Bristow Group Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES

VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES

12 Months Ended

Dec. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES

Equity investments and advances as of December 31, 2016 and 2015 were as follows (in thousands):



	Ownership	2016		2015
Dart	50%	$	24,782	$	23,892
Era Training Center	50%	4,484		4,996
Heli-Union Era Australia	47%	—		10
		$	29,266	$	28,898

The Company owns a 50% interest in Aeróleo, which is a VIE. Pursuant to a new shareholders’ agreement entered into on October 1, 2015 (see Note 4), the Company is the primary beneficiary, and Aeróleo is now a consolidated entity. The Company also owned a 50% interest in Era do Brazil, a VIE, prior to October 1, 2015. As the primary beneficiary, the Company has been consolidating this entity since September 30, 2012. On October 1, 2015, the Company acquired the remaining 50% interest, and Era do Brazil is now a wholly-owned subsidiary.

Combined Condensed Financial Statements

Summarized financial information for the Company’s equity investments and advances in Dart as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 was as follows (in thousands):



	2016		2015
Current assets	$	28,442	$	22,567
Non-current assets	29,475		30,716
Current liabilities	6,737		4,225
Non-current liabilities	8,315		8,850



	2016		2015			2014
Operating revenues	$	40,930	$	33,190		$	40,174
Costs and expenses:
Operating and administrative	32,878		32,869			31,755
Depreciation and amortization	3,161		4,224			4,129
Total costs and expenses	36,039		37,093			35,884
Operating income	$	4,891	$	(3,903	)	$	4,290
Net income	$	2,657	$	(3,150	)	$	2,172

Summarized financial information for the Company’s equity investments and advances in all other investees as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 was as follows (in thousands):



	2016		2015
Current assets	$	535	$	703
Non-current assets	4,641		5,159
Current liabilities	653		597
Non-current liabilities	3,652		3,984



	2016			2015			2014
Operating revenues	$	694		$	622		$	2,737
Costs and expenses:
Operating and administrative	338			685			750
Depreciation and amortization	519			740			2,370
Total costs and expenses	857			1,425			3,120
Operating income	$	(163	)	$	(803	)	$	(383	)
Net income (loss)	$	(409	)	$	(1,064	)	$	(749	)

As of December 31, 2016 and 2015, cumulative undistributed net earnings of equity investees included in the Company’s consolidated retained earnings were $1.1 million and $0.1 million, respectively.

VIEs

Aeróleo. On July 1, 2011, the Company acquired a 50% economic interest and a 20% voting interest in Aeróleo, a Brazilian entity that provides helicopter transport services to the Brazilian offshore oil and gas industry, for $4.8 million in cash. The Company and its partner also each loaned Aeróleo $6.0 million at an interest rate of 6.0% per annum. On October 1, 2015, the Company’s partner completed a transfer of its 50% economic and 80% voting interest in Aeróleo to a third party. In connection with the transfer, the Company entered into a shareholders agreement with its new partner that requires supermajority shareholder and/or board approval with respect to specified, significant actions, and a put/call option arrangement which gives the Company the right to purchase at any time, and the new partner the right to put to the Company after two years, the new partner’s interest in Aeróleo.

As a result of liquidity issues related to the contract suspensions by one of Aeróleo’s customers, Petroleo Brasileiro S.A. (“Petrobras”), Aeróleo is unable to adequately finance its activities without additional financial support, making it a VIE. Prior to October 1, 2015, the Company determined it was not the primary beneficiary as its 20% voting interest did not allow it to direct the activities that most significantly affect Aeróleo’s economic performance. As a result of the new shareholders agreement following the partner’s transfer of interests, the Company determined that it now has control over the activities that most significantly affect Aeróleo’s economic performance and is the VIE’s primary beneficiary. Accordingly, Aeróleo’s results are consolidated in the Company’s financial statements beginning on October 1, 2015.

For the years ended December 31, 2015 and 2014, the Company recognized $21.4 million and $16.7 million, respectively, of operating revenues from Aeróleo, and $42.1 million was outstanding as of September 30, 2015 (See Note 1).

The Company’s consolidated balance sheets at December 31, 2016 and 2015, include assets of Aeróleo totaling $12.9 million and $17.9 million, respectively. The distribution of these assets to Era Group and its subsidiaries other than Aeróleo is subject to restrictions. In addition, the Company’s consolidated balance sheets include liabilities of $9.2 million and $15.9 million, respectively. The creditors for such liabilities do not have recourse to Era Group or its subsidiaries other than Aeróleo.

Era do Brazil. On July 1, 2011, the Company and its partner each contributed $4.8 million in cash to Era do Brazil, a 50-50 joint venture. Era do Brazil is a highly leveraged entity with all its outstanding debt due to the Company, which made it a VIE. As the primary beneficiary, the Company consolidated Era do Brazil in its financial statements effective September 30, 2012. In connection with the Aeróleo transaction on October 1, 2015, the Company acquired, for nominal consideration, the remaining 50% ownership interest in Era do Brazil making it a wholly-owned subsidiary.

Joint Ventures

Dart. Era DHS LLC, a wholly owned subsidiary of the Company, acquired 49% of the capital stock of Dart Helicopter Services LLC (“Dart Helicopters”), a sales, marketing and parts manufacturing organization based in North America that engineers and manufactures after-market parts and equipment for sale to helicopter manufacturers and operators. During 2009, the Company provided a $0.3 million loan to Dart Helicopters with a maturity of June 2012 at an annual interest rate of 5.0%, which was payable quarterly with principal due at maturity. On February 28, 2011, the Company made an additional investment of $5.0 million in Dart Helicopters, and on July 31, 2011, contributed its ownership in Dart Helicopters to Dart in exchange for a 50% economic and voting interest in Dart and a note receivable of $5.1 million. The note receivable had a balance of $3.2 million at December 31, 2016 and bears interest at a rate of 4.0% per annum, requires quarterly principal and interest payments and matures on July 31, 2023. During the years ended December 31, 2016, 2015 and 2014, the Company purchased $1.9 million, $2.1 million and $3.6 million, respectively, of products from Dart.

Era Training Center. Era Training Center LLC (“Era Training Center”) operates flight training devices and provides training services to the Company and third-party customers. During the years ended December 31, 2016, 2015 and 2014, the Company provided helicopter, management and other services to the joint venture totaling $0.2 million, $0.4 million and $0.4 million, respectively, and incurred $0.6 million, $0.5 million and $0.7 million, respectively, for simulator fees. Era Training Center has a $4.0 million note with the Company secured by two flight simulators which bears interest at 6.0% per annum and requires quarterly payments of $0.1 million until January 2026.

Lake Palma. Lake Palma operated seven helicopters in Spain. Effective July 24, 2014, the Company sold its 51% interest in Lake Palma to its joint venture partner, Fumigacion Aerea Andaluza S.A. (“FAASA”), for a purchase price of $9.3 million and recognized a gain of $1.5 million in equity earnings, net of taxes. In connection with the transaction, the Company assigned debt obligations of $2.9 million due to Lake Palma to FAASA, and the balance of the purchase price was funded in cash.