10-Q 1 form10-qw02022011.htm FORM 10-Q QUARTERLY REPORT form10-qw02022011.htm




UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Form 10-Q
 
R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2010
   
 
OR
   
£
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
(IRS Employer
incorporation or organization)
Identification Number)
   
2000 W.  Sam Houston Pkwy. S.,
77042
Suite 1700
(Zip Code)
Houston, Texas
 
(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 R     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 R      No o
 
 
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 R
Accelerated filer £
Non-accelerated filer £
Smaller reporting company £
   
(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).
£  Yes      R  No
 
Indicate the number shares outstanding of each of the issuer’s classes of Common Stock, as of January 31, 2011.
36,288,362 shares of Common Stock, $.01 par value


 
 

 


BRISTOW GROUP INC.
INDEX — FORM 10-Q

 
 
Page
PART I
 
     
Item 1.
Financial Statements                                                                                                                            
2
 
     
Item 2.
37
 
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk                                                                                                                            
62
 
     
Item 4.
Controls and Procedures                                                                                                                            
62
 
     
PART II
 
     
Item 1.
Legal Proceedings                                                                                                                            
63
 
     
Item 1A.
Risk Factors                                                                                                                            
63
 
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                            
63
 
     
Item 6.
Exhibits                                                                                                                            
64
 
     
Signatures                                                                                                                                           
65
 


PART I — FINANCIAL INFORMATION
 
 
BRISTOW GROUP INC. AND SUBSIDIARIES
 
Condensed Consolidated Statements of Income
 
   
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
     
2010
   
2009
     
2010
   
2009
 
   
(Unaudited)
(In thousands, except per share amounts)
Gross revenue:
                           
 
Operating revenue from non-affiliates
 
$
264,064
 
$
260,907
   
$
788,711
 
$
757,440
 
 
Operating revenue from affiliates
   
18,543
   
14,581
     
52,442
   
46,643
 
 
Reimbursable revenue from non-affiliates
   
34,918
   
27,615
     
80,914
   
78,214
 
 
Reimbursable revenue from affiliates
   
344
   
203
     
599
   
3,076
 
       
317,869
   
303,306
     
922,666
   
885,373
 
Operating expense:
                           
 
Direct cost
   
186,937
   
189,456
     
559,211
   
543,525
 
 
Reimbursable expense
   
34,548
   
28,219
     
79,746
   
81,180
 
 
Depreciation and amortization
   
21,338
   
20,663
     
61,637
   
57,319
 
 
General and administrative
   
33,715
   
30,758
     
95,132
   
89,246
 
         
276,538
   
269,096
     
795,726
   
771,270
 
                               
Gain (loss) on disposal of assets
   
(33
)
 
2,448
     
3,582
   
13,337
 
Earnings from unconsolidated affiliates, net of losses
   
5,341
   
3,068
     
9,355
   
10,625
 
 
Operating income
   
46,639
   
39,726
     
139,877
   
138,065
 
                             
Interest income
   
417
   
365
     
877
   
797
 
Interest expense
   
(13,773
)
 
(10,979
)
   
(36,263
)
 
(31,631
)
Other income (expense), net
   
(2,792
)
 
3,695
     
(2,388
)
 
4,023
 
 
Income before provision for income taxes
   
30,491
   
32,807
     
102,103
   
111,254
 
(Provision for) benefit from income taxes
   
11,823
   
(5,681
)
   
(33
)
 
(26,427
)
 
Net income
   
42,314
   
27,126
     
102,070
   
84,827
 
 
Net income attributable to noncontrolling interests
   
(555
)
 
(448
)
   
(623
)
 
(1,256
)
 
Net income attributable to Bristow Group
   
41,759
   
26,678
     
101,447
   
83,571
 
 
Preferred stock dividends
   
   
     
   
(6,325
)
 
Net income available to common stockholders
 
$
41,759
 
$
26,678
   
$
101,447
 
$
77,246
 
                             
Earnings per common share:
                           
 
Basic                                                                        
 
$
1.15
 
$
0.74
   
$
2.82
 
$
2.43
 
 
Diluted                                                                        
 
$
1.13
 
$
0.74
   
$
2.77
 
$
2.32
 

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


BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

   
December 31,
 
March 31,
 
   
2010
 
2010
 
   
(Unaudited)
     
   
(In thousands)
 
ASSETS
Current assets:
             
 
Cash and cash equivalents
 
$
100,863
 
$
77,793
 
 
Accounts receivable from non-affiliates, net of allowance for doubtful accounts of $0.7 million
and $0.2 million, respectively
   
233,730
   
203,312
 
 
Accounts receivable from affiliates, net of allowance for doubtful accounts of $­­­­5.6 million
and $4.7 million, respectively
   
20,915
   
16,955
 
 
Inventories
   
195,537
   
186,863
 
 
Prepaid expenses and other current assets
   
38,292
   
31,448
 
   
Total current assets
   
589,337
   
516,371
 
Investment in unconsolidated affiliates
   
206,139
   
204,863
 
Property and equipment – at cost:
             
 
Land and buildings
   
96,593
   
86,826
 
 
Aircraft and equipment
   
2,141,804
   
2,036,962
 
         
2,238,397
   
2,123,788
 
 
Less – Accumulated depreciation and amortization
   
(450,897
)
 
(404,443
)
         
1,787,500
   
1,719,345
 
Goodwill
   
31,636
   
31,755
 
Other assets
   
24,124
   
22,286
 
       
$
2,638,736
 
$
2,494,620
 
                   
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
             
 
Accounts payable
 
$
47,068
 
$
48,545
 
 
Accrued wages, benefits and related taxes
   
41,877
   
35,835
 
 
Income taxes payable
   
   
2,009
 
 
Other accrued taxes
   
2,851
   
3,056
 
 
Deferred revenue
   
8,009
   
19,321
 
 
Accrued maintenance and repairs
   
15,035
   
10,828
 
 
Accrued interest
   
8,143
   
6,430
 
 
Other accrued liabilities
   
19,304
   
14,508
 
 
Deferred taxes
   
13,268
   
10,217
 
 
Short-term borrowings and current maturities of long-term debt
   
8,039
   
15,366
 
   
Total current liabilities
   
163,594
   
166,115
 
Long-term debt, less current maturities
   
717,469
   
701,195
 
Accrued pension liabilities
   
112,248
   
106,573
 
Other liabilities and deferred credits
   
32,107
   
20,842
 
Deferred taxes
   
137,189
   
143,324
 
Commitments and contingencies (Note 5)
             
Stockholders’ investment:
             
 
Common stock, $.01 par value, authorized 90,000,000; outstanding: 36,289,089 as of December
31 and 35,954,040 as of March 31 (exclusive of 1,291,325 treasury shares)
   
363
   
359
 
 
Additional paid-in capital
   
686,952
   
677,397
 
 
Retained earnings
   
920,792
   
820,145
 
 
Accumulated other comprehensive loss
   
(138,687
)
 
(148,102
)
       
1,469,420
   
1,349,799
 
 
Noncontrolling interests
   
6,709
   
6,772
 
       
1,476,129
   
1,356,571
 
       
$
2,638,736
 
$
2,494,620
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


BRISTOW GROUP INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

   
Nine Months Ended
December 31,
 
   
2010
 
2009
 
   
(Unaudited)
 
   
(In thousands)
 
Cash flows from operating activities:
             
 
Net income
 
$
102,070
 
$
84,827
 
Adjustments to reconcile net income to net cash provided by operating activities:
             
 
Depreciation and amortization
   
61,637
   
57,319
 
 
Deferred income taxes
   
(3,648
)
 
18,892
 
 
Discount amortization on long-term debt
   
2,360
   
2,213
 
 
Gain on disposal of assets
   
(3,582
)
 
(13,337
)
 
Gain on sales of joint ventures
   
(572
)
 
 
 
Stock-based compensation
   
10,763
   
9,914
 
 
Equity in earnings from unconsolidated affiliates less than (in excess of) dividends received
   
(1,447
)
 
(6,853
)
 
Tax benefit related to stock-based compensation
   
(230
)
 
(409
)
Increase (decrease) in cash resulting from changes in:
             
 
Accounts receivable
   
(26,514
)
 
794
 
 
Inventories
   
(6,414
)
 
(11,382
)
 
Prepaid expenses and other assets
   
(8,365
)
 
14,555
 
 
Accounts payable
   
(3,546
)
 
4,638
 
 
Accrued liabilities
   
(5,340
)
 
3,216
 
 
Other liabilities and deferred credits
   
(1,773
)
 
(1,370
)
Net cash provided by operating activities
   
115,399
   
163,017
 
Cash flows from investing activities:
             
 
Capital expenditures
   
(122,748
)
 
(250,272
)
 
Deposits on assets held for sale
   
1,000
   
 
 
Proceeds from sales of joint ventures 
   
1,291
   
 
 
Proceeds from asset dispositions
   
17,175
   
74,973
 
 
Acquisition, net of cash received
   
   
(178,961
)
Net cash used in investing activities
   
(103,282
)
 
(354,260
)
Cash flows from financing activities:
             
 
Proceeds from borrowings
   
253,013
   
 
 
Debt issuance costs
   
(3,339
)
 
 
 
Repayment of debt
   
(246,553
)
 
(10,068
)
 
Distribution to noncontrolling interest owners
   
(637
)
 
 
 
Partial prepayment of put/call obligation
   
(44
)
 
(52
)
 
Acquisition of noncontrolling interest
   
(800
)
 
 
 
Preferred stock dividends paid
   
   
(6,325
)
 
Issuance of common stock
   
754
   
1,336
 
 
Tax benefit related to stock-based compensation
   
230
   
409
 
Net cash provided by (used in) financing activities
   
2,624
   
(14,700
)
Effect of exchange rate changes on cash and cash equivalents
   
8,329
   
12,033
 
Net increase (decrease) in cash and cash equivalents
   
23,070
   
(193,910
)
Cash and cash equivalents at beginning of period
   
77,793
   
300,969
 
Cash and cash equivalents at end of period
 
$
100,863
 
$
107,059
 
Supplemental disclosure of cash flow information:
             
Cash paid during the period for:
             
 
Interest
 
$
32,350
 
$
31,830
 
 
Income taxes
 
$
9,072
 
$
9,904
 

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


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, 2011 is referred to as fiscal year 2011.  Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the information contained in the following notes to condensed consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and related notes thereto contained in our fiscal year 2010 Annual Report (the “fiscal year 2010 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 financial position of the Company as of December 31, 2010, the consolidated results of operations for the three and nine months ended December 31, 2010 and 2009, and the consolidated cash flows for the nine months ended December 31, 2010 and 2009.





 
5

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


Foreign Currency
 
See “Foreign Currency” in Note 1 to the fiscal year 2010 Financial Statements for a discussion of the related accounting policies.  Other income (expense), net, in our condensed consolidated statements of income includes foreign currency transaction gains (losses) of $(0.5) million and $(0.7) million for the three and nine months ended December 31, 2010, respectively, and $0.7 million and $(0.1) million, for the three and nine months ended December 31, 2009, respectively.  Additionally, other income (expense), net includes $2.8 million and $3.9 million of hedging gains realized during the three and nine months ended December 31, 2009, respectively, resulting from termination of forward contracts on euro-denominated aircraft purchase commitments.
 
During the three and nine months ended December 31, 2010 and 2009, our primary foreign currency exposures were to the British pound sterling, the euro, the Australian dollar 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
December 31,
 
Nine Months Ended
December 31,
   
   
2010
   
2009
 
2010
   
2009
   
                         
One British pound sterling into U.S. dollars
                       
High
 
1.63
   
1.68
 
1.63
   
1.70
   
Average
 
1.58
   
1.63
 
1.54
   
1.61
   
Low
 
1.54
   
1.58
 
1.43
   
1.44
   
At period-end
 
1.57
   
1.61
 
1.57
   
1.61
   
One euro into U.S. dollars
                       
High
 
1.42
   
1.51
 
1.42
   
1.51
   
Average
 
1.36
   
1.48
 
1.31
   
1.42
   
Low
 
1.30
   
1.42
 
1.19
   
1.29
   
At period-end
 
1.34
   
1.43
 
1.34
   
1.43
   
One Australian dollar into U.S. dollars
                       
High
 
1.03
   
0.94
 
1.03
   
0.94
   
Average
 
0.99
   
0.91
 
0.93
   
0.84
   
Low
 
0.96
   
0.87
 
0.81
   
0.69
   
At period-end
 
1.03
   
0.90
 
1.03
   
0.90
   
One Nigerian naira into U.S. dollars
                       
High
 
0.0068
   
0.0069
 
0.0070
   
0.0069
   
Average
 
0.0067
   
0.0067
 
0.0067
   
0.0067
   
Low
 
0.0065
   
0.0066
 
0.0065
   
0.0063
   
At period-end
 
0.0066
   
0.0067
 
0.0066
   
0.0067
   
________
Source:  Bank of England and Oanda.com
 

 
6

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


We estimate that the fluctuation of exchange rates related to these currencies versus exchange rates during the three and nine months ended December 31, 2009 had the following effect on our financial condition and results of operations, net of the effect of derivative contracts discussed in Note 7 (in thousands):
 
 
Three Months Ended
December 31,
 2010
   
Nine Months
Ended
December 31,
2010
 
               
Revenue
$
(2,278
)
 
$
(3,393
)
Operating expense
 
3,022
     
6,812
 
Earnings from unconsolidated affiliates, net of losses 
 
(119
)
   
(350
)
Operating income
 
625
     
3,069
 
Non-operating expense
 
(4,022
)
   
(4,533
)
Income before provision for income taxes
 
(3,397
)
   
(1,464
(Provision for) benefit from income taxes
 
531
     
(394
)
Net income
 
(2,866
)
   
(1,858
Cumulative translation adjustment
 
(818
)
   
9,010
 
Total stockholders’ investment
$
(3,684
)
 
$
7,152
 

Our earnings from unconsolidated affiliates 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 December 31, 2010 and 2009, earnings from unconsolidated affiliates were increased by $0.3 million and $1.0 million, respectively, as a result of the impact of changes in foreign currency exchange rates on the results of our unconsolidated affiliates, primarily in Brazil.  During the nine months ended December 31, 2010 and 2009, earnings from unconsolidated affiliates were increased by $0.9 million and $5.4 million, respectively, as a result of the impact of changes in foreign currency exchange rates on the results of our unconsolidated affiliates, primarily in Brazil.
 
Other Matters
 
In addition to the foreign currency items discussed above, other income (expense), net also includes gains on sales of two joint ventures of $0.6 million during the nine months ended December 31, 2010 and a $2.3 million redemption premium as a result of the early redemption of the 6⅛% Senior Notes due 2013 (“6⅛% Senior Notes”) during the three and nine months ended December 31, 2010 as discussed in Note 3.
 
As of December 31 and March 31, 2010, other accrued liabilities on the condensed consolidated balance sheets primarily includes accruals for insurance, travel, training, accommodations, fuel and freight as well as deposits for aircraft held for sale.
 
As discussed in “Item 1A. Risk Factors” in our fiscal year 2010 Annual Report, our results of operations are subject to seasonal fluctuations as a result of harsh weather conditions and shorter winter days which can limit activity and reduce flying.
 
Recent Accounting Pronouncements
 
On April 1, 2010, we adopted new accounting and disclosure requirements for transfers of financial assets which changed the requirements for derecognizing financial assets and require greater transparency and additional disclosures for transfers of financial assets and the entity’s continuing involvement with them.  In addition, the concept of a qualifying special-purpose entity was eliminated.  We have no financial assets subject to these requirements and therefore the adoption of these requirements had no impact on our financial position, cash flows and results of operations.
 

 
7

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


On April 1, 2010, we adopted an amendment to the accounting and disclosure requirements for the consolidation of Variable Interest Entities (“VIEs”).  This amendment changes how a reporting entity identifies a controlling financial interest in a VIE from the quantitative risk and rewards approach to a qualitative approach and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the entity the primary beneficiary of the VIE.  Our adoption of this amendment did not change our conclusions with regard to VIEs and did not have an impact on our financial position, cash flows and results of operations.  The additional disclosure requirements included in this amendment are provided in Note 2.
 
In January 2010, the Financial Accounting Standards Board (“FASB”) issued a standard to amend disclosure requirements related to fair value measurements by requiring additional disclosures for transfers in and out of Level 1 and Level 2 fair value measurements, as well as requiring fair value measurement disclosures for each “class” of assets and liabilities.  This standard also requires separate line item disclosure of all purchases, sales, issuances and settlements of financial instruments valued using significant unobservable inputs (Level 3) in the reconciliation for fair value measurements, in contrast to the current aggregate presentation as a single line item.  Certain disclosure requirements of this standard were effective April 1, 2010, while other disclosure requirements of the standard are effective for financial statements issued for fiscal years beginning after December 15, 2010 and interim periods within those years.  Since these amended principles require only additional disclosures concerning fair value measurements, adoption did not and will not impact our financial position, cash flows or results of operations.
 
In October 2009, the FASB issued application guidance on multiple deliverables in revenue arrangements which is effective for us on April 1, 2011.  This update provides further guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting and establishes a selling price hierarchy for determining the selling price of a deliverable.  The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available.  We have not yet determined the impact that the adoption of this guidance would have on our financial position, cash flows or results of operations, if any.
 
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 December 31, 2010, we have three VIEs of which we are the primary beneficiary and were involved in one VIE of which we are not the primary beneficiary.
 
VIEs of which we are the primary beneficiary
 
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 Helicopter Group Limited (“Bristow Helicopters”).  Its subsidiaries provide helicopter services to customers primarily in the U.K, Norway, Australia and Nigeria.  Bristow Aviation is organized with three different classes of ordinary shares having disproportionate voting rights.  The Company, Caledonia Investments plc and its subsidiary, Caledonia Industrial & Services Limited (collectively, “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.
 

 
8

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)

 
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 ($142.5 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 $813.6 million as of December 31, 2010.
 
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 (“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 a 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 December 31, 2010) 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.  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 in our condensed consolidated statements of income, with a corresponding increase in noncontrolling interest on our condensed consolidated balance sheets.  Prepayments of the guaranteed return element of the call option are reflected as a reduction in noncontrolling interest on our condensed consolidated balance sheets.  The other 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.
 

 
9

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


Bristow Aviation and its subsidiaries are exposed to similar operational risks and are therefore monitored and evaluated on a similar basis by management.  Accordingly, the financial information reflected on our condensed consolidated balance sheets and statements of income for Bristow Aviation and subsidiaries is presented in the aggregate, including intercompany amounts with other consolidated entities, as follows (in thousands):
 
 
December 31,
 2010
 
March 31, 2010
 
Assets
           
Cash and cash equivalents
$
48,964
 
$
54,292
 
Accounts receivable
 
170,111
   
149,848
 
Inventories
 
104,632
   
98,993
 
Prepaid expenses and other current assets
 
47,319
   
35,093
 
Total current assets
 
371,026
   
338,226
 
Investment in unconsolidated affiliates
 
12,818
   
12,938
 
Property and equipment, net
 
235,744
   
204,521
 
Goodwill
 
15,456
   
15,569
 
Other assets
 
8,735
   
15,020
 
Total assets
$
643,779
 
$
586,274
 
Liabilities
           
Accounts payable
 
71,194
   
54,592
 
Accrued liabilities
 
879,302
   
793,754
 
Deferred taxes
 
12,219
   
11,633
 
Short-term borrowings and current maturities of long-term debt
 
3,152
   
16,497
 
Total current liabilities
 
965,867
   
876,476
 
Long-term debt, less current maturities
 
152,469
   
138,020
 
Accrued pension liabilities
 
112,248
   
106,573
 
Other liabilities and deferred credits
 
12,865
   
6,211
 
Deferred taxes
 
11,137
   
14,989
 
Total liabilities
$
1,254,586
 
$
1,142,269
 

 
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
 
2010
   
2009
   
2010
   
2009
 
Revenue
$
227,599
   
$
226,475
   
$
655,426
   
$
642,495
 
Operating income
$
11,716
   
$
7,832
   
$
29,849
   
$
37,846
 
Net loss
$
18,160
   
$
20,776
   
$
59,628
   
$
49,408
 
 
Bristow Caribbean Ltd. — Effective September 30, 2010, we own 100% of Bristow Caribbean Ltd. (“BCL”) resulting from our purchase on that date of 60% of the interest in BCL we previously did not own for $0.8 million.  BCL operates eight aircraft in Trinidad, providing offshore helicopter services to customers.  As the Company maintained a controlling financial interest both prior to and subsequent to the change in ownership interest, the transaction was viewed as a transaction among the equity owners.  No gain or loss was recognized in the statement of income, and any difference between the fair value of the consideration paid and the amount by which the noncontrolling interest was adjusted was recognized as equity attributable to the parent.
 

 
10

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 
 
The activities that most significantly impact BCL’s economic performance relate to the day-to-day operation of the company, including identifying and contracting with customers, and strategic decisions regarding the potential expansion of the company’s operations.  Prior to September 30, 2010, we controlled the significant management decisions of this entity, including the payment of dividends to our partner, and therefore consolidated BCL as the entity’s primary beneficiary.
 
BCL 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 for the period prior to September 30, 2010.
 
Bristow Helicopters Nigeria Ltd. — Bristow Helicopters Nigeria Ltd. (“BHNL”) is a joint venture in Nigeria with local partners, in which we own an interest of 40%. BHNL provides helicopter services to customers in Nigeria.
 
In order to have a presence in the Nigerian market, Bristow was 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 the expertise of Bristow in the overall management and day-to-day operation of BHNL. Thus, because Bristow has the power to direct the most significant activities affecting the ongoing success of BHNL and holds a variable interest in the entity in the form of its equity investment, Bristow consolidates BHNL as the primary beneficiary.
 
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 an interest of 50.17%.  PAAN provides helicopter services to customers in Nigeria.
 
The activities that most significantly impact PAAN’s economic performance relate to the day-to-day operation of the company (including identifying and contracting with customers), setting the operating and capital budgets, and strategic decisions regarding the potential expansion of the company’s operations.  Throughout the history of the PAAN, through its Board seats and managing director, Bristow has directed the key operational decisions of PAAN (without objection from the other Board members).  As we have the power to direct the significant activities of PAAN, we consolidate the entity as the primary beneficiary.  However, as we own a majority interest in PAAN, the separate presentation of financial information for PAAN is not required.
 
VIEs of which we are not the primary beneficiary
 
Heliservicio — We own a 24% interest in Heliservicio (“Heliservicio”), a Mexican corporation, which provides onshore helicopter services to the Mexican Federal Electric Commission and offshore helicopter transportation services to Petróleos Mexicanos and other companies on a contract and ad hoc basis.  Heliservicio leases 21 aircraft from us and leases 13 aircraft from third parties to provide helicopter services to its customers.  See Note 2 for discussion of the pending sale of our interest in Heliservicio.
 
The activities that most significantly impact Heliservicio’s economic performance relate to (a) the day-to-day operation of the company, including decisions relating to hiring/firing personnel, where and when to fly, and what customers to fly for and extend credit to; and (b) strategic decisions regarding the potential expansion of the company’s operations.  The other partner in Heliservicio has the ability to control these decisions through its majority board representation.  As such, we have determined that we would not be the primary beneficiary of Heliservicio as we do not have the power to direct the most significant activities which affect the economic success of the entity.  Accordingly, we account for our 24% interest in Heliservicio as an equity method investment.
 

 
11

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


The following table summarizes the amounts recorded for this nonconsolidated VIE and the related off-balance sheet guarantees (in thousands):
 
   
December 31, 2010
   
March 31, 2010
 
   
Carrying
Amount
   
Maximum
Exposure
to Loss
   
Carrying
Amount
 
Maximum
Exposure
to Loss
 
Assets:
                             
Accounts receivable (1)
 
$
14,283
   
$
19,868
   
$
11,986
 
$
16,571
 
Investment in unconsolidated affiliate
   
2,459
     
2,459
     
3,329
   
3,329
 
Total assets
 
$
16,742
   
$
22,327
   
$
15,315
 
$
19,900
 
Off-Balance Sheet:
                             
Guarantees (2)
 
$
   
$
23,817
   
$
 
$
26,352
 
__________

(1)
Amounts presented herein include unbilled accounts receivable of $3.5 million and $3.8 million as of December 31 and March 31, 2010, respectively.  The carrying amounts presented are net of allowances for doubtful accounts of $5.6 million and $4.6 million as of December 31 and March 31, 2010, respectively.  
   
(2)
We have received a counter-guarantee from our partner in Heliservicio for 76% ($18.1 million and $20.0 million as of December 31 and March 31, 2010, respectively) of these amounts, which is not reflected in the table above.  
 
In addition to our 24% interest in Heliservicio, we own a 99% interest in Rotorwing Leasing Resources, L.L.C. (“RLR”), a consolidated subsidiary that leases helicopters to Heliservicio.  On January 14, 2011, we entered into an Equity Interest Purchase and Sale Agreement (the “Equity Agreement”) with Controladora De Servicios Aeronauticos, S.A. de C.V. (“CICSA”) and Rotorwing Financial Services, Inc. (“RFS”), the owner of the other 76% of Heliservicio and the owner of the other 1% of RLR, respectively.  Through this agreement, we and our partners have agreed that CICSA will purchase the remaining 24% interest in Heliservicio.  Additionally, concurrent with the sale of our interest in Heliservicio, we will execute our option under a prior agreement to purchase the 1% interest in RLR owned by RFS.  We expect this transaction to be substantially complete by March 31, 2011. Once complete, we will have no ownership interest in Heliservicio and full ownership of RLR.
 
The Equity Agreement also includes provisions for the settlement of past due amounts (including past due accounts receivable) due from Heliservicio to us and settlement of other matters.  As part of this agreement, on January 31, 2011, we received a net payment from Heliservicio of $2.7 million that was applied to outstanding accounts receivable and wrote-off $5.6 million of previously reserved accounts receivable due from Heliservicio.
 
The Equity Agreement also provides for our release from the $23.8 million in guarantees included in the table above and discussed in Note 5.  While we will no longer have an equity interest in an operating entity in Mexico, we will continue to lease aircraft from RLR and other consolidated subsidiaries to Heliservicio under revised lease agreements.
 
We currently have approximately $24 million of inventory supporting the fleet of aircraft operated by Heliservicio in Mexico, of which approximately $12 million is in Mexico with the remainder in transit to Mexico or at our maintenance facilities in the U.S.  We expect to recover the value of this inventory either through use in Heliservicio’s operations, consumption elsewhere in the Bristow Group fleet, in support of other operator's fleets or through sale of the inventory to third parties.  However, if certain events do not occur as expected, it is possible that a partial impairment of the inventory may be necessary.  We estimate the range of potential loss to be $5 million to $10 million.

 
12

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


NOTE 3 — DEBT
 
Debt as of December 31 and March 31, 2010 consisted of the following (in thousands):
 
 
December 31,
2010
 
March 31,
2010
 
7 ½% Senior Notes due 2017, including $0.4 million and $0.5 million of unamortized premium, respectively
$
350,426
 
$
350,473
 
$200 Million Term Loan
 
200,000
   
 
Revolving Credit Facility
 
43,000
   
 
6 ⅛% Senior Notes due 2013
 
   
230,000
 
3% Convertible Senior Notes due 2038, including $16.6 million and $19.0 million of unamortized discount, respectively
 
98,403
   
96,043
 
Bristow Norway Debt
 
11,194
   
11,841
 
RLR Note
 
15,206
   
16,089
 
Term loans
 
5,314
   
12,081
 
Other debt
 
1,965
   
34
 
Total debt
 
725,508
   
716,561
 
Less short-term borrowings and current maturities of long-term debt
 
(8,039
)
 
(15,366
)
Total long-term debt
$
717,469
 
$
701,195
 
 
Revolving Credit Facility and Term Loan
 
In November 2010, we entered into a $375 million amended and restated revolving credit and term loan agreement (“Amended and Restated Credit Agreement”), which includes a five-year, $175 million revolving credit facility (“Revolving Credit Facility”) and a five-year, $200 million term loan (“$200 Million Term Loan”) and a subfacility of $30 million for letters of credit.  The Amended and Restated Credit Agreement replaces our syndicated senior secured credit facilities which consisted of a $100 million revolving credit facility (with a subfacility of $25 million for letters of credit) and a $25 million letter of credit facility.  Borrowings outstanding as of December 31, 2010 under the Revolving Credit Facility totaled $43.0 million.  Proceeds from the $200 Million Term Loan and the borrowings under the Revolving Credit Facility were used primarily to redeem the 6⅛% Senior Notes as described below.  Borrowings under the Revolving Credit Facility are due on November 22, 2015.  Borrowings under the $200 Million Term Loan are payable in quarterly installments commencing on December 31, 2011, with the aggregate unpaid principal balance of $130 million due on November 22, 2015.  We incurred $3.3 million of deferred financing costs which are included in other assets as of December 31, 2010 and will be amortized to interest expense over five years.
 
Borrowings under the Revolving Credit Facility and $200 Million Term Loan bear interest at a rate equal to, at our option, Base Rate or LIBOR plus a borrowing margin ranging from 0.625% to 2.875% based on our leverage ratio.  “Base Rate” means the higher of the per annum rate the administrative agent publicly announces as its prime lending rate in effect from time to time or the Federal Funds rate plus 0.50% per annum.   The borrowing margin is the greater of 2.50% per annum or the appropriate percentage based on the leverage ratio until delivery of the financial statements for the three months ended June 30, 2011 and the borrowing rate was 2.79% as of December 31, 2010.
 
Obligations under the Amended and Restated Credit Agreement are guaranteed by certain of the our principal domestic subsidiaries (the “Guarantor Subsidiaries”) and secured by the U.S. cash and cash equivalents, accounts receivable, inventories, non-aircraft equipment, prepaid expenses and other current assets, intangible assets and intercompany promissory notes held by Bristow Group Inc. and the Guarantor Subsidiaries, and 100% and 65% of the capital stock of certain of our principal domestic and foreign subsidiaries, respectively.  In addition, the Amended and Restated Credit Agreement includes customary covenants, including certain financial covenants and restrictions on our ability to enter into certain transactions, including those that could result in the incurrence of additional indebtedness and liens; the making of loans, guarantees or investments; sale of assets; payments of dividends or repurchases of our capital stock; and entering into transactions with affiliates.
 

 
13

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)

 
6⅛% Senior Notes due 2013
 
On December 23, 2010, we redeemed the 6⅛% Senior Notes and incurred a $2.3 million redemption premium, which is included in other income (expense), net for the three and nine months ended December 31, 2010.  Additionally, we recorded non-cash expense of $2.4 million for unamortized debt issuance cost, which is included in interest expense for the three and nine months ended December 31, 2010.
 
3% Convertible Senior Notes due 2038
 
In June 2008, we completed the sale of $115.0 million of 3% Convertible Senior Notes due 2038 (“3% Convertible Senior Notes”).  The notes are convertible, under certain circumstances, using a net share settlement process, into a combination of cash and our common stock, par value $.01 per share (“Common Stock”).  In general, upon conversion of a note, the holder will receive cash equal to the principal amount of the note and Common Stock to the extent of the note’s conversion value in excess of such principal amount.  For further details on the 3% Convertible Senior Notes, see Note 6 to the fiscal year 2010 Financial Statements.
 
The balances of the liability and equity components of the 3% Convertible Senior Notes as of each period presented are as follows (in thousands):

 
December 31,
 2010
 
March 31,
 2010
 
Equity component – net carrying value 
$
14,905
 
$
14,905
 
Debt component:
           
Face amount due at maturity
$
115,000
 
$
115,000
 
Unamortized discount
 
(16,597
)
 
(18,957
)
Debt component – net carrying value
$
98,403
 
$
96,043
 
 
The remaining debt discount is being amortized into interest expense over the expected five year remaining life of the 3% Convertible Senior Notes using the effective interest rate of 6.9%.  Interest expense related to the 3% Convertible Senior Notes was recognized as follows (in thousands):
 
 
Three Months Ended
December 31,
 
Nine Months Ended
December 31,
 
   
2010
   
2009
   
2010
   
2009
 
Contractual coupon interest
$
862
 
$
862
 
$
2,588
 
$
2,588
 
Amortization of debt discount
 
795
   
751
   
2,360
   
2,213
 
Total interest expense
$
1,657
 
$
1,613
 
$
4,948
 
$
4,801
 
 
Bristow Norway Debt and Overdraft Facility
 
Bristow Norway had two term loans with a Norwegian bank that were used to purchase two helicopters.  In August 2009, these two term loans were repaid in the amounts of Norwegian kroner (“NOK”) 9.5 million ($1.6 million) and NOK 26.0 million ($4.3 million).  There is a third term loan that was used to purchase a third helicopter and was denominated in U.S. dollars prior to converting to NOK in August 2009.  In October 2010, this third term loan was refinanced for three years at a fixed rate of approximately 5% per annum, payable in quarterly installments of NOK 1.7 million ($0.3 million as of December 31, 2010), with the balloon payment of NOK 47.9 million ($8.2 million as of December 31, 2010) due at maturity.  As of December 31, 2010, this term loan had a balance of NOK 65.1 million ($11.2 million).  This outstanding term loan is secured by the helicopter and certain receivables.  Additionally, Bristow Norway has an overdraft facility of NOK 5 million ($0.9 million) with a Norwegian bank.  No borrowings were outstanding under this overdraft facility as of December 31, 2010.  Borrowings under the overdraft facility bear interest at a reference rate plus a margin and this overdraft facility can be terminated by either party upon ten banking days’ written notice. 
 

 
14

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 
 
Term loans
 
In May 2010, we repaid $5.9 million of the term loans early.  The quarterly principal payments of $0.6 million were reduced to $0.3 million, with the final principal payment remaining due on June 30, 2015.  On January 21, 2011, the balance outstanding of the term loans was repaid in full.
 
Other debt
 
On July 15, 2010, we borrowed $8.1 million from Whitney National Bank, which was secured by one aircraft, and was subsequently repaid on December 15, 2010.
 
In April 2010, Aviashelf Aviation Co., a fully consolidated subsidiary operating in Russia, entered into a short-term loan with Bank Iturup for 60 million Russian rubles ($2.0 million) at a 19% interest rate that matures on March 31, 2011.
 
NOTE 4 — FAIR VALUE DISCLOSURES
 
Assets and liabilities subject to fair value are categorized into one of three different levels depending on the observability of the inputs employed in the measurement, as follows:
 
·  
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
·  
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
·  
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The following table summarizes the financial instruments we had as of December 31, 2010, which are 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
December 31,
2010
   
Balance Sheet
Classification
 
Derivative asset
 
$
   
$
623
   
$
   
$
623
     
Prepaid expenses and other current assets
 
Rabbi Trust investments
   
3,295
     
     
     
3,295
     
Other assets
 
Total assets
 
$
3,295
   
$
623
   
$
   
$
3,918
         
 
The rabbi trust investments consist of money market and mutual funds whose fair value is 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 as discussed in Note 10 in the fiscal year 2010 Financial Statements.  The methods and assumptions used to estimate the fair values of the derivative assets in the table above include the mark-to-market statements from the counterparties, which can be validated using modeling techniques that include market inputs, such as publicly available forward market rates, and are designated as Level 2 within the valuation hierarchy.  For further details on the derivative assets see Note 7.
 

 
15

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 
 
The fair value of our financial instruments 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 values of our debt, including the current portion, are as follows (in thousands):
 
   
December 31, 2010
   
March 31, 2010
 
   
Carrying
Value
   
Fair 
Value
   
Carrying
Value
   
Fair
Value
 
7 ½% Senior Notes 
 
$
350,426
   
$
366,625
   
$
350,473
   
$
352,625
 
$200 Million Term Loan
   
200,000
     
200,000
     
     
 
Borrowings on Revolving Credit Facility
   
43,000
     
43,000
     
     
 
6 ⅛% Senior Notes
   
     
     
230,000
     
228,850
 
3% Convertible Senior Notes
   
98,403
     
115,000
     
96,043
     
101,488
 
Other
   
33,679
     
33,679
     
40,045
     
40,045
 
   
$
725,508
   
$
758,304
   
$
716,561
   
$
723,008
 
 
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.
 
NOTE 5 — COMMITMENTS AND CONTINGENCIES
 
Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next four fiscal years to purchase additional aircraft.  As of December 31, 2010, we had 9 aircraft on order and options to acquire an additional 34 aircraft.  Although a similar number of our existing aircraft may be sold during the same period, the additional aircraft on order are expected to provide incremental fleet capacity in terms of potential revenue and operating income.
 
   
Three
 Months
Ending
 March 31,
   
Fiscal Year Ending March 31,
     
   
2011
   
2012
   
2013
   
2014
   
2015
 
Total
Commitments as of December 31, 2010:
                                           
Number of aircraft:
                                           
Medium
   
3
     
     
     
     
   
3
Large
   
     
6
     
     
     
   
6
     
3
(1)
   
6
(2)
   
     
     
   
9
Related expenditures (in thousands) (3)
 
$
13,333
   
$
91,931
   
$
   
$
   
$
 
$
105,264
Options as of December 31, 2010:
                                           
Number of aircraft:
                                           
Medium
   
     
3
     
11
     
4
     
7
   
25
Large
   
     
     
5
     
4
     
   
9
     
     
3
     
16
     
8
     
7
   
34
Related expenditures (in thousands) (3)
 
$
2,556
   
$
90,833
   
$
261,572
   
$
125,034
   
$
81,240
 
$
561,235
_________

(1)
No signed customer contracts are currently in place for these aircraft.
   
(2)
Signed customer contracts are currently in place for these six aircraft.
   
(3)
Includes progress payments on aircraft scheduled to be delivered in future periods.
 

 

 
16

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 
 
The following chart presents an analysis of our aircraft orders and options during fiscal year 2011:
 
   
Three Months Ended
 
   
December 31, 2010
     
September 30, 2010
     
June 30, 2010
 
   
Orders
     
Options
     
Orders
     
Options
     
Orders
     
Options
 
Beginning of quarter
 
12
     
35
     
7
     
41
     
9
     
39
 
Aircraft delivered
 
(3
)
   
     
(1
)
   
     
(1
)
   
 
Cancelled orders
 
     
     
     
     
(1
)
   
 
Exercised options
 
     
     
6
     
(6
)
   
     
 
Reinstated options
 
     
     
     
     
     
2
 
Transferred options
 
     
(1
)
   
     
     
     
 
End of quarter
 
9
     
34
     
12
     
35
     
7
     
41
 
 
Employee Agreements — Certain of our employees are represented by collective bargaining agreements and/or unions.  These agreements generally include annual escalations of up to 6%.  Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement.
 
Internal Review — In February 2005, we voluntarily advised the staff of the SEC that the Audit Committee of our board of directors had engaged special outside counsel to undertake a review of certain payments made by two of our affiliated entities in Nigeria.  The review of these payments, which initially focused on Foreign Corrupt Practices Act matters, was subsequently expanded by the Audit Committee to cover operations in other countries and other issues (the “Internal Review”).  As a result of the findings of the Internal Review (which was completed in late 2005), our quarter ended December 31, 2004 and prior financial statements were restated.  We also provided the SEC with documentation resulting from the Internal Review which eventually resulted in a formal SEC investigation.  In September 2007, we consented to the issuance of an administrative cease-and-desist order by the SEC, in final settlement of the SEC investigation.  The SEC did not impose any fine or other monetary sanction upon the Company.  Without admitting or denying the SEC’s findings, we consented to be ordered not to engage in future violations of certain provisions of the federal securities laws involving improper foreign payments, internal controls and books and records.  For further information on the restatements, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2005.
 
Following the settlement with the SEC regarding improper payments made by foreign affiliates of the Company in Nigeria, outside counsel to the Company was contacted by the U.S. Department of Justice (the “DOJ”) and was asked to provide certain information regarding the Internal Review.  We were advised on January 31, 2011 that the DOJ has closed its inquiry into this matter.
 
In November 2005, two of our consolidated foreign affiliates were named in a lawsuit filed with the High Court of Lagos State, Nigeria by Mr. Benneth Osita Onwubalili and his affiliated company, Kensit Nigeria Limited, which allegedly acted as agents of our affiliates in Nigeria.  The claimants allege that an agreement between the parties was terminated without justification and seek damages of $16.3 million.  We responded to this claim in early 2006.  There has been minimal activity on this claim since then.
 
Document Subpoena Relating to DOJ Antitrust Investigation — In June 2005, one of our subsidiaries received a document subpoena from the Antitrust Division of the DOJ.  The subpoena related to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the U.S. Gulf of Mexico.  The subpoena focused on activities during the period from January 1, 2000 to June 13, 2005.  The Company submitted to the DOJ substantially all documents responsive to the subpoena and had discussions with the DOJ and provided documents related to our operations in the U.S. as well as internationally.  On August 3, 2010, the Company was advised by the DOJ that it had closed the investigation.
 

 
17

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 

Civil Class Action Lawsuit — On June 12, 2009, Superior Offshore International, Inc. v. Bristow Group Inc., et al, Case No. 1:09-cv-00438, was filed in the U.S. District Court for the District of Delaware.  The purported class action complaint, which also named other providers of offshore helicopter services in the Gulf of Mexico as defendants, alleged violations of Section 1 of the Sherman Act.  Among other things, the complaint alleged that the defendants unlawfully conspired to raise and maintain the price of offshore helicopter services between January 1, 2001 and December 31, 2005.  The plaintiff was seeking to represent a purported class of direct purchasers of offshore helicopter services and was asking for, among other things, unspecified treble monetary damages and injunctive relief.  In September 2010, the court granted our and the other defendants’ motion to dismiss the case on several grounds.  The plaintiff has since filed a motion seeking a rehearing and seeking leave to amend its original complaint which was partially granted to permit limited discovery.  We intend to continue to defend against this lawsuit vigorously.  We are currently unable to determine whether it could have a material affect on our business, financial condition and results of operations.
 
Environmental Contingencies — The U.S. Environmental Protection Agency, also referred to as the EPA, has in the past notified us that we are a potential responsible party, or PRP, at four 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.  We were identified by the EPA as a PRP at the Western Sand and Gravel Superfund site in Rhode Island in 1984, at the Sheridan Disposal Services Superfund site in Waller County, Texas, in 1989, at the Gulf Coast Vacuum Services Superfund site near Abbeville, Louisiana, in 1989, and at the Operating Industries, Inc. Superfund site in Monterey Park, California, in 2003.  We have not received any correspondence from the EPA with respect to the Western Sand and Gravel Superfund site since February 1991, nor with respect to the Sheridan Disposal Services Superfund site since 1989.  Remedial activities at the Gulf Coast Vacuum Services Superfund site were completed in September 1999 and the site was removed from the National Priorities List in July 2001.  The EPA submitted a de minimus settlement offer to us in March 2010 which we have accepted.  Following finalization of the settlement, we will be released from liability in connection with this site.  Although we have not yet obtained a formal release for 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 affect on our business, financial condition or results of operations.
 
Guarantees  We have guaranteed the repayment of up to £10 million ($15.7 million) of the debt of FBS Limited, an unconsolidated affiliate.  See discussion of this commitment in Note 3 to our fiscal year 2010 Financial Statements.  Additionally, we provided an indemnity agreement to Afianzadora Sofimex, S.A. to support the issuance of surety bonds on behalf of Heliservicio, another unconsolidated affiliate, from time to time.  As of December 31, 2010, surety bonds denominated in Mexican pesos with an aggregate value of 295 million Mexican pesos ($23.8 million) were outstanding.  Furthermore, we have received a counter-guarantee from our partner in Heliservicio for 76% ($18.1 million) of the surety bonds outstanding.  As discussed in Note 2, on January 14, 2011 we entered into an agreement to sell our interest in Heliservicio.  This agreement provides for our release from the indemnity agreement to Afianzadora Sofimex, S.A.  We expect this transaction to be completed by March 31, 2011 at which time we will no longer provide this guarantee.
 
The following table summarizes our commitments under these guarantees, before the benefit of the counter-guarantee, as of December 31, 2010 (in thousands):
 
Amount of Commitment Expiration Per Period
Total
 
Remainder
of Fiscal
Year 2011
 
Fiscal Years
2012-2013
 
Fiscal Years
2014-2015
 
Fiscal Year
 2016 and Thereafter
 
$
39,472
   
$
1,712
   
$
19,023
   
$
18,737
   
$
 
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 deductibles, self-insured retentions and loss sensitive premium adjustments.  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, cash flows or results of operations.
 

 
18

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


NOTE 6 — TAXES
 
Our effective income tax rates were (38.8)% and 17.3% for the three months ended December 31, 2010 and 2009, respectively, and zero and 23.8% for the nine months ended December 31, 2010 and 2009, respectively.  The effective income tax rates for the three and nine months ended December 31, 2010 reflect the tax implications of the implementation of a restructuring that more closely aligns our legal structure with our global operational structure.  As a result of this restructuring, which was effective November 1, 2010, most U.S. tax on offshore profits will be deferred until the profits are repatriated.
 
For the three and nine months ended December 31, 2010, we have also recorded a net reduction of our provision for income taxes of $16.6 million and $17.4 million, respectively, primarily due to the reversal of deferred tax balances recorded in prior fiscal years.  Because offshore profits will be deferred until the profits are repatriated, deferred tax liabilities recorded in prior fiscal years are no longer required.  Excluding this reduction, our effective tax rates were 15.6% and 17.0% for the three and nine months ended December 31, 2010, respectively.
 
Our effective income tax rate was also reduced as a result of changes in activity levels between jurisdictions with different tax rates.
 
During the three months ended December 31, 2010 and 2009, we accrued tax contingency related items totaling $1.0 million and $0.5 million, respectively.  During the nine months ended December 31, 2010 and 2009, we accrued tax contingency related items totaling $2.7 million and $3.7 million, respectively.
 
As of December 31, 2010, there were $11.5 million of unrecognized tax benefits, all of which would have an impact on our effective income tax rate, if recognized.  For the three months ended December 31, 2010 and 2009, we accrued interest and penalties of $0.1 million and zero, respectively, and for the nine months ended December 31, 2010 and 2009, we accrued interest and penalties of $0.4 million and $0.3 million, respectively, in connection with uncertain tax positions.
 
NOTE 7 — DERIVATIVES
 
From time to time we enter into forward exchange contracts as a hedge against foreign currency asset and liability commitments and anticipated transaction exposures, including intercompany purchases. All derivatives are recognized as assets or liabilities and measured at fair value.  Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding effect on earnings.  We do not use financial instruments for trading or speculative purposes.
 
We entered into forward contracts during fiscal years 2010 and 2009 to mitigate our exposure to exchange rate fluctuations on our euro-denominated aircraft purchase commitments, which have been designated as cash flow hedges for accounting purposes.  We had no open forward contracts relating to euro-denominated aircraft purchase commitments as of March 31, 2010.  We had six open forward contracts as of December 31, 2010, which had rates ranging from 1.3153 U.S. dollars per euro to 1.3267 U.S. dollars per euro.  These contracts had an underlying nominal value of between €5,000,000 and €7,000,000, for a total of €34,300,871, with the first contract expiring in May 2011 and the last in June 2011.  As of December 31, 2010, the fair value of these contracts was an asset of $0.6 million.  As of December 31, 2010, an unrecognized gain of $0.4 million, net of tax, on these contracts is included as a component of accumulated other comprehensive loss and the derivative asset is included in prepaid expenses and other current assets in our condensed consolidated balance sheet.  No gains or losses relating to forward contracts are recognized in our consolidated statements of income for the three and nine months ended December 31, 2010; however, we recognized gains of $2.8 million and $3.9 million, respectively, for the three and nine months ended December 31, 2009 in our condensed consolidated statements of income as a component of other income (expense), net relating to hedges as a result of early termination of forward contracts on euro-denominated aircraft purchase commitments.
 

 
19

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 
 
Information on the location and amounts of derivative gains and losses in the consolidated statements of income for the three months ended December 31, 2010 is as follows (in thousands):
 
Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivative (Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Foreign currency
 forward contracts
 
$
(455
)
 
Other income (expense), net
 
$
   
Other income (expense), net
 
$
 
   
$
(455
)
     
$
       
$
 
 
Information on the location and amounts of derivative gains and losses in the consolidated statements of income for the nine months ended December 31, 2010 is as follows (in thousands):
 
Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivative (Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Foreign currency
forward contracts
 
$
405
   
Other income (expense), net
 
$
   
Other income (expense), net
 
$
 
   
$
405
       
$
       
$
 
 
Information on the location and amounts of derivative gains and losses in the consolidated statements of income for the three months ended December 31, 2009 is as follows (in thousands):
 
Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivative (Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Foreign currency
 forward contracts
 
$
(668
)
 
Other income (expense), net
 
$
   
Other income (expense), net
 
$
2,804
 
   
$
(668
)
     
$
       
$
2,804
 

 
20

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 
 
Information on the location and amounts of derivative gains and losses in the consolidated statements of income for the nine months ended December 31, 2009 is as follows (in thousands):
 
Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivative (Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Foreign currency
forward contracts
 
$
8,094
   
Other income (expense), net
 
$
   
Other income (expense), net
 
$
3,936
 
   
$
8,094
       
$
       
$
3,936
 
 
NOTE 8 — EMPLOYEE BENEFIT PLANS
 
Pension Plans
 
The following table provides a detail of the components of net periodic pension cost (in thousands):
 
 
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
 
2010
   
2009
   
2010
   
2009
 
Service cost for benefits earned during the period
$
1,354
   
$
1,139
   
$
3,966
   
$
3,365
 
Interest cost on pension benefit obligation
 
6,760
     
6,576
     
19,800
     
19,435
 
Expected return on assets
 
(6,783
)
   
(5,213
)
   
(19,870
)
   
(15,407
)
Amortization of unrecognized losses
 
1,325
     
1,150
     
3,882
     
3,399
 
Net periodic pension cost
$
2,656
   
$
3,652
   
$
7,778
   
$
10,792
 
 
We pre-funded our contributions of $19.9 million to our U.K. plans for fiscal year 2011 in March 2010.  The current estimate of our cash contributions to our Norwegian pension plan for fiscal year 2011 is $4.2 million, $4.1 million of which was paid during the nine months ended December 31, 2010.
 
Incentive Compensation
 
We have a number of incentive and stock option plans which are described in Note 10 to our fiscal year 2010 Financial Statements.
 
Stock-based compensation expense, which includes stock options, restricted stock units and restricted stock, totaled $2.8 million and $3.3 million for the three months ended December 31, 2010 and 2009, respectively, and totaled $10.8 million and $9.9 million for the nine months ended December 31, 2010 and 2009, respectively.  Stock-based compensation expense has been allocated to our various business units.
 
During the nine months ended December 31, 2010, 282,549 stock options were granted at an average exercise price and fair value of $30.16 and $15.03 per share, respectively.  The key input variables used in valuing these options under the Black Scholes model were: risk-free interest rate of 2.64%; dividend yield of zero; stock price volatility of 45.4%; and expected option lives of 7 years.  Also during the nine months ended December 31, 2010, we awarded 276,024 shares of restricted stock at a weighted average grant date fair value of $30.93 per share.  There were no stock options granted during the three months ended December 31, 2010.
 

 
21

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 

Compensation expense of $3.0 million and $3.3 million was recorded related to the performance cash awards during the three and nine months ended December 31, 2010, respectively.  No compensation expense was recorded related to the performance cash awards during the three and nine months ended December 31, 2009.
 
NOTE 9 — COMPREHENSIVE INCOME, EARNINGS PER SHARE AND DIVIDENDS
 
Comprehensive Income
 
Comprehensive income is as follows (in thousands):
 
   
Three Months Ended
   
Nine Months Ended
 
   
December 31,
   
December 31,
 
   
2010
   
2009
   
2010
   
2009
 
Net income
 
$
42,314
   
$
27,126
   
$
102,070
   
$
84,827
 
Other comprehensive income gain:
                               
Currency translation adjustments (1) 
   
(818
)
   
1,927
     
9,010
     
40,926
 
Unrealized gain (loss) on cash flow hedges (2) 
   
(455
)
   
(668
)
   
405
     
8,094
 
Comprehensive income
 
$
41,041
   
$
28,385
   
$
111,485
   
$
133,847
 
__________

(1)
 
During the three and nine months ended December 31, 2010 and 2009, the U.S. dollar weakened against the British pound sterling, resulting in translation gains recorded as a component of stockholders’ investment as of December 31, 2010 and 2009.
   
(2)
 
Net of income tax effect of $(0.2) million and $0.2 million for the three and nine months ended December 31, 2010, respectively, and $(0.4) million and $4.4 million for the three and nine months ended December 31, 2009, respectively.


 
22

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)


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.  The following table sets forth the computation of basic and diluted earnings per share:
 
 
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
   
2010
   
2009
   
2010
   
2009
 
Net income to common stockholders (in thousands):
                       
Income available to common stockholders – basic
$
41,759
 
$
26,678
 
$
101,447
 
$
77,246
 
Preferred stock dividends
 
   
   
   
6,325
 
Interest expense on assumed conversion of 3% Convertible Senior Notes, net of tax (1)
 
   
   
   
 
Income available to common stockholders – diluted
$
41,759
 
$
26,678
 
$
101,447
 
$
83,571
 
                         
Shares:
                       
Weighted-average number of common shares outstanding – basic
 
36,204,121
   
35,896,054
   
35,984,029
   
31,732,633
 
Assumed conversion of preferred stock outstanding during the
period (2)
 
   
   
   
3,961,119
 
Assumed conversion of 3% Convertible Senior Notes outstanding
during the period (1)  
 
   
   
   
 
Net effect of dilutive stock options, restricted stock units and
restricted stock awards based on the treasury stock method
 
711,124
   
374,697
   
699,979
   
375,939
 
Weighted-average number of common shares outstanding – diluted
 
36,915,245
   
36,270,751
   
36,684,008
   
36,069,691
 
Basic earnings per common share
$
1.15
 
$
0.74
 
$
2.82
 
$
2.43
 
Diluted earnings per common share
$
1.13
 
$
0.74
 
$
2.77
 
$
2.32
 
_________

(1)
Diluted earnings per common share for each of the three and nine months ended December 31, 2010 and 2009 excludes approximately 1.5 million potentially dilutive shares initially issuable upon the conversion of our 3% Convertible Senior Notes.  The 3% Convertible Senior Notes will be convertible, under certain circumstances, using a net share settlement process, into a combination of cash and our Common Stock.  The initial base conversion price of the notes is approximately $77.34 (subject to adjustment in certain circumstances), based on the initial base conversion rate of 12.9307 shares of Common Stock per $1,000 principal amount of convertible notes.  In general, upon conversion of a note, the holder will receive cash equal to the principal amount of the note and Common Stock to the extent of the note's conversion value in excess of such principal amount.  In addition, if at the time of conversion the applicable price of our Common Stock exceeds the base conversion price, holders will receive up to an additional 8.4049 shares of our Common Stock per $1,000 principal amount of notes, as determined pursuant to a specified formula.  Such shares did not impact our calculation of diluted earnings per share for the three and nine months ended December 31, 2010 or 2009 as our stock price did not meet or exceed $77.34 per share.
   
(2)
Diluted earnings per common share included weighted-average shares resulting from the assumed conversion of our preferred stock at the conversion rate that results in the most dilution:  1.4180 shares of Common Stock for each share of preferred stock.  On September 15, 2009, we converted our preferred stock into 6,522,800 shares of Common Stock at this conversion rate.  For further discussion on the preferred stock, see Note 11 in the fiscal year 2010 Financial Statements.


 
23

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 

Diluted earnings per common share excludes options to purchase shares, restricted stock units and restricted stock awards which were outstanding during the period but were anti-dilutive as follows:

 
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
 
2010
   
2009
   
2010
   
2009
 
Options:
                             
Outstanding
 
535,472
     
473,609
     
468,532
     
414,974
 
Weighted-average exercise price
$
31.47
   
$
39.92
   
$
31.68
   
$
41.15
 
Restricted stock units:
                             
Outstanding
 
83,940
     
231,581
     
85,238
     
241,071
 
Weighted-average price
$
46.81
   
$
40.02
   
$
46.80
   
$
40.22
 
Restricted stock awards:
                             
Outstanding
 
     
     
7,738
     
974
 
Weighted-average price
$
   
$
   
$
36.21
   
$
20.22
 
 
NOTE 10 — SEGMENT INFORMATION
 
We conduct our business in one segment: Helicopter Services.  The Helicopter Services segment operations are conducted primarily through five business units: North America, Europe, West Africa, Australia and Other International.  Additionally, we also operate a training business unit, Bristow Academy, and provide technical services to customers in the U.S. and U.K.
 
Beginning on January 1, 2010, the U.S. Gulf of Mexico and Arctic business units were combined into the North America business unit.  Additionally, there are no longer Latin America, Western Hemisphere (“WH”) Centralized Operations and Eastern Hemisphere (“EH”) Centralized Operations business units.  The Latin America business unit is now included in the Other International business unit.  The Bristow Academy business unit and the technical services business previously included with the WH Centralized Operations and EH Centralized Operations business units are now aggregated for reporting purposes in Corporate and other.  The remainder of the costs within WH Centralized Operations and EH Centralized Operations are included in Corporate and other for reporting purposes or have been allocated to our other business units to the extent these operations support those business units.  Amounts presented below for the three and nine months ended December 31, 2009 have been revised to conform to current period presentation.
 

 
24

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
 

The following tables show reportable segment information for the three and nine months ended December 31, 2010 and 2009 and as of December 31 and March 31, 2010, where applicable, reconciled to consolidated totals, and prepared on the same basis as our condensed consolidated financial statements (in thousands).
 
   
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
   
2010
   
2009
   
2010
   
2009
 
Segment gross revenue from external customers:
                               
Europe
 
$
129,705
   
$
119,003
   
$
348,469
   
$
346,866
 
North America
   
45,589
     
45,580
     
153,598
     
144,084
 
West Africa
   
53,725
     
58,736
     
170,931
     
165,005
 
Australia
   
41,440
     
38,188
     
114,095
     
96,684
 
Other International
   
41,865
     
33,344
     
110,979
     
103,237
 
Corporate and other
   
5,545
     
8,455
     
24,594
     
29,497
 
Total segment gross revenue
 
$
317,869
   
$
303,306
   
$
922,666
   
$
885,373
 

Intrasegment gross revenue:
                               
Europe
 
$
123
   
$
287
   
$
645
   
$
1,402
 
North America
   
40
     
104
     
123
     
193
 
West Africa
   
     
     
     
 
Australia
   
     
     
     
 
Other International
   
     
1
     
     
109
 
Corporate and other
   
848
     
9
     
1,062
     
2,145
 
Total intrasegment gross revenue
 
$
1,011
   
$
401
   
$
1,830
   
$
3,849
 

Consolidated gross revenue reconciliation:
                               
Europe
 
$
129,828
   
$
119,290
   
$
349,114
   
$
348,268
 
North America
   
45,629
     
45,684
     
153,721
     
144,277
 
West Africa
   
53,725
     
58,736
     
170,931
     
165,005
 
Australia
   
41,440
     
38,188
     
114,095
     
96,684
 
Other International
   
41,865
     
33,345
     
110,979
     
103,346
 
Corporate and other
   
6,393
     
8,464
     
25,656
     
31,642
 
Intrasegment eliminations
   
(1,011
)
   
(401
)
   
(1,830
)
   
(3,849
)
Total consolidated gross revenue
 
$
317,869
   
$
303,306
   
$
922,666
   
$
885,373
 

Earnings from unconsolidated affiliates, net of losses – equity method investments:
                               
Europe
 
$
3,490
   
$
2,542
   
$
8,230
   
$
6,392
 
Other International
   
1,854
     
526
     
1,184
     
4,225
 
Corporate and other
   
(3
)
   
     
(59
)
   
8
 
Total earnings from unconsolidated affiliates, net of losses –
equity method investments
 
$
5,341
   
$
3,068
   
$
9,355
   
$
10,625
 


 
25

BRISTOW GROUP INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)



   
Three Months Ended
December 31,
   
Nine Months Ended
December 31,
 
   
2010
   
2009
   
2010
   
2009
 
Consolidated operating income (loss) reconciliation:
                               
Europe
 
$
25,470
   
$
19,239
   
$
65,381
   
$
58,080
 
North America
   
1,917
     
1,511
     
16,129
     
10,653
 
West Africa
   
15,995
     
14,913
     
48,789
     
43,640
 
Australia
   
7,139
     
9,358
     
21,185
     
22,025
 
Other International
   
11,595
     
5,181
     
24,962
     
25,371
 
Corporate and other
   
(15,444
)
   
(12,924
)
   
(40,151
)
   
(35,041
)
Gain (loss) on disposal of assets
   
(33
)
   
2,448
     
3,582
     
13,337
 
Total consolidated operating income
 
$
46,639
   
$
39,726
   
$
139,877
   
$
138,065
 

Depreciation and amortization:
                               
Europe
 
$
7,182
   
$
7,406
   
$
19,389
   
$
20,563
 
North America
   
3,751
     
3,950
     
12,327
     
11,182
 
West Africa
   
2,615
     
2,638
     
8,060
     
7,094
 
Australia
   
3,002
     
2,451
     
8,359
     
5,795
 
Other International
   
3,330
     
2,904
     
9,607
     
9,322
 
Corporate and other
   
1,458
     
1,314