UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Registrant’s telephone number, including area code:

(713) 267-7600

BRISTOW GROUP INC.

INDEX — FORM 10-Q

PART I — FINANCIAL INFORMATION

BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity and Redeemable Noncontrolling InterestStockholders’ Investment

(Unaudited)

(In thousands, except share amounts)

Note 1 — BASIS OF PRESENTATION, CONSOLIDATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Foreign Currency

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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 SeptemberJune 30, 20172018 and 2016, earnings from unconsolidated affiliates, net of losses, increased $0.3 million and decreased $1.3 million, respectively, and during the six months ended September 30, 2017, and 2016, earnings from unconsolidated affiliates, net of losses, decreased by $0.9$2.6 million and $1.3$1.1 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:

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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):

In general, we recognize revenue when it is both realized or realizableDuring the three months ended June 30, 2018 and earned. We consider revenue to be realized or realizable and earned when2017, interest expense, net consisted of the following conditions exist: there(in thousands):

As of June 30 and March 31, 2018, the allowance for doubtful accounts for non-affiliates was $3.2 million and $3.3 million, respectively. There were no allowances for doubtful accounts related to accounts receivable due from affiliates as of June 30 and March 31, 2018. The allowance for doubtful accounts for non-affiliates as of June 30 and March 31, 2018 primarily relates to amounts due from a customer in Nigeria for which we no longer believe collection is persuasive evidence of an arrangement (generally a client contract exists); the services or products have been performed or delivered to the client; the sales price is fixed or determinable; and collection has occurred or is probable.

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

Prepaid Expenses and Other Current Assets

As of SeptemberJune 30 and March 31, 2017,2018, prepaid expenses and other current assets included the short-term portion of contract acquisition and pre-operating costs totaling $11.3$10.1 million and $9.7$10.8 million, respectively, related to the SARsearch and rescue (“SAR”) contracts in the U.K. and two clientcustomer contracts in Norway, which are recoverable under the contracts and will be expensed over the terms of the contracts. For the three months ended SeptemberJune 30, 20172018 and 2016,2017, we expensed $2.8$2.7 million and $3.5$2.9 million, respectively, and for both the six months ended September 30, 2017 and 2016, we expensed $5.7 million, related to these contracts.

Goodwill

Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill has an indefinite useful life and is not amortized, but is assessed for impairment annually or when events or changes in circumstances indicate that a potential impairment exists.

Goodwill of $20.4$19.2 million and $19.8$19.9 million as of SeptemberJune 30 and March 31, 2017,2018, respectively, related to our Asia Pacific reporting unit was as follows (in thousands):

Other Intangible Assets

Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values. Intangible assets by type were as follows (in thousands):

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

The Bristow Norway AS and Eastern Airways International Limited (“Eastern Airways”) acquisitions, included in our Europe Caspian region, resulted in intangible assets for clientcustomer contracts, clientcustomer relationships, trade names and trademarks, internally developed software and licenses. The Capiteq Limited, operating under the name Airnorth, acquisition included in our Asia Pacific region, resulted in intangible assets for clientcustomer contracts, clientcustomer relationships and trade name and trademarks.

Other Assets

In addition to the other intangible assets described above, other assets included the long-term portion of contract acquisition and pre-operating costs totaling $53.5$45.2 million and $51.1$50.6 million, respectively, as of SeptemberJune 30 and March 31, 2017,2018, related to the SAR contracts in the U.K. and two clientcustomer contracts in Norway, which are recoverable under the contracts and will be expensed over the terms of the contracts.

Property and Equipment, and Assets Held for Sale and OEM Cost Recoveries

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The following table presents details on the aircraft sold or disposed of and impairments on assets held for sale during the three and six months ended SeptemberJune 30, 20172018 and 2016:2017:

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During fiscal year 2018, we sold our 100% interestreached 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 Bristow Academy. As of September 30, 2017, we concluded the disposal group, comprised of the Bristow Academy, assets and liabilities met the assets held for sale criteria under ASC 360, but did not meet the requirements for classification as discontinued operations. We evaluated the carrying value of the Bristow Academy disposal groupcertain aircraft in our fleet through a decrease in property and determined an impairment of $6.5 million, recorded within loss on disposal of assets on our condensed consolidated statement of operations, was necessary to record the disposal groupequipment – at fair value based on the terms of the sale. The condensed consolidated balance sheet as of September 30, 2017, includes amounts attributable to the Bristow Academy disposal group of current assets of $1.4 million, $1.2cost, reduced rent expense by $16.6 million and $0.3recorded a deferred liability of $13.9 million, included within Accounts Receivable from non-affiliates, Inventories, and Prepaid expenses andin other current assets, respectively, and $1.4 million and $0.4 million included within Other accrued liabilities and Accounts payable, respectively. The Bristow Academy disposal group is includedother liabilities and deferred credits, related to a reduction in Corporaterent expense to be recorded in future periods, of which $3.5 million was recognized during the three months ended June 30, 2018. 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 othera reduction in Note 9 - Segment Information.rent expense for leased aircraft. For the owned aircraft, we allocated the $94.5 million as a reduction in carrying value by reducing the historical acquisition value of each affected aircraft on a pro-rata basis utilizing the historical acquisition value of the aircraft. We revised our salvage values for each affected aircraft by reducing the historical acquisition value by the applicable amount and applying our stated salvage value percentage for owned aircraft of 50%. In accordance with accounting standards, we will recognize the change in depreciation due to the reduction in carrying value and revision of salvage values on a prospective basis over the remaining life of the aircraft. This will result in a reduction of depreciation expense of $6.4 million during the remainder of fiscal year 2019, $8.4 million during fiscal year 2020, $5.6 million during fiscal year 2021 and $21.3 million during fiscal year 2022 and beyond. For the leased aircraft, we will recognize the remaining deferred liability of $10.4 million as a reduction in rent expense prospectively on a straight-line basis over the remaining lease terms. This will result in a reduction to rent expense of $4.4 million during the remainder of fiscal year 2019, $4.0 million during fiscal year 2020 and $2.0 million during fiscal year 2021.

During the 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 sixcapital 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 expect to realize the remaining $2.3 million recovery during fiscal year 2019 as follows: $1.0 million decrease in direct cost in the three months ended September 30, 2016,2018, $1.0 million decrease in direct cost in the three months ended December 31, 2018 and $0.3 million decrease in direct cost in the three months ended March 31, 2019. The increase in revenue relates to compensation for lost revenue in prior periods from the late delivery of aircraft and the decreases in direct cost over fiscal year 2019 relate to prior costs we recorded accelerated depreciationhave incurred and future costs we expect to incur.

Other accrued liabilities of $1.3$51.3 million and $8.2$66.0 million on sixas of June 30 and 11 aircraft,March 31, 2018, respectively, as our management decided to exit these model types earlier than originally anticipated.includes the following:

Recent Accounting Pronouncements

We consider the applicability and impact of all accounting standard updates (“ASUs”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance on revenue recognition replacing the existing accounting standard and industry-specific guidance for revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. This accounting guidance requires an entityThe underlying principle of the new standard is to recognize the amount of revenue to which it expects to be entitled fordepict the transfer of promised goods or services to customers and will replace most existing revenue recognition guidance when it becomes effective.at the amount expected to be collected. This new standard is effective for annual reporting periods beginning after December 15, 2016. However, in July 2015,2017. We adopted the FASB approved the deferralstandard as of the effective date of the revenue recognition standard permitting public entities to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Early application is permitted, but not before the original effective date of December 15, 2016. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the balance sheet. We have not adopted this standard yet but expect to adopt the new revenue standardApril 1, 2018 using the modified retrospective transition approach. We are continuingmethod applied to evaluateopen contracts and only to the effect this accounting guidance will have on our financial statements and related disclosures and are still assessing the differences between the new revenue standard and current accounting practices.

In February 2016, the FASB issued accounting guidance which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. Additionally, this accounting guidance requires a modified retrospective transition approach for all leases existing at, or entered into after the date of initial application, with an option to use certain transition relief. We have not yet adopted this standard and are currently evaluating the effect this standard will have on our financial statements.

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

In January 2017, the FASB issued accounting guidance which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides criteria for determining when a transaction involves the acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction does not involve the acquisition of a business. If the criteria are not met, then the amendment requires that to be considered a business, the operation must include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We have not yet adopted this accounting guidance and are currently evaluating the effect thiseffective April 1, 2018. This accounting guidance will havehas had no impact on our financial statements.statements since adoption as we have not entered into any transactions during this period.

In March 2017, the FASB issued accounting guidance related to the presentation of net periodic pension cost and net periodic postretirementpost-retirement benefit cost. The accounting guidance requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose the amount of net benefit cost that is included in the statement of operations or capitalized in assets, by line item. The accounting guidance requires employers to report the service cost component in the same line item(s) as other compensation costs and to report other pension-related costs (which include interest costs, amortization of pension-related costs from prior periods, and the gains or losses on plan assets) separately and exclude them from the subtotal of operating income. The accounting guidance also allows only the service cost component to be eligible for capitalization when applicable. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted as of the first interim period of an annual period for which interim or annual financial statements have not been issued. The accounting guidance requires application on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirementpost-retirement benefit cost in the statement of operations and on a prospective basis for the capitalization of the service cost component of net periodic pension cost and net periodic postretirementpost-retirement benefit in assets. We have not yet adopted this accounting guidance effective April 1, 2018 and are currently evaluatingour statement of operations was retrospectively adjusted by $0.1 million with an increase in direct cost and a corresponding credit in other income (expense), net for the effect this accounting guidance will have on our financial statements.three months ended June 30, 2017.

In May 2017, the FASB issued accounting guidance on determining which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted, and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will haveeffective April 1, 2018 with no impact on our financial statements.statements as there were no changes to the terms or conditions of share-based payment awards.

In August 2017,February 2018, the FASB issued new accounting guidance on derivatives and hedging, which amends and simplifies existing guidance in orderincome statement reporting of comprehensive income, specifically pertaining to allow companies to more accurately present the economicreclassification of certain tax effects of risk management activities in the financial statements.from accumulated other comprehensive income. This accounting guidancepronouncement is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted, and earlieris applied prospectively to changes in terms or conditions of awards occurring on or after the adoption is permitted.date. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements.

In accordance with the new revenue standard requirements discussed in Note 21, the disclosure of the impact of adoption on our condensed consolidated financial statements for the three months ended June 30, 2018 follows (in thousands):

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.

The Company, Caledonia, the E.U. Investor and Bristow Aviation have entered into a shareholder agreement respecting, among other things, the composition of the board of directors of Bristow Aviation. On matters coming before Bristow Aviation’s board, Caledonia’s representatives have a total of three votes and the two other directors have one vote each. In addition, Caledonia has the right to nominate two persons to our board of directors and to replace any such directors so nominated.nominated, provided that Caledonia owned (1) at least 1,000,000 shares of common stock of the Company or (2) at least 49% of the total outstanding shares of Bristow Aviation. According to Caledonia’s most recent Form 13F filed with the SEC on July 10, 2018, Caledonia was no longer the direct beneficial owner of any shares of our common stock as of June 30, 2018. Accordingly, pursuant to the terms of the Master Agreement dated December 12, 1996 among Caledonia and the Company, Caledonia does not currently satisfy the requirements to designate directors for nomination to our board of directors.

Caledonia, the Company and the E.U. Investor also have entered into a put/call agreement under which, upon giving specified prior notice, we have the right to buy all the Bristow Aviation shares held by Caledonia and the E.U. Investor, who, in turn, each have the right to require us to purchase such shares. Under current English law, we would be required, in order for Bristow Aviation to retain its operating license, to find a qualified E.U. investor to own any Bristow Aviation shares we have the right to acquire under the put/call agreement. The only restriction under the put/call agreement limiting our ability to exercise the put/call option is a requirement to consult with the Civil Aviation Authority (the “CAA”) in the U.K. regarding the suitability of the new holder of the Bristow Aviation shares. The put/call agreement does not contain any provisions should the CAA not approve the new E.U. investor. However, we would work diligently to find an E.U. investor suitable to the CAA. The amount by which we could purchase the shares of the other investors holding 51% of the equity of Bristow Aviation is fixed under the terms of the call option, and we have reflected this amount on our condensed consolidated balance sheets as noncontrolling interest.

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):