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

Annual report pursuant to Section 13 and 15(d)

SHARE-BASED COMPENSATION AND OTHER EMPLOYEE BENEFIT PLANS

SHARE-BASED COMPENSATION AND OTHER EMPLOYEE BENEFIT PLANS

12 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION AND OTHER EMPLOYEE BENEFIT PLANS

Key Employee Incentive Plans

In connection with the Chapter 11 Cases, the Compensation Committee of Old Bristow’s Board adopted an Executive Key Employee Incentive Plan (the “Executive KEIP”) and a Non-Executive Key Employee Incentive Plan (“Non-Executive KEIP”), each approved by the Bankruptcy Court on August 22, 2019. The Executive KEIP was designed to incentivize Old Bristow’s senior executives by providing a total potential cash award pool of approximately $3.1 million at threshold, $6.1 million at target and up to $12.3 million for exceeding target, and was contingent upon achievement of certain financial targets and safety metrics, and the timing of confirmation of the Plan by the Bankruptcy Court. The Non-Executive KEIP was designed to enhance retention of up to 183 other non-insider employees and provided a total potential cash award pool of approximately $7.7 million at threshold, $10.3 million at target and up to $15.4 million for exceeding target, with 50 percent of the payment contingent upon achievement of certain financial targets and safety metrics, and 50 percent of the payment being based on continued employment with Old Bristow. The payments for the Executive KEIP were made on a quarterly basis with the first payment made in October 2019. The payments for the Non-Executive KEIP were made quarterly with the first payment made in October 2019. In addition to the key employee incentive plans approved by the Bankruptcy Court, Old Bristow made retention payments in April and October 2019 (Predecessor) totaling $3.2 million to non-executives and retention payments in April 2019 (Predecessor) totaling $3.1 million to executives. Old Bristow made payments for the management incentive plan of $3.5 million in May 2019 (Predecessor) for the first quarter of fiscal year 2020, $9.2 million in October 2019 (Predecessor) for the second quarter of fiscal year and $6.7 million in January 2020 (Successor) for the third quarter of fiscal year 2020 and $8.4 million for the fourth quarter of fiscal year 2020 (Successor) in June 2020.

Management Incentive Plan

On the Effective Date, the Compensation Committee of Old Bristow’s Board adopted the 2019 Management Incentive Plan (the “MIP”). At the time of its adoption, the MIP served as an equity-based compensation plan for directors, officers and participating employees and other service providers of Old Bristow and its affiliates, pursuant to which Old Bristow was permitted to issue awards covering shares of the Old Bristow Common Stock and Old Bristow Preferred Stock. During the five months ended March 31, 2020 (Successor), Old Bristow awarded 188,210 shares of restricted Old Bristow Preferred Stock, 312,606 shares of restricted Old Bristow Common Stock, 113,081 Old Bristow Preferred Stock options and 265,049 Old Bristow Common Stock options. Upon the closing of the Merger, these awards converted into 656,617 shares of restricted Combined Company Common Stock and 433,283 stock options to purchase Combined Company Common Stock, of which

73,131 shares of restricted Combined Company Common Stock and 48,448 Combined Company Common Stock options vested and 227,884 shares of restricted of Combined Company Common Stock and 151,307 Combined Company Common Stock options were forfeited on June 11, 2020 (Successor). As of March 31, 2021 (Successor), 1,571,590 shares remained available to grant under the 2012 Incentive Plan.

Restricted Stock - MIP. During the fiscal year ended March 31, 2021 (Successor), the number of shares and the weighted average grant price of restricted stock transactions since close of the Merger were as follows:


	Number of Shares	Weighted Average Grant Price
Non-vested as of June 11, 2020 (Successor):	656,617	$	38.52
Granted	247,204	$	17.56
Vested/released	(2,780)	$	19.41
Forfeited/expired	(268,850)	$	38.44
Non-vested outstanding as of March 31, 2021	632,191	$	30.51

As of March 31, 2021 (Successor), the Company had approximately $10.3 million in total unrecognized compensation costs associated with these awards, and the weighted average period over which it is expected to be recognized is 2.4 years. Total stock-based compensation expense related to the MIP was $2.4 million for the five months ended March 31, 2020 (Successor).

Stock Options - MIP. During the fiscal year ended March 31, 2021 (Successor), the stock options transactions since the close of the Merger were as follows:


	Number of Shares	Weighted Average Grant Price
Non-vested as of June 11, 2020:	433,283	$	25.23
Granted	28,334	$	10.99
Forfeited/expired	(189,567)	$	25.28
Non-vested outstanding as of March 31, 2021	272,050	$	23.71
Vested(1)	96,008	$	24.69

___________________________

(1)Stock options awarded out of the MIP plan upon emergence vest in equal tranches over a four year period with 25% of the underlying shares vest in annual tranches. These stock options are not exercisable by employees until 2026 as stipulated by the MIP Plan for the awards granted upon emergence.

As of March 31, 2021 (Successor), the Company had approximately $3.4 million in total unrecognized compensation costs associated with these awards, and the weighted average period over which it is expected to be recognized is 2.4 years The weighted average remaining contractual term on the non vested stock options is 8.6 years and 8.5 years on the vested and exercisable stock options.

2012 Incentive Plan.

In 2013, Era adopted the Era Group Inc. 2012 Incentive Plan (“2012 Incentive Plan”) under which a maximum of 4,000,000 shares of its common stock at par value of $0.01 per share were reserved for issuance. Awards granted under the 2012 Plan may be in the form of stock options, stock appreciation rights, shares of restricted stock, other share-based awards (payable in cash or common stock) or performance awards, or any combination thereof, and may be made to outside directors, employees or consultants. Upon the closing of the Merger, 151,768 shares of unvested Combined Company restricted stock awards previously issued under the 2012 Incentive Plan remained unvested. As of March 31, 2021 (Successor), 153,184 shares remained available to grant under the 2012 Incentive Plan.

Restricted Stock - 2012 Incentive Plan. During the fiscal year ended March 31, 2021 (Successor), the number of shares and the weighted average grant price of restricted stock transactions were as follows:


	Number of Shares	Weighted Average Grant Price
Non-vested as of June 11, 2020:	151,768	$	21.68
Granted	165,831	$	11.05
Vested	(53,785)	$	24.72
Forfeited/expired	(1,500)	$	19.52
Non-vested outstanding as of March 31, 2021	262,314	$	12.68

As of March 31, 2021 (Successor), the Company had approximately $3.7 million in total unrecognized compensation costs associated with these awards, and the weighted average period over which it is expected to be recognized is 2.0 years.

Stock Options - 2012 Incentive Plan. During the fiscal year ended March 31, 2021 (Successor), the stock options transactions were as follows:


	Number of Shares	Weighted Average Grant Price
Non-vested as of June 11, 2020:	52,255	$	22.45
Granted	133,334	$	11.30
Forfeited/expired	(5,000)	$	21.55
Non-vested outstanding as of March 31, 2021	180,589	$	14.30
Vested and exercisable	47,255	$	22.76

As of March 31, 2021 (Successor), the Company had approximately $1.1 million in total unrecognized compensation costs associated with these awards, and the weighted average period over which it is expected to be recognized is 2.2 years The weighted average remaining contractual term on the non vested stock options is 7.5 years and 2.6 years on the vested and exercisable stock options. As of March 31, 2021 (Successor), the weighted average exercise price of the vested and exercisable stock options was $61.82.

Total stock based compensation expense, which includes stock options and restricted stock was $11.5 million for the fiscal year March 31, 2021 (Successor).

During the fiscal year March 31, 2021 (Successor), the Company awarded 413,035 Combined Company restricted stock units. Of this amount, 161,668 were performance-based restricted stock units of which 150,001 had an average grant date fair value of $7.73 while 11,667 had an average grant date fair value of $24.54. The grant date fair values of these awards were determined under a Monte Carlo Simulation in a risk-neutral framework using Geometric Brownian Motion and will vest on a cliff-basis, after three years, subject to certain stock price performance targets. The remainder of the awards comprised of 44,946 restricted stock units for annual director awards at a grant date fair value of $15.76 and 206,421 restricted stock units of non-performance based restricted stock units awarded at an average grant date fair value of $19.41 per share. The grant date fair values of both non-performance based restricted stock units and annual director awards were derived using the Company’s closing stock price on each of the respective award dates.

During the fiscal year March 31, 2021 (Successor), the Company awarded 161,668 Combined Company stock options that vest on a cliff-basis after three years. Of the 161,668 stock options, 150,001 had a grant date fair value of $10.99 and the remaining 11,667 had a grant date fair value of $14.56. The Company utilized the Black-Scholes option valuation model for estimating the fair value of its stock options.

Pension Plans

Defined Contribution Plans

The Bristow Group Inc. Employee Savings and Retirement Plan (the “Bristow Plan”) covers certain of the Company’s U.S. employees. Under the Bristow Plan, the Company matches each participant’s contributions up to 3% of the employee’s compensation. In addition, under the Bristow Plan, the Company contributes an additional 3% of the employee’s compensation after the end of each calendar year.

Bristow Helicopters and Bristow International Aviation (Guernsey) Limited (“BIAGL”) each have a defined contribution plan. These defined contribution plans replaced the defined benefit pension plans described below for future accruals.

The Company’s contributions to its defined contribution plans were $21.9 million, $8.5 million, $13.6 million and $22.2 million for the fiscal year 2021 (Successor), five months ended March 31, 2020 (Successor), seven months ended October 31, 2019 (Predecessor), and fiscal year 2019 (Predecessor), respectively.

Defined Benefit Plans

The defined benefit pension plans of Bristow Helicopters and BIAGL replaced by the defined contribution plans described above covered all full-time employees of Bristow Aviation and BIAGL employed on or before December 31, 1997. Both plans were closed to future accrual as of February 1, 2004. The defined benefits for employee members were based on the employee’s annualized average last three years’ pensionable salaries up to February 1, 2004, increasing thereafter in line with retail price inflation (prior to 2011) and consumer price inflation (from 2011 onwards), and subject to maximum increases of 5% per year over the period to retirement. Any valuation deficits are funded by contributions by Bristow Helicopters and BIAGL. Plan assets are held in separate funds administered by the plans’ trustee (the “Plan Trustee”), which are primarily invested in equities and debt securities. For members of the two closed defined benefit pension plans, since January 2005, Bristow Helicopters contributes a maximum of 7% of a participant’s non-variable salary, and since April 2006, the maximum employer contribution into the plan has been 7.35% for pilots. Each member is required to contribute a minimum of 5% of non-variable salary for Bristow Helicopters to match the contribution. In addition, there are three defined contribution plans for staff who were not members of the original defined benefit plans, two of which are closed to new members.

The following tables provide a rollforward of the projected benefit obligation and the fair value of plan assets, set forth the defined benefit retirement plans’ funded status and provide detail of the components of net periodic pension cost calculated for the U.K. pension plans. The measurement date adopted is March 31. Any such gains or losses are amortized over the average remaining life expectancy of the plan members.


	Fiscal Year Ended March 31, 2021		Five Months Ended March 31, 2020		Seven Months Ended October 31, 2019
	Successor				Predecessor
Change in benefit obligation:
Projected benefit obligation (PBO) at beginning of period	$	494,992	$	528,858	$	504,076
Service cost	743		594		29
Interest cost	9,449		4,109		6,705
Actuarial loss (gain)	41,343		(5,545)		34,618
Benefit payments and expenses	(24,854)		(11,394)		(13,882)



Effect of exchange rate changes	57,245		(21,630)		(2,688)
Projected benefit obligation (PBO) at end of period	$	578,918	$	494,992	$	528,858
Change in plan assets:
Market value of assets at beginning of period	$	477,137	$	495,343	$	478,350
Actual return on assets	11,738		6,827		24,633
Employer contributions	16,778		7,144		9,032

Benefit payments and expenses	(24,854)		(11,394)		(13,882)

Effect of exchange rate changes	53,969		(20,783)		(2,790)
Market value of assets at end of period	$	534,768	$	477,137	$	495,343
Reconciliation of funded status:
Accumulated benefit obligation (ABO)	$	578,918	$	494,992	$	528,858
Projected benefit obligation (PBO)	$	578,918	$	494,992	$	528,858
Fair value of assets	(534,768)		(477,137)		(495,343)
Net recognized pension liability	$	44,150	$	17,855	$	33,515
Amounts recognized in accumulated other comprehensive loss	$	45,071	$	(6,389)	$	—

The components of net periodic pension cost (benefit) other than the service cost component are included in other income (expense), net on the Company’s consolidated statements of operations. The following table provides a detail of the components of net periodic pension cost (benefit) (in thousands):


	Fiscal Year Ended March 31, 2021		Five Months Ended March 31, 2020		Seven Months Ended October 31, 2019		Fiscal Year Ended March 31, 2019
	Successor				Predecessor
Service cost for benefits earned during the period	$	743	$	594	$	29	$	655
Interest cost on pension benefit obligation	9,449		4,109		6,705		12,984
Expected return on assets	(13,090)		(5,735)		(5,610)		(17,118)

Amortization of unrecognized losses	—		—		—		8,001
Net periodic pension cost (gain)	$	(2,898)	$	(1,032)	$	1,124	$	4,522

Service cost component is reported in the Company’s statement of operations in total costs and expenses. All other components of net periodic pension cost are reported in the other expenses, net.

The amount in accumulated other comprehensive loss as of March 31, 2021 (Successor) expected to be recognized as a component of net periodic pension cost in fiscal year 2022 is zero, net of tax, and represents amortization of the net actuarial losses.

In October 2018, the U.K. High Court ruled that the U.K. defined pension schemes will be required to equalize for the effect of unequal guaranteed minimum pensions (“GMPs”) accrued between 1990 and 1997 by adjusting other non-GMP

benefits. The Company recorded additional pension liability of $2.9 million as of December 31, 2018 (Predecessor) related to this ruling that will be recorded as additional service cost over the future service period of approximately 20 years.

Actuarial assumptions used to develop the components of the U.K. plans were as follows:


	Fiscal Year Ended March 31, 2021		Five Months Ended March 31, 2020		Seven Months Ended October 31, 2019		Fiscal Year Ended March 31, 2019
	Successor				Predecessor
Discount rate	2.30	%	1.90	%	1.90	%	2.60	%
Expected long-term rate of return on assets	2.62	%	2.80	%	2.80	%	3.62	%
Pension increase rate	2.60	%	2.80	%	2.80	%	2.90	%

The Company utilizes a British pound sterling denominated AA corporate bond index as a basis for determining the discount rate for its U.K. plans. The expected rate of return assumptions have been determined following consultation with the Company’s actuarial advisors. In the case of bond investments, the rates assumed have been directly based on market redemption yields at the measurement date, and those on other asset classes represent forward-looking rates that have typically been based on other independent research by investment specialists.

Under U.K. and Guernsey legislation, it is the Plan Trustee who is responsible for the investment strategy of the plans, although day-to-day management of the assets is delegated to a team of regulated investment fund managers. The Plan Trustee of the Bristow Staff Pension Scheme (the “Scheme”) has the following three stated primary objectives when determining investment strategy:

(i)“funding objective” — to ensure that the Scheme is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place which will take into account the financial covenant to the employer;

(ii)“stability objective” — to have due regard to the likely level and volatility of required contributions when setting the Scheme’s investment strategy; and

(iii)“security objective” — to ensure that the solvency position of the Scheme (as assessed on a gilt basis) is expected to improve. The Plan Trustee will take into account the strength of the employer’s covenant when determining the expected improvement in the solvency position of the Scheme.

The types of investments are held, and the relative allocation of assets to investments is selected, in light of the liability profile of the Scheme, its cash flow requirements, the funding level and the Plan Trustee’s stated objectives. In addition, in order to avoid an undue concentration of risk, assets are diversified within and across asset classes.

In determining the overall investment strategy for the plans, the Plan Trustee undertakes regular asset and liability modeling (the “ALM”) with the assistance of their U.K. actuary. The ALM looks at a number of different investment scenarios and projects both a range and a best estimate of likely return from each one. Based on these analyses, and following consultation with the Company, the Trustee determines the benchmark allocation for the plans’ assets.

The market value of the plan’s assets as of March 31, 2021 (Successor) and March 31, 2020 (Predecessor) was allocated between asset classes as follows. Details of target allocation percentages under the Plan Trustee’s investment strategies as of the same dates are also included.


	Successor
	Target Allocation as of March 31,		Target Allocation as of March 31,		Actual Allocation as of March 31,		Actual Allocation as of March 31,
Asset Category	2021		2020		2021		2020
Equity securities	14.1	%	25.3	%	15.1	%	23.0	%
Debt securities	19.0	%	25.0	%	16.4	%	27.1	%
Property	6.7	%	7.4	%	6.4	%	6.5	%
Other assets	60.2	%	42.3	%	62.1	%	43.4	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

The following table summarizes, by level within the fair value hierarchy, the plan assets as of March 31, 2021 (Successor), which are valued at fair value (in thousands):


	Successor
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2021
Cash and cash equivalents	$	5,933	$	26,628	$	—	$	32,561

Equity investments- UK	1,518		—		—		1,518
Equity investments- non UK	2,345		—		—		2,345
Insurance Linked Securities	—		27,870		—		27,870
Illiquid credit	—		—		25,938		25,938
Liquid credit	—		102,373		—		102,373
Property debt (ICG longbow)	—		—		34,078		34,078
Alternatives	—		48,013		—		48,013
Diversified growth (absolute return) funds	1,242		—		—		1,242
Government debt securities	414		85,403		—		85,817
Corporate debt securities	1,656		—		—		1,656
Insurance Policy	—		—		171,357		171,357
Total investments	$	13,107	$	290,287	$	231,374	$	534,768

The following table summarizes, by level within the fair value hierarchy, the plan assets as of March 31, 2020 (Predecessor), which are valued at fair value (in thousands):


	Successor
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2020
Cash and cash equivalents	$	8,680	$	—	$	—	$	8,680
Cash plus	—		10,788		—		10,788
Equity investments - U.K.	992		—		—		992
Equity investments - Non-U.K.	1,488		—		—		1,488
Insurance Linked Securities	—		24,303		—		24,303
Illiquid credit	—		—		28,271		28,271
Diversified growth (absolute return) funds	868		40,919		—		41,787
Government debt securities	248		86,549		—		86,797
Corporate debt securities	1,612		—		—		1,612
Alternatives	—		41,167		—		41,167
Property debt	—		—		31,247		31,247
Multi asset credit	—		40,918		—		40,918
Insurance policies	—		—		159,087		159,087
Total investments	$	13,888	$	244,644	$	218,605	$	477,137

The investments’ fair value measurement level within the fair value hierarchy is classified in its entirety based on the lowest level of input that is significant to the measurement. The fair value of assets using Level 2 inputs is determined based on the fair value of the underlying investment using quoted prices in active markets or other significant inputs that are deemed observable.

Estimated future benefit payments over each of the next five fiscal years from March 31, 2021 (Successor) and in the aggregate for the following five fiscal years after fiscal year 2027 are as follows (in thousands):


	Successor
Projected Benefit Payments by the Plans for Fiscal Years Ending March 31,	Payments
2022	$	23,869
2023	24,696
2024	25,110
2025	25,662
2026	26,076
Aggregate 2027 - 2031	132,726

The Company expects to fund these payments with cash contributions to the plans, plan assets and earnings on plan assets. The current estimates of cash contributions for the Company’s pension plans required for fiscal year 2022 (Successor) are expected to be $18.0 million.