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EX-31.1 - EXHIBIT 31.1 - Bristow Group Incbrsq110-q06302016ex311.htm
EX-32.2 - EXHIBIT 32.2 - Bristow Group Incbrsq110-q06302016ex322.htm
EX-32.1 - EXHIBIT 32.1 - Bristow Group Incbrsq110-q06302016ex321.htm
EX-31.2 - EXHIBIT 31.2 - Bristow Group Incbrsq110-q06302016ex312.htm
EX-15.1 - EXHIBIT 15.1 - Bristow Group Incbrsq110-q06302016ex151.htm


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, 2016
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)
 
 
2103 City West Blvd.,
4th Floor
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)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
 
(Do not check if a smaller reporting company)
 
 
 
 
 
 
 
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 the number shares outstanding of each of the issuer’s classes of Common Stock, as of July 29, 2016.
35,063,321 shares of Common Stock, $.01 par value
 




BRISTOW GROUP INC.
INDEX — FORM 10-Q
 



PART I — FINANCIAL INFORMATION
 
Item 1.     Financial Statements.
BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
 
  
 
Three Months Ended 
 June 30,
 
 
2016
 
2015
 
 
 
 
 
 
 
(Unaudited)
(In thousands, except per share amounts)
Gross revenue:
 
 
 
 
Operating revenue from non-affiliates
 
$
338,675

 
$
420,013

Operating revenue from affiliates
 
17,509

 
20,098

Reimbursable revenue from non-affiliates
 
13,214

 
26,885

 
 
369,398

 
466,996

Operating expense:
 
 
 
 
Direct cost
 
289,543

 
336,118

Reimbursable expense
 
12,614

 
26,167

Depreciation and amortization
 
34,694

 
37,146

General and administrative
 
52,595

 
61,332

 
 
389,446

 
460,763

 
 
 
 
 
Loss on disposal of assets
 
(10,017
)
 
(7,695
)
Earnings from unconsolidated affiliates, net of losses
 
3,830

 
6,296

Operating income (loss)
 
(26,235
)
 
4,834

 
 
 
 
 
Interest expense, net
 
(10,886
)
 
(7,669
)
Other income (expense), net
 
(6,189
)
 
3,839

Income (loss) before provision for income taxes
 
(43,310
)
 
1,004

Benefit (provision) for income taxes
 
2,238

 
(2,633
)
Net loss
 
(41,072
)
 
(1,629
)
Net (income) loss attributable to noncontrolling interests
 
300

 
(1,628
)
Net loss attributable to Bristow Group
 
(40,772
)
 
(3,257
)
Accretion of redeemable noncontrolling interests
 

 
(6,301
)
Net loss attributable to common stockholders
 
$
(40,772
)
 
$
(9,558
)
 
 
 
 
 
Loss per common share:
 
 
 
 
Basic
 
$
(1.17
)
 
$
(0.27
)
Diluted
 
$
(1.17
)
 
$
(0.27
)
 
 
 
 
 
Cash dividends declared per common share
 
$
0.07

 
$
0.34


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

1


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
  
 
Three Months Ended 
 June 30,
 
 
2016
 
2015
 
 
 
 
 
 
 
(Unaudited)
(In thousands)
Net loss
 
$
(41,072
)
 
$
(1,629
)
Other comprehensive income:
 
 
 
 
Currency translation adjustments
 
(7,135
)
 
12,608

Total comprehensive income (loss)
 
(48,207
)
 
10,979

 
 
 
 
 
Net (income) loss attributable to noncontrolling interests
 
300

 
(1,628
)
Currency translation adjustments attributable to noncontrolling interests
 
(4,442
)
 
2,106

Total comprehensive (income) loss attributable to noncontrolling interests
 
(4,142
)
 
478

Total comprehensive income (loss) attributable to Bristow Group
 
(52,349
)
 
11,457

Accretion of redeemable noncontrolling interests
 

 
(6,301
)
Total comprehensive income (loss) attributable to common stockholders
 
$
(52,349
)
 
$
5,156

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

2


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 
 
June 30, 
 2016
 
March 31,  
 2016
 
 
(Unaudited)
 
 
 
 
(In thousands)
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
122,711

 
$
104,310

Accounts receivable from non-affiliates
 
243,446

 
243,425

Accounts receivable from affiliates
 
7,551

 
5,892

Inventories
 
137,673

 
142,503

Assets held for sale
 
40,572

 
43,783

Prepaid expenses and other current assets
 
51,941

 
53,183

Total current assets
 
603,894

 
593,096

Investment in unconsolidated affiliates
 
207,351

 
194,952

Property and equipment – at cost:
 
 
 
 
Land and buildings
 
242,846

 
253,098

Aircraft and equipment
 
2,533,042

 
2,570,577

 
 
2,775,888

 
2,823,675

Less – Accumulated depreciation and amortization
 
(537,891
)
 
(540,423
)
 
 
2,237,997

 
2,283,252

Goodwill
 
28,650

 
29,990

Other assets
 
140,234

 
161,655

Total assets
 
$
3,218,126

 
$
3,262,945

 
 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
 
 
 
 
Accounts payable
 
$
93,259

 
$
96,966

Accrued wages, benefits and related taxes
 
61,175

 
59,431

Income taxes payable
 
19,838

 
27,400

Other accrued taxes
 
7,853

 
7,995

Deferred revenue
 
42,531

 
24,206

Accrued maintenance and repairs
 
20,994

 
22,196

Accrued interest
 
5,948

 
11,985

Other accrued liabilities
 
49,796

 
48,392

Deferred taxes
 
2,334

 
1,881

Short-term borrowings and current maturities of long-term debt
 
78,036

 
60,394

Contingent consideration
 
3,723

 
29,522

Total current liabilities
 
385,487

 
390,368

Long-term debt, less current maturities
 
1,123,315

 
1,071,578

Accrued pension liabilities
 
60,370

 
70,107

Other liabilities and deferred credits
 
26,843

 
33,273

Deferred taxes
 
154,704

 
172,254

Commitments and contingencies (Note 5)
 


 

Redeemable noncontrolling interest
 
14,095

 
15,473

Stockholders’ investment:
 
 
 
 
Common stock, $.01 par value, authorized 90,000,000; outstanding: 35,063,321 as of June 30 and 34,976,743 as of March 31 (exclusive of 1,291,441 treasury shares)
 
378

 
377

Additional paid-in capital
 
802,771

 
801,173

Retained earnings
 
1,129,048

 
1,172,273

Accumulated other comprehensive loss
 
(301,396
)
 
(289,819
)
Treasury shares, at cost (2,756,419 shares)
 
(184,796
)
 
(184,796
)
Total Bristow Group stockholders’ investment
 
1,446,005

 
1,499,208

Noncontrolling interests
 
7,307

 
10,684

Total stockholders’ investment
 
1,453,312

 
1,509,892

Total liabilities, redeemable noncontrolling interest and stockholders’ investment
 
$
3,218,126

 
$
3,262,945

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

3


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
  
 
Three Months Ended 
 June 30,
 
 
2016
 
2015
 
 
 
 
 
 
 
(Unaudited)
(In thousands)
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(41,072
)
 
$
(1,629
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
34,694

 
37,146

Deferred income taxes
 
(7,216
)
 
(7,293
)
Discount amortization on long-term debt
 
27

 
918

Loss on disposal of assets
 
10,017

 
7,695

Impairments of inventories
 

 
5,439

Stock-based compensation
 
4,200

 
3,967

Equity in earnings from unconsolidated affiliates in excess of dividends received
 
(3,587
)
 
(5,530
)
Tax benefit related to stock-based compensation
 

 
(337
)
Increase (decrease) in cash resulting from changes in:
 
 
 
 
Accounts receivable
 
(18,391
)
 
6,329

Inventories
 
(2,000
)
 
(4,872
)
Prepaid expenses and other assets
 
(2,390
)
 
(17,582
)
Accounts payable
 
5,328

 
14,830

Accrued liabilities
 
10,334

 
(20,243
)
Other liabilities and deferred credits
 
(5,342
)
 
(2,901
)
Net cash provided by (used in) operating activities
 
(15,398
)
 
15,937

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(21,063
)
 
(67,777
)
Proceeds from asset dispositions
 
11,500

 
9,301

Net cash used in investing activities
 
(9,563
)
 
(58,476
)
Cash flows from financing activities:
 
 
 
 
Proceeds from borrowings
 
74,408

 
364,774

Debt issuance costs
 
(2,925
)
 

Repayment of debt
 
(18,035
)
 
(285,589
)
Partial prepayment of put/call obligation
 
(13
)
 
(14
)
Acquisition of noncontrolling interest
 

 
(2,000
)
Payment of contingent consideration
 
(10,000
)
 
(8,000
)
Common stock dividends paid
 
(2,453
)
 
(11,871
)
Tax benefit related to stock-based compensation
 

 
337

Net cash provided by financing activities
 
40,982

 
57,637

Effect of exchange rate changes on cash and cash equivalents
 
2,380

 
1,150

Net increase in cash and cash equivalents
 
18,401

 
16,248

Cash and cash equivalents at beginning of period
 
104,310

 
104,146

Cash and cash equivalents at end of period
 
$
122,711

 
$
120,394

Cash paid during the period for:
 
 
 
 
Interest
 
$
18,114

 
$
16,655

Income taxes
 
$
4,058

 
$
7,365

Supplemental disclosure for non-cash investing activities:
 
 
 
 
Completion of deferred sale leaseback
 
$

 
$
(74,480
)
Deferred sale leaseback advance
 
$

 
$
18,285

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

4


BRISTOW GROUP INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Equity and Redeemable Noncontrolling Interests
(Unaudited)
(In thousands, except share amounts)
 
 
 
Total Bristow Group Stockholders’ Investment
 
 
 
 
 
Redeemable Noncontrolling Interests
 
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, 2016
$
15,473

 
$
377

 
34,976,743

 
$
801,173

 
$
1,172,273

 
$
(289,819
)
 
$
(184,796
)
 
$
10,684

 
$
1,509,892

Issuance of common stock

 
1

 
86,578

 
1,598

 

 

 

 

 
1,599

Distributions paid to noncontrolling interests

 

 

 

 

 

 

 
(13
)
 
(13
)
Common stock dividends ($0.07 per share)

 

 

 

 
(2,453
)
 

 

 

 
(2,453
)
Currency translation adjustments
(1,058
)
 

 

 

 

 

 

 
(3,384
)
 
(3,384
)
Net income (loss)
(320
)
 

 

 

 
(40,772
)
 

 

 
20

 
(40,752
)
Other comprehensive loss

 

 

 

 

 
(11,577
)
 

 

 
(11,577
)
June 30, 2016
$
14,095

 
$
378

 
35,063,321

 
$
802,771

 
$
1,129,048

 
$
(301,396
)
 
$
(184,796
)
 
$
7,307

 
$
1,453,312


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



5

BRISTOW GROUP INC. 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, 2017 is referred to as “fiscal year 2017”. Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission, the information contained in the following notes to condensed consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and related notes thereto contained in our fiscal year 2016 Annual Report (the “fiscal year 2016 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, 2016 and the consolidated statements of operations, comprehensive income and cash flows for the three months ended June 30, 2016 and 2015.
Certain reclassifications of prior period information have been made to conform to the presentations of the current period information as a result of an adoption of a required accounting standard. In the prior period financial statements, we had included unamortized debt issuance costs in other assets. Current period presentation has reclassified certain of these unamortized debt issuance costs as direct deductions of our debt balances on our condensed consolidated balance sheet. These reclassifications had no effect on net income or cash flows provided by operating activities as previously reported.

6

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

Foreign Currency
During the three months ended June 30, 2016 and 2015, 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,
 
 
 
2016
 
2015
 
One British pound sterling into U.S. dollars
 
 
 
 
 
High
 
1.48

 
1.59

 
Average
 
1.43

 
1.53

 
Low
 
1.31

 
1.46

 
At period-end
 
1.34

 
1.57

 
One euro into U.S. dollars
 
 
 
 
 
High
 
1.15

 
1.14

 
Average
 
1.13

 
1.11

 
Low
 
1.10

 
1.06

 
At period-end
 
1.11

 
1.11

 
One Australian dollar into U.S. dollars
 
 
 
 
 
High
 
0.78

 
0.81

 
Average
 
0.75

 
0.78

 
Low
 
0.72

 
0.76

 
At period-end
 
0.74

 
0.77

 
One Norwegian kroner into U.S. dollars
 
 
 
 
 
High
 
0.1245

 
0.1370

 
Average
 
0.1212

 
0.1291

 
Low
 
0.1163

 
0.1234

 
At period-end
 
0.1195

 
0.1267

 
One Nigerian naira into U.S. dollars
 
 
 
 
 
High
 
0.0050

 
0.0051

 
Average
 
0.0048

 
0.0051

 
Low
 
0.0035

 
0.0050

 
At period-end
 
0.0035

 
0.0050

 
_____________ 
Source: Bank of England, FactSet and Oanda.com
Other income (expense), net, in our condensed consolidated statements of operations includes foreign currency transaction losses of $6.3 million and foreign currency transaction gains of $3.9 million for the three months ended June 30, 2016 and 2015, respectively. The losses for the three months ended June 30, 2016 were primarily driven by the strengthening of the U.S. dollar against the Nigerian naira and British pound sterling as reflected in the table above.

7

BRISTOW GROUP INC. AND SUBSIDIARIES
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, 2015, earnings from unconsolidated affiliates, net of losses, increased $1.7 million 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,
 
 
 
2016
 
2015
 
One Brazilian real into U.S. dollars
 
 
 
 
 
High
 
0.3121

 
0.3435

 
Average
 
0.2849

 
0.3258

 
Low
 
0.2702

 
0.3108

 
At period-end
 
0.3121

 
0.3184

 
_____________ 
Source: FactSet and Oanda.com
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, 2016
Revenue
 
$
(15,010
)
Operating expense
 
15,052

Earnings from unconsolidated affiliates, net of losses
 
(1,788
)
Non-operating expense
 
(10,117
)
Income before provision for income taxes
 
(11,863
)
Provision for income taxes
 
2,778

Net income
 
(9,085
)
Cumulative translation adjustment
 
(11,577
)
Total stockholders’ investment
 
$
(20,662
)
Revenue Recognition
In general, we recognize revenue when it is both realized or realizable and earned. We consider revenue to be realized or realizable and earned when the following conditions exist: there is persuasive evidence of an arrangement (generally a client contract exists); the services or products have been performed or delivered to the client; the sales price is fixed or determinable; and collection has occurred or is probable.
Revenue from helicopter services, including search and rescue (“SAR”) services, is recognized based on contractual rates as the related services are performed. The charges under these contracts are generally based on a two-tier rate structure consisting of a daily or monthly fixed fee plus additional fees for each hour flown. These contracts are for varying periods and generally permit the client to cancel the contract before the end of the term. We also provide services to clients on an “ad hoc” basis, which usually entails a shorter contract notice period and duration. The charges for ad hoc services are based on an hourly rate or a daily or monthly fixed fee plus additional fees for each hour flown. In order to offset potential increases in operating costs, our long-term contracts may provide for periodic increases in the contractual rates charged for our services. We recognize the impact of these rate increases when the criteria outlined above have been met. This generally includes written recognition from the clients that they are in agreement with the amount of the rate escalation. Cost reimbursements from clients are recorded as reimbursable revenue with the related reimbursed costs recorded as reimbursable expense on our condensed consolidated statements of operations.
Bristow Academy, our helicopter training unit, primarily earns revenue from military training, flight training provided to individual students and ground school courses. We recognize revenue from these sources using the same revenue recognition principles described above as services are provided. We consider revenue to be realized or realizable and earned when the following conditions exist: there is persuasive evidence of an arrangement (generally a contract exists); the services have been performed or delivered to the client or student; the sales price is fixed and determinable; and collection has occurred or is probable.

8

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

Eastern Airways International Limited (“Eastern Airways”) and Capiteq Limited, operating under the name Airnorth, primarily earn revenue through charter and scheduled airline services and provision of airport services (Eastern Airways only). Both chartered and scheduled airline service revenue is recognized net of passenger taxes and discounts. Revenue is recognized at the earlier of the period in which the service is provided or the period in which the right to travel expires, which is determined by the terms and conditions of the ticket. Ticket sales are recorded within deferred revenue in accordance with the above policy. Airport services revenue is recognized when earned.
Interest Expense, Net
During the three months ended June 30, 2016 and 2015, interest expense, net consisted of the following (in thousands):
 
Three Months Ended 
 June 30,
 
2016
 
2015
Interest income
$
234

 
$
221

Interest expense
(11,120
)
 
(7,890
)
Interest expense, net
$
(10,886
)
 
$
(7,669
)
Accretion of Redeemable Noncontrolling Interests
Accretion of redeemable noncontrolling interests of $6.3 million for the three months ended June 30, 2015 related to put arrangements whereby the noncontrolling interest holders may require us to redeem the remaining shares of Airnorth and Eastern Airways at a formula-based amount that is not considered fair value (the “redemption amount”). Redeemable noncontrolling interest is adjusted each period for comprehensive income, dividends attributable to the noncontrolling interest and changes in ownership interest, if any, such that the noncontrolling interest represents the proportionate share of Airnorth’s and Eastern Airways’ equity (the “carrying value”). Additionally, at each period end we are required to compare the redemption amount to the carrying value of the redeemable noncontrolling interest and record the redeemable noncontrolling interest at the higher of the two amounts, with a corresponding charge or credit directly to retained earnings. While this charge or credit does not impact net income (loss), it does result in a reduction or increase of income (loss) available to common shareholders in the calculation of diluted earnings (loss) per share (see Note 8).
Accounts Receivable
As of June 30 and March 31, 2016, the allowance for doubtful accounts for non-affiliates was $5.6 million in both periods. There were no allowances for doubtful accounts related to accounts receivable due from affiliates as of June 30 and March 31, 2016. The allowance for doubtful accounts for non-affiliates as of June 30 and March 31, 2016 primarily related to amounts due from two clients in Nigeria and one client in Australia for which we no longer believed collection was probable.
Inventories
As of June 30 and March 31, 2016, inventories were net of allowances of $25.0 million and $27.8 million, respectively.
Prepaid Expenses and Other Current Assets
As of June 30 and March 31, 2016, prepaid expenses and other current assets included the short-term portion of contract acquisition and pre-operating costs totaling $12.6 million and $12.1 million, respectively, related to the SAR contracts in the U.K. and Australia and a client contract 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, 2016, we expensed $2.2 million due to the start-up of some of these contracts.

9

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

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 annually or when events or changes in circumstances indicate that a potential impairment exists. Goodwill of $28.7 million and $30.0 million as of June 30 and March 31, 2016, respectively, related to our reporting units were as follows (in thousands):
 
Europe Caspian
 
Asia Pacific
 
Total
March 31, 2016
$
10,026

 
$
19,964

 
$
29,990

Foreign currency translation
(700
)
 
(640
)
 
(1,340
)
June 30, 2016
$
9,326

 
$
19,324

 
$
28,650

Accumulated goodwill impairment of $42.2 million as of both June 30 and March 31, 2016 related to our reporting units were as follows (in thousands):
 
Europe Caspian
 
Africa
 
Corporate and other
 
Americas
 
Total
March 31, 2016
$
(25,177
)
 
$
(6,179
)
 
$
(10,223
)
 
$
(576
)
 
$
(42,155
)
Impairments

 

 

 

 

June 30, 2016
$
(25,177
)
 
$
(6,179
)
 
$
(10,223
)
 
$
(576
)
 
$
(42,155
)
Other Intangible Assets
Other Intangible Assets — Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values. Intangible assets by type were as follows (in thousands):
 
Client
contracts
 
Client
relationships
 
Trade name and trademarks
 
Internally developed software
 
Licenses
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Carrying Amount
March 31, 2016
$
8,170

 
$
12,779

 
$
5,008

 
$
1,149

 
$
752

 
$
27,858

Foreign currency translation
(3
)
 
(64
)
 
(292
)
 
(47
)
 
(2
)
 
(408
)
June 30, 2016
$
8,167

 
$
12,715

 
$
4,716

 
$
1,102

 
$
750

 
$
27,450

 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Amortization
March 31, 2016
$
(8,062
)
 
$
(10,600
)
 
$
(636
)
 
$
(480
)
 
$
(601
)
 
$
(20,379
)
Amortization expense
(57
)
 
(184
)
 
(73
)
 
(55
)
 
(14
)
 
(383
)
June 30, 2016
$
(8,119
)
 
$
(10,784
)
 
$
(709
)
 
$
(535
)
 
$
(615
)
 
$
(20,762
)
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining contractual life, in years
0.2

 
6.3

 
13.7

 
2.6

 
2.4

 
4.4

Future amortization expense of intangible assets for each of the years ending March 31 are as follows (in thousands):
                 
2017
$
668

2018
879

2019
753

2020
465

2021
465

Thereafter
3,458

 
$
6,688

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

10

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

Other Assets
As of June 30 and March 31, 2016, other assets included the long-term portion of contract acquisition and pre-operating costs totaling $51.7 million and $55.1 million, respectively, related to the SAR contracts in the U.K. and a client contract in Norway, which are recoverable under the contract and will be expensed over the terms of the contracts.
Property and Equipment and Assets Held for Sale
During the three months ended June 30, 2016 and 2015, we made capital expenditures as follows:
 
Three Months Ended 
 June 30,
 
2016

2015
Number of aircraft delivered:
 
 
 
Medium

 
1

SAR aircraft

 
1

Total aircraft

 
2

Capital expenditures (in thousands):
 
 
 
Aircraft and related equipment (1)
$
17,487

 
$
40,462

Other
3,576

 
27,315

Total capital expenditures
$
21,063

 
$
67,777

_____________ 
(1)
During the three months ended June 30, 2016 and 2015, we spent $3.1 million and $28.3 million, respectively, on progress payments for aircraft to be delivered in future periods.
The following table presents details on the aircraft sold or disposed of and impairments on assets held for sale during the three months ended June 30, 2016 and 2015:
 
Three Months Ended 
 June 30,
 
2016
 
2015
 
 
 
 
 
(In thousands, except for number of aircraft)
 
 
 
 
Number of aircraft sold or disposed of
6

 
9

Proceeds from sale or disposal of assets
$
11,500

 
$
9,301

Gain from sale or disposal of assets (1)
$
132

 
$
2,167

 
 
 
 
Number of aircraft impaired
11

 
9

Impairment charges on aircraft held for sale (1)
$
10,149

 
$
9,862

_____________ 
(1) 
Included in gain (loss) on disposal of assets on our condensed consolidated statements of operations.
During the three months ended June 30, 2016 and 2015, we recorded accelerated depreciation of $6.9 million and $10.5 million on 11 and 19 aircraft, respectively, as our management decided to exit these model types earlier than originally anticipated. We expect to record an additional $3.5 million in depreciation expense over the remainder of fiscal year 2017 relating to this change in fleet exit timing.
The weakening of the British pound sterling during the three months ended June 30, 2016 triggered a review of our property and equipment for potential impairment. In accordance with Accounting Standard Codification 360-10-35, we estimated future undiscounted cash flows to test the recoverability of our property and equipment, which largely consists of our held for use aircraft. The determination of estimated future undiscounted cash flows required us to use significant unobservable inputs including assumptions related to projected demand for services and rates. We determined that the estimated future undiscounted cash flows were above the carrying value as of June 30, 2016 and no impairment was recorded. Future declines in operating performance or anticipated business outlook may reduce our estimated future undiscounted cash flows and result in impairment.

11

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

Recent Accounting Pronouncements
We consider the applicability and impact of all accounting standard updates (“ASUs”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance on revenue recognition for revenue from contracts with customers. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers and will replace most existing revenue recognition guidance when it becomes effective. This new standard was effective for annual reporting periods beginning after December 15, 2016. However, in July 2015, the FASB approved the deferral of the effective date of the revenue recognition standard permitting public entities to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Early application is permitted, but not before the original effective date of December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect this standard will have on our financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.
In August 2014, the FASB issued accounting guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within a year of the date the financial statements are issued. The standard applies to all entities and is effective for annual and interim periods beginning after December 15, 2016 with early adoption permitted. We are evaluating the effect this standard will have on our financial statements and related disclosures.
In February 2015, the FASB issued accounting guidance which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The guidance amends the criteria for determining which entities are considered Variable Interest Entities (“VIEs”) and amends the criteria for determining if a service provider possesses a variable interest in a VIE. This pronouncement is effective for annual and interim periods in fiscal years beginning after December 15, 2015. A reporting entity may apply the amendments using a modified retrospective approach or a full retrospective application. We have adopted this accounting guidance effective April 1, 2016 and there is no material effect on our financial statements and related disclosures.
In April 2015, the FASB issued accounting guidance relating to the presentation of debt issuance costs. The intent is to simplify the presentation of debt issuance costs by requiring entities to record debt issuance costs on the balance sheet as a direct deduction from the carrying amount of the related debt liability, similar to debt discounts or premiums. In August 2015, the FASB issued additional guidance to allow issuers to continue to recognize debt issuance costs related to line-of-credit arrangements as an asset and amortize that asset over the term of the credit agreement regardless of whether a balance is outstanding. These pronouncements are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. We have adopted this accounting guidance effective April 1, 2016. As a result of the adoption, we presented the $8.9 million of unamortized debt issuance costs that was previously included in other assets in our condensed consolidated balance sheet as of March 31, 2016 as direct deductions from the carrying amount of the related debt.
In November 2015, the FASB issued a new standard which changes how deferred taxes are classified on an entity’s balance sheet. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The new guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and early adoption is permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively. If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. We have not yet adopted this accounting guidance or determined the method of adoption but we believe the adoption of this guidance would reduce current assets and current liabilities and increase long-term assets and long-term liabilities by such amounts.
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 pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. Additionally, this pronouncement 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 nor have we determined the effect of the standard on our ongoing financial reporting.

12

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

In March 2016, the FASB issued accounting guidance related to accounting for employee share-based payments. The amendments are 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 pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and early adoption is permitted. We have not yet adopted this standard nor have we determined the effect of the standard on our ongoing financial reporting.
Note 2 — 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, 2016, 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 2016 Financial Statements for a description of other investments in significant affiliates.
Bristow Aviation Holdings Limited — We own 49% of Bristow Aviation Holdings Limited’s (“Bristow Aviation”) common stock and a significant amount of its subordinated debt. Bristow Aviation is incorporated in England and holds all of the outstanding shares in Bristow Helicopters Limited (“Bristow Helicopters”). Bristow Aviation's subsidiaries provide industrial aviation services to clients 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”) own 49%, 46% and 5%, respectively, of Bristow Aviation’s total outstanding ordinary shares, although Caledonia has 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 ($121.6 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 $1.8 billion as of June 30, 2016.
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.
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.
Furthermore, the call option provides a mechanism whereby the economic risk for the other investors 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 shareholders (£1.0 million as of June 30, 2016) 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 shareholders at a rate of sterling LIBOR plus 3% (prior to May 2004, the rate was fixed at 12%) by recognizing noncontrolling interest expense on our condensed consolidated statements of operations, with a

13

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

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 investors have an option to put their 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.
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, 
 2016
 
March 31,  
 2016
 
Assets
 
 
 
 
 
Cash and cash equivalents
 
$
121,612

 
$
62,773

 
Accounts receivable
 
584,428

 
565,223

 
Inventories
 
97,556

 
102,738

 
Prepaid expenses and other current assets
 
40,981

 
53,776

 
Total current assets
 
844,577

 
784,510

 
Investment in unconsolidated affiliates
 
4,109

 
4,676

 
Property and equipment, net
 
233,099

 
251,494

 
Goodwill
 
28,650

 
29,990

 
Other assets
 
73,656

 
82,443

 
Total assets
 
$
1,184,091

 
$
1,153,113

 
Liabilities
 
 
 
 
 
Accounts payable
 
$
604,882

 
$
521,563

 
Accrued liabilities
 
150,316

 
141,977

 
Accrued interest
 
1,765,120

 
1,698,360

 
Current maturities of long-term debt
 
11,861

 
10,322

 
Total current liabilities
 
2,532,179

 
2,372,222

 
Long-term debt, less current maturities
 
143,869

 
155,222

 
Accrued pension liabilities
 
60,370

 
70,107

 
Other liabilities and deferred credits
 
7,191

 
7,928

 
Deferred taxes
 
15,616

 
20,330

 
Redeemable noncontrolling interest
 
14,095

 
15,473

 
Total liabilities
 
$
2,773,320

 
$
2,641,282

 
 
 
 
Three Months Ended 
 June 30,
 
 
 
2016
 
2015
 
Revenue
 
$
318,454

 
$
386,771

 
Operating loss
 
(19,743
)
 
(17,743
)
 
Net loss
 
(88,543
)
 
(64,777
)

14

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

Bristow Helicopters Nigeria Ltd. — Bristow Helicopters Nigeria Ltd. (“BHNL”) is a joint venture in Nigeria in which Bristow Helicopters owned a 48% interest, a Nigerian company owned 100% by Nigerian employees owned a 50% interest and an employee trust fund owned the remaining 2% interest as of June 30, 2016. BHNL provides industrial aviation services to clients 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 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 clients 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.

15

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

Note 3 — DEBT
Debt as of June 30 and March 31, 2016 consisted of the following (in thousands):
 
 
June 30, 
 2016
 
March 31,  
 2016
6¼% Senior Notes due 2022
 
$
401,535

 
$
401,535

Term Loan
 
328,693

 
335,665

Term Loan Credit Facility
 
200,000

 
200,000

Revolving Credit Facility
 
206,950

 
144,000

Airnorth debt
 
18,903

 
19,652

Eastern Airways debt
 
15,634

 
15,643

Other debt
 
39,395

 
24,394

Unamortized debt issuance costs
 
(9,759
)
 
(8,917
)
Total debt
 
1,201,351

 
1,131,972

Less short-term borrowings and current maturities of long-term debt
 
(78,036
)
 
(60,394
)
Total long-term debt
 
$
1,123,315

 
$
1,071,578

Term Loan and Revolving Credit Facility — On May 23, 2016, we entered into an eighth amendment (the “Eighth Amendment”) to our amended and restated revolving credit and term loan agreement, which includes a $400 million revolving credit facility with a subfacility of $30 million for letters of credit (the “Revolving Credit Facility”) and a five-year, $350 million term loan (the “Term Loan”, and together with the Revolving Credit Facility, the “Credit Facilities”) (the “Amended and Restated Credit Agreement”) that, among other things, (a) replaced the maximum leverage ratio requirement with a maximum senior secured leverage ratio defined as the sum of senior secured debt and the present value of obligations under operating leases to consolidated EBITDA for the most recent four consecutive fiscal quarters, which ratio may not be not greater than 4.25:1.00 for each fiscal quarter ending during the period from March 31, 2016 through September 30, 2017 and 4.00:1.00 for each fiscal quarter ending thereafter, (b) replaced the interest coverage ratio requirement with a minimum current ratio, defined as the ratio of the sum of consolidated current assets minus the book value of aircraft held for sale plus the unused amount of aggregate revolving commitments less $25 million to consolidated current liabilities, which may not be not less than 1.00:1.00 as of the last day of each fiscal quarter, (c) allows for the issuance of certain additional indebtedness when the leverage ratio exceeds 4.75:1.00, including (i) unsecured, subordinated or convertible indebtedness to refinance outstanding term loans under the Amended and Restated Credit Agreement and our senior secured term loan agreement (the “Term Loan Credit Agreement”), (ii) additional unsecured, subordinated or convertible indebtedness of up to $100 million in principal amount, (iii) equipment financings, including, without limitation, aircraft sale and leaseback transactions, and (iv) financings of U.K. bases with respect to helicopter SAR services and (d) limits cash dividends on our common stock to $0.07 per share per quarter. In addition, in connection with the Eighth Amendment and the first amendment to the Term Loan Credit Agreement described below, certain of our U.S. subsidiaries have granted liens on certain of their aircraft to secure our obligations under the Amended and Restated Credit Agreement and the Term Loan Credit Agreement on a pari passu secured basis in favor of the lenders under each such agreement. Also, as part of the Eight Amendment, the applicable margin for borrowings under the Credit Facilities will range from 0.50% to 3.5% depending on whether the Base Rate or LIBOR was used and based on our leverage ratio pricing grid.
During the three months ended June 30, 2016, we had borrowings of $72.0 million and made payments of $9.0 million under the Revolving Credit Facility. Additionally, we paid $7.0 million to reduce our borrowings under the Term Loan. As of June 30, 2016, we had $0.6 million in letters of credit outstanding under the Revolving Credit Facility.
Term Loan Credit Facility — On May 23, 2016, we entered into the first amendment to the Term Loan Credit Agreement that, among other things, incorporates, as applicable, the provisions of the Eighth Amendment described above.
Other Debt — Other debt includes borrowings for aircraft purchase payments totaling $24.0 million with interest rates ranging from 2.5% to 3.5% payable in December 2016 and January 2017 and amounts payable relating to the third year earn-out payment for our investment in Cougar Helicopters Inc. (“Cougar”) totaling $15.4 million due in April 2017.

16

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

Note 4 — 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.
Non-recurring Fair Value Measurements
The majority of our non-financial assets, which include inventories, property and equipment, assets held for sale, goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur such that a non-financial asset is required to be evaluated for impairment and deemed to be impaired, the impaired non-financial asset is recorded at its fair value.
The following table summarizes the assets as of June 30, 2016, valued at fair value on a non-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,
2016
 
Total
Loss for the
Three Months
Ended
June 30,
2016
Assets held for sale
 
$

 
$
40,572

 
$

 
$
40,572

 
$
(10,149
)
Total assets
 
$

 
$
40,572

 
$

 
$
40,572

 
$
(10,149
)
The following table summarizes the assets as of June 30, 2015, valued at fair value on a non-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,
2015
 
Total
Loss for the
Three Months
Ended
June 30,
2015
Inventories
 
$

 
$
13,922

 
$

 
$
13,922

 
$
(5,439
)
Assets held for sale
 

 
35,523

 

 
35,523

 
(9,862
)
Total assets
 
$

 
$
49,445

 
$

 
$
49,445

 
$
(15,301
)
The fair value of inventories using Level 2 inputs is determined by evaluating the current economic conditions for sale and disposal of spare parts, which includes estimates as to the recoverability of the carrying value of the parts based on historical experience with sales and disposal of similar spare parts, the expected timeframe of sales or disposals, the location of the spare parts to be sold and the condition of the spare parts to be sold or otherwise disposed of.
The fair value of assets held for sale using Level 2 inputs is determined through evaluation of expected sales proceeds for aircraft. This analysis includes estimates based on historical experience with sales, recent transactions involving similar assets, quoted market prices for similar assets and condition and location of aircraft to be sold or otherwise disposed of. The loss for the three months ended June 30, 2016 related to eleven aircraft held for sale and the loss for the three months ended June 30, 2015 related to nine aircraft held for sale.

17

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

Recurring Fair Value Measurements
The following table summarizes the financial instruments we had as of June 30, 2016, 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,
2016
 
Balance  Sheet
Classification
Rabbi Trust investments
 
$
3,045

 
$

 
$

 
$
3,045

 
Other assets
Total assets
 
$
3,045

 
$

 
$

 
$
3,045

 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration: (1)
 
 
 
 
 
 
 
 
 
 
      Current
 
$

 
$

 
$
3,723

 
$
3,723

 
Contingent consideration
      Long-term
 

 

 
3,037

 
3,037

 
Other liabilities and deferred credits
Total liabilities
 
$

 
$

 
$
6,760

 
$
6,760

 
 
_____________ 
(1) 
Relates to the acquisition of Airnorth totaling $6.8 million. For further details on Airnorth, see Note 2 to the fiscal year 2016 Financial Statements.
The following table summarizes the financial instruments we had as of March 31, 2016, 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,
2016
 
Balance  Sheet
Classification
Rabbi Trust investments
 
$
2,990

 
$

 
$

 
$
2,990

 
Other assets
Total assets
 
$
2,990

 
$

 
$

 
$
2,990

 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration: (1)
 
 
 
 
 
 
 
 
 
 
      Current
 
$

 
$

 
$
29,522

 
$
29,522

 
Contingent consideration
      Long-term
 

 

 
3,069

 
3,069

 
Other liabilities and deferred credits
Total liabilities
 
$

 
$

 
$
32,591

 
$
32,591

 
 
_____________ 
(1) 
Relates to our investment in Cougar totaling $26.0 million and Airnorth totaling $6.6 million. For further details on Cougar and Airnorth, see Notes 2 and 3 to the fiscal year 2016 Financial Statements.
The rabbi trust investments consist of cash and mutual funds whose fair value are based on quoted prices in active markets for identical assets, and are designated as Level 1 within the valuation hierarchy. The rabbi trust holds investments related to our non-qualified deferred compensation plan for our senior executives.

18

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

The following table provides a rollforward of the contingent consideration liability Level 3 fair value measurements during the three months ended June 30, 2016 (in thousands):
 
 
Significant
Unobservable
Inputs (Level 3)
    Balance as of March 31, 2016
 
$
32,591
 
        Change in fair value of contingent consideration
 
169
 
        Payment of Cougar third year earn-out
 
(10,000
)
 Reclass of remaining Cougar third year earn-out to short-term borrowings and other accrued liabilities
 
(16,000
)
    Balance as of June 30, 2016
 
$
6,760
 
We assess the estimated fair value of the contractual obligation to pay the contingent consideration on a quarterly basis and any changes in estimated fair value are recorded as accretion expense included in depreciation and amortization on our condensed consolidated statements of operations. Fluctuations in the fair value of contingent consideration are impacted by two unobservable inputs, management's estimate of the probability of Cougar or Airnorth achieving certain agreed performance targets and the estimated discount rate. As of June 30 and March 31, 2016, the discount rate approximated 4% for the contingent consideration related to Cougar and 2% for the contingent consideration related to Airnorth.
Fair Value of Debt
The fair value of our debt has been estimated in accordance with the accounting standard regarding fair value. The fair value of our fixed rate long-term debt is estimated based on quoted market prices. The carrying and fair value of our long-term debt, including the current portion and excluding unamortized debt issuance costs, are as follows (in thousands):
 
 
June 30, 2016
 
March 31, 2016
 
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
6¼% Senior Notes
 
$
401,535

 
$
303,681

 
$
401,535

 
$
277,059

Term Loan
 
328,693

 
328,693

 
335,665

 
335,665

Term Loan Credit Facility
 
200,000

 
200,000

 
200,000

 
200,000

Revolving Credit Facility
 
206,950

 
206,950

 
144,000

 
144,000

Airnorth debt
 
18,903

 
18,903

 
19,652

 
19,652

Eastern Airways debt
 
15,634

 
15,634

 
15,643

 
15,643

Other debt
 
39,395

 
39,395

 
24,394

 
24,394

 
 
$
1,211,110

 
$
1,113,256

 
$
1,140,889

 
$
1,016,413

Other
The fair values of our cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to the short-term nature of these items.

19

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

Note 5 — COMMITMENTS AND CONTINGENCIES
Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next five fiscal years to purchase additional aircraft. As of June 30, 2016, we had 36 aircraft on order and options to acquire an additional 10 aircraft. Although a similar number of our existing aircraft may be sold during the same period, the additional aircraft on order will provide incremental fleet capacity in terms of revenue and operating income.
 
 
Nine Months Ending March 31, 2017
 
Fiscal Year Ending March 31,
 
 
 
 
2018
 
2019
 
2020
 
2021 and thereafter
 
Total
Commitments as of June 30, 2016: (1) (2)
 
 
 
 
 
 
 
 
 
 
 
 
Number of aircraft:
 
 
 
 
 
 
 
 
 
 
 
 
Medium
 
10

 

 

 

 

 
10

Large (2)
 

 
5

 
4

 
4

 
5

 
18

U.K. SAR
 
4

 
4

 

 

 

 
8

 
 
14

 
9

 
4

 
4

 
5

 
36

Related expenditures (in thousands) (3)
 
 
 
 
 
 
 
 
 
 
 
 
Medium and large
 
$
46,002

 
$
66,044

 
$
60,455

 
$
63,685

 
$
45,656

 
$
281,842

U.K. SAR
 
57,583

 
58,208

 

 

 

 
115,791

 
 
$
103,585

 
$
124,252

 
$
60,455

 
$
63,685

 
$
45,656

 
$
397,633

Options as of June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
Number of aircraft:
 
 
 
 
 
 
 
 
 
 
 
 
Medium
 

 
5

 

 

 

 
5

Large
 

 
3

 
2

 

 

 
5

 
 

 
8

 
2

 

 

 
10

 
 
 
 
 
 
 
 
 
 
 
 
 
Related expenditures (in thousands) (3)
 
$
25,974

 
$
116,055

 
$
30,410

 
$

 
$

 
$
172,439

_____________ 
(1) 
Signed client contracts are currently in place that will utilize eight of these U.K SAR aircraft.
(2) 
In July and August 2016, through discussions with helicopter manufacturers we: (i) reached agreements to defer payment of approximately $13 million in capital expenditures out of fiscal year 2017 and into future periods and approximately $5 million in capital expenditures out of fiscal year 2018 into future periods and (ii) signed a non-binding memorandum of understanding to defer payment of approximately $17 million in capital expenditures out of fiscal year 2017 and into future periods and approximately $59 million in capital expenditures out of fiscal year 2018 into future periods.
(3) 
Includes progress payments on aircraft scheduled to be delivered in future periods.
The following chart presents an analysis of our aircraft orders and options during the three months ended June 30, 2016:
     
 
 
 
Orders
 
Options
 
Beginning of period
 
36

 
14

 
Expired options
 

 
(4
)
 
End of period
 
36

 
10

We periodically purchase aircraft for which we have no orders.
Operating Leases — We have non-cancelable operating leases in connection with the lease of certain equipment, land and facilities, including leases for aircraft. Rental expense incurred under all operating leases was $51.3 million and $53.9 million for the three months ended June 30, 2016 and 2015, respectively, which includes rental expense incurred under operating leases for aircraft of $44.7 million and $46.6 million, respectively.

20

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

The aircraft leases range from base terms of up to 180 months with renewal options of up to 240 months in some cases, include purchase options upon expiration and some include early purchase options. The leases contain terms customary in transactions of this type, including provisions that allow the lessor to repossess the aircraft and require us to pay a stipulated amount if we default on our obligations under the agreements. The following is a summary of the terms related to aircraft leased under operating leases with original or remaining terms in excess of one year as of June 30, 2016:
 
End of Lease Term
 
Number of Aircraft
 
Nine months ending March 31, 2017 to fiscal year 2018
 
19

 
Fiscal year 2019 to fiscal year 2021
 
56

 
Fiscal year 2022 to fiscal year 2025
 
12

 
 
 
87

 
Employee Agreements — Approximately 50% of our employees are represented by collective bargaining agreements and/or unions with 79.1% of these employees being represented by collective bargaining agreements and/or unions that have expired or will expire in one year. These agreements generally include annual escalations of up to 4%. Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement. We also have employment agreements with members of senior management.
Separation Programs — In March 2015 and May 2016, we offered voluntary separation programs (“VSPs”) to certain employees as part of our ongoing efforts to improve efficiencies and reduce costs. During the three months ended June 30, 2016 and 2015, we recognized $0.9 million and $6.4 million in severance expense as a result of the VSPs, $0.8 million and $5.8 million of which is included in direct cost and $0.1 million and $0.6 million in general administrative expense, respectively. Additionally, beginning in March 2015, we initiated involuntary separation programs (“ISPs”) in certain regions. During the three months ended June 30, 2016 and 2015, we recognized $4.5 million and $1.6 million in severance expense as a result of the ISPs, $0.5 million and $0.5 million of which is included in direct cost and $4.0 million and $1.1 million in general administrative expense, respectively.
On April 18, 2016, Mr. Jeremy Akel departed the Company as Senior Vice President and Chief Operating Officer. Mr. Akel and the Company have entered into a Separation Agreement and Release in Full, dated June 7, 2016 to specify the terms of his departure from the Company, pursuant to which he will receive benefits generally consistent with the termination without cause terms set forth in the Bristow Group Inc. Management Severance Benefits Plan for U.S. Employees effective June 4, 2014 and the Amended and Restated Severance Benefits Agreement between Mr. Akel and the Company dated April 20, 2012. Additionally, on July 1, 2016, Ms. Hilary Ware departed the Company as Senior Vice President and Chief Administration Officer. Ms. Ware and the Company have entered into a Separation Agreement and Release in Full, dated July 14, 2016 to specify the terms of her departure from the Company, pursuant to which she will receive benefits generally consistent with the termination without cause terms set forth in the Bristow Group Inc. Management Severance Benefits Plan for U.S. Employees effective June 4, 2014 and the Amended and Restated Severance Benefits Agreement between Ms. Ware and the Company dated November 4, 2010. We recognized compensation expense related to the departure of Mr. Akel during the three months ended June 30, 2016 included in the amounts above. We expect to recognize $1.5 million in compensation expense related to the departure of Ms. Ware during the three months ending September 30, 2016.
Environmental Contingencies — The U.S. Environmental Protection Agency (the “EPA”), has in the past notified us that we are a potential responsible party (“PRP”) at three former waste disposal facilities that are on the National Priorities List of contaminated sites. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, also known as the Superfund law, persons who are identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites. Although we have not yet obtained a formal release of liability from the EPA with respect to any of the sites, we believe that our potential liability in connection with the sites is not likely to have a material adverse effect on our business, financial condition or results of operations.
Other Purchase Obligations — As of June 30, 2016, we had $311.4 million of other purchase obligations representing unfilled purchase orders for aircraft parts, commitments associated with upgrading facilities at our bases and non-cancelable power-by-the-hour maintenance commitments.

21

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

Other Matters — Although infrequent, aircraft accidents have occurred in the past, and the related losses and liability claims have been covered by insurance subject to deductible, self-insured retention and loss sensitive factors.
On April 29, 2016, an accident occurred with an Airbus Helicopters EC225LP (also known as a H225) model helicopter operated by another helicopter company, which resulted in a crash near Turøy outside of Bergen, Norway. The aircraft was carrying eleven passengers and two crew members at the time of the accident. Thirteen fatalities were reported. The cause of the accident is not yet known and is under investigation by authorities in Norway.
We operate a total of 27 H225 model aircraft worldwide (including 16 owned and 11 leased) as follows:
Five H225 model aircraft registered in Norway;
Thirteen H225 model aircraft registered in the United Kingdom; and
Nine H225 model aircraft registered in Australia.
The Norwegian Civil Aviation Authority previously issued a safety directive on April 29, 2016, requiring operators to suspend public transport flights and commercial air transport operations of all H225 model aircraft registered in, or flying in or offshore of, Norway. The safety directive permitted continued search and rescue flights of the affected aircraft in Norway for the purpose of saving life.
The U.K. Civil Aviation Authority also previously issued a safety directive on April 29, 2016, requiring operators to suspend public transport flights and commercial air transport operations of all H225 model aircraft registered in, or flying in or offshore of the United Kingdom.
On June 1, 2016, the Accident Investigation Board Norway published a preliminary report that contains new findings from the investigation into the accident and a safety recommendation to the European Aviation Safety Agency ("EASA"). The Norwegian Civil Aviation Authority subsequently issued a new safety directive on June 1, 2016, suspending all operations, including SAR training and flights, of all H225 and AS332L2 model aircraft registered in, or flying in or offshore of, Norway. The U.K. Civil Aviation Authority also issued a new safety directive on June 2, 2016, suspending all operations, including SAR operations, of all H225 and AS332L2 model aircraft registered in, or flying in or offshore of, the United Kingdom.
On June 2, 2016, EASA issued an emergency airworthiness directive prohibiting flight of H225 and AS332L2 model aircraft. The airworthiness directive by its terms does not apply to military, customs, police, SAR, firefighting, coastguard or similar activities or services as those types of services are governed by the member states of EASA directly. The Australian Civil Aviation Safety Authority subsequently issued the same airworthiness directive on June 3, 2016, prohibiting flight of H225 and AS332L2 model aircraft in Australia.
As a result and until further notice, we will not operate for commercial purposes any of our H225 model aircraft in Norway, the United Kingdom or Australia. We do not have any AS332L2 model aircraft in our fleet.
The Accident Investigation Board Norway issued a further preliminary report on June 28, 2016 which indicates that, at this stage of the investigation, the most likely cause of the accident was the result of a fatigue fracture in one of the second stage planet gears. However, what initiated the fatigue fracture has not yet been determined.
Our other aircraft fleets, including SAR, continue to operate globally. We expect to increase utilization of other in-region aircraft and implement contingency plans designed to identify other available aircraft that can be safely and quickly mobilized to minimize or eliminate the impact on our client’s critical operations. It is too early to determine whether the H225 accident that occurred in Norway in April 2016 will have a material impact on us as we are in the process of quantifying the impact and investigating potential claims against Airbus.
We operate in jurisdictions internationally where we are subject to risks that include government action to obtain additional tax revenue.  In a number of these jurisdictions, political unrest, the lack of well-developed legal systems and legislation that is not clear enough in its wording to determine the ultimate application, can make it difficult to determine whether legislation may impact our earnings until such time as a clear court or other ruling exists.  We operate in jurisdictions currently where amounts may be due to governmental bodies that we are not currently recording liabilities for as it is unclear how broad or narrow legislation may ultimately be interpreted.  We believe that payment of amounts in these instances is not probable at this time, but is reasonably possible.

22

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

A loss contingency is reasonably possible if the contingency has a more than remote but less than probable chance of occurring. Although management believes that there is no clear requirement to pay amounts at this time and that positions exist suggesting that no further amounts are currently due, it is reasonably possible that a loss could occur for which we have estimated a maximum loss at June 30, 2016 to be approximately $4 million to $7 million.
We are a defendant in certain claims and litigation arising out of operations in the normal course of business. In the opinion of management, uninsured losses, if any, will not be material to our financial position, results of operations or cash flows.
Note 6 — TAXES
In accordance with GAAP, we estimate the full-year effective tax rate from continuing operations and apply this rate to our year-to-date income from continuing operations. In addition, we separately calculate the tax impact of unusual or infrequent items, if any. The tax impacts of such unusual or infrequent items are treated discretely in the quarter in which they occur. During the three months ended June 30, 2016 and 2015, our effective tax rate was 5.2% and 262.3%, respectively. The effective tax rate for the three months ended June 30, 2016 was impacted by valuation allowances against future realization of foreign tax credits.  Additionally, we continue to value against net operating losses in certain foreign jurisdictions.
The relationship between our provision for or benefit from income taxes and our pre-tax book income can vary significantly from period to period considering, among other factors, (a) the overall level of pre-tax book income, (b) changes in the blend of income that is taxed based on gross revenues or at high effective tax rates versus pre-tax book income or at low effective tax rates and (c) our geographical blend of pre-tax book income. Consequently, our income tax expense does not change proportionally with our pre-tax book income. Significant decreases in our pre-tax book income typically result in higher effective tax rates, while significant increases in pre-tax book income can lead to lower effective tax rates, subject to the other factors impacting income tax expense noted above. The increase in our effective tax rate excluding discrete items for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily related to an increase in the blend of earnings taxed in relatively high taxed jurisdictions versus low taxed jurisdictions. Additionally, during the three months ended June 30, 2016 and 2015, we increased our valuation allowance by $13.2 million and $2.0 million, respectively, which also increased our effective tax rate.
As of June 30, 2016, there were $0.7 million of unrecognized tax benefits, all of which would have an impact on our effective tax rate if recognized.
Note 7 — EMPLOYEE BENEFIT PLANS
Pension Plans
The following table provides a detail of the components of net periodic pension cost (in thousands):
 
 
 
Three Months Ended 
 June 30,
 
 
 
 
2016
 
2015
 
 
Service cost for benefits earned during the period
 
$
1,960

 
$
2,373

 
 
Interest cost on pension benefit obligation
 
4,782

 
5,171

 
 
Expected return on assets
 
(6,471
)
 
(6,941
)
 
 
Amortization of unrecognized losses
 
1,961

 
2,131

 
 
Net periodic pension cost
 
$
2,232

 
$
2,734

 
The current estimates of our cash contributions required for fiscal year 2017 for our pension plans to be paid in fiscal year 2017 are $17.8 million, of which $6.6 million was paid during the three months ended June 30, 2016.

23

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

Incentive Compensation
Stock-based awards are currently made under the Bristow Group Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”). A maximum of 5,400,000 shares of common stock, par value $.01 per share (“Common Stock”), are reserved. Awards granted under the 2007 Plan may be in the form of stock options, stock appreciation rights, shares of restricted stock, other stock-based awards (payable in cash or Common Stock) or performance awards, or any combination thereof, and may be made to outside directors, employees or consultants. As of June 30, 2016, 1,181,955 shares remained available for grant under the 2007 Plan.
On May 23, 2016, our board of directors approved an amendment and restatement of the 2007 Plan, approved by our stockholders on August 3, 2016, that effected each of the following changes: (i) reserved an additional 5,246,729 “shares” (or 2,623,365 full value shares) that, when combined with “shares” remaining available for issuance under the 2007 Plan resulted in a total of approximately 6,400,000 “shares” (or approximately 3,200,000 full value shares) available for issuance under the amended and restated plan, with each option and stock appreciation right granted under the amended and restated plan counting as one “shares” against such total and with each incentive award that may be settled in Common Stock counting as two “shares” (or one full value share) against such total; (ii) increased the maximum share-based employee award under the amended and restated plan from 500,000 full value shares to 1,000,000 full value shares; (iii) set the maximum aggregate compensation and incentive awards that may be provided by the Company in any calendar year to any non-employee member of the board of directors at $1,125,000; and (iv) made other administrative and updating changes.
We have a number of other incentive and stock option plans which are described in Note 9 to our fiscal year 2016 Financial Statements.
Total stock-based compensation expense, which includes stock options and restricted stock, totaled $4.2 million and $4.0 million for the three months ended June 30, 2016 and 2015, respectively. Stock-based compensation expense has been allocated to our various regions.
During the three months ended June 30, 2016, we awarded 556,051 shares of restricted stock and 1,085,888 stock options were granted, subject to the approval of the amendment and restatement of the 2007 Plan discussed above. We will begin accounting for these awards during the three months ended September 30, 2016, as the awards were not considered granted until stockholder approval of the amendment and the restatement of the 2007 Plan.
 
 
 
 
Performance cash awards vest and pay out in cash three years after the date of grant at varying levels depending on our performance in Total Shareholder Return against a peer group of companies. These awards were designed to tie a significant portion of total compensation to performance. One of the effects of this type of compensation is that it requires liability accounting which can result in volatility in earnings. The liability recorded for these awards as of June 30 and March 31, 2016 was $6.1 million and $15.8 million, respectively, and represents an accrual based on the fair value of the awards on those dates. The decrease in the liability during the three months ended June 30, 2016 resulted from the payout in June 2016 of the awards granted in June 2013, partially offset by the value of the new awards granted in June 2016. Any changes in fair value of the awards in future quarters will increase or decrease the liability and impact results in those periods. The effect, either positive or negative, on future period earnings can vary based on factors including changes in our stock price or the stock prices of the peer group companies, as well as changes in other market and company-specific assumptions that are factored into the calculation of fair value of the performance cash awards.
Compensation expense related to the performance cash awards recorded during the three months ended June 30, 2016 and 2015 was $1.1 million and $3.4 million, respectively.

24

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

Note 8 — DIVIDENDS, SHARE REPURCHASES, EARNINGS PER SHARE AND ACCUMULATED OTHER COMPREHENSIVE INCOME
Dividends
On August 2, 2016, our board of directors approved a dividend of $0.07 per share of Common Stock, payable on September 15, 2016 to shareholders of record on September 1, 2016. See discussion of our dividends in Note 10 to our fiscal year 2016 Financial Statements. The declaration of future dividends is at the discretion of our board of directors and subject to our results of operations, financial condition, cash requirements and other factors and restrictions under applicable law and our debt instruments.
Share Repurchases
We did not repurchase any shares during the three months ended June 30, 2016 and 2015. As of July 31, 2016, we had $150.0 million of repurchase authority remaining that was authorized by our board of directors for share repurchases through November 4, 2016; however, covenants in our debt agreements restrict our ability to repurchase our Common Stock. For additional information on our repurchases of Common Stock, see “Share Repurchases” in Note 10 to the fiscal year 2016 Financial Statements. The timing and method of any repurchases under the program will depend on a variety of factors, is subject to our results of operations, financial condition, cash requirements, and other factors and restrictions under applicable law and our debt instruments, and may be suspended or discontinued at any time.
Earnings per Share
Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted earnings per common share excludes options to purchase shares and restricted stock awards, which were outstanding during the period but were anti-dilutive, as follows:
 
 
Three Months Ended 
 June 30,
 
 
2016
 
2015
Options:
 
 
 
 
Outstanding
 
1,127,883

 
747,253

Weighted average exercise price
 
$
44.35

 
$
68.47

Restricted stock awards:
 
 
 
 
Outstanding
 
462,358

 
262,746

Weighted average price
 
$
31.43

 
$
58.53



25

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

The following table sets forth the computation of basic and diluted earnings per share:
 
 
Three Months Ended 
 June 30,
 
 
2016
 
2015
Net loss available to common stockholders (in thousands):
 
 
 
 
Loss available to common stockholders – basic
 
$
(40,772
)
 
$
(9,558
)
Interest expense on assumed conversion of 3% Convertible Senior Notes, net of tax (1)
 

 

Loss available to common stockholders – diluted
 
$
(40,772
)
 
$
(9,558
)
Shares:
 
 
 
 
Weighted average number of common shares outstanding – basic
 
34,990,136

 
34,857,969

Assumed conversion of 3% Convertible Senior Notes outstanding during the period (1)
 

 

Net effect of dilutive stock options and restricted stock awards based on the treasury stock method
 

 

Weighted average number of common shares outstanding – diluted
 
34,990,136

 
34,857,969

 
 
 
 
 
Basic loss per common share
 
$
(1.17
)
 
$
(0.27
<