) monthly unaudited consolidated financial statements of the borrower and its subsidiaries from 10 days to 20 business days after the end of each month.
On August 22, 2019, we entered into Amendment No. 2 to the Term Loan Agreement (the “Second Term Loan Amendment”), dated the same date, by and among the Company, BHC III and the Term Loan Agent. The Second Term Loan Amendment amended the Term Loan Agreement in order to clarify the definition of Pledged Aircraft under the Term Loan Agreement.
On August 26, 2019, in connection with the entry into the DIP Credit Agreement, we entered into Amendment No. 3 to the Term Loan Agreement (the “Third Term Loan Amendment”), dated the same date, by and among the Company, BHC III, the lenders party thereto and the Term Loan Agent. The Third Term Loan Amendment amended and restated the Term Loan Agreement in order to, among other things, permit the entry into the DIP Credit Agreement, the incurrence of indebtedness thereunder and the granting of related liens thereunder, and make certain other conforming changes.
On September 30, 2019, we entered into Amendment No. 4 to the Term Loan Agreement (the “Fourth Term Loan Amendment”), dated the same date, by and among the Company, BHC III and the Term Loan Agent. The Fourth Term Loan Amendment amended the Term Loan Agreement in order to extend the delivery dates (i) for the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2019 until October 31, 2019 and (ii) for the Company’s unaudited consolidated financial statements for each of the fiscal quarters ended June 30, 2019 and September 30, 2019 until December 31, 2019.
In connection with the Amended Plan, on October 31, 2019, we entered into Amendment No. 5 to the Term Loan Agreement (the “Fifth Term Loan Amendment”), dated the same date, by and among the Company, BHC III, the guarantors party thereto, the lenders party thereto and the Term Loan Agent. The Fifth Term Loan Amendment amended the Term Loan Agreement in order to, among other things, (i) increase the applicable margin in respect of all outstanding term loans to 8.00% in the case of Eurodollar Rate loans and 7.00% for Base Rate loans (with increases to 9.00% and 8.00%, respectively, with respect to all such term loans outstanding after the six-month anniversary of the Effective Date), (ii) release Bristow Helicopter Group Limited from all guaranty and collateral obligations in respect of the 2019 Term Loan, (iii) modify certain negative covenants to, among other things, allow for future aircraft-related financings and related liens and investments and (iv) delete certain provisions relating to the Chapter 11 Cases, in light of the occurrence of the Effective Date of the Amended Plan, including the deletion of the requirements to (x) deliver Variance Reports (as defined in the Term Loan Agreement) and (y) ensure that total operating disbursements and total receipts of the Company and its subsidiaries for certain specified periods did not exceed (with respect to disbursements) or were not less than (with respect to total receipts) the aggregate amount forecasted therefor for such period by more (with respect to disbursements) or less (with respect to total receipts) than a specified percentage of the forecasted amount.

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(Unaudited)


Backstop Commitment Agreement — On July 24, 2019, the Company entered into a Backstop Commitment Agreement (the “Backstop Commitment Agreement”) with the other parties thereto (the “Commitment Parties”), pursuant to which the Commitment Parties agreed to backstop a total $385 million new money rights offering (the “Rights Offering”) of New Stock of the Reorganized Company. In accordance with the Amended Plan and certain Rights Offering procedures filed as part of the Amended Plan, the Company granted the Supporting Noteholders, including certain Commitment Parties who are Unsecured Noteholders (the “Unsecured Commitment Parties”) or Secured Noteholders (the “Secured Commitment Parties”), and holders of certain other unsecured claims (collectively with the Unsecured Noteholders, the “Unsecured Claims”), the right to purchase shares of New Stock of the Reorganized Company (the “Rights Offering Shares”), which were comprised of 91.825% of New Common Stock and 8.175% of New Preferred Stock, for an aggregate purchase price of, in the case of the Unsecured Claims, $347.5 million (the “Unsecured Rights Offering Amount”) and, in the case of the Secured Noteholders, $37.5 million (the “Secured Rights Offering Amount” and, together with the Unsecured Rights Offering Amount, the “Rights Offering Amount”)). Under the Backstop Commitment Agreement, the Commitment Parties agreed to purchase any Rights Offering Shares that were not duly subscribed for pursuant to the Rights Offering (the “Unsubscribed Shares”) at the Per Equity Share Purchase Price (as defined in the Backstop Commitment Agreement).
Under the Backstop Commitment Agreement, the Debtors agreed to pay (i) on the earlier of the closing date of the transactions contemplated by the Backstop Commitment Agreement or the termination of the Backstop Commitment Agreement, a backstop commitment fee (the “Backstop Commitment Fee”) in, at the election of the Commitment Parties, New Stock equal to 10% of (a) the Unsecured Rights Offering Amount to the Unsecured Commitment Parties and (b) the Secured Rights Offering Amount to the Secured Commitment Parties and (ii) both as promptly as reasonably practicable after entry of the BCA Approval Order (as defined in the Backstop Commitment Agreement) and on a monthly basis thereafter, all reasonably incurred and documented professional fees of the Commitment Parties. The Backstop Commitment Fee was paid in New Stock to the Commitment Parties pro rata based on the amount of their respective backstop commitments.
The rights to purchase Rights Offering Shares (excluding Unsubscribed Shares) in the Rights Offering were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to section 1145 of the Bankruptcy Code. A portion of the New Common Stock issued in the Rights Offering was issued in reliance upon such exemption, and a portion of the New Common Stock and all of the New Preferred Stock were issued in reliance upon the exemption from registration under the Securities Act provided by Section 4(a)(2) thereof or another available exemption from registration thereunder. The offer and sale of the Unsubscribed Shares purchased by the Commitment Parties pursuant to the Backstop Commitment Agreement were made in reliance upon the exemption from registration under the Securities Act provided by Section 4(a)(2) thereof or another available exemption from registration thereunder. As a condition to the closing of the transactions contemplated by the Backstop Commitment Agreement, the Reorganized Company entered into a registration rights agreement with certain Commitment Parties requiring the Reorganized Company, subject to the terms and conditions thereof, to register the Commitment Parties’ securities under the Securities Act.
The Commitment Parties’ commitments to backstop the Rights Offering and the other transactions contemplated by the Backstop Commitment Agreement were conditioned upon satisfaction of all applicable conditions set forth therein. The Rights Offering Shares were issued pursuant to the Rights Offering and the Backstop Commitment Agreement on the Effective Date.
On September 30, 2019, we entered into a limited waiver and amendment to the Backstop Commitment Agreement (the “BCA Amendment”), dated the same date, by and between the Company, on behalf of itself and each of the other Debtors, and certain Commitment Parties. The BCA Amendment extended the delivery dates (i) for the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2019 until October 31, 2019 and (ii) for the Company’s unaudited consolidated financial statements for each of the fiscal quarters ended June 30, 2019 and September 30, 2019 until December 31, 2019.
Debtor-in-Possession Credit Agreement In connection with the Chapter 11 Cases and pursuant to a commitment letter between the DIP Borrowers (as defined below) and the lenders party thereto, on July 25, 2019, the Debtors filed a motion seeking, among other things, interim and final approval of the proposed Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) among the Company, as lead borrower, BHC III, as co-borrower (together with the Company, the “DIP Borrowers”), the other Debtors and guarantors party thereto and other guarantors from time to time party thereto, the financial institutions or other entities from time to time party thereto, and Ankura Trust Company, LLC, as administrative agent and collateral agent (the “DIP Agent”). On August 21, 2019, the Bankruptcy Court entered a final order, which, among other things, approved the DIP Credit Agreement, and on August 26, 2019, the Company entered into the DIP Credit Agreement. On August 27, 2019, the Company borrowed the full amount of the DIP Credit Agreement of $150 million at an 8.5% borrowing rate, $75 million of which was used to pay down a portion of the 8.75% Senior Secured Notes discussed below and the remainder of which was to be used for general corporate purposes.

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(Unaudited)


On September 30, 2019, we entered into Amendment No. 1 to the DIP Credit Agreement (the “DIP Credit Agreement Amendment”), dated the same date, among the Company, BHC III and the DIP Agent. The DIP Credit Agreement Amendment amended the DIP Credit Agreement to extend the delivery dates (i) for the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2019 until October 31, 2019 and (ii) for the Company’s unaudited consolidated financial statements for each of the fiscal quarters ended June 30, 2019 and September 30, 2019 until December 31, 2019. On October 31, 2019, we repaid borrowings under the DIP Credit Agreement in exchange for New Stock of the Reorganized Company, and the DIP Credit Agreement terminated pursuant to its terms.
Consent Solicitation and Supplemental Indenture — On November 21, 2018, we completed the previously announced solicitation of consents from holders of our outstanding 8.75% Senior Secured Notes to amend certain provisions of the Secured Indenture pursuant to a supplemental indenture (the “Secured Supplemental Indenture”). The Secured Supplemental Indenture became effective upon the execution and delivery thereof, but would become operative only upon the delivery of a cash payment to eligible holders of the 8.75% Senior Secured Notes who validly delivered and did not revoke consents prior to the receipt of the consents required to effect the amendments under the Secured Supplemental Indenture. As the cash payment was not made, the Secured Supplemental Indenture did not become operative.
ABL Facility — On April 17, 2018, two of our subsidiaries entered into a new asset-backed revolving credit facility (the “ABL Facility”), which provides for commitments in an aggregate amount of $75 million, with a portion allocated to each borrower subsidiary, subject to an availability block of $15 million and a borrowing base calculated by reference to eligible accounts receivable. The maximum amount of the ABL Facility could be increased from time to time to a total of as much as $100 million, subject to the satisfaction of certain conditions, and any such increase would be allocated among the borrower subsidiaries. The ABL Facility matures in five years, subject to certain early maturity triggers related to maturity of other material debt or a change of control of the Company. Amounts borrowed under the ABL Facility are secured by certain accounts receivable owing to the borrower subsidiaries and the deposit accounts into which payments on such accounts receivable are deposited. As of June 30, 2019, there were no outstanding borrowings under the ABL Facility nor had we made any draws during the three months ended June 30, 2019. Letters of credit issued under the ABL Facility in the aggregate face amount of $14.7 million were outstanding on June 30, 2019.
The ABL Facility was amended pursuant to the ABL Waiver. As discussed above under “—Waiver of Defaults,” the ABL Waiver provided that the maturity date of December 14, 2021 shall be subject to certain early maturity triggers related to a Change of Control of the Company (as such definition has been amended by the ABL Waiver) or the ABL Waiver Termination Date.
On the Effective Date, the Company entered into an Amendment and Restatement, Confirmation and Waiver Agreement (the “ABL Amendment”) to the ABL Facility (together with the ABL Amendment, the “Amended ABL”), by and among the Company, as parent, Bristow Norway AS and Bristow Helicopters, as borrowers and guarantors, the financial institutions from time to time party thereto as lenders and Barclays Bank PLC, in its capacity as agent and security trustee. The ABL Amendment amended the ABL Facility in order to, among other things, (i) make permanent certain waivers of defaults or events of default that were previously provided during the pendency of the Chapter 11 Cases, (ii) confirm the existing maturity date of April 17, 2023, (iii) provide that the maximum amount of the Amended ABL may be increased, subject to satisfaction of certain conditions, from time to time to a total of as much as $115 million from its current aggregate of $100 million, and (iv) provide for the accession at a later date of Bristow U.S. LLC as a co-borrower under the Amended ABL and the addition of certain of its receivables to the borrowing base and the collateral for the Amended ABL.
8.75% Senior Secured Notes due 2023 — On August 12, 2019, we commenced a tender offer (the “Tender Offer”) to purchase for cash our outstanding 8.75% Senior Secured Notes, up to an aggregate principal amount that would not result in an aggregate purchase price (including accrued and unpaid interest to, but not including, the settlement date) that exceeded $75.0 million. On September 11, 2019, we completed the Tender Offer, purchasing $74.8 million aggregate principal amount of the 8.75% Senior Secured Notes for $74.8 million, plus accrued and unpaid interest of $0.2 million, using funds borrowed under the DIP Credit Agreement. In accordance with the Amended Plan, on the Effective Date, all outstanding obligations under the 8.75% Senior Secured Notes, including the indentures governing such obligations, were cancelled, except to the limited extent expressly set forth in the Amended Plan.

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4½% Convertible Senior Notes due 2023 The balances of the debt and equity components of our 4½% Convertible Senior Notes are as follows (in thousands):
 
 
June 30,
 2019
 
March 31,
 2019
 
 
 
 
 
Equity component - net carrying value (1)
 
$
36,778

 
$
36,778

Debt component:
 
 
 
 
Face amount due at maturity
 
$
143,750

 
$
143,750

Unamortized discount
 

 
(30,806
)
Debt component - net carrying value
 
$
143,750

 
$
112,944

_____________ 
(1) Net of equity issuance costs of $1.0 million.
Prior to May 11, 2019, the remaining debt discount was being amortized to interest expense over the term of the 4½% Convertible Senior Notes using the effective interest rate. The effective interest rate for the three months ended June 30, 2019 was 11.0%. Interest expense related to our 4½% Convertible Senior Notes was as follows (in thousands):
 
 
Three Months Ended
 June 30,
 
 
2019
 
2018
Contractual coupon interest
 
$
715

 
$
1,611

Amortization of debt discount
 
648

 
1,313

Total interest expense
 
$
1,363

 
$
2,924

As of May 11, 2019, we determined that the 4½% Convertible Senior Notes were an allowed claim and therefore reclassified the balance to liabilities subject to compromise and discontinued accruing interest on these obligations. Contractual interest on the 4½% Convertible Senior Notes for the three months ended June 30, 2019 was $1.6 million, which is $0.9 million in excess of reported interest expense for the three months ended June 30, 2019. In connection with reclassifying the 4½% Convertible Senior Notes to liabilities subject to compromise, we wrote-off $30.2 million of unamortized discount and $2.3 million of deferred financing fees. See Note 2 for further details. In accordance with the Amended Plan, on the Effective Date, all outstanding obligations under the 4½% Convertible Senior Notes, including the indentures governing such obligations, were cancelled, except to the limited extent expressly set forth in the Amended Plan.
Macquarie Debt — On October 3, 2019, the Bankruptcy Court approved a term sheet (the “Macquarie Term Sheet”) among the Company, as guarantor, Bristow U.S. LLC, as borrower and lessee, BriLog Leasing Ltd., as lessee, Macquarie Bank Limited, as administrative agent and security agent, Macquarie Leasing LLC, as lender and owner participant, and Macquarie Rotorcraft Leasing Holdings Limited, as owner participant, pursuant to which, among other matters, the parties agreed to enter into definitive documentation at emergence for an amendment to the Macquarie Credit Agreement (the “Macquarie Amendment”).
The parties entered into the Macquarie Amendment on October 31, 2019. Among other things, the Macquarie Amendment (i) extended the maturity date of the loan made under the Macquarie Credit Agreement by 12 months to March 6, 2023, (ii) adjusted the loan amortization in accordance with the newly extended maturity date, (iii) confirmed that an event of default under four or more existing leases involving parties to the Macquarie Term Sheet that remains unremedied after the applicable grace period for such an event of default will constitute an event of default under the Macquarie Credit Agreement, (iv) to the extent permitted by other debt instruments, provided for the collateralization of the obligations owed under such existing leases with the liens securing the Macquarie Credit Agreement and (v) allowed for the delivery by October 31, 2019 of the annual financial statements of the Company and its subsidiaries for the fiscal year ended March 31, 2019, and by December 31, 2019 of the quarterly financial statements of the Company and its subsidiaries for the fiscal quarters of the Company ended June 30, 2019 and September 30, 2019.
PK Air Debt — On October 3, 2019, the Company entered into an Omnibus Agreement (the “Omnibus Agreement”), dated the same date, among Bristow Equipment Leasing Ltd., as borrower, PK Transportation Finance Ireland Limited (“PK Transportation”), as lender, PK AirFinance, as agent for the lender and as security trustee for the MAG Agent and the MAG Parties (each as defined in the PK Credit Agreement), PK AirFinance and PK Transportation. Pursuant to the Omnibus Agreement, among other matters, the parties have agreed, effective upon satisfaction of the conditions precedent set forth in the Omnibus Agreement (the “Omnibus Effective Date”), to amend the PK Credit Agreement to, among other things, extend the maturity date of the 24

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


loans made under the PK Credit Agreement by 18 months to January 27, 2025 and increase the principal amount of the loans in an aggregate amount of approximately $17.3 million. The Omnibus Agreement also updates the amortization schedule as of October 3, 2019 to provide that, among other things, only interest will be payable on the loans for the six months following the Omnibus Effective Date, with a balloon amount of approximately $104.2 million due on the maturity date. If the loans are refinanced by full prepayment during the six-month period following the Effective Date, no prepayment penalty will be due. Each loan is secured by an aircraft which has been pledged as collateral for the loans.
The Omnibus Agreement also provides that the Borrower Guarantee and Indemnity Cap (as defined in the PK Credit Agreement) will be reduced by the amount of increased principal when paid. In addition, the Omnibus Agreement adjusts the information covenants under the PK Credit Agreement such that the Company shall provide a copy of the annual audit report for each fiscal year for the Company and its subsidiaries as soon as available and in any event within 90 days after the end of such fiscal year of the Company (or, in the case of the fiscal year ended March 31, 2019, by October 31, 2019), and quarterly financial statements of the Company and its subsidiaries within 45 days after the end of each fiscal quarter of the Company (and, in the case of each of the fiscal quarters ended June 30, 2019 and September 30, 2019, by December 31, 2019). In the Omnibus Agreement, PK Transportation also agreed to waive certain events of default arising from breaches of covenants in other agreements as a result of the Chapter 11 Cases and failure to provide its financial statements by their required due dates.
6¼% Senior Notes due 2022 As of May 11, 2019, we determined that the 6¼% Senior Notes were an allowed claim and therefore reclassified the balance to liabilities subject to compromise and discontinued accruing interest on these obligations. Contractual interest on the 6¼% Senior Notes for the three months ended June 30, 2019 was $6.3 million, which is $3.5 million in excess of reported interest expense for the three months ended June 30, 2019. In connection with reclassifying the 6¼% Senior Notes to liabilities subject to compromise, we wrote-off $2.4 million of deferred financing fees. See Note 2 for further details. In accordance with the Amended Plan, on the Effective Date, all outstanding obligations under the 6¼% Senior Notes, including the indentures governing such obligations, were cancelled, except to the limited extent expressly set forth in the Amended Plan.


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Table of Contents
BRISTOW GROUP INC. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Note 6 — FAIR VALUE DISCLOSURES
Assets and liabilities subject to fair value measurement are categorized into one of three different levels depending on the observability of the inputs employed in the measurement, as follows:
Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – inputs that reflect quoted prices for identical assets or liabilities in markets which are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
Recurring Fair Value Measurements
The following table summarizes the financial instruments we had as of June 30, 2019, valued at fair value on a recurring basis (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
 June 30,
 2019
 
Balance  Sheet
Classification
Derivative financial instruments
 
$

 
$
2,134

 
$

 
$
2,134

 
Prepaid expenses and other current assets
Rabbi Trust investments
 
2,632

 

 

 
2,632

 
Other assets
Total assets
 
$
2,632

 
$
2,134

 
$

 
$
4,766

 
 
The following table summarizes the financial instruments we had as of March 31, 2019, valued at fair value on a recurring basis (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,
 2019
 
Balance  Sheet
Classification
Derivative financial instruments
 
$

 
$
1,845

 
$