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, 2014 is referred to as “fiscal year 2014.” Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), the information contained in the following notes to condensed consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and related notes thereto contained in our fiscal year 2013 Annual Report (the “fiscal year 2013 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 September 30, 2013, the consolidated results of operations for the three and six months ended September 30, 2013 and 2012, and the consolidated cash flows for the six months ended September 30, 2013 and 2012.

Foreign Currency

See “Foreign Currency” in Note 1 to the fiscal year 2013 Financial Statements for a discussion of the related accounting policies. During the three and six months ended September 30, 2013 and 2012, our primary foreign currency exposure was 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 September 30,		Six Months Ended September 30,
	2013	2012	2013	2012
One British pound sterling into U.S. dollars
High	1.62	1.63	1.62	1.63
Average	1.55	1.58	1.54	1.58
Low	1.48	1.54	1.48	1.53
At period-end	1.62	1.61	1.62	1.61
One euro into U.S. dollars
High	1.35	1.31	1.35	1.33
Average	1.32	1.25	1.32	1.27
Low	1.28	1.21	1.26	1.21
At period-end	1.35	1.29	1.35	1.29
One Australian dollar into U.S. dollars
High	0.95	1.06	1.07	1.06
Average	0.92	1.04	0.95	1.03
Low	0.89	1.01	0.89	0.97
At period-end	0.94	1.04	0.94	1.04
One Nigerian naira into U.S. dollars
High	0.0064	0.0065	0.0065	0.0065
Average	0.0063	0.0063	0.0063	0.0063
Low	0.0061	0.0062	0.0061	0.0061
At period-end	0.0063	0.0064	0.0063	0.0064

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Source: Bank of England and Oanda.com

Other income (expense), net, in our condensed consolidated statements of income includes foreign currency transaction gain (losses) of $0.4 million and $(0.2) million for the three months ended September 30, 2013 and 2012, respectively, and $(1.0) million and $(1.1) million for the six months ended September 30, 2013 and 2012, respectively. Other income (expense), net also includes $1.1 million for the three and six months ended September 30, 2013 for the sale of intellectual property.

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 September 30, 2013 and 2012, earnings from unconsolidated affiliates, net of losses, were decreased by $2.1 million and $0.2 million, respectively, and during the six months ended September 30, 2013 and 2012, earnings from unconsolidated affiliates, net of losses, were decreased by $2.4 million and $3.8 million, respectively, as a result of the impact of changes in foreign currency exchange rates on the results of our unconsolidated affiliates, primarily the impact of changes in the Brazilian real and U.S. dollar exchange rate on results 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 (in thousands):



	Three Months Ended September 30,		Six Months Ended September 30,
	2013	2012	2013	2012
One Brazilian real into U.S. dollars
High	0.4568	0.5029	0.5123	0.5488
Average	0.4380	0.4941	0.4617	0.5033
Low	0.4093	0.4879	0.4093	0.4811
At period-end	0.4475	0.4944	0.4475	0.4944

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Source: 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 September 30, 2013			Six Months Ended September 30, 2013
Revenue	$	(6,874	)	$	(9,862	)
Operating expense	4,858			6,531
Earnings from unconsolidated affiliates, net of losses	(1,868		)	1,330
Non-operating expense	615			273
Income before provision for income taxes	(3,269		)	(1,728		)
Provision for income taxes	719			380
Net income	(2,550		)	(1,348		)
Cumulative translation adjustment	15,766			11,207
Total stockholders’ investment	$	13,216		$	9,859

Accounts Receivable

As of September 30 and March 31, 2013, the allowance for doubtful accounts for non-affiliates was $5.0 million and $5.1 million, respectively, primarily related to amounts due from ATP Oil and Gas Corporation, a client in the U.S. Gulf of Mexico, as a result of its filing for bankruptcy. As of September 30 and March 31, 2013, there were no allowances for doubtful accounts related to accounts receivable due from affiliates. See “Summary of Significant Accounting Policies” in Note 1 to the fiscal year 2013 Financial Statements for further information related to our accounting policies for accounts receivable.

Inventories

During the six months ended September 30, 2013, we increased our inventory allowance by $2.4 million as a result of our review of excess inventory on aircraft model types we ceased ownership of or classified all or a significant portion of as held for sale; $1.5 million of this allowance was recorded during the three months ended September 30, 2013. A majority of this allowance relates to small aircraft types operating primarily in our North America business unit as we continue to move toward operating a fleet of mostly large and medium aircraft in this market. See “Summary of Significant Accounting Policies” in Note 1 to the fiscal year 2013 Financial Statements for further information related to our accounting policies for inventories.

Prepaid Expenses and Other Current Assets

As of March 31, 2013, prepaid expenses and other current assets included $12.7 million in fees related to a potential financing in connection with our bid to provide search and rescue (“SAR”) services in the U.K. During the six months ended September 30, 2013, we increased our borrowing capacity on our revolving credit facility from $200 million to $350 million (“Revolving Credit Facility”) and cancelled the potential financing. During the six months ended September 30, 2013, we included the $12.7 million of unamortized deferred financing fees as interest expense on our condensed consolidated statement of income.

Other Assets

As of September 30 and March 31, 2013, other assets includes contract acquisition costs and pre-operating costs totaling $15.4 million and $10.8 million, respectively, related to the SAR contract acquisition costs which are recoverable under the contract and will be expensed over the term of the contract.

Property and Equipment and Assets Held for Sale

During the three and six months ended September 30, 2013 and 2012, we made capital expenditures as follows:



	Three Months Ended September 30,				Six Months Ended September 30,
	2013		2012		2013		2012
Number of aircraft delivered:
Medium	3		—		5		—
Large	2		—		5		3
Total aircraft	5		—		10		3
Capital expenditures (in thousands):
Aircraft and related equipment	$	145,653	$	14,887	$	312,880	$	94,856
Other	14,374		11,963		26,679		18,549
Total capital expenditures	$	160,027	$	26,850	$	339,559	$	113,405

Additionally, the following tables present details on the aircraft sold or disposed of and impairments on assets held for sale during the three and six months ended September 30, 2013 and 2012:



	Three Months Ended September 30, 2013						Three Months Ended September 30, 2012
	Number of aircraft	Proceeds		Gains (losses)			Number of aircraft	Proceeds		Gains (losses)
	(In thousands, except for number of aircraft)
Aircraft sold or disposed of ⁽¹⁾	11	$	153,710	$	(2,114	)	6	$	76,149	$	738
Impairment of aircraft held for sale	1	$	—	$	(950	)	2	$	—	$	(2,000	)

	Six Months Ended September 30, 2013						Six Months Ended September 30, 2012
	Number of aircraft	Proceeds		Gains (losses)			Number of aircraft	Proceeds		Gains (losses)
	(In thousands, except for number of aircraft)
Aircraft sold or disposed of ⁽¹⁾	15	$	155,603	$	(2,605	)	10	$	96,376	$	(2,688	)
Impairment of aircraft held for sale	3	$	—	$	(2,180	)	9	$	—	$	(3,889	)

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⁽¹⁾	During the three and six months ended September 30, 2013 and 2012, seven and two of these aircraft were leased back of which $145.6 million and $50.4 million, respectively, had been received in proceeds.

See “Summary of Significant Accounting Policies” in Note 1 to the fiscal year 2013 Financial Statements for further information related to our accounting policies for property and equipment and assets held for sale.

Recent Accounting Pronouncement

In February 2013, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance on the presentation of reclassifications of items out of accumulated other comprehensive income. This guidance amends existing guidance by requiring that additional information be disclosed about items reclassified out of accumulated other comprehensive income. The additional information includes separately stating the total change for each component of other comprehensive income (for example unrealized gains or losses on available-for-sale securities or foreign currency items) and separately disclosing both current-period other comprehensive income and reclassification adjustments. Entities are also required to present, either on the face of the statement of income or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income as separate line items of net income but only if the entire amount reclassified must be reclassified to net income in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity must cross-reference to other disclosures that provide additional detail about those amounts. This pronouncement was effective for interim and annual periods beginning after December 15, 2012. We adopted this pronouncement for our fiscal year 2014 beginning April 1, 2013, and it did not have an impact on our financial statements.

In July 2013, the FASB issued accounting guidance relating to the presentation of unrecognized tax benefits. The intent is to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We are evaluating the impact that the adoption of this standard may have on our consolidated financial statements.