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, 2014

Equity Method Investments and Joint Ventures [Abstract]

VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES

Equity investments and advances as of December 31, 2014 and 2013 were as follows (in thousands):



	Ownership	2014		2013
Dart	50%	$	25,942	$	25,264
Aeróleo ⁽¹⁾	50%	—		—
Era do Brazil ⁽²⁾	50%	—		—
Era Training Center	50%	5,722		6,236
Lake Palma⁽³⁾	51%	—		3,411
Heli-Union Era Australia	45%	89		75
		$	31,753	$	34,986

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(1)	Investment was impaired in 2012.


(2)	Consolidated entity as of September 30, 2012 as this is a VIE in which the Company is the primary beneficiary.


(3)	The Company owned a 51% financial interest in Lake Palma; however, it did not consolidate as it only controlled 50% of the venture’s voting rights. Effective July 24, 2014, the Company sold its interest in Lake Palma to its joint venture partner (see further discussion below).

Combined Condensed Financial Statements

Summarized financial information for the Company’s equity investments and advances in Dart as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 was as follows (in thousands):



	2014		2013
Current assets	$	22,447	$	19,231
Non-current assets	34,309		37,636
Current liabilities	4,386		8,613
Non-current liabilities	8,907		6,963



	2014		2013		2012
Operating revenues	$	40,174	$	39,185	$	42,870
Costs and expenses:
Operating and administrative	31,755		31,538		33,706
Depreciation and amortization	4,129		5,213		5,375
Total costs and expenses	35,884		36,751		39,081
Operating income	$	4,290	$	2,434	$	3,789
Net income	$	2,172	$	789	$	1,245

Summarized financial information for the Company’s equity investments and advances in all other investees as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 was as follows (in thousands):



	2014		2013
Current assets	$	1,151	$	4,378
Non-current assets	5,899		20,018
Current liabilities	465		2,789
Non-current liabilities	4,298		7,918



	2014			2013			2012
Operating revenues	$	2,737		$	4,682		$	20,009
Costs and expenses:
Operating and administrative	750			1,035			16,221
Depreciation and amortization	2,370			3,450			3,165
Total costs and expenses	3,120			4,485			19,386
Operating income	$	(383	)	$	197		$	623
Net income (loss)	$	(749	)	$	(476	)	$	540

As of December 31, 2014 and 2013, cumulative unfunded net losses of equity investees included in the Company’s consolidated retained earnings were $2.9 million and $4.6 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.

In response to an accident involving an AW139 helicopter on contract with Petroleo Brasileiro S.A. (“Petrobras Brazil”) from one of Aeróleo's competitors, Petrobras Brazil canceled its award to Aeróleo to contract four AW139 helicopters that were dry-leased and mobilized by the Company after the notification of the award in August 2011. As a result, the four AW139 helicopters were idle from August 2011 until late November 2012 resulting in liquidity issues that required the Company and its partner to make additional capital contributions to Aeróleo to enable it to continue operations. Petrobras Brazil also contracts with Aeróleo for three EC225 helicopters that Aeróleo dry-leases from the Company. Following the suspension of the use of the EC225 helicopters in late October 2012, Petrobras Brazil attempted to unilaterally suspend all of its EC225 helicopter contracts with Aeróleo for the duration of the global suspension of the EC225 helicopter, alleging that the helicopter could not meet the terms of the contract. Aeróleo did not receive monthly payments for the EC225 helicopters under contract with Petrobras Brazil from April through late September and October, 2013 and commenced generating hourly flight revenues thereafter upon the resumption of Aeróleo’s EC225 helicopters flight operations for Petrobras Brazil. As a result of these events, Aeróleo has experienced liquidity issues such that it does not have sufficient equity to finance its activities without additional financial support, making it a VIE. The Company has determined it is not the primary beneficiary as its 20% voting interest does not allow it to direct the activities that most significantly affect Aeróleo’s economic performance.

On March 1, 2012, in response to these liquidity issues the Company recorded an impairment charge of $5.9 million, net of tax, on its equity investments and advances to Aeróleo. The Company leases 11 helicopters to Aeróleo, and for the years ended December 31, 2014, 2013 and 2012, the Company recognized $16.7 million, $16.2 million and $17.6 million, respectively, of operating revenues from these leases, of which $31.0 million and $21.0 million was outstanding as of December 31, 2014 and 2013, respectively (See Note 1).

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 immediately acquired a helicopter, subject to a lease to Aeróleo, from the Company for $11.5 million ($9.5 million in cash and a $2.0 million note payable). During the year ended December 31, 2012, the Company loaned $10.8 million to Era do Brazil secured by a helicopter purchased from the Company in 2011 and Era do Brazil’s ownership interests. Upon receipt of the proceeds from the loan, Era do Brazil repaid the outstanding principal amount of $1.6 million remaining on the original helicopter acquisition note due to the Company and loaned $9.2 million to Aeróleo in the form of two notes, each of an equal amount. Era do Brazil then distributed the two notes due from Aeróleo to its members. As a result of these transactions, Era do Brazil is a highly leveraged entity with all its outstanding debt due to the Company, making it a VIE. As the primary beneficiary, the Company has consolidated Era do Brazil in its financial statements effective September 30, 2012.

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 is 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 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, 2014, 2013 and 2012, the Company purchased $3.6 million, $2.9 million and $1.7 million, respectively, of products from Dart Helicopters and 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, 2014, 2013 and 2012, the Company provided helicopter, management and other services to the joint venture totaling $0.4 million, $0.4 million and $0.5 million, respectively, and incurred $0.7 million, $0.7 million and $0.8 million for simulator fees from the joint venture in 2014, 2013 and 2012, respectively. Era Training Center has a $4.7 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. The Company received advances of $1.2 million in 2012 and did not receive any advances in 2013 and 2014. 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.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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