Annual report pursuant to Section 13 and 15(d)

TAXES

v3.22.1
TAXES
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
TAXES TAXES
The components of deferred tax assets and liabilities are as follows (in thousands):
Successor Predecessor
  March 31, 2022 March 31, 2021
Deferred tax assets:
Foreign tax credits $ 29,624  $ 33,576 
State net operating losses 42,526  41,929 
Net operating losses 124,976  122,376 
Accrued pension liability 3,720  8,408 
Accrued equity compensation 3,994  2,913 
Interest expense limitation 39,919  37,546 
Deferred revenue 375  375 
Employee award programs 792  586 
Employee payroll accruals 1,386  2,470 
Capitalized start-up costs 5,762  6,025 
Accrued expenses not currently deductible 12,871  10,354 
Lease liabilities 66,853  67,312 
Other 4,431  6,599 
Valuation allowance - foreign tax credits (29,624) (33,576)
Valuation allowance - state (39,873) (39,276)
Valuation allowance - interest expense limitation (15,276) (11,288)
Valuation allowance (88,359) (91,764)
Total deferred tax assets $ 164,097  $ 164,565 
Deferred tax liabilities:
Property and equipment $ (96,734) $ (87,252)
Inventories (762) (4,160)
Investment in foreign subsidiaries and unconsolidated affiliates (15,588) (21,071)
ROU asset (67,433) (67,439)
Intangibles (19,663) (20,363)
Other (3,728) (6,710)
Total deferred tax liabilities $ (203,908) $ (206,995)
Net deferred tax liabilities $ (39,811) $ (42,430)
Companies may use foreign tax credits to offset the U.S. income taxes due on income earned from foreign sources. The foreign tax credits claimed for a particular taxable year are limited by the total income tax on the U.S. income tax return as well as by the ratio of foreign source net income in each statutory category to total net income. The amount of creditable foreign taxes available for the taxable year that exceeds the limitation (i.e., “excess foreign tax credits”) may be carried back one year and forward ten years. As of March 31, 2022, the Company had $29.6 million of excess foreign tax credits, of which $4.0 million expired in fiscal year 2022, $0.2 million will expire in fiscal year 2023, $15.6 million will expire in fiscal year 2024, $13.2 million will expire in fiscal year 2025 and $0.6 million will expire after fiscal year 2027. As of March 31, 2022, the Company had a $47.5 million net operating loss carryforward in the U.S. In addition, the Company has net operating losses in certain states totaling $550.0 million, which began to expire in fiscal year 2022.
Certain limitations on the deductibility of interest expense pursuant to the Tax Cuts and Jobs Act (the “Act”) became effective on April 1, 2018. As of March 31, 2022 and 2021, the Company had $190.1 million and $178.8 million gross disallowed U.S. interest expense carryforward, respectively. The disallowed interest expense can be carried forward indefinitely. As of March 31, 2022, a valuation allowance of $72.7 million has been recorded for a portion of the deferred tax asset related to interest expense limitations.
The realization of deferred income tax assets is dependent upon the generation of sufficient taxable income during future periods in which the temporary differences are expected to reverse. The valuation allowance is adjusted if the assessment of the
“more likely than not” criteria changes. The valuation allowance continues to be applied against certain deferred income tax assets where the Company has assessed that the realization of such assets does not meet the “more likely than not” criteria. As of March 31, 2022, valuation allowances were $88.3 million for foreign operating loss carryforwards, $39.9 million for state operating loss carryforwards, $15.3 million for interest expense limitation carryforwards and $29.6 million for foreign tax credits. As of March 31, 2021, valuation allowances were $91.7 million for foreign operating loss carryforwards, $39.3 million for state operating loss carryforwards, $11.3 million for interest expense limitation carryforwards and $33.6 million for foreign tax credits
The following table is a rollforward of the valuation allowance against the Company’s deferred tax assets (in thousands):
Fiscal Year Ended
March 31, 2022		 Fiscal Year Ended
March 31, 2021		 Five Months Ended
March 31, 2020		 Seven Months Ended
October 31, 2019
  Successor Predecessor
Balance – beginning of fiscal year $ (175,903) $ (118,561) $ (124,700) $ (128,214)
Adjustment due to Merger —  (52,553) —  — 
Additional allowances (16,701) (14,360) (19,434) (5,381)
Reversals and other changes 19,472  9,571  25,573  8,895 
Balance – end of fiscal year $ (173,132) $ (175,903) $ (118,561) $ (124,700)
The components of loss before benefit (expense) for income taxes for the periods reflected in the table below is as follows (in thousands): 
  Fiscal Year Ended
March 31, 2022		 Fiscal Year Ended
March 31, 2021		 Five Months Ended
March 31, 2020		 Seven Months Ended
October 31, 2019
  Successor Predecessor
Domestic $ (23,346) $ (14,314) $ 163,866  $ (568,781)
Foreign 18,927  (42,326) (24,308) (318,603)
Total $ (4,419) $ (56,640) $ 139,558  $ (887,384)
The expense (benefit) for income taxes consisted of the following for the periods reflected in the table below is as follows (in thousands):
  Fiscal Year Ended
March 31, 2022		 Fiscal Year Ended
March 31, 2021		 Five Months Ended
March 31, 2020		 Seven Months Ended
October 31, 2019
  Successor Predecessor
Current:
Domestic $ 5,971  $ 719  $ (1,542) $ 2,516 
Foreign 7,068  14,387  6,572  9,178 
$ 13,039  $ 15,106  $ 5,030  $ 11,694 
Deferred:
Domestic $ (5,945) $ (11,894) $ (5,072) $ (49,634)
Foreign 4,200  (3,567) 524  (13,238)
$ (1,745) $ (15,461) $ (4,548) $ (62,872)
Total $ 11,294  $ (355) $ 482  $ (51,178)
The reconciliation of the U.S. Federal statutory tax rate to the effective income tax rate for the (expense) benefit for income taxes for the periods reflected in the table below is as follows:
  Fiscal Year Ended
March 31, 2022		 Fiscal Year Ended
March 31, 2021		 Five Months Ended
March 31, 2020		 Seven Months Ended
October 31, 2019
  Successor Predecessor
Statutory rate 21.0  % 21.0  % 21.0  % 21.0  %
Effect of U.S. tax reform —  % —  % —  % —  %
Net foreign tax on non-U.S. earnings (348.2) % (25.2) % (4.2) % (0.7) %
Benefit of foreign tax deduction in the U.S. 25.2  % 2.3  % (0.2) % —  %
Foreign earnings indefinitely reinvested abroad 44.8  % 5.8  % 2.2  % (5.9) %
Change in valuation allowance 16.7  % —  % (0.4) % (0.6) %
Foreign earnings that are currently taxed in the U.S. (40.5) % (5.6) % 0.8  % —  %
Bargain purchase gain —  % 30.1  % —  % —  %
Sales of subsidiaries 22.0  % —  % —  % (1.1) %
Effect of change in foreign statutory corporate income tax rates
 —  % 1.7  % —  % —  %
Preferred stock embedded derivative —  % 5.7  % (27.7) % —  %
Contingent beneficial conversion feature —  % —  % —  % (1.0) %
Impairment of foreign investments 62.4  % (26.2) % 1.4  % (0.6) %
Fresh start accounting and reorganization —  % —  % 6.7  % (3.6) %
Professional fees to be capitalized for tax —  % (2.9) % 1.3  % (1.3) %
Changes in tax reserves (3.8) % —  % 0.1  % —  %
Impact of U.S. withholding tax (10.1) % (1.3) % (0.3) % (0.1) %
Nondeductible employee separation payments —  % (1.0) % —  % —  %
Other, net (45.2) % (3.8) % (0.4) % (0.3) %
Effective tax rate (255.7) % 0.6  % 0.3  % 5.8  %
During the fiscal year ended March 31, 2022, the Company’s effective tax rate was (255.7)%. The Company’s effective income tax rate for the fiscal year ended March 31, 2022 is primarily impacted by income tax from non-US earnings in certain profitable jurisdictions, the Company’s impairment of foreign investments that do not generate an income tax benefit, adjustments to valuation allowances against future realization of deductible business interest expense and adjustments to valuation allowances against net operating losses. During the fiscal year ended March 31, 2022, the Company’s expense for income taxes was $11.3 million.
For the Predecessor periods, Old Bristow prepared the provision for income taxes using a discrete effective tax rate method due to small changes in estimated annual pre-tax income or loss potentially resulting in significant changes in the estimated annual effective tax rate. For the five months ended March 31, 2020 (Successor), Old Bristow estimated the post-emergence annual effective tax rate from continuing operations and applied this rate to the two-month post-emergence losses from continuing operations. In addition, Old Bristow separately calculated the tax impact of unusual or infrequent items. The tax impacts of such unusual or infrequent items were treated discretely in the quarter in which they occurred.
During the five months ended March 31, 2020 and seven months ended October 31, 2019, Old Bristow’s effective tax rates were 0.3% and 5.8% percent, respectively.
The Company’s operations are subject to the jurisdiction of multiple tax authorities, which impose various types of taxes on the Company, including income, value added, sales and payroll taxes. Determination of taxes owed in any jurisdiction requires the interpretation of related tax laws, regulations, judicial decisions and administrative interpretations of the local tax authority. As a result, the Company is subject to tax assessments in such jurisdictions including the re-determination of taxable amounts by tax authorities that may not agree with its interpretations and positions taken. The following table summarizes the years open by jurisdiction as of March 31, 2022:
  Years Open
U.S. 2019 to present
U.K. 2021 to present
Guyana 2013 to present
Nigeria 2012 to present
Trinidad 2010 to present
Australia 2018 to present
Norway 2018 to present
Suriname 2017 to present
Brazil 2017 to present
The effects of a tax position are recognized in the period in which the Company determines that it is more-likely-than-not (defined as a more than 50% likelihood) that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than 50% likely of being recognized upon ultimate settlement.
As of March 31, 2022 and 2021, the Company had $3.9 million and $4.3 million, of unrecognized tax benefits respectively, all of which would have an impact on its effective tax rate, if recognized.
The activity associated with unrecognized tax benefit for the periods reflected in the table below is as follows (in thousands):
  Fiscal Year Ended
March 31, 2022		 Fiscal Year Ended
March 31, 2021		 Five Months Ended
March 31, 2020		 Seven Months Ended
October 31, 2019
  Successor Predecessor
Unrecognized tax benefits – beginning of period $ 4,258  $ 4,252  $ 4,060  $ 4,337 
Increases for tax positions taken in prior periods 147  30  213  170 
Decreases for tax positions taken in prior periods (420) —  (21) (442)
Decrease related to statute of limitation expirations (43) (24) —  (5)
Unrecognized tax benefits – end of period $ 3,942  $ 4,258  $ 4,252  $ 4,060 
As of March 31, 2022, the Company had aggregated approximately $125.5 million in unremitted earnings generated by foreign subsidiaries. The Company expects to indefinitely reinvest these earnings. The Company has not provided deferred taxes on these unremitted earnings. If the Company’s expectations were to change, withholding and other applicable taxes incurred upon repatriation, if any, are not expected to have a material impact on its results of operations.
Income taxes paid were $12.0 million, $15.1 million, $7.6 million, and $9.5 million during the fiscal years ended March 31, 2022 and 2021, five months ended March 31, 2020, and the seven months ended October 31, 2019 (Predecessor), respectively.