e424b5
This
prospectus supplement relates to an effective registration
statement under the Securities Act of 1933, but is not complete
and may be changed. This prospectus supplement is not an offer
to sell these securities and it is not soliciting an offer to
buy these securities in any jurisdiction where the offer or sale
is not permitted.
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Filed Pursuant to
Rule 424(b)(5)
Registration No.
333-151519
SUBJECT
TO COMPLETION, DATED JUNE 9, 2008
PRELIMINARY
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 9, 2008
$100,000,000
Bristow
Group Inc.
% Convertible
Senior Notes Due 2038
We are offering
$100,000,000 aggregate principal amount of
our % Convertible Senior Notes
due 2038, or the notes. The notes will bear interest
at a rate of % per year. Interest
on the notes will be payable semi-annually in arrears on
June 15 and December 15 of each year, beginning
December 15, 2008. The notes will mature on June 15,
2038.
Holders may convert
their notes at their option under certain circumstances
described herein prior to the close of business on the business
day immediately preceding the maturity date. Upon conversion, we
will deliver cash and, if applicable, a number of shares of our
common stock determined as described in this prospectus
supplement. The initial base conversion rate for the notes will
be ,
equivalent to an initial base conversion price of approximately
$ per share of our common stock.
If the price of our common stock at the time of determination
exceeds the base conversion price, the base conversion rate will
be increased by an additional number of shares as described
herein. The base conversion rate will be subject to adjustment
in certain events.
Following certain
corporate transactions prior to June 15, 2015, we will
increase the applicable conversion rate for a holder who elects
to convert its notes in connection with those corporate
transactions by a number of additional shares of common stock as
described in this prospectus supplement.
We may redeem the
notes, in whole or in part, for cash at any time on or after
June 15, 2015 at a price equal to 100% of the principal
amount of notes to be purchased plus accrued and unpaid
interest. Holders may require us to repurchase all or a portion
of their notes for cash on June 15, 2015, June 15,
2020, June 15, 2025, June 15, 2030, and June 15,
2035, at a price equal to 100% of the principal amount of notes
to be purchased plus accrued and unpaid interest.
If we undergo a
fundamental change, as defined in this prospectus supplement,
holders may require us to purchase all or a portion of their
notes for cash at a price equal to 100% of the principal amount
of the notes to be purchased plus accrued and unpaid interest.
The notes will be
unsecured senior obligations, will rank equal in right of
payment to any of our existing or future unsecured senior debt,
and will rank senior to all of our subordinated debt. The notes
will be unconditionally guaranteed on a senior basis by those of
our subsidiaries that currently provide guarantees of our other
senior notes or our Credit Facilities, as well as certain future
subsidiaries. The notes will effectively rank junior to any of
our secured debt to the extent of the value of the assets
securing such indebtedness, and will be structurally
subordinated to all liabilities of our subsidiaries that are not
guarantors.
For a more detailed
description of the notes, see Description of the
Notes beginning on
page S-80.
Concurrent with this
offering, and by a separate prospectus supplement, we are
offering 4,100,000 shares of our common stock for sale in
an underwritten public offering (4,715,000 shares if the
underwriters exercise their over-allotment option in full).
Additionally, Caledonia Investments plc (Caledonia),
one of our largest shareholders, has expressed an interest in
purchasing approximately $12,000,000 of our common stock at the
offering price in a private placement (the Caledonia
Private Placement). Closing of the Caledonia Private
Placement is subject to final acceptance by Caledonia of the
offering price and customary closing conditions, including
regulatory clearance. The completion of the concurrent common
stock offering, the Caledonia Private Placement and this
offering are not conditioned on the other. There is no assurance
that our concurrent offering of common stock or the Caledonia
Private Placement will be completed or, if completed, that they
will be completed for the amounts or the pricing contemplated.
Our common stock
is listed on the New York Stock Exchange under the symbol
BRS. On June 4, 2008, the last reported sale
price of our common stock on the New York Stock Exchange was
$49.53 per share.
We do not intend to
apply for listing of the notes on any securities exchange or for
inclusion of the notes in any automated quotation system.
Investing in the
notes involves risks. See Risk Factors on
page S-14.
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Underwriting
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Price to
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Discounts and
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Proceeds to
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Public(1)
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Commissions
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Bristow(1)
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Per Note
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%
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%
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%
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Total
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$
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$
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$
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(1)
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Plus
accrued interest, if any, from June , 2008, if
settlement occurs after that date.
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The underwriters
have a
30-day
option to purchase a maximum of $15,000,000 additional principal
amount of the notes.
Delivery of the
notes will be made in book-entry form on or about
June , 2008.
Neither the
Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus supplement or the related
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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Credit
Suisse |
Goldman, Sachs & Co. |
JPMorgan |
The date of this
prospectus supplement is June , 2008.
TABLE OF
CONTENTS
PROSPECTUS
SUPPLEMENT
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Page
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S-1
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S-14
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S-31
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S-31
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S-32
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S-33
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S-35
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S-38
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S-64
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S-77
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S-80
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S-108
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S-115
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S-118
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S-119
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S-119
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S-119
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F-1
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PROSPECTUS
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Page
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Bristow Group Inc.
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1
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Risk Factors
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2
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Forward-Looking Statements
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2
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Use of Proceeds
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3
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Ratio of Earnings to
Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends
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3
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Description of Debt
Securities
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3
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Description of Guarantees
of the Debt Securities
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4
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Description of Capital
Stock
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4
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Description of Warrants
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12
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Plan of Distribution
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12
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Legal Matters
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14
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Experts
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14
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Where You Can Find More
Information
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14
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You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus or any free writing prospectus prepared
by us or on our behalf. We have not authorized anyone to provide
you with additional or different information. We are not making
an offer to sell these notes or the guarantees in any
jurisdiction where the offer is not permitted. You should not
assume that the information contained in this prospectus
supplement or the accompanying prospectus is accurate as of any
date other than the date on the front of this document or that
any information we have incorporated by reference is accurate as
of any date other than the date of the document incorporated by
reference. Our business, financial condition, results of
operations and prospects may have changed since these dates.
We provide information to you about this offering of our notes
in two separate documents that are bound together: (1) this
prospectus supplement, which describes the specific details
regarding this offering, and (2) the accompanying
prospectus, which provides general information, some of which
may not apply to this offering. Generally, when we refer to this
prospectus, we are referring to both documents
combined. If information in this prospectus supplement is
inconsistent with the accompanying prospectus, you should rely
on this prospectus supplement.
You should carefully read this prospectus supplement and the
accompanying prospectus, including the information incorporated
by reference in the prospectus, before you invest. These
documents contain information you should consider when making
your investment decision.
i
SUMMARY
This summary highlights certain information contained
elsewhere in this prospectus supplement. This summary does not
contain all of the information you should consider before
deciding whether to participate in this offering. You should
carefully read the entire prospectus supplement, the
accompanying prospectus, and the documents incorporated by
reference in their entirety, including Risk Factors,
before deciding whether to participate in this offering. We use
the pronouns we, our and us
and the terms Bristow Group and the
company to refer collectively to Bristow Group Inc.
and its consolidated subsidiaries and affiliates, unless the
context indicates otherwise. We also own interests in other
entities that we do not consolidate for financial reporting
purposes, which we refer to as unconsolidated affiliates, unless
the context indicates otherwise. Bristow Group, Bristow Aviation
Holdings Limited (Bristow Aviation), its
consolidated subsidiaries and affiliates, and the unconsolidated
affiliates are each separate corporations, limited liability
companies or other legal entities, and our use of the terms
we, our and us does not
suggest that we have abandoned their separate identities or the
legal protections given to them as separate legal entities. Our
fiscal year ends March 31, and we refer to fiscal years
based on the end of such period. Therefore, the fiscal year
ended March 31, 2008 is referred to as fiscal year
2008.
OUR
COMPANY
We are the leading provider of helicopter services to the
worldwide offshore energy industry based on the number of
aircraft operated. We are one of two helicopter service
providers to the offshore energy industry with global
operations. We have operations in most of the major offshore oil
and gas producing regions of the world, including in the North
Sea, the U.S. Gulf of Mexico, Nigeria and Australia, and we
generated 76% of our revenues from international operations in
fiscal year 2008. We have a long history in the helicopter
services industry through Bristow Helicopters Ltd. and Offshore
Logistics, Inc., having been founded in 1955 and 1969,
respectively.
We provide helicopter services to a broad base of major,
independent, international and national energy companies.
Customers charter our helicopters to transport personnel between
onshore bases and offshore platforms, drilling rigs and
installations. A majority of our helicopter revenue is
attributable to oil and gas production activities, which have
historically provided a more stable source of revenue than
exploration and development related activities. As of
March 31, 2008, we operated 406 aircraft and our
unconsolidated affiliates operated 142 aircraft in addition to
those aircraft leased from us. Additionally, our Global Training
division is approved to provide helicopter flight training to
the commercial pilot and flight instructor level by both the
U.S. Federal Aviation Administration (FAA) and
the European Joint Aviation Authority. Bristow Academy, which
forms the central core of our Global Training division, operates
69 aircraft (including 59 owned and 10 leased
aircraft) and employs 165 people, including 74 flight
instructors. The Global Training division supports, coordinates,
standardizes, and in the case of the Bristow Academy schools,
directly manages our flight training activities.
Aircraft
Fleet Capacity Expansion
In response to significant demand for our helicopter services,
we are expanding our aircraft fleet capacity. As of
March 31, 2008, we had 35 aircraft on order and options to
acquire an additional 50 aircraft. We have financing available
to fund the purchase price for all of the aircraft on order and
a portion of the aircraft under option, and subject to
completion of this offering, will have funds for us to commit to
purchase additional aircraft which will further expand our
fleet. We expect that these additional aircraft on order, any
aircraft we acquire pursuant to options and aircraft we acquire
using the proceeds from this offering and our proposed
concurrent common stock offering will increase our profitability
by growing our business and replacing some of the older, smaller
aircraft we currently own with newer, larger aircraft that can
transport more passengers and allow us to generate more revenue.
All of the aircraft under option and 25 of the 35 aircraft on
order are large- or medium-sized aircraft, as compared with our
existing fleet, of which about 46% consists of large- or
medium-sized aircraft.
S-1
As of March 31, 2008, we had commitments to purchase 16
large, 9 medium and 10 training aircraft and options to purchase
an additional 17 large and 33 medium aircraft. Of the aircraft
on order, 27 are expected to be delivered during fiscal year
2009, including 10 training aircraft. During the fiscal year
ended March 31, 2008, we spent $328.5 million on
aircraft and related equipment. We expect to spend an additional
$349.3 million to acquire the aircraft that were on order
as of March 31, 2008 and an additional $240 million to
acquire aircraft currently under option and related
infrastructure. We plan to finance these aircraft purchases and
related infrastructure with cash on hand (exclusive of the
proceeds from this offering, the Caledonia Private Placement and
our concurrent common stock offering), cash flow from operations
and potentially borrowings under our revolving credit facility.
The chart below presents (1) the number of helicopters in
our fleet (comprising 373 owned aircraft, including 4 held for
sale, 25 leased aircraft and 8 aircraft operated for one of our
customers) and their distribution among our business units as of
March 31, 2008; (2) the number of helicopters we had
on order or under option as of March 31, 2008; and
(3) the percentage of gross revenue that each of our
business units provided during the fiscal year ended
March 31, 2008. For additional information regarding our
commitments and options to acquire aircraft, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Future Cash Requirements.
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Number of Aircraft
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Percentage of
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Helicopters
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Revenue for
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Small(1)
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Medium
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Large
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Training
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Fixed Wing
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Total
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Fiscal Year 2008
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North America
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121
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30
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4
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1
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156
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23
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%
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South and Central America
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4
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28
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1
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33
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6
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%
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Europe
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1
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10
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38
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49
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36
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%
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West Africa
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12
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28
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3
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7
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50
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17
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%
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Southeast Asia
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3
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11
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13
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27
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11
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%
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Other International
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11
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9
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2
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22
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5
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%
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EH Centralized Operations
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1
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%
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Bristow Academy
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68
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1
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69
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1
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%
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Total, consolidated affiliates(2)
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141
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118
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68
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68
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11
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406
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100
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%
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Unconsolidated affiliates(3)
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55
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56
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8
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23
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142
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Total
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196
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174
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76
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68
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34
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548
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Aircraft not currently in fleet:(4)
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On order
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9
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16
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10
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35
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Under option
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33
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17
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50
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(1) |
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We have been disposing of our smaller aircraft in the U.S. Gulf
of Mexico and are currently exploring alternatives for
accelerating the disposition of approximately 50 of such
aircraft within the next eighteen months. Any such aircraft
dispositions will be subject to obtaining terms acceptable to us
and other factors which may affect the timing or completion of
the disposition. |
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(2) |
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Includes 4 aircraft held for sale. |
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(3) |
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The 142 aircraft operated by our unconsolidated affiliates are
in addition to those aircraft leased from us. |
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(4) |
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All of these aircraft are attributed to our consolidated
affiliates. |
We expect that the additional aircraft on order, any aircraft we
acquire pursuant to options and aircraft we acquire using the
proceeds from this offering and our proposed concurrent common
stock offering will generally be deployed proportionally across
our global business units.
S-2
OUR
INDUSTRY
Increased Demand for Helicopter Services. We
are currently experiencing significant demand for our helicopter
services, and in certain of our markets, we are unable to meet
the full demand and have been forced to decline customer orders.
This is due in part to the robust global environment we are
currently experiencing for oil and gas production and
exploration. Based on our current contract level and discussions
with our customers about their future needs for aircraft related
to their oil and gas production and exploration plans, we
anticipate the demand for helicopter services will continue at a
very high level for the near term. Further, based on the
projects planned by our customers in the markets in which we
currently operate, we anticipate global demand for our services
will grow in the long term and exceed the supply of aircraft we
and our competitors currently have in our fleets and on order.
In addition, this high level of demand has allowed us to
increase the rates we charge for our services over the past
several years.
Limited Aircraft Supply. Currently, helicopter
manufacturers are indicating very limited supply availability
for large- and medium-sized aircraft during the next two to
three years. We expect that this tightness in aircraft
availability from the manufacturers and the lack of suitable
aircraft in the secondary market, coupled with the increase in
demand for helicopter services, should create market conditions
conducive for us to continue to increase the rates we charge for
our services. We believe that our recent aircraft acquisitions
and commitments position us to benefit from the current market
conditions and to deploy new aircraft on order or under option
at these favorable rates and contract terms.
Advanced Industry Fleet Age. The helicopter
fleet serving the offshore energy industry includes many
aircraft of advanced age. Approximately 52% of the helicopter
fleet serving the offshore energy industry is over 15 years
old, and approximately 28% of this helicopter fleet is over
25 years old. Older aircraft generally are less efficient
and have higher maintenance cost than newer aircraft, and
customers typically prefer newer aircraft. We expect these
factors will cause the need to replace a significant portion of
older aircraft serving the offshore energy industry.
Aircraft Resale Market. Unlike equipment in
most sectors of the energy services industry, helicopters have
applications in numerous other markets, including air medical,
tourism, firefighting, corporate transportation, traffic
monitoring, police and military. Accordingly, we sell used
aircraft into these other markets which are not typically
affected by the same economic drivers as the offshore energy
industry. Our experience has been that the after market is
relatively liquid given the significant number of helicopters in
use in these other industries globally during normal market
conditions. Helicopters generally retain a high portion of their
original value as a substantial portion of a helicopters
value resides in its dynamic components, such as rotors and
engines, which are periodically overhauled, replaced or
upgraded. In addition, these other markets place demand on
aircraft supply which tends to support relatively stable values.
We believe that the availability of these markets will permit us
to rationalize our asset base if there is a decline in demand
for our helicopter services.
Classes of Helicopters. Helicopters are
generally classified as small (four to eight passengers), medium
(12 to 16 passengers) and large helicopters (18 to 25
passengers), each of which serves a different transportation
need of the offshore energy industry. Medium and large
helicopters, which can fly in a wider variety of operating
conditions and over longer distances and carry larger payloads
than small helicopters, are most commonly used for crew changes
on large offshore production facilities and drilling rigs. With
their ability to carry greater payloads, travel greater
distances and move at higher speeds, medium and large
helicopters are preferred in international markets, where the
offshore facilities tend to be larger, the drilling locations
tend to be more remote and the onshore infrastructure tends to
be more limited. As a result of the greater distances offshore,
demand for medium and large helicopters is also driven by
drilling, development and production activity levels in
deepwater locations throughout the world. Additionally, some
local governmental regulations in certain international markets
require us to operate twin-engine medium and large aircraft in
those markets. Small helicopters are generally used for daytime
flights on shorter routes and to reach production facilities
that cannot accommodate medium and large helicopters.
Competitive Landscape. We are one of only two
helicopter service providers to the offshore energy industry
with global operations. Our global competitor has entered into
an agreement, subject to customary closing conditions, whereby
it is to be acquired by a private equity investment company. The
remaining
S-3
helicopter service providers in our industry are smaller local
or regional providers. Many of these smaller local or regional
providers often do not meet typical requirements of the larger
oil and gas companies, such as extensive safety programs and
procedures, a sufficient track record of safety or the ability
to acquire the necessary insurance. In addition, these providers
generally do not have sufficient access to original equipment
manufacturer (OEM) manufacturing slots or the capital required
to purchase new aircraft. We believe our leading global
operations are attractive to our customers because we deliver a
consistent standard of high quality service throughout the most
active offshore oil and gas regions in the world.
OUR
STRENGTHS
We believe that we possess a number of strengths, including:
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We have a history of consistent revenue and Adjusted EBITDA
growth. We have a history of consistent revenue
growth, including 17.6% compounded annual growth rate over the
past three fiscal years. Our growth has translated into
increases in Adjusted EBITDA (as defined under Summary
Historical Financial Information) of 19.3% compounded
annually over the past three fiscal years. Our revenues are
driven primarily by offshore, production-related operating
expenses, which over the last twelve years have been relatively
stable and upward trending, including during a downturn in the
energy industry. Worldwide there are more than 8,800 production
platforms and 660 rigs. The ongoing nature of production work
makes it less volatile than exploration and development work,
which is more reactive to changes or expected changes in
commodity prices. Accordingly, we have experienced less
volatility in demand than other sectors of the energy services
industry. In addition, most of our contracts provide that the
customer will reimburse us for cost increases associated with
the contract, including fuel cost increases. Lastly, our pricing
structure, consisting of a fixed monthly reservation fee plus
additional fees for each hour flown, fixes a percentage of our
revenue stream in the short-term, stabilizing the impact of
short-term fluctuations in flight hours by customers.
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We have a global footprint. We operate in 20
countries including the U.S. and U.K. and have the largest
fleet of helicopters serving the offshore energy market in the
world. We have the largest fleet in each of Nigeria, Australia
and the U.S. Gulf of Mexico and also have a strong market
position in the North Sea and other key markets. This global
footprint allows us to provide our offshore energy customers
with consistent, high-quality service, reduces our exposure to
any one market and provides us with flexibility in deploying our
aircraft to the most attractive markets.
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We have a record of safe operations and operate a modern,
well-maintained fleet. We have a record of safe
operations, including fewer accidents per 100,000 flight hours
over the past five years than the industry average for the
U.S. Gulf of Mexico and the North Sea. We continuously
maintain and improve the quality of the equipment that we
operate and apply state-of-the-art safety technologies across
our global organization. Our size and our strong safety record
allow us access to the substantial amount and type of insurance
coverage required by our customers. As of March 31, 2008,
the average age of the helicopters in our consolidated fleet was
approximately 13 years. The average age of our fleet has
been reduced with the addition of 36 new aircraft in the fiscal
year ended March 31, 2008.
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We have strong, long-term relationships with our
customers. We have strong, long-term
relationships with our customers, which include major,
independent, international and national energy companies. Our
relationships with these companies involve information sharing
regarding future aircraft requirements and coordination of our
respective operations. Our close customer relationships have
allowed us to expand our helicopter fleet capacity based on
identifiable specific projects that require new aircraft.
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We have a strong pilot training program. We
have a strong pilot training program through Bristow Academy. We
anticipate a long-term demand for skilled pilots in the
rotorwing aviation services business. This view is based upon
internal analysis of our existing pilots compared to anticipated
future requirements to meet growing demand in the offshore
energy services and other sectors. We believe that our ability
to train new pilots provides us with a strategic advantage over
our competitors.
|
S-4
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We have an experienced management team. Our
management team has extensive experience in the energy services
industry and helicopter services sector. We train each of these
managers on our corporate values, including safety, quality,
integrity and profitability, and their performance is evaluated
using key performance indicators which directly link to those
values. Our senior management team is composed of eight
executives who have an average of over 28 years of relevant
experience.
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We have the financial flexibility to pursue
growth. As adjusted for this offering and as
further adjusted for the concurrent offering discussed below,
our balance-sheet debt as a percentage of total capital was 42%
and 38%, respectively, at March 31, 2008. We also do not
have a significant amount of off-balance sheet obligations. (see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Future Cash
Requirements Contractual Obligations, Commercial
Commitments and Off Balance Sheet Arrangements). Under our
syndicated secured credit facilities entered into in August 2006
(Credit Facilities), we have an undrawn
$100 million revolving credit facility and
$24.6 million available under a $25 million letter of
credit facility as of the date of this prospectus supplement. We
believe that this capital structure provides us with the
financial flexibility to pursue opportunities to grow our
business, including through the aircraft fleet investment
program described above and potential strategic acquisitions.
|
OUR
STRATEGY
Our goal is to advance our position as the leading helicopter
services provider to the offshore energy industry. We intend to
employ the following strategies to achieve this goal:
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Grow our business. We plan to continue to grow
our business globally and increase our revenue, profitability
and fleet capacity. We have a footprint in most major oil and
gas producing regions of the world, and we have the opportunity
to expand and deepen our presence in many of these markets. We
anticipate this growth will result primarily from the deployment
of new aircraft into markets where we expect they will be most
profitably employed, as well as by executing opportunistic
acquisitions. Through our relationships with our existing
customers, we are aware of future business opportunities in a
broad range of the markets we currently serve that would require
capital expenditures of roughly double our current
$590 million capital expenditure budget plus the amount of
proceeds from this offering and the concurrent offering
described below. Our acquisition-related growth may include
increasing our role and participation with existing
unconsolidated affiliates and may include increasing our
position in existing markets or expanding into new markets.
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Strategically position our company as the preferred provider
of helicopter services. We position our company
as the preferred provider of helicopter services by maintaining
strong relationships with our customers and providing safe and
high-quality service. We focus on maintaining relationships with
our customers field operations and corporate management.
We believe that this focus helps us better anticipate customer
needs and provide our customers with the right aircraft in the
right place at the right time, which in turn allows us to better
manage our existing fleet and capital investment program. We
also leverage our close relationships with our customers to
establish mutually beneficial operating practices and safety
standards worldwide. By applying standard operating and safety
practices across our global operations, we are able to provide
our customers with consistent, high-quality service in each of
their areas of operation. By better understanding our
customers needs and by virtue of our global operations and
safety standards, we have effectively competed against other
helicopter service providers based on aircraft availability,
customer service, safety and reliability, and not just price.
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Integrate our global operations. We are an
integrated global operator, and we intend to continue to
identify and implement further opportunities to integrate our
global organization. In the past several years, we have changed
our senior management team, integrated our operations among
previously independently managed businesses, created a global
flight and maintenance standards group, improved our global
asset allocation and made other changes in our corporate
operations. We anticipate that these improvements and further
integration opportunities will result in revenue growth, and may
also generate cost savings.
|
S-5
We intend to use proceeds from this offering to purchase
additional aircraft and for other general corporate purposes,
including acquisitions. In the past two and a half years, we
have raised an aggregate of approximately $750 million in
additional capital through debt and equity offerings and private
financing. We intend to fund our future capital needs with cash
on hand, our Credit Facilities, cash flow from operations and a
balanced mix of debt and equity with the objective of
maintaining a conservative amount of leverage.
CONCURRENT
OFFERING
Concurrent with this offering, and by a separate prospectus
supplement, we are offering 4,100,000 shares of our common
stock (4,715,000 shares if the underwriters exercise their
over-allotment option in full). Additionally, Caledonia, one of
our largest shareholders, has expressed an interest in
purchasing approximately $12,000,000 of our common stock at the
offering price in a private placement. Closing of the Caledonia
Private Placement is subject to final acceptance by Caledonia of
the offering price and customary closing conditions, including
regulatory clearance, which we expect to be obtained by the end
of July 2008. Any shares of our common stock sold to Caledonia
will be in addition to the shares offered in the concurrent
common stock offering, and the underwriters will not receive any
discount or commission on the sale of our shares to Caledonia.
The completion of the concurrent common stock offering, the
Caledonia Private Placement and this offering are not
conditioned on the other. We would expect to use the
$193.6 million ($222.7 million if the underwriters
exercise their overallotment option in full) of estimated net
proceeds from the concurrent common stock offering, based on an
assumed offering price of $49.53 (the closing price for our
common stock on June 4, 2008), as well as the proceeds from
the Caledonia Private Placement, to purchase additional aircraft
and for other general corporate purposes, including
acquisitions. There is no assurance that our concurrent offering
of common stock or the Caledonia Private Placement will be
completed or, if completed, that they will be completed for the
amounts or the pricing contemplated.
OUR
CORPORATE OFFICES AND INTERNET ADDRESS
Our principal executive offices are located at
2000 W. Sam Houston Pkwy. S., Suite 1700,
Houston, Texas, 77042. Our telephone number is
(713) 267-7600.
Our website address is www.bristowgroup.com. Information
contained on our website does not constitute part of this
prospectus.
RISK
FACTORS
An investment in the notes involves significant risks. You
should carefully consider the information under the section
titled Risk Factors and all other information
included in this prospectus supplement and the accompanying
prospectus and the documents incorporated by reference before
investing in the notes.
THE
OFFERING
The following summary contains basic information about this
offering and the notes and is not intended to be complete. This
summary does not contain all of the information that may be
important to you. For a more complete understanding of the terms
and provisions of the notes, please refer to the section of this
prospectus supplement entitled Description of the
Notes. For purposes of the description of the notes
included in this prospectus supplement, references to the
company, the issuer, us,
we and our refer only to Bristow Group
Inc. and do not include any of our subsidiaries.
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Issuer |
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Bristow Group Inc., a Delaware corporation. |
|
Securities |
|
$100,000,000 aggregate principal amount
of % Convertible Senior Notes
due 2038, or the notes. We have also granted the
underwriters a
30-day
option to purchase a maximum of $15,000,000 additional principal
amount of the notes. |
S-6
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Maturity |
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The notes will mature on June 15, 2038, subject to earlier
redemption, repurchase or conversion. |
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Subsidiary Guarantors |
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The notes will be jointly and severally guaranteed on a senior
unsecured basis by those of our U.S. subsidiaries that currently
provide guarantees of our other senior notes or our revolving
credit facility, as well as certain future subsidiaries. |
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Ranking and Subordination |
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The notes will be our unsecured senior obligations. Accordingly,
the notes and the related subsidiary guarantees will rank: |
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equally in right of payment with our outstanding
61/8% Senior
Notes due 2013, our
71/2% Senior
Notes due 2017 and any of our and the guarantors future
unsecured senior indebtedness;
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will be effectively subordinated to all of our and
the guarantors existing and future secured indebtedness to
the extent of the value of the collateral securing such
indebtedness, including indebtedness under our Credit
Facilities; and
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will rank senior to all of our and the
guarantors future subordinated indebtedness.
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In addition, the notes will be effectively subordinated to the
existing and future liabilities, including trade payables, of
our non-guarantor subsidiaries. As of March 31, 2008, our
non-guarantor subsidiaries had approximately $358.4 million
of total liabilities (including trade payables but excluding
intercompany liabilities and guarantees). Revenue related to our
non-guarantor subsidiaries constituted 70% of our operating
revenue during fiscal year 2008 (excluding intercompany
revenues), and our non-guarantor subsidiaries held approximately
57% of our consolidated assets as of March 31, 2008. |
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Interest |
|
% per year on the principal amount
from June , 2008, payable semi-annually in
arrears on June 15 and December 15 of each year,
beginning December 15, 2008. |
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Conversion rights |
|
Under the circumstances discussed below, you will be able to
surrender your notes for conversion, in whole or in part, into
cash and, if applicable, shares of our common stock at any time
on or before the close of business on the business day
immediately preceding the maturity date of the notes, unless the
notes have been previously redeemed or repurchased. Prior to
January 1, 2038, you may convert your notes only in the
following circumstances: |
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with respect to any calendar quarter commencing
after June 30, 2008, if the last reported sale price of our
common stock for at least 20 trading days during the period of
30 consecutive trading days ending on the last trading day of
the immediately preceding calendar quarter is greater than 120%
of the base conversion price on such last trading day;
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during the five
business-day
period following any five consecutive
trading-day
period in which the trading price for $1,000 principal amount of
notes was less than 97% of the product of the last reported sale
price of our common stock and the applicable conversion rate on
such day;
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S-7
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if we have called the particular notes for
redemption, until the close of business on the business day
prior to the redemption date; or
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upon the occurrence of specified corporate
transactions described under Description of the
Notes Conversion Rights Conversion Upon
Specified Corporate Transactions.
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On or after January 1, 2038, notes may be converted until
the close of business on the business day preceding maturity
without regard to the foregoing conditions. |
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Conversion payment |
|
Subject to certain exceptions, we will deliver to holders in
respect of each $1,000 principal amount of notes surrendered for
conversion cash and shares of common stock, if applicable, in an
amount equal to the sum of the daily settlement amounts for each
of the 20 consecutive trading days during the applicable cash
settlement averaging period. |
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The daily settlement amount, for each of the
20 consecutive trading days during a cash settlement averaging
period, shall consist of: |
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cash equal to $50 or, if less, the daily conversion
value; and
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to the extent the daily conversion value exceeds
$50, a number of shares equal to (A) the difference between
the daily conversion value and $50, divided by (B) the
applicable stock price of our common stock for such day.
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The daily conversion value means generally,
for each of the 20 consecutive trading days during a cash
settlement averaging period, the product of (1) the daily
conversion rate fraction for such day and (2) the
applicable stock price of our common stock on such day. |
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The daily conversion rate fraction for each
trading day during the relevant cash settlement averaging period
will be determined as follows: |
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|
if the applicable stock price of our common stock on
such trading day is less than or equal to the base conversion
price, the daily conversion rate fraction for such trading day
will be equal to the base conversion rate divided by 20; and
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|
if the applicable stock price of our common stock on
such trading day is greater than the base conversion price, the
daily conversion rate fraction for such trading day will be
equal to l/20th of the following:
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Base Conversion Rate
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+
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(Applicable Stock Price
of our Common Stock on such Trading Day
- Base Conversion Price)
Applicable
Stock Price
of our Common Stock on such Trading Day
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×
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Incremental Share Factor
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The cash settlement averaging period with
respect to any note being converted means the 20 consecutive
trading-day
period beginning on and including the second trading day after a
conversion date (as defined under Description of the
Notes |
S-8
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Conversion Rights Conversion Procedures),
except that with respect to any conversion date that is on or
after the 24th scheduled trading day immediately preceding the
maturity date or a redemption date, as applicable, the cash
settlement averaging period means the 20 consecutive trading
days beginning on and including the 22nd scheduled trading day
prior to the maturity date or redemption date, as the case may
be. |
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The initial base conversion rate for the
notes will
be ,equivalent
to an initial base conversion price of
approximately $ per share of our
common stock. The base conversion rate will be subject to
adjustment in certain events. The incremental share
factor is
initially ,
subject to the same proportional adjustment as the base
conversion rate. |
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You will not receive any additional cash payment, including any
accrued but unpaid interest, upon conversion of a note except in
circumstances described in Description of the
Notes Interest. Instead, interest will be
deemed paid by the delivery of the settlement amount to you upon
conversion of a note. |
|
Increase of conversion rate upon certain fundamental changes |
|
If a make-whole fundamental change (as defined under
Description of the Notes Conversion
Rights Increase of Applicable Conversion Rate Upon
Conversion Upon Make-Whole Fundamental Change) occurs
prior to June 15, 2015, we may be required in certain
circumstances to increase the applicable conversion rate for any
notes converted in connection with such fundamental change. A
description of how the conversion rate will be increased and a
table showing the increase in conversion rate that would apply
at various stock prices and effective dates of the fundamental
change are set forth under Description of the
Notes Conversion Rights Increase of
Applicable Conversion Rate Upon Conversion Upon Make-Whole
Fundamental Change. |
|
Sinking fund |
|
None. |
|
Optional redemption |
|
We may not redeem the notes before June 15, 2015. We may
redeem the notes, in whole or in part, for cash on or after
June 15, 2015, on at least 30 days but not more
than 60 days notice by mail to holders of notes at a
redemption price equal to 100% of the principal amount of the
notes to be redeemed, plus any accrued and unpaid interest to,
but excluding, the redemption date. |
|
Optional repurchase right of holders |
|
Holders may require us to repurchase all or a portion of their
notes for cash on June 15, 2015, June 15, 2020,
June 15, 2025, June 15, 2030, and June 15, 2035,
at a purchase price equal to 100% of the principal amount of the
notes to be repurchased, plus any accrued and unpaid interest
to, but excluding, the repurchase date. |
|
Repurchase of notes upon a fundamental change |
|
If we undergo a fundamental change (as defined under
Description of the Notes Fundamental Change
Permits Holders to Require Us to Purchase Notes), you will
have the option to require us to purchase all or any portion of
your notes for cash. The fundamental change purchase price will
be 100% of the principal amount of the |
S-9
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notes to be purchased plus any accrued and unpaid interest to,
but excluding, the fundamental change repurchase date. |
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Use of proceeds |
|
We estimate that the proceeds from this offering will be
approximately $96.6 million ($111.2 million if the
underwriters exercise their overallotment option in full). We
intend to use the net proceeds from this offering, together with
the estimated aggregate net proceeds of $193.6 million from
our proposed concurrent common stock offering
($222.7 million if the underwriters exercise their
overallotment option in full) based on an assumed offering price
of $49.53 (the closing price for our common stock on
June 4, 2008) as well as the proceeds from the Caledonia
Private Placement, to purchase additional aircraft. If we do not
complete the concurrent common stock offering, the funds
available to purchase additional aircraft will be reduced. We
plan to order additional aircraft from time to time following
completion of this offering and expect to pay the purchase price
for additional aircraft at various dates during fiscal years
2009 to 2013. Pending such use, we plan to invest the net
proceeds of this offering in highly liquid, investment-grade or
better securities. Depending on our ability to obtain such
aircraft orders and the timing of such use, we may use a portion
of the net proceeds for working capital and other general
corporate purposes, including acquisitions. |
|
Trustee and Paying Agent |
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U.S. Bank National Association. |
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Governing law |
|
The indenture and the notes provide that they will be governed
by, and construed in accordance with, the laws of the State of
New York. |
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Book-entry form |
|
The notes will be issued in book-entry form and will be
represented by permanent global certificates deposited with, or
on behalf of, The Depository Trust Company, which we refer
to as DTC, and registered in the name of a nominee
of DTC. Beneficial interests in any of the notes will be shown
on, and transfers will be effected only through, records
maintained by DTC or its nominee and any such interest may not
be exchanged for certificated securities, except in limited
circumstances. |
|
Absence of a public market for the notes |
|
The notes are new securities, and there is currently no
established market for the notes. The underwriters have advised
us that they currently intend to make a market in the notes.
However, they are not obligated to do so, and may discontinue
any market making with respect to the notes without notice. We
do not intend to apply for a listing of the notes on any
national securities exchange or any automated dealer quotation
system. Accordingly, we cannot assure you as to the development
or liquidity of any market for the notes. Our common stock is
listed on the New York Stock Exchange under the symbol
BRS. |
S-10
SUMMARY
HISTORICAL FINANCIAL INFORMATION
The following summary financial data as of and for each of the
five years ended March 31, 2008 is derived from our audited
consolidated financial statements. You should read the following
information in conjunction with the other information contained
in our consolidated financial statements, including the notes
thereto, that are set forth elsewhere in this prospectus
supplement.
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Fiscal Year Ended March 31,
|
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2004(1)
|
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2005(2)
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2006(3)
|
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2007(4)
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2008(5)
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(In thousands, except per share amounts and number of
aircraft)
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Statement of Operations Data:(6)
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
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Total gross revenue(7)
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$
|
574,124
|
|
|
$
|
622,637
|
|
|
$
|
709,901
|
|
|
$
|
843,595
|
|
|
$
|
1,012,764
|
|
Direct cost(7)
|
|
$
|
437,672
|
|
|
$
|
473,818
|
|
|
$
|
540,310
|
|
|
$
|
634,302
|
|
|
$
|
726,433
|
|
Operating income
|
|
$
|
86,194
|
|
|
$
|
73,695
|
|
|
$
|
68,467
|
|
|
$
|
111,128
|
|
|
$
|
148,748
|
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Earnings from unconsolidated affiliates, net
|
|
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11,039
|
|
|
|
9,600
|
|
|
|
6,758
|
|
|
|
11,423
|
|
|
|
12,978
|
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Interest income
|
|
|
1,684
|
|
|
|
3,144
|
|
|
|
4,046
|
|
|
|
8,716
|
|
|
|
12,725
|
|
Interest expense
|
|
|
(16,829
|
)
|
|
|
(15,665
|
)
|
|
|
(14,689
|
)
|
|
|
(10,940
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)
|
|
|
(23,779
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)
|
Loss on extinguishment of debt
|
|
|
(6,205
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
(7,811
|
)
|
|
|
(1,136
|
)
|
|
|
4,615
|
|
|
|
(8,998
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)
|
|
|
1,585
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|
Provision for income taxes
|
|
|
(18,476
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)
|
|
|
(20,407
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)
|
|
|
(14,668
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)
|
|
|
(38,781
|
)
|
|
|
(44,526
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)
|
Minority interest
|
|
|
(1,382
|
)
|
|
|
(210
|
)
|
|
|
(219
|
)
|
|
|
(1,200
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
48,214
|
|
|
|
49,021
|
|
|
|
54,310
|
|
|
|
71,348
|
|
|
|
107,814
|
|
Income (loss) from discontinued operations
|
|
|
1,611
|
|
|
|
2,539
|
|
|
|
3,499
|
|
|
|
2,824
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
49,825
|
|
|
$
|
51,560
|
|
|
$
|
57,809
|
|
|
$
|
74,172
|
|
|
$
|
103,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Diluted earnings per common share:
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
Earnings from continuing operations
|
|
$
|
2.08
|
|
|
$
|
2.10
|
|
|
$
|
2.30
|
|
|
$
|
2.64
|
|
|
$
|
3.53
|
|
Earnings (loss) from discontinued operations
|
|
|
0.07
|
|
|
|
0.11
|
|
|
|
0.15
|
|
|
|
0.10
|
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.15
|
|
|
$
|
2.21
|
|
|
$
|
2.45
|
|
|
$
|
2.74
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
85,679
|
|
|
$
|
146,440
|
|
|
$
|
122,482
|
|
|
$
|
184,188
|
|
|
|
290,050
|
|
Working capital
|
|
|
235,691
|
|
|
|
270,747
|
|
|
|
283,337
|
|
|
|
368,006
|
|
|
|
541,422
|
|
Total assets
|
|
|
1,046,828
|
|
|
|
1,149,576
|
|
|
|
1,176,413
|
|
|
|
1,505,803
|
|
|
|
1,977,355
|
|
Total debt
|
|
|
255,534
|
|
|
|
262,080
|
|
|
|
265,296
|
|
|
|
259,082
|
|
|
|
606,218
|
|
Stockholders investment
|
|
|
429,952
|
|
|
|
492,993
|
|
|
|
537,697
|
|
|
|
871,657
|
|
|
|
967,441
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
83,331
|
|
|
$
|
104,473
|
|
|
$
|
39,265
|
|
|
$
|
104,430
|
|
|
$
|
87,557
|
|
Net cash used in investing activities
|
|
|
(62,582
|
)
|
|
|
(46,539
|
)
|
|
|
(54,180
|
)
|
|
|
(264,335
|
)
|
|
|
(310,145
|
)
|
Net cash provided by (used in) financing activities
|
|
|
3,539
|
|
|
|
2,763
|
|
|
|
(5,394
|
)
|
|
|
215,682
|
|
|
|
328,860
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(8)
|
|
$
|
128,072
|
|
|
$
|
140,009
|
|
|
$
|
131,856
|
|
|
$
|
170,470
|
|
|
$
|
237,830
|
|
Capital expenditures
|
|
|
(67,855
|
)
|
|
|
(90,023
|
)
|
|
|
(139,572
|
)
|
|
|
(304,776
|
)
|
|
|
(338,003
|
)
|
Aircraft in fleet
|
|
|
332
|
|
|
|
320
|
|
|
|
331
|
|
|
|
345
|
|
|
|
406
|
|
Average revenue per aircraft
|
|
$
|
1,729
|
|
|
$
|
1,946
|
|
|
$
|
2,145
|
|
|
$
|
2,445
|
|
|
$
|
2,494
|
|
|
|
|
(1) |
|
Results for fiscal year 2004 include $21.7 million
($15.7 million, net of tax) of curtailment gain relating to
the pension plan, $7.9 million ($5.7 million, net of
tax) of foreign currency transaction losses and a
$6.2 million in loss on extinguishment of debt related to
notes redeemed in that fiscal year. |
S-11
|
|
|
(2) |
|
Results for fiscal year 2005 include $2.2 million
($1.4 million, net of tax) in costs associated with the
Internal Review (as defined in Risk Factors
Risks Relating to Our Internal Review and Governmental
Investigations), a $3.7 million reduction in our provision
for income taxes resulting from the resolution of tax
contingencies and $1.3 million ($0.9 million, net of
tax) of foreign currency transaction losses. |
|
(3) |
|
Results for fiscal year 2006 include $10.5 million
($6.8 million, net of tax) in costs associated with the
Internal Review, $2.6 million ($1.7 million, net of
tax) in costs associated with the DOJ antitrust investigation,
$1.0 million in an impairment charge to reduce the value of
our investment in a Brazilian joint venture as we expected at
that time that our investment would not be recoverable, a
$11.4 million reduction in our provision for income taxes
resulting from the resolution of tax contingencies and
$5.4 million ($3.5 million, net of tax) of foreign
currency transaction gains. |
|
(4) |
|
Results for fiscal year 2007 include $3.1 million
($2.0 million, net of tax) in costs associated with the
Internal Review, $1.9 million ($1.3 million, net of
tax) in costs associated with the DOJ antitrust investigation,
$2.5 million ($1.6 million, net of tax) in a gain
realized on the sale of our investment in a Brazilian joint
venture for which we had recorded an impairment charge in fiscal
year 2006 as we expected at that time that our investment would
not be recoverable, $2.5 million of additional tax expense
resulting from the sale of Turbo Engines, Inc.
(Turbo) in November 2006 and $9.8 million
($6.3 million, net of tax) of foreign currency transaction
losses. Diluted earnings per share for fiscal year 2007 was also
impacted by our issuance of 5.50% mandatory convertible
preferred stock (Preferred Stock) in September and
October 2006, which resulted in a reduction of $0.30 per share. |
|
(5) |
|
Results for fiscal year 2008 include $1.0 million
($0.7 million, net of tax) in a reversal of costs accrued
for the Internal Review as we settled the SEC investigation,
$1.3 million ($0.8 million, net of tax) in costs
associated with the DOJ investigations, $10.7 million
($7.0 million, net of tax) in net interest incurred on the
71/2% Senior
Notes issued in June and November 2007 and $1.5 million
($1.0 million, net of tax) of foreign currency transaction
gains. Diluted earnings per share for fiscal year 2008 was also
impacted by the issuance of Preferred Stock in September and
October 2006, which resulted in a reduction of $0.96 per share.
Additionally, fiscal year 2008 includes the significant items as
discussed under Managements Discussion and Analysis
of Financial Condition and Results of Operations
Executive Overview Overview of Operating
Results Fiscal Year 2008 Compared to Fiscal Year
2007 included elsewhere in this Prospectus Supplement. |
|
(6) |
|
Amounts reflect our Grasso Production Management business
(Grasso) as discontinued operations. Grasso was sold
on November 2, 2007. |
|
(7) |
|
Gross revenue includes reimbursable revenue of
$94.0 million, $86.2 million, $62.9 million,
$53.6 million and $52.2 million for fiscal years 2008,
2007, 2006, 2005 and 2004, respectively. Direct cost includes
reimbursable expense of $91.1 million, $85.9 million,
$61.9 million, $52.9 million and $52.2 million
for fiscal years 2008, 2007, 2006, 2005 and 2004, respectively. |
|
(8) |
|
Adjusted EBITDA means earnings before interest expense, taxes,
depreciation and amortization, loss on extinguishment of debt
and non-cash compensation adjusted for non-cash components of
net income (minority interest in earnings and equity in earnings
from unconsolidated affiliates (over) under dividends received).
Adjusted EBITDA is not a measure of financial performance or
liquidity under U.S. generally accepted accounting principles
(GAAP). Accordingly, it should not be considered as
a substitute for net income, operating income, net cash provided
by operating activities or any other operating or liquidity
measure prepared in accordance with GAAP. Additionally, our
Adjusted EBITDA computation may not be comparable to other
similarly titled measures of other companies. We believe that
Adjusted EBITDA provides additional information regarding our
ability to meet our future debt service, capital expenditures
and working capital requirements. While we believe that Adjusted
EBITDA may provide additional information with respect to our
ability to meet our future debt service, capital expenditures
and working capital requirements, certain functional or legal
requirements of our business may require us to use our available
funds for other purposes. |
S-12
The following table reconciles Adjusted EBITDA to net cash
provided by operating activities for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Adjusted EBITDA
|
|
$
|
128,072
|
|
|
$
|
140,009
|
|
|
$
|
131,856
|
|
|
$
|
170,470
|
|
|
$
|
237,830
|
|
Cash items (deducted from) added to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax
|
|
|
(7,059
|
)
|
|
|
(19,995
|
)
|
|
|
(15,191
|
)
|
|
|
(20,383
|
)
|
|
|
(36,917
|
)
|
Interest expense
|
|
|
(16,829
|
)
|
|
|
(15,665
|
)
|
|
|
(14,689
|
)
|
|
|
(10,940
|
)
|
|
|
(23,784
|
)
|
Losses (gains) on asset dispositions
|
|
|
(3,943
|
)
|
|
|
(8,039
|
)
|
|
|
(102
|
)
|
|
|
(10,618
|
)
|
|
|
(9,393
|
)
|
Gain on disposal of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,019
|
)
|
Loss on extinguishment of debt
|
|
|
(6,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
10,984
|
|
|
|
(8,612
|
)
|
|
|
(34,718
|
)
|
|
|
(1,428
|
)
|
|
|
(32,600
|
)
|
Inventories
|
|
|
(4,111
|
)
|
|
|
(5,127
|
)
|
|
|
(12,518
|
)
|
|
|
(10,225
|
)
|
|
|
(18,969
|
)
|
Prepaid expenses and other
|
|
|
5,232
|
|
|
|
(724
|
)
|
|
|
(5,925
|
)
|
|
|
(6,634
|
)
|
|
|
(18,249
|
)
|
Accounts payable
|
|
|
(5,156
|
)
|
|
|
6,889
|
|
|
|
15,944
|
|
|
|
(10,688
|
)
|
|
|
7,019
|
|
Accrued liabilities
|
|
|
(3,192
|
)
|
|
|
11,090
|
|
|
|
(35,397
|
)
|
|
|
5,771
|
|
|
|
(36,766
|
)
|
Other liabilities and deferred credits
|
|
|
795
|
|
|
|
(538
|
)
|
|
|
9,933
|
|
|
|
(811
|
)
|
|
|
17,725
|
|
Other non-cash items
|
|
|
(15,257
|
)
|
|
|
5,185
|
|
|
|
72
|
|
|
|
(84
|
)
|
|
|
2,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
83,331
|
|
|
$
|
104,473
|
|
|
$
|
39,265
|
|
|
$
|
104,430
|
|
|
$
|
87,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-13
RISK
FACTORS
If you purchase our notes, you will take on financial risk.
Before buying our notes in this offering, you should carefully
consider the risks relating to an investment in the notes
described below, as well as other information contained in this
prospectus supplement and the accompanying prospectus.
Additionally, you should carefully consider the risks to our
business described in the documents incorporated by reference in
this prospectus supplement and the accompanying prospectus.
These risks could result in the loss of all or part of your
investment.
Risks
Relating to Our Customers and Contracts
The
demand for our services is substantially dependent on the level
of offshore oil and gas exploration, development and production
activity.
We provide helicopter services to companies engaged in offshore
oil and gas exploration, development and production activities.
As a result, demand for our services, as well as our revenue and
our profitability, are substantially dependent on the worldwide
levels of activity in offshore oil and gas exploration,
development and production. These activity levels are
principally affected by trends in, and expectations regarding,
oil and gas prices, as well as the capital expenditure budgets
of oil and gas companies. We cannot predict future exploration,
development and production activity or oil and gas price
movements. Historically, the prices for oil and gas and activity
levels have been volatile and are subject to factors beyond our
control, such as:
|
|
|
|
|
the supply of and demand for oil and gas and market expectations
for such supply and demand;
|
|
|
|
actions of the Organization of Petroleum Exporting Countries and
other oil producing countries to control prices or change
production levels;
|
|
|
|
general economic conditions, both worldwide and in particular
regions;
|
|
|
|
governmental regulation;
|
|
|
|
the price and availability of alternative fuels;
|
|
|
|
weather conditions, including the impact of hurricanes and other
weather-related phenomena;
|
|
|
|
advances in exploration, development and production technology;
|
|
|
|
the policies of various governments regarding exploration and
development of their oil and gas reserves; and
|
|
|
|
the worldwide political environment, including the war in Iraq,
uncertainty or instability resulting from an escalation or
additional outbreak of armed hostilities or other crises in the
Middle East or the other geographic areas in which we operate
(including, but not limited to, Nigeria), or further acts of
terrorism in the U.S. or elsewhere.
|
The
implementation by our customers of cost-saving measures could
reduce the demand for our services.
Oil and gas companies are continually seeking to implement
measures aimed at greater cost savings. As part of these
measures, these companies are attempting to improve cost
efficiencies with respect to helicopter transportation services.
For example, these companies may reduce staffing levels on both
old and new installations by using new technology to permit
unmanned installations and may reduce the frequency of
transportation of employees by increasing the length of shifts
offshore. In addition, these companies could initiate their own
helicopter or other alternative transportation methods. The
continued implementation of these kinds of measures could reduce
the demand for helicopter services and have a material adverse
effect on our business, financial condition and results of
operations.
Our
industry is highly competitive and cyclical, with intense price
competition.
Our industry has historically been cyclical and is affected by
the volatility of oil and gas price levels. There have been
periods of high demand for our services, followed by periods of
low demand for our services.
S-14
Changes in commodity prices can have a dramatic effect on demand
for our services, and periods of low activity intensify price
competition in the industry and often result in our aircraft
being idle for long periods of time.
We
depend on a small number of large offshore energy industry
customers for a significant portion of our
revenue.
We derive a significant amount of our revenue from a small
number of national oil companies and major and independent oil
and gas companies. Our loss of one of these significant
customers, if not offset by sales to new or other existing
customers, could have a material adverse effect on our business,
financial condition and results of operations. Additionally, a
change in policy by national oil companies could adversely
affect us. See Business Customers and
Contracts included elsewhere in this prospectus supplement.
Our
contracts generally can be terminated or downsized by our
customers without penalty.
Many of our fixed-term contracts contain provisions permitting
early termination by the customer for any reason and generally
without penalty, and with limited notice requirements. In
addition, many of our contracts permit our customers to decrease
the number of aircraft under contract with a corresponding
decrease in the fixed monthly payments without penalty. As a
result, you should not place undue reliance on our customer
contracts or the terms of those contracts.
We may
not be able to obtain customer contracts with acceptable terms
covering some of our new helicopters, and some of our new
helicopters may replace existing helicopters already under
contract, which could adversely affect the utilization of our
existing fleet.
We have ordered, and have options for, a substantial number of
new helicopters. Many of our new helicopters may not be covered
by customer contracts when they are placed into service, and we
cannot assure you as to when we will be able to utilize these
new helicopters or on what terms. To the extent our helicopters
are covered by a customer contract when they are placed into
service, many of these contracts are for a short term, requiring
us to seek renewals more frequently. Alternatively, we expect
that some of our customers may request new helicopters in lieu
of our existing helicopters, which could adversely affect the
utilization of our existing fleet.
Risks
Relating to Our Internal Review and Governmental
Investigations
The
DOJ investigation relating to the Internal Review, any
proceedings related to the Internal Review including proceedings
in other countries and the consequences of the activities
identified in the Internal Review could result in civil or
criminal proceedings, the imposition of fines and penalties, the
commencement of third-party litigation, the incurrence of
expenses, the loss of business and other adverse effects on our
company.
In February 2005, we voluntarily advised the staff of the United
States Securities and Exchange Commission (SEC) that
the Audit Committee of our board of directors had engaged
special outside counsel to undertake a review of certain
payments made by two of our affiliated entities in a foreign
country. The review of these payments, which initially focused
on Foreign Corrupt Practices Act matters, was subsequently
expanded by the Audit Committee to cover operations in other
countries and other issues (the Internal Review). As
a result of the findings of the Internal Review (which was
completed in late 2005), our quarter ended December 31,
2004 and prior financial statements were restated. We also
provided the SEC with documentation resulting from the Internal
Review which eventually resulted in a formal SEC investigation.
In September 2007, we consented to the issuance of an
administrative
cease-and-desist
order by the SEC, in final settlement of the SEC investigation.
The SEC did not impose any fine or other monetary sanction upon
us. Without admitting or denying the SECs findings, we
consented to be ordered not to engage in future violations of
certain provisions of the federal securities laws involving
improper foreign payments, internal controls and books and
records. For further information on the restatements, see our
Annual Report on
Form 10-K
for the fiscal year ended March 31, 2005.
S-15
Following the previously disclosed settlement with the SEC
regarding improper payments made by foreign affiliates of the
company in Nigeria, our outside counsel was contacted by the DOJ
and was asked to provide certain information regarding the Audit
Committees related Internal Review. We previously provided
disclosure regarding the Internal Review in our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2005. We have entered
into an agreement with the DOJ that tolls the statute of
limitations relating to these matters. We intend to continue to
be responsive to the DOJs requests. At this time, it is
not possible to predict what the outcome of the DOJs
investigation into these matters will be for us.
As a result of the disclosure and remediation of a number of
activities identified in the Internal Review, we may encounter
difficulties conducting business in certain foreign countries
and retaining and attracting additional business with certain
customers. We cannot predict the extent of these difficulties;
however, our ability to continue conducting business in these
countries and with these customers and through agents may be
significantly impacted. We could still face legal and
administrative proceedings, the institution of administrative,
civil injunctive or criminal proceedings involving us
and/or
current or former employees, officers
and/or
directors who are within the jurisdictions of such authorities,
the imposition of fines and other penalties, remedies
and/or
sanctions, including precluding us from participating in
business operations in their countries. It is also possible that
we may become subject to claims by third parties, possibly
resulting in litigation. The matters identified in the Internal
Review and their effects could have a material adverse effect on
our business, financial condition and results of operations.
In addition, we face legal actions relating to remedial actions
which we have taken as a result of the Internal Review, and may
face further legal action of this type in the future. In
November 2005, two of our consolidated foreign affiliates were
named in a lawsuit filed with the High Court of Lagos State,
Nigeria by Mr. Benneth Osita Onwubalili and his affiliated
company, Kensit Nigeria Limited, which allegedly acted as agents
of our affiliates in Nigeria. The claimants allege that an
agreement between the parties was terminated without
justification and seek damages of $16.3 million. We have
responded to this claim and are continuing to investigate this
matter.
As we continue to operate our compliance program, other
situations involving foreign operations, similar to those
matters disclosed to the SEC in February 2005 and described
above, could arise that warrant further investigation and
subsequent disclosures. As a result, new issues may be
identified that may impact our financial statements and lead us
to take other remedial actions or otherwise adversely impact us.
During fiscal years 2006 and 2007, we incurred approximately
$10.5 million and $3.1 million in professional fees
related to the Internal Review and related matters. During
fiscal year 2008, we reversed $1.0 million of previously
accrued settlement costs due to the fact that we settled the SEC
investigation and incurred $0.6 million for legal fees
related to the DOJ investigation relating to the Internal Review.
The
disclosure and remediation of activities identified in the
Internal Review could result in the loss of business
relationships and adversely affect our business.
As a result of the disclosure and remediation of a number of
activities identified in the Internal Review, we may encounter
difficulties conducting business in certain foreign countries
and retaining and attracting additional business with certain
customers. We cannot predict the extent of these difficulties;
however, our ability to continue conducting business in these
countries and with these customers and through agents may be
significantly impacted. In addition, applicable governmental
authorities may preclude us from bidding on contracts to provide
services in the countries where improper activities took place.
The
DOJ antitrust investigation or any related proceedings in other
countries could result in criminal proceedings and the
imposition of fines and penalties, the commencement of
third-party litigation, the incurrence of expenses, the loss of
business and other adverse effects on our company.
In June 2005, one of our subsidiaries received a document
subpoena from the DOJ. The subpoena related to a grand jury
investigation of potential antitrust violations among providers
of helicopter transportation services in the U.S. Gulf of
Mexico. The subpoena focused on activities during the period
from January 1, 2000 to June 13, 2005. We believe we
have submitted to the DOJ substantially all documents responsive
to the
S-16
subpoena. We have had discussions with the DOJ and provided
documents related to our operations in the U.S. as well as
internationally. We intend to continue to provide additional
information as required by the DOJ in connection with the
investigation. There is no assurance that, after review of any
information furnished by us or by third parties, the DOJ will
not ultimately conclude that violations of U.S. antitrust
laws have occurred. The period of time necessary to resolve the
DOJ antitrust investigation is uncertain, and this matter could
require significant management and financial resources that
could otherwise be devoted to the operation of our business.
The outcome of the DOJ antitrust investigation and any related
legal proceedings in other countries could include civil
injunctive or criminal proceedings involving us or our current
or former officers, directors or employees, the imposition of
fines and other penalties, remedies
and/or
sanctions, including potential disbarments, and referrals to
other governmental agencies. In addition, in cases where
anti-competitive conduct is found by the government, there is a
greater likelihood for civil litigation to be brought by third
parties seeking recovery. Any such civil litigation could have
serious consequences for our company, including the costs of the
litigation and potential orders to pay restitution or other
damages or penalties, including potentially treble damages, to
any parties that were determined to be injured as a result of
any impermissible anti-competitive conduct. Any of these adverse
consequences could have a material adverse effect on our
business, financial condition and results of operations. The DOJ
antitrust investigation, any related proceedings in other
countries and any third-party litigation, as well as any
negative outcome that may result from the investigation,
proceedings or litigation, could also negatively impact our
relationships with customers and our ability to generate revenue.
In connection with this matter, we incurred $2.6 million,
$1.9 million and $0.7 million in legal and other
professional fees in fiscal years 2006, 2007 and 2008,
respectively, and significant expenditures may continue to be
incurred in the future.
Risks
Relating to Our Business
We are
highly dependent upon the level of activity in the U.S. Gulf of
Mexico and the North Sea.
In fiscal years 2006, 2007, and 2008 approximately 55%, 55% and
53%, respectively, of our gross revenue was derived from
helicopter services provided to customers operating in the
U.S. Gulf of Mexico and the North Sea. The U.S. Gulf
of Mexico and the North Sea are mature exploration and
production regions that have experienced substantial seismic
survey and exploration activity for many years. Because a large
number of oil and gas prospects in these regions have already
been drilled, additional prospects of sufficient size and
quality could be more difficult to identify. In addition, the
U.S. governments exercise of authority under the
Outer Continental Shelf Lands Act, as amended, to restrict the
availability of offshore oil and gas leases could adversely
impact exploration and production activity in the U.S. Gulf
of Mexico. If activity in oil and gas exploration, development
and production in either the U.S. Gulf of Mexico or the
North Sea materially declines, our business, financial condition
and results of operations could be materially and adversely
affected. We cannot predict the levels of activity in these
areas.
Our
future growth depends on the level of international oil and gas
activity and our ability to operate outside of the U.S. Gulf of
Mexico and the North Sea.
Our future growth will depend significantly on our ability to
expand into international markets outside of the U.S. Gulf
of Mexico and the North Sea. Expansion of our business depends
on our ability to operate in these regions.
Expansion of our business outside of the U.S. Gulf of
Mexico and the North Sea may be adversely affected by:
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local regulations restricting foreign ownership of helicopter
operators;
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requirements to award contracts to local operators; and
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the number and location of new drilling concessions granted by
foreign sovereigns.
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S-17
We cannot predict the restrictions or requirements that may be
imposed in the countries in which we operate. If we are unable
to continue to operate or retain contracts in markets outside of
the U.S. Gulf of Mexico and the North Sea, our future
business, financial condition and results of operations may be
adversely affected, and our operations outside of the
U.S. Gulf of Mexico and the North Sea may not grow.
In
order to grow our business, we may require additional capital in
the future, which may not be available to us.
Our business is capital intensive, and to the extent we do not
generate sufficient cash from operations, we will need to raise
additional funds through public or private debt or equity
financings to execute our growth strategy. Adequate sources of
capital funding may not be available when needed, or may not be
available on favorable terms. If we raise additional funds by
issuing equity or certain types of convertible debt securities,
dilution to the holdings of existing stockholders may result. If
funding is insufficient at any time in the future, we may be
unable to acquire additional aircraft, take advantage of
business opportunities or respond to competitive pressures, any
of which could harm our business. See discussion of our capital
commitments in Managements Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources Future Cash
Requirements included elsewhere in this prospectus
supplement.
Our
operations outside of the U.S. Gulf of Mexico and the North Sea
are subject to additional risks.
During fiscal years 2006, 2007 and 2008, approximately 45%, 45%
and 47%, respectively, of our gross revenue was attributable to
helicopter services provided to oil and gas customers operating
outside of the U.S. Gulf of Mexico and the North Sea.
Operations in most of these areas are subject to various risks
inherent in conducting business in international locations,
including:
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political, social and economic instability, including risks of
war, general strikes and civil disturbances;
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physical and economic retribution directed at
U.S. companies and personnel;
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governmental actions that restrict payments or the movement of
funds or result in the deprivation of contract rights;
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the taking of property without fair compensation; and
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the lack of well-developed legal systems in some countries which
could make it difficult for us to enforce our contractual rights.
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For example, there has been continuing unrest in Nigeria, where
we derived 15%, 16% and 17% of our gross revenue in fiscal years
2006, 2007 and 2008, respectively. This unrest adversely
affected our results of operations in Nigeria in fiscal year
2007, and any future unrest in Nigeria or our other operating
regions could adversely affect our business, financial condition
and results of operations in those periods. We cannot predict
whether any of these events will continue to occur in the future
in Nigeria or occur in the future elsewhere.
Foreign
exchange risks and controls may affect our financial position
and results of operations.
Through our operations outside the U.S., we are exposed to
currency fluctuations and exchange rate risks. The majority of
both our revenue and expenses from our Europe business unit is
denominated in British pound sterling. Our foreign exchange rate
risk is even greater when our revenue is denominated in a
currency different from that associated with the corresponding
expenses. In addition, some of our contracts provide for payment
in currencies other than British pound sterling or
U.S. dollars. We attempt to minimize our exposure to
foreign exchange rate risk by contracting the majority of our
services, other than in our Europe business unit, in
U.S. dollars. As a result, a strong U.S. dollar may
increase the local cost of our services that are provided under
U.S. dollar-denominated contracts, which may reduce the
demand for our services in foreign countries. Generally, we do
not enter into hedging transactions to protect against foreign
exchange risks related to our gross revenue.
S-18
Because we maintain our financial statements in
U.S. dollars, our financial results are vulnerable to
fluctuations in the exchange rate between the U.S. dollar
and foreign currencies, such as the British pound sterling. In
preparing our financial statements, we must convert all
non-U.S. dollar
currencies to U.S. dollars. The effect of foreign currency
translation is reflected in a component of stockholders
investment, while foreign currency transaction gains or losses
and translation of currency amounts not deemed permanently
reinvested are credited or charged to income and reflected in
other income (expense). In the past three fiscal years, our
stockholders investment has decreased by as much as
$20.7 million and increased by as much as
$27.1 million, as a result of translation adjustments. In
addition, during this period our results of operations have
included foreign currency gains or losses ranging from a loss of
$9.8 million to a gain of $5.4 million. Changes in
exchange rates could cause significant changes in our financial
position and results of operations in the future.
We operate in countries with foreign exchange controls including
Brazil, Egypt, India, Kazakhstan, Malaysia, Nigeria, Russia and
Turkmenistan. These controls may limit our ability to repatriate
funds from our international operations and unconsolidated
affiliates or otherwise convert local currencies into
U.S. dollars. These limitations could adversely affect our
ability to access cash from these operations.
See further discussion of foreign exchange risks and controls
under Item 7A. Quantitative and Qualitative
Disclosure About Market Risk included in our Annual Report
on
Form 10-K
for the fiscal year ended March 31, 2008, incorporated
herein by reference.
We
operate in many international areas through entities that we do
not control.
We conduct many of our international operations through entities
in which we have a minority investment or through strategic
alliances with foreign partners. For example, we have acquired
interests in, and in some cases have lease and service
agreements with, entities that operate aircraft in Egypt,
Mexico, Norway, the U.K., Kazakhstan and Turkmenistan. We
provide engineering and administrative support to certain of
these entities. We derive significant amounts of lease revenue,
service revenue and dividend income from these entities. In
fiscal years 2006, 2007 and 2008, we received approximately
$56.2 million, $54.1 million and $56.5 million,
respectively, of revenue from the provision of aircraft and
other services to unconsolidated affiliates. Because we do not
own a majority or maintain voting control of our unconsolidated
affiliates, we do not have the ability to control their
policies, management or affairs. The interests of persons who
control these entities or partners may differ from ours, and may
cause such entities to take actions that are not in our best
interest. If we are unable to maintain our relationships with
our partners in these entities, we could lose our ability to
operate in these areas, potentially resulting in a material
adverse effect on our business, financial condition and results
of operations.
Labor
problems could adversely affect us.
Approximately 330 pilots in our North America business unit and
approximately 2,200 of our employees in the U.K., Nigeria and
Australia (collectively, about 69% of our employees) are
represented under collective bargaining or union agreements.
Periodically, certain groups of our employees who are not
covered by a collective bargaining agreement consider entering
into such an agreement. In addition, many of the employees of
our affiliates are represented by collective bargaining
agreements. Any disputes over the terms of these agreements or
our potential inability to negotiate acceptable contracts with
the unions that represent our employees under these agreements
could result in strikes, work stoppages or other slowdowns by
the affected workers.
If our unionized workers engage in a strike, work stoppage or
other slowdown, other employees elect to become unionized,
existing labor agreements are renegotiated, or future labor
agreements contain terms that are unfavorable to us, we could
experience a disruption of our operations or higher ongoing
labor costs which could adversely affect our business, financial
condition and results of operations.
See Business Employees included
elsewhere in this prospectus supplement for further discussion
on the status of collective bargaining or union agreements.
S-19
Our
failure to attract and retain qualified personnel could have an
adverse effect on us.
Our ability to attract and retain qualified pilots, mechanics
and other highly-trained personnel is an important factor in
determining our future success. For example, many of our
customers require pilots with very high levels of flight
experience. The market for these experienced and highly-trained
personnel is competitive and may become more competitive.
Accordingly, we cannot assure you that we will be successful in
our efforts to attract and retain such personnel. Some of our
pilots, mechanics and other personnel, as well as those of our
competitors, are members of the U.S. or U.K. military
reserves who have been, or could be, called to active duty. If
significant numbers of such personnel are called to active duty,
it would reduce the supply of such workers and likely increase
our labor costs. Additionally, our fleet capacity expansion
program will require us to retain additional pilots, mechanics
and other flight-related personnel. Finally, as a result of the
disclosure and remediation of activities identified in the
Internal Review, we may have difficulty attracting and retaining
qualified personnel, and we may incur increased expenses. Our
failure to attract and retain qualified personnel could have a
material adverse effect on our current business and our growth
strategy.
Helicopter
operations involve risks that may not be covered by our
insurance or may increase our operating costs.
The operation of helicopters inherently involves a degree of
risk. Hazards such as harsh weather and marine conditions,
mechanical failures, crashes and collisions are inherent in our
business and may result in personal injury, loss of life, damage
to property and equipment and suspension or reduction of
operations. Our aircraft have been involved in accidents in the
past, some of which have included loss of life and property
damage. We may experience similar accidents in the future.
We attempt to protect ourselves against these losses and damage
by carrying insurance, including hull and liability, general
liability, workers compensation, and property and casualty
insurance. Our insurance coverage is subject to deductibles and
maximum coverage amounts, and we do not carry insurance against
all types of losses, including business interruption. We cannot
assure you that our existing coverage will be sufficient to
protect against all losses, that we will be able to maintain our
existing coverage in the future or that the premiums will not
increase substantially. In addition, future terrorist activity,
risks of war, accidents or other events could increase our
insurance premiums. The loss of our liability insurance
coverage, inadequate coverage from our liability insurance or
substantial increases in future premiums could have a material
adverse effect on our business, financial condition and results
of operations.
We are
subject to government regulation that limits foreign ownership
of aircraft companies.
We are subject to governmental regulation that limits foreign
ownership of aircraft companies. Based on regulations in various
markets in which we operate, our aircraft may be subject to
deregistration and we may lose our ability to operate within
these countries if certain levels of local ownership are not
maintained. Deregistration of our aircraft for any reason,
including foreign ownership in excess of permitted levels, would
have a material adverse effect on our ability to conduct
operations within these markets. We cannot assure you that there
will be no changes in aviation laws, regulations or
administrative requirements or the interpretations thereof, that
could restrict or prohibit our ability to operate in certain
regions. Any such restriction or prohibition on our ability to
operate may have a material adverse effect on our business,
financial condition and results of operations.
See further discussion in Business Government
Regulation included elsewhere in this prospectus
supplement.
Actions
taken by agencies empowered to enforce governmental regulations
could increase our costs and reduce our ability to operate
successfully.
Our operations are regulated by governmental agencies in the
various jurisdictions in which we operate. These agencies have
jurisdiction over many aspects of our business, including
personnel, aircraft and ground facilities. Statutes and
regulations in these jurisdictions also subject us to various
certification and reporting requirements and inspections
regarding safety, training and general regulatory compliance.
Other statutes and
S-20
regulations in these jurisdictions regulate the offshore
operations of our customers. The agencies empowered to enforce
these statutes and regulations may suspend, curtail or require
us to modify our operations. A suspension or substantial
curtailment of our operations for any prolonged period, and any
substantial modification of our current operations, may have a
material adverse effect on our business, financial condition and
results of operations. See further discussion in
Business Government Regulation and
Business Environmental included
elsewhere in this prospectus supplement.
We
face substantial competition.
The helicopter business is highly competitive. Chartering of
helicopters is usually done on the basis of competitive bidding
among those providers having the necessary equipment,
operational experience and resources. Factors that affect
competition in our industry include price, reliability, safety,
professional reputation, availability, equipment and quality of
service.
In our North America business unit, we face competition from a
number of providers, including one U.S. competitor with a
comparable number of helicopters servicing the U.S. Gulf of
Mexico. We have two significant competitors in the North Sea and
one significant competitor in Nigeria.
Certain of our customers have the capability to perform their
own helicopter operations should they elect to do so, which has
a limiting effect on our rates. The loss of a significant number
of our customers or termination of a significant number of our
contracts could have a material adverse effect on our business,
financial condition and results of operations.
As a result of significant competition, we must continue to
provide safe and efficient service or we will lose market share,
which could have a material adverse effect on our business,
financial condition and results of operations. The loss of a
significant number of our customers or termination of a
significant number of our contracts could have a material
adverse effect on our business, financial condition and results
of operations.
See further discussion in Business
Competition included elsewhere in this prospectus
supplement.
Our
operations are subject to weather-related and seasonal
fluctuations.
Generally, our operations can be impaired by harsh weather
conditions. Poor visibility, high wind, heavy precipitation and
sand storms can affect the operation of helicopters and result
in a reduced number of flight hours. A significant portion of
our operating revenue is dependent on actual flight hours, and a
substantial portion of our direct cost is fixed. Thus, prolonged
periods of harsh weather can have a material adverse effect on
our business, financial condition and results of operations.
In the Gulf of Mexico, the months of December through March have
more days of harsh weather conditions than the other months of
the year. Heavy fog during those months often limits visibility.
In addition, in the Gulf of Mexico, June through November is
tropical storm and hurricane season. When a tropical storm or
hurricane is about to enter or begins developing in the Gulf of
Mexico, flight activity may increase because of evacuations of
offshore workers. However, during a tropical storm or hurricane,
we are unable to operate in the area of the storm. In addition,
as a significant portion of our facilities are located along the
coast of the U.S. Gulf of Mexico, tropical storms and
hurricanes may cause substantial damage to our property in these
locations, including helicopters. Additionally, we incur costs
in evacuating our aircraft, personnel and equipment prior to
tropical storms and hurricanes.
The fall and winter months have fewer hours of daylight,
particularly in the North Sea and Alaska. While some of our
aircraft are equipped to fly at night, we generally do not do
so. In addition, drilling activity in the North Sea and Alaska
is lower during the winter months than the rest of the year.
Anticipation of harsh weather during this period causes many oil
companies to limit activity during the winter months.
Consequently, flight hours are generally lower during these
periods, typically resulting in a reduction in operating revenue
during those months. Accordingly, our reduced ability to operate
in harsh weather conditions and darkness may have a material
adverse effect on our business, financial condition and results
of operations.
S-21
The Harmattan, a dry and dusty West African trade wind, blows
between the end of November and the middle of March. The heavy
amount of dust in the air can severely limit visibility and
block the sun for several days, comparable to a heavy fog. We
are unable to operate aircraft during these harsh conditions.
Consequently, flight hours may be lower during these periods
resulting in reduced operating revenue which may have a material
adverse impact on our business, financial condition and results
of operations.
Environmental
regulations and liabilities may increase our costs and adversely
affect us.
Our operations are subject to U.S. federal, state and
local, and foreign environmental laws and regulations that
impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage,
recycling and disposal of toxic and hazardous wastes. The nature
of the business of operating and maintaining helicopters
requires that we use, store and dispose of materials that are
subject to environmental regulation. Environmental laws and
regulations change frequently, which makes it impossible for us
to predict their cost or impact on our future operations.
Liabilities associated with environmental matters could have a
material adverse effect on our business, financial condition and
results of operations. We could be exposed to strict, joint and
several liability for cleanup costs, natural resource damages
and other damages as a result of our conduct that was lawful at
the time it occurred or the conduct of, or conditions caused by,
prior operators or other third parties. Additionally, any
failure by us to comply with applicable environmental laws and
regulations may result in governmental authorities taking action
against our business that could adversely impact our operations
and financial condition, including the:
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issuance of administrative, civil and criminal penalties;
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denial or revocation of permits or other authorizations;
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imposition of limitations on our operations; and
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performance of site investigatory, remedial or other corrective
actions.
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For additional information see Business
Environmental included elsewhere in this prospectus
supplement and Item 3. Legal Proceedings
included in our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008, incorporated
herein by reference.
Our
dependence on a small number of helicopter manufacturers and the
limited availability of aircraft poses a significant risk to our
business and prospects, including our ability to execute our
growth strategy.
We contract with a small number of manufacturers for most of our
aircraft expansion and replacement needs. If any of these
manufacturers faced production delays due to, for example,
natural disasters, labor strikes or availability of skilled
labor, we may experience a significant delay in the delivery of
previously ordered aircraft. Currently, helicopter manufacturers
are indicating very limited availability for large- and
medium-sized aircraft during the next two years, and we have
limited alternative sources of new aircraft. As a result, we may
not be able to obtain orders for additional aircraft with
acceptable pricing, delivery dates or other terms. Delivery
delays or our inability to obtain acceptable aircraft orders
would adversely affect our revenue and profitability and could
jeopardize our ability to meet the demands of our customers and
execute our growth strategy. Additionally, lack of availability
of new aircraft resulting from a backlog in orders has resulted
in an increase in prices for certain types of used helicopters.
A
shortfall in availability of aircraft components and parts
required for maintenance and repairs of our aircraft and
supplier cost increases could adversely affect us.
In connection with the required routine maintenance and repairs
performed on our aircraft in order for them to stay fully
operational and available for use in our operations, we rely on
a few key vendors for the supply and overhaul of components
fitted to our aircraft. Currently those vendors are working at
or near full capacity supporting the aircraft production lines
and the maintenance requirements of the aircraft operators who
are also operating at near capacity in certain industries,
including operators such as us who support the energy industry.
These vendors are therefore experiencing backlogs in
manufacturing schedules and some parts are in limited supply
from time to time. Lead times for ordering certain critical
components are extending into longer time
S-22
periods, and this could have an adverse impact upon our ability
to maintain and repair our aircraft. To the extent that these
suppliers also supply parts for aircraft used by the
U.S. military, parts delivery for our aircraft may be
delayed during periods in which there are high levels of
military operations. Our inability to perform timely maintenance
and repairs can result in our aircraft being underutilized which
could have an adverse impact on our operating results.
Furthermore, our operations in remote locations, where delivery
of these components and parts could take a significant period of
time, may also impact our ability to maintain and repair our
aircraft. While every effort is made to mitigate such impact,
this may pose a risk to our operating results. Additionally,
supplier cost increases for critical aircraft components and
parts also pose a risk to our operating results. Cost increases
are passed through to our customers through rate increases where
possible, including as a component of contract escalation
charges. However, as certain of our contracts are long-term in
nature, cost increases may not be adjusted in our contract rates
until the contracts are up for renewal.
Risks
Related to Our Level of Indebtedness
Our
substantial indebtedness could adversely affect our financial
condition and impair our ability to fulfill our obligations
under our indebtedness, including the notes.
We have, and following the completion of this offering, we will
have, substantial debt and substantial debt service
requirements. As of March 31, 2008 and as adjusted to give
effect to this offering, we had approximately
$606.2 million and $706.2 million, respectively, of
outstanding indebtedness.
Our level of indebtedness may have important consequences to our
business and to you, including:
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making it more difficult for us to satisfy our obligations with
respect to the notes;
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impairing our ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions
or other general corporate purposes or to repurchase the notes
from you upon a change of control;
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requiring us to dedicate a substantial portion of our cash flow
to the payment of principal and interest on our indebtedness,
which reduces the availability of our cash flow to fund working
capital, capital expenditures, acquisitions and other general
corporate purposes;
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subjecting us to the risk of increased sensitivity to interest
rate increases on our indebtedness with variable interest rates,
including our borrowings under our syndicated senior secured
Credit Facilities which consist of a $100 million revolving
credit facility (with a subfacility of $25 million for
letters of credit) and a $25 million letter of credit
facility;
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increasing the possibility of an event of default under the
financial and operating covenants contained in our debt
instruments; and
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limiting our ability to adjust to rapidly changing market
conditions, reducing our ability to withstand competitive
pressures and making us more vulnerable to a downturn in general
economic conditions or our business than our competitors with
less debt.
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If we are unable to generate sufficient cash flow from
operations in the future to service our debt, we may be required
to refinance all or a portion of our existing debt or obtain
additional financing. We cannot assure you that any such
refinancing would be possible or that any additional financing
could be obtained. Our inability to obtain such refinancing or
financing may have a material adverse effect on us.
Despite
our and our subsidiaries current levels of indebtedness,
we may incur substantially more debt, which could further
exacerbate the risks associated with our substantial
indebtedness.
Although the agreements governing our Credit Facilities and the
indentures governing our
61/8% Senior
Notes due 2013 (the
61/8% Senior
Notes) and the
71/2% Senior
Notes due 2017 (the
71/2% Senior
Notes and, together with the
61/8% Senior
Notes, the Senior Notes) contain restrictions on the
incurrence of additional indebtedness, these restrictions are
subject to a number of qualifications and exceptions, and we
could incur substantial additional indebtedness. In addition to
amounts that we may borrow under our Credit
S-23
Facilities, the indentures governing the Senior Notes also allow
us to borrow significant amounts of money from other sources.
Also, these restrictions do not prevent us from incurring
obligations that do not constitute indebtedness as
defined in the relevant agreement. If we incur additional
indebtedness, the related risks that we now face could intensify.
To
service our indebtedness, including the notes, we will continue
to require a significant amount of cash, and our ability to
generate cash depends on many factors beyond our
control.
Our ability to make scheduled payments of principal or interest
with respect to our indebtedness, including the notes, will
depend on our ability to generate cash and on our financial
results. Our ability to generate cash depends on the demand for
our services, which is subject to levels of activity in offshore
oil and gas exploration, development and production, general
economic conditions, and financial, competitive, regulatory and
other factors affecting our operations, many of which are beyond
our control. We cannot assure you that our operations will
generate sufficient cash flow or that future borrowings will be
available to us under our Credit Facilities or otherwise in an
amount sufficient to enable us to pay our indebtedness,
including the notes, or to fund our other liquidity needs.
Restrictive
covenants in our debt agreements may restrict the manner in
which we can operate our business.
Our Credit Facilities and the indentures governing our Senior
Notes limit, among other things, our ability and the ability of
our restricted subsidiaries to:
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borrow money or issue guarantees;
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pay dividends, redeem capital stock or make other restricted
payments;
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incur liens to secure indebtedness;
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make certain investments;
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sell certain assets;
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enter into transactions with our affiliates; or
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merge with another person or sell substantially all of our
assets.
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If we fail to comply with these covenants, we would be in
default under our existing Credit Facilities and the indentures
governing our Senior Notes, and the principal and accrued
interest on our Senior Notes and our other outstanding
indebtedness may become due and payable. See Description
of Indebtedness. In addition, our Credit Facilities
contain, and our future indebtedness agreements may contain,
additional affirmative and negative covenants. For additional
information see Note 5 to the Consolidated Financial
Statements included elsewhere in this prospectus supplement.
As a result of these covenants, our ability to respond to
changes in business and economic conditions and to obtain
additional financing, if needed, may be significantly
restricted, and we may be prevented from engaging in
transactions that might otherwise be considered beneficial to
us. Our existing Credit Facilities also require, and our future
credit facilities may require, us to maintain specified
financial ratios and satisfy certain financial condition tests.
Our ability to meet these financial ratios and tests can be
affected by events beyond our control, and we cannot assure you
that we will meet those tests. The breach of any of these
covenants could result in a default under our existing Credit
Facilities. Upon the occurrence of an event of default under our
existing or future credit facilities, the lenders could elect to
declare all amounts outstanding under such credit facilities,
including accrued interest or other obligations, to be
immediately due and payable. There can be no assurance that our
assets would be sufficient to repay in full that indebtedness
and our other indebtedness, including the notes.
The instruments governing certain of our indebtedness, including
our existing Credit Facilities and the indentures governing our
Senior Notes and the notes, contain cross-default provisions.
Under these provisions, a default under one instrument governing
our indebtedness may constitute a default under our other
instruments of indebtedness that contain cross-default
provisions.
S-24
Risks
Related to this Offering and the Notes
We are
dependent on our subsidiaries and our unconsolidated affiliates
for our cash flow.
We are a holding company with no material assets other than
cash, our equity interests in our subsidiaries, our interests in
our unconsolidated affiliates and our indebtedness from those
subsidiaries and affiliates. Our subsidiaries and our
unconsolidated affiliates conduct substantially all of our
operations and directly own substantially all of our assets.
Therefore, our operating cash flow and ability to meet our debt
obligations, including the notes, will depend on the cash flow
provided by our subsidiaries and our unconsolidated affiliates
in the form of loans, dividends, aircraft leases, maintenance
charges, reimbursable expenses or other payments to us as a
shareholder, equity holder, service provider or lender. The
ability of our subsidiaries and our unconsolidated affiliates to
make such payments to us will depend on their earnings, tax
considerations, legal restrictions and restrictions under their
indebtedness. Our non-guarantor subsidiaries are not obligated
to make funds available for payment of the notes.
The
notes will continue to be structurally subordinated to all
indebtedness of our subsidiaries that are not guarantors of the
notes.
We derive substantially all of our revenue from our consolidated
subsidiaries and our unconsolidated affiliates. While certain of
our U.S. subsidiaries will guarantee the notes, our
non-U.S. subsidiaries,
many of which are significant, will not guarantee the notes. You
will not have any claim as a creditor against our subsidiaries
that are not guarantors of the notes. Accordingly, all
obligations of our non-guarantor subsidiaries will have to be
satisfied before any of the assets of such subsidiaries would be
available for distribution, upon a liquidation or otherwise, to
us or a guarantor of the notes. As of March 31, 2008, our
non-guarantor subsidiaries had approximately $358.4 million
of total liabilities (including trade payables but excluding
intercompany liabilities and guarantees). Revenue related to our
non-guarantor subsidiaries constituted 70% of our operating
revenue during fiscal year 2008 (excluding intercompany
revenue), and our non-guarantor subsidiaries held approximately
57% of our consolidated assets as of March 31, 2008.
Similar to our non-guarantor subsidiaries, you will not have any
claim as a creditor against our unconsolidated affiliates. We
own less than 50% of the equity of our unconsolidated affiliates
and some of our subsidiaries so that, in addition to the claims
of creditors of those entities, the equity interests of our
partners or other shareholders in any dividend or other
distribution made by these entities would need to be satisfied
on a proportionate basis with us. These unconsolidated
affiliates and subsidiaries may also be subject to restrictions
on their ability to distribute cash to us in their financing or
other agreements, and as a result, we may not be able to access
their cash flow to service our debt obligations, including the
notes.
The
notes and the subsidiary guarantees will continue to be
unsecured and effectively subordinated to our and our subsidiary
guarantors secured indebtedness.
Holders of our secured debt will have claims that are
effectively senior to your claims as holders of the notes to the
extent of the value of the assets securing the secured debt. The
notes will be effectively subordinated to all secured debt.
If we become insolvent or are liquidated, or if payment under
any secured debt is accelerated, the lender thereunder would be
entitled to exercise the remedies available to a secured lender.
Accordingly, the lender will have priority over any claim for
payment under the notes or the guarantees to the extent of the
assets that constitute their collateral. If this were to occur,
it is possible that there would be no assets remaining from
which claims of the holders of the notes could be satisfied.
Further, if any assets did remain after payment of these
lenders, the remaining assets might be insufficient to satisfy
the claims of the holders of the notes and holders of other
unsecured debt that is deemed the same class as the notes, and
potentially all other general creditors who would participate
ratably with holders of the notes.
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A
court could subordinate or void the obligations under our
subsidiaries guarantees.
Under the U.S. federal bankruptcy laws and comparable provisions
of state fraudulent conveyance laws, a court could void
obligations under the subsidiary guarantees, subordinate those
obligations to other obligations of our subsidiary guarantors or
require you to repay any payments made pursuant to the
subsidiary guarantees, if:
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(1)
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fair consideration or reasonably equivalent value was not
received in exchange for the obligation; and
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(2)
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at the time the obligation was incurred, the obligor:
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was insolvent or rendered insolvent by reason of the obligation;
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was engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital; or
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intended to incur, or believed that it would incur, debts beyond
its ability to pay them as the debts matured.
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The measure of insolvency for these purposes will depend upon
the law of the jurisdiction being applied. Generally, however, a
company will be considered insolvent if:
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the sum of its debts, including contingent liabilities, is
greater than the saleable value of all of its assets at a fair
valuation;
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the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and matured; or
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it could not pay its debts as they become due.
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Moreover, regardless of solvency, a court might void the
guarantees, or subordinate the guarantees, if it determined that
the transaction was made with intent to hinder, delay or defraud
creditors.
Each subsidiary guarantee will contain a provision intended to
limit the guarantors liability to the maximum amount that
it could incur without causing the incurrence of obligations
under its subsidiary guarantee to be a fraudulent transfer. This
provision, however, may not be effective to protect the
subsidiary guarantees from attack under fraudulent transfer law.
The indenture requires that certain subsidiaries must guarantee
the notes in the future. These considerations will also apply to
these guarantees.
The
notes currently have no established trading or other public
market.
Prior to this offering, there has been no trading market for the
notes. We do not intend to apply for a listing of the notes on
any national securities exchange or any automated dealer
quotation system. The underwriters have advised us that they
currently intend to make a market in the notes after the
offering is completed. However, they are not obligated to do so
and may discontinue market making with respect to the notes
without notice. In addition, the liquidity of the trading market
in the notes, and the market price quoted for the notes, may be
adversely affected by changes in the overall market for this
type of security and by changes in our financial performance or
prospects or in the prospects for companies in our industry
generally. As a result, there can be no assurance that an active
trading market will develop for the notes.
Conversion
of the notes or future sales or issuances of common stock,
including conversion of our outstanding Preferred Stock in
September 2009, may dilute the ownership interest of existing
stockholders, including holders who have previously converted
their notes. Such dilution may adversely affect the trading
price of our common stock and the notes.
We may issue equity securities in the future for a number of
reasons, including to finance our operations and business
strategy, to acquire assets or companies, to adjust our ratio of
debt to equity, or in connection
S-26
with our incentive and stock option plans. Any issuance of
equity securities after this offering, including the issuance of
shares upon conversion of our outstanding Preferred Stock in
September 2009 and issuance of shares, if any, upon conversion
of the notes, could dilute the interests of our existing
stockholders, including holders who have previously received
shares upon conversion of their notes, and could substantially
affect the trading price of our common stock and the notes. In
addition, the anticipated conversion of the notes into shares of
our common stock could depress the price of our common stock.
In addition, the price of our common stock could also be
affected by possible sales of our common stock by investors who
view the notes as a more attractive means of equity
participation in our company and by hedging or arbitrage trading
activity that may develop involving our common stock. The
hedging or arbitrage could, in turn, affect the trading price of
the notes.
We may
not be able to pay interest on the notes or repurchase the notes
at the option of the holder on specified dates or upon a
fundamental change.
The notes bear interest at a rate
of % per year. On June 15,
2015, 2020, 2025, 2030 and 2035, holders of the notes have the
right to require us to repurchase all or a portion of their
notes for cash at a price equal to 100% of their principal
amount plus any accrued and unpaid interest up to, but excluding
the repurchase date. Holders of notes also have the right to
require us to repurchase all or a portion of their notes for
cash upon the occurrence of a fundamental change. In addition,
upon conversion of the notes, you will have the right to receive
a cash payment under certain circumstances. We may not have
sufficient funds to pay interest to the note holders or to make
the required cash repurchase of the notes, or make the cash
payment, if any, required upon conversion at the applicable time
and, in such circumstances, may not be able to arrange the
necessary financing on favorable terms, if at all. In addition,
our ability to make the required repurchase upon a fundamental
change may be limited by law or the terms of other debt
agreements or securities. Our failure to pay interest on the
notes or to make the required cash repurchase or cash payment,
as the case may be, would constitute an event of default under
the indenture governing the notes which, in turn, could
constitute an event of default under other debt agreements or
securities, thereby resulting in their acceleration and required
prepayment and thereby further restricting our ability to make
such interest payments and repurchases. Any inability on our
part to pay for your notes that are tendered for repurchase or
conversion could result in your receiving substantially less
than the principal amount of the notes. See Description of
the Notes Interest, Description of the
Notes Conversion Rights Payment Upon
Conversion, Description of the Notes
Fundamental Change Permits Holders to Require Us to Purchase
Notes and Description of the Notes
Repurchase of Notes by Us at Option of Holder.
Your
right to convert the notes is conditional, which could impair
the value of the notes.
The notes are convertible only if specified conditions are met.
If the specified conditions for conversion are not met, you will
not be able to convert your notes, and you may not be able to
receive the value of the cash and shares into which the notes
would otherwise be convertible.
The
market price of the notes could be significantly affected by the
market price of our common stock and other
factors.
We expect that the market price of our notes will be
significantly affected by the market price of our common stock.
This may result in greater volatility in the market price of the
notes than would be expected for nonconvertible debt securities.
The market price of our common stock will likely continue to
fluctuate in response to the factors discussed elsewhere in
Risk Factors, among others, many of which are beyond
our control.
Settlement
of all conversions may be delayed, and as a result, you may
receive less consideration than expected for your
notes.
Upon conversion of the notes, settlement may be delayed until
after the 24th trading day following the relevant
conversion date. See Description of the Notes
Conversion Rights General. As a result, upon
S-27
conversion of the notes, the value of the common stock you
receive may be less than expected, or you may not receive any
common stock, because the value of our common stock may decline
(or not appreciate as much as you may expect) between the day
that you exercise your conversion right and the day our
conversion obligation in respect of your notes is finally
determined.
In the
event of a default, we may have insufficient funds to make any
payments due on the notes.
A default under the indenture pursuant to which the notes are
issued could lead to a default under existing and future
agreements governing our indebtedness. If, due to a default, the
repayment of related indebtedness were to be accelerated after
any applicable notice or grace periods, we may not have
sufficient funds to repay such indebtedness and the notes.
The
notes are not protected by restrictive covenants.
The indenture governing the notes does not contain any financial
or operating covenants or restrictions on the payments of
dividends, the incurrence of indebtedness or the issuance or
repurchase of securities by us or any of our subsidiaries. In
addition, the indenture does not contain covenants or other
provisions to afford protection to holders of the notes in the
event of a change of control involving us except to the extent
described under Description of the Notes
Fundamental Change Permits Holders to Require Us to Purchase
Notes and Description of the Notes
Conversion Rights Increase of Applicable Conversion
Rate Upon Conversion Upon Make-Whole Fundamental Change.
The
base conversion rate and the incremental share factor for the
notes may not be adjusted for all dilutive events.
The base conversion rate and the incremental share factor of the
notes are subject to adjustment for certain events, including,
but not limited to, the issuance of stock dividends on our
common stock, the issuance of certain rights or warrants,
subdivisions, combinations, distributions of capital stock,
indebtedness or assets, cash dividends and certain issuer tender
or exchange offers as described under Description of the
Notes Conversion Rights Conversion Rate
Adjustments. Neither the base conversion rate nor the
incremental share factor will be adjusted, however, for other
events, such as a third party tender or exchange offer or an
issuance of common stock for cash, that may adversely affect the
trading price of the notes or our common stock. In addition, an
event that adversely affects the value of the notes may occur,
and that event may not result in an adjustment to the base
conversion rate or the incremental share factor.
Some
significant restructuring transactions may not constitute a
fundamental change, in which case we would not be obligated to
offer to purchase the notes.
Upon the occurrence of a fundamental change, you have the right
to require us to purchase your notes. However, the fundamental
change provisions will not afford protection to holders of notes
in the event of certain transactions. For example, transactions
such as leveraged recapitalizations, refinancings,
restructurings, or acquisitions initiated by us may not
constitute a fundamental change requiring us to purchase the
notes. In the event of any such transaction, the holders would
not have the right to require us to purchase the notes, even
though each of these transactions could increase the amount of
our indebtedness, or otherwise adversely affect our capital
structure or any credit ratings, thereby adversely affecting the
holders of notes.
The
adjustment to the applicable conversion rate for notes converted
in connection with certain corporate transactions may not
adequately compensate you for any lost value of your notes as a
result of such transaction.
If a make-whole fundamental change as described
under Description of the Notes Conversion
Rights Increase of Applicable Conversion Rate Upon
Conversion Upon Make-Whole Fundamental Change occurs prior
to June 15, 2015, under certain circumstances we will
increase the applicable conversion rate for notes converted in
connection with such specified corporate transaction. The
adjustment to the applicable conversion rate for notes converted
in connection with such corporate transaction may not adequately
S-28
compensate you for any lost value of your notes as a result of
such transaction. In addition, if the price paid per share for
our common stock in, or the average price of our common stock
over a five
trading-day
period immediately preceding the effective date of, such
corporate transaction is greater than
$ per share, or less than
$ per share, no adjustment will be
made to the applicable conversion rate. In addition, in no event
will the applicable conversion rate after this adjustment
exceed per
$1,000 principal amount of notes, subject to adjustments in the
same manner as the base conversion rate as set forth under
Description of the Notes Conversion
Rights Conversion Rate Adjustments.
Our obligation to increase the applicable conversion rate in
connection with any such specified corporate transaction could
be considered a penalty, in which case the enforceability
thereof would be subject to general principles of law and equity.
Holding
the notes does not entitle you to any rights with respect to our
common stock, but you will be subject to all changes made with
respect to our common stock.
As a holder of the notes, you will not be entitled to any rights
with respect to our common stock (including, without limitation,
voting rights and rights to receive any dividends or other
distributions on our common stock), but you will be subject to
all changes affecting our common stock. You will have rights
with respect to our common stock only if you convert your notes,
which you are permitted to do only in the limited circumstances
described in this prospectus supplement. For example, in the
event that an amendment is proposed to our restated certificate
of incorporation or amended and restated bylaws requiring
stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs
prior to your conversion, you will not be entitled to vote on
the amendment, although you will nevertheless be subject to any
changes in the powers, preferences or rights of our common stock.
We may
issue preferred stock with rights senior to our common
stock.
Our restated certificate of incorporation authorizes the
issuance of shares of preferred stock without stockholder
approval. The shares may have dividend, voting, liquidation and
other rights and preferences that are senior to the rights of
our common stock. In addition, such shares of preferred stock
may be convertible into shares of our common stock. Conversion
of shares of our preferred stock into shares of our common stock
may dilute the value of our common stock, which may adversely
affect the value of your notes. The rights and preferences of
any class or series of preferred stock issued by us would be
established by our board of directors in its sole discretion.
Our
stockholder rights plan, provisions in our charter documents or
Delaware law may inhibit a takeover, which could adversely
affect the value of our common stock.
Our stockholder rights plan, our restated certificate of
incorporation, our amended and restated bylaws and Delaware
corporate law contain provisions that could delay or prevent a
change of control or changes in our management that a
stockholder might consider favorable. These provisions will
apply even if the offer may be considered beneficial by some of
our stockholders. If a chance of control or change in management
is delayed or prevented, the market price of our common stock
could decline. Please read Description of Capital
Stock included on page 4 of the accompanying
prospectus for a description of these provisions.
We
limit foreign ownership of our company, which could reduce the
price of our notes and our common stock and cause owners of our
common stock who are not U.S. persons to lose their voting
rights.
Our restated certificate of incorporation provides that persons
or entities that are not citizens of the United
States (as defined in the Federal Aviation Act of
1958) shall not collectively own or control more than 25%
of the voting power of our outstanding capital stock (the
Permitted Foreign Ownership Percentage) and that, if
at any time persons that are not citizens of the United States
nevertheless collectively own or control more than the Permitted
Foreign Ownership Percentage, the voting rights of our
outstanding voting capital stock in excess of the Permitted
Foreign Ownership Percentage owned by certain stockholders who
are not citizens of the United States shall automatically be
suspended. These voting rights will be suspended in reverse
S-29
chronological order by date of registry until the number of
voting shares held by persons that are not citizens of the
United States is less than or equal to the Permitted Foreign
Ownership Percentage. Our restated certificate of incorporation
further authorizes us to redeem any such suspended shares to the
extent necessary for us to comply with any present or future
requirements of the Federal Aviation Act. Shares held by persons
who are not citizens of the United States may lose their
associated voting rights and be redeemed as a result of these
provisions. These restrictions may also have an adverse impact
on the liquidity or market value of our notes and our common
stock because holders may be unable to transfer our notes and
our common stock to persons who are not citizens of the United
States.
Provisions
of the notes could discourage an acquisition of us by a third
party.
Certain provisions of the notes could make it more difficult or
more expensive for a third party to acquire us. Upon the
occurrence of certain transactions constituting a fundamental
change, holders of the notes will have the right, at their
option, to require us to repurchase for cash any or all of their
notes at a price equal to 100% of the principal amount plus any
accrued and unpaid interest. See Description of the
Notes Fundamental Change Permits Holders to Require
Us to Purchase Notes. We also may be required to issue
additional shares of our common stock upon conversion of
outstanding notes in the event of certain corporate
transactions. See Description of the Notes
Conversion Rights Increase of Applicable Conversion
Rate Upon Conversion Upon Make-Whole Fundamental Change.
We
have no plans to pay regular dividends on our common
stock.
We do not intend to declare or pay regular dividends on our
common stock in the foreseeable future. Instead, we generally
intend to invest any future earnings in our business. Subject to
Delaware law, our board of directors will determine the payment
of future dividends on our common stock, if any, and the amount
of any dividends in light of any applicable contractual
restrictions limiting our ability to pay dividends, our earnings
and cash flows, our capital requirements, our financial
condition, and other factors our board of directors deems
relevant. Our Senior Notes and Credit Facilities restrict our
payment of cash dividends or other distributions to
stockholders. Accordingly, you may have to sell some or all of
the common stock issuable upon conversion of your notes in order
to generate cash flow from your investment. You may not receive
a gain on your investment when you sell such common stock and
may lose the entire amount of your investment.
You
may have to pay taxes with respect to some distributions on our
common stock that result in adjustments to the conversion
rate.
The conversion rate of the notes is subject to adjustment for
certain events arising from stock splits and combinations, stock
dividends, certain cash dividends and certain other actions by
us that modify our capital structure. See Description of
the Notes Conversion Rights Conversion
Rate Adjustments and Description of the
Notes Conversion Rights Increase of
Applicable Conversion Rate Upon Conversion Upon Make-Whole
Fundamental Change. If the conversion rate is adjusted as
a result of a distribution that is taxable to holders of our
common stock, such as a cash dividend, you may be required to
include an amount in income for U.S. federal income tax
purposes, notwithstanding the fact that you do not actually
receive such distribution. If you are a
non-U.S. holder
(as defined in Material U.S. Federal Income and
Estate Tax Considerations), any such deemed dividend would
be subject to U.S. federal withholding tax at a 30% rate or
such lower rate as may be prescribed by an applicable tax
treaty. Any such withholding tax on a deemed dividend may be
withheld from interest, shares of common stock or sales proceeds
subsequently paid or credited to the
non-U.S. holder.
See Material U.S. Federal Income and Estate Tax
Considerations.
S-30
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus
contain forward-looking statements within the
meaning of Section 27A of the Securities Act and
Section 21 E of the Securities Exchange Act of 1934.
Forward-looking statements are statements about our future
business, strategy, operations, capabilities and results; use of
proceeds; financial projections; plans and objectives of our
management; expected actions by us and by third parties,
including our customers, competitors, vendors and regulators;
and other matters. Some of the forward-looking statements can be
identified by the use of words such as believes,
belief, expects, plans,
anticipates, intends,
projects, estimates, may,
might, would, could or other
similar words; however, all statements in this prospectus, other
than statements of historical fact or historical financial
results are forward-looking statements.
Our forward-looking statements reflect our views and assumptions
on the date we are filing this prospectus regarding future
events and operating performance. We believe that they are
reasonable, but they involve known and unknown risks,
uncertainties and other factors, many of which may be beyond our
control, that may cause actual results to differ materially from
any future results, performance or achievements expressed or
implied by the forward-looking statements. Accordingly, you
should not put undue reliance on any forward-looking statements.
Factors that could cause our forward-looking statements to be
incorrect and actual events or our actual results to differ from
those that are anticipated include all of the following:
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the risks and uncertainties described under Risk
Factors in this prospectus supplement;
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the level of activity in the oil and natural gas industry is
lower than anticipated;
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production-related activities become more sensitive to variances
in commodity prices;
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the major oil companies do not continue to expand
internationally;
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market conditions are weaker than anticipated;
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we are unable to acquire additional aircraft due to limited
availability;
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we are not able to re-deploy our aircraft to regions with the
greater demand;
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we do not achieve the anticipated benefit of our fleet capacity
expansion program;
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outcome of the DOJ investigation relating to our Internal
Review, which is ongoing, has a greater than anticipated
financial or business impact; and
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the outcome of the DOJ antitrust investigation, which is
ongoing, has a greater than anticipated financial or business
impact.
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All forward-looking statements in this prospectus are qualified
by these cautionary statements and are only made as of the date
of this prospectus. We do not undertake any obligation, other
than as required by law, to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise.
USE OF
PROCEEDS
We estimate that the net proceeds from this offering will be
approximately $96.6 million ($111.2 million if the
underwriters exercise their option to purchase additional notes
in full). We intend to use the net proceeds from this offering,
together with the estimated aggregate net proceeds of
$193.6 million from our proposed concurrent common stock
offering ($222.7 million if the underwriters exercise their
option to purchase additional shares in full) based on an
assumed offering price of $49.53 (the closing price of our
common stock on June 4, 2008), as well as the proceeds from
the Caledonia Private Placement, to purchase additional
aircraft. If we do not complete the concurrent common stock
offering or the Caledonia Private Placement, the funds available
to purchase additional aircraft will be reduced. We plan to
order additional aircraft from time to time following completion
of this offering and expect to pay the purchase price for
additional aircraft at various dates during fiscal years 2009 to
2013. Pending such use, we plan to invest the net proceeds of
this
S-31
offering in highly liquid, investment-grade or better
securities. Depending on our ability to obtain such aircraft
orders and the timing of such use, we may use a portion of the
net proceeds for working capital and other general corporate
purposes, including acquisitions.
There is no assurance that our concurrent offering of common
stock or the Caledonia Private Placement will be completed or,
if completed, that they will be completed for the amounts or the
pricing contemplated. The completion of the concurrent common
stock offering, the Caledonia Private Placement and this
offering are not conditioned on each other.
For a discussion of our aircraft on order and under option,
please read Managements Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources Future Cash
Requirements and Business Helicopter
Services Fleet Capacity Expansion.
PRICE
RANGE OF OUR COMMON STOCK AND DIVIDEND POLICY
Our common stock is listed on the NYSE under the symbol
BRS. Prior to becoming listed on the NYSE in 2003,
our common stock had been quoted on the NASDAQ National Market
system since 1984.
The following table shows the range of closing prices for our
common stock during each quarter of our last two fiscal years
and the first quarter fiscal year 2009 through June 4, 2008.
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Price
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High
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Low
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Fiscal Year Ended March 31, 2007
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First Quarter
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$
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38.37
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$
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33.62
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Second Quarter
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$
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38.52
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$
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32.21
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Third Quarter
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$
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36.84
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$
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32.11
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Fourth Quarter
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$
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38.45
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$
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33.51
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Fiscal Year Ended March 31, 2008
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First Quarter
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$
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52.21
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$
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36.01
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Second Quarter
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$
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53.06
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$
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41.85
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Third Quarter
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$
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58.63
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$
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45.07
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Fourth Quarter
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$
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57.38
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$
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49.58
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Fiscal Year Ended March 31, 2009
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First Quarter (through June 4, 2008)
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$
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58.03
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$
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49.53
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On June 4, 2008, the last reported sale price of our common
stock on the NYSE was $49.53 per share. As of May 15, 2008,
there were 639 holders of record of our common stock.
We have not paid dividends on our common stock since January
1984. We do not intend to declare or pay regular dividends on
our common stock in the foreseeable future. Instead, we
generally intend to invest any future earnings in our business.
Subject to Delaware law, our board of directors will determine
the payment of future dividends on our common stock, if any, and
the amount of any dividends in light of:
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any applicable contractual restrictions limiting our ability to
pay dividends;
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our earnings and cash flows;
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our capital requirements;
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our financial condition; and
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other factors our board of directors deems relevant.
|
In addition, the terms of our Senior Notes and Credit Facilities
restrict our ability to pay cash dividends and other
distributions to stockholders.
S-32
CAPITALIZATION
The following table sets forth our consolidated cash and
capitalization as of March 31, 2008 on a historical basis
and as adjusted to give effect to this offering and as further
adjusted to give effect to our proposed concurrent common stock
offering, in each case together with the application of the
estimated net proceeds from the offerings, but without giving
effect to the Caledonia Private Placement. You should read this
table in conjunction with the information set forth under
Use of Proceeds, Managements Discussion
and Analysis of Financial Condition and Results of
Operations and Description of Indebtedness and
the consolidated financial statements and the notes included
elsewhere in this prospectus supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
|
|
|
|
|
|
|
As Further
|
|
|
|
|
|
|
|
|
|
Adjusted for
|
|
|
|
|
|
|
|
|
|
Concurrent
|
|
|
|
|
|
|
As Adjusted for
|
|
|
Common Stock
|
|
|
|
Actual
|
|
|
This Offering(1)
|
|
|
Offering(1)
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
290,050
|
|
|
$
|
386,695
|
|
|
$
|
580,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, including current portion(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
71/2% Senior
Notes due 2017, including $0.6 million of unamortized
premium
|
|
$
|
350,601
|
|
|
$
|
350,601
|
|
|
$
|
350,601
|
|
61/8% Senior
Notes due 2013
|
|
|
230,000
|
|
|
|
230,000
|
|
|
|
230,000
|
|
Senior secured credit facilities(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans
|
|
|
16,683
|
|
|
|
16,683
|
|
|
|
16,683
|
|
Hemisco Helicopters International, Inc. note
|
|
|
4,380
|
|
|
|
4,380
|
|
|
|
4,380
|
|
Advance from customer
|
|
|
1,400
|
|
|
|
1,400
|
|
|
|
1,400
|
|
Sakhalin debt
|
|
|
3,154
|
|
|
|
3,154
|
|
|
|
3,154
|
|
Notes offered hereby(4)(5)
|
|
|
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
606,218
|
|
|
|
706,218
|
|
|
|
706,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
4,570
|
|
|
|
4,570
|
|
|
|
4,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
5.50% mandatory convertible preferred stock, $.01 par
value, authorized and outstanding 4,600,000 shares;
entitled in liquidation to $230 million; net of offering
costs of $7.4 million
|
|
|
222,554
|
|
|
|
222,554
|
|
|
|
222,554
|
|
Common stock, $.01 par value, authorized
90,000,000 shares: outstanding 23,923,685; outstanding
28,023,685 as adjusted (in each case, exclusive of 1,281,050
treasury shares)
|
|
|
239
|
|
|
|
239
|
|
|
|
280
|
|
Additional paid-in capital
|
|
|
186,390
|
|
|
|
186,390
|
|
|
|
379,936
|
|
Retained earnings
|
|
|
606,931
|
|
|
|
606,931
|
|
|
|
606,931
|
|
Accumulated other comprehensive loss
|
|
|
(48,673
|
)
|
|
|
(48,673
|
)
|
|
|
(48,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders investment
|
|
|
967,441
|
|
|
|
967,441
|
|
|
|
1,161,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
1,578,229
|
|
|
$
|
1,678,229
|
|
|
$
|
1,871,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Estimated net proceeds from the concurrent common stock offering
are based on an assumed offering price of $49.53 (the closing
price for our common stock on June 4, 2008). The net
proceeds of this offering and our proposed concurrent common
stock offering are included in Cash and cash
equivalents in the table above. |
|
(2) |
|
For description of other obligations and commitments, please
read Managements Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources Future Cash |
S-33
|
|
|
|
|
Requirements Contractual Obligations, Commercial
Commitments and Off Balance Sheet Arrangements. |
|
(3) |
|
As of June 4, 2008, we had no borrowings outstanding and
$0.4 million in letters of credit issued under these
facilities, which consist of a $100 million revolving
credit facility and a $25 million letter of credit facility. |
|
(4) |
|
This amount excludes $3.4 million of offering costs for
this offering and $12.8 million of combined offering costs
for this and the concurrent offering. |
|
(5) |
|
In May 2008, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position No. APB
14-a,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash Upon Conversion (Including Partial Cash
Settlement). Under this new staff position for convertible
debt instruments (such as the notes) that may be settled
entirely or partially in cash upon conversion, an entity must
separately account for the liability and equity components of
the instrument in a manner that reflects the issuers
economic interest cost. The effect of the staff position on the
accounting for the notes is that the estimated fair value of the
equity component would be reflected as an increase to
paid-in-capital
within stockholders investment and a decrease in debt for the
estimated original issue discount. The staff position is
effective for fiscal year 2010 beginning with the three month
period ended June 30, 2009, with retrospective application
required. Early adoption is not permitted. As a result, we will
be required to record a greater amount of non-cash interest
expense in current and prior periods presented as a result of
the amortization of the discounted carrying value of the notes
to their face amount over the term of the notes. We may report
lower net income in our financial results because the staff
position will require interest to include both the current
periods amortization of the debt discount and the
instruments coupon interest. We are currently evaluating
the staff position, which could adversely affect our future
financial results, the trading price of our common stock and the
trading price of the notes. |
S-34
SELECTED
HISTORICAL FINANCIAL DATA
The following selected financial data as of and for each of the
five years ended March 31, 2008 is derived from our audited
consolidated financial statements. You should read the following
information in conjunction with the other information contained
in our consolidated financial statements, including the notes
thereto, that are set forth elsewhere in this prospectus
supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2004(1)
|
|
|
2005(2)
|
|
|
2006(3)
|
|
|
2007(4)
|
|
|
2008(5)
|
|
|
|
(In thousands, except per share amounts and number of
aircraft)
|
|
|
Statement of Operations Data:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross revenue(7)
|
|
$
|
574,124
|
|
|
$
|
622,637
|
|
|
$
|
709,901
|
|
|
$
|
843,595
|
|
|
$
|
1,012,764
|
|
Direct cost(7)
|
|
$
|
437,672
|
|
|
$
|
473,818
|
|
|
$
|
540,310
|
|
|
$
|
634,302
|
|
|
$
|
726,433
|
|
Operating income
|
|
$
|
86,194
|
|
|
$
|
73,695
|
|
|
$
|
68,467
|
|
|
$
|
111,128
|
|
|
$
|
148,748
|
|
Earnings from unconsolidated affiliates, net
|
|
|
11,039
|
|
|
|
9,600
|
|
|
|
6,758
|
|
|
|
11,423
|
|
|
|
12,978
|
|
Interest income
|
|
|
1,684
|
|
|
|
3,144
|
|
|
|
4,046
|
|
|
|
8,716
|
|
|
|
12,725
|
|
Interest expense
|
|
|
(16,829
|
)
|
|
|
(15,665
|
)
|
|
|
(14,689
|
)
|
|
|
(10,940
|
)
|
|
|
(23,779
|
)
|
Loss on extinguishment of debt
|
|
|
(6,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
(7,811
|
)
|
|
|
(1,136
|
)
|
|
|
4,615
|
|
|
|
(8,998
|
)
|
|
|
1,585
|
|
Provision for income taxes
|
|
|
(18,476
|
)
|
|
|
(20,407
|
)
|
|
|
(14,668
|
)
|
|
|
(38,781
|
)
|
|
|
(44,526
|
)
|
Minority interest
|
|
|
(1,382
|
)
|
|
|
(210
|
)
|
|
|
(219
|
)
|
|
|
(1,200
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
48,214
|
|
|
|
49,021
|
|
|
|
54,310
|
|
|
|
71,348
|
|
|
|
107,814
|
|
Income (loss) from discontinued operations
|
|
|
1,611
|
|
|
|
2,539
|
|
|
|
3,499
|
|
|
|
2,824
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
49,825
|
|
|
$
|
51,560
|
|
|
$
|
57,809
|
|
|
$
|
74,172
|
|
|
$
|
103,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2.08
|
|
|
$
|
2.10
|
|
|
$
|
2.30
|
|
|
$
|
2.64
|
|
|
$
|
3.53
|
|
Earnings (loss) from discontinued operations
|
|
|
0.07
|
|
|
|
0.11
|
|
|
|
0.15
|
|
|
|
0.10
|
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.15
|
|
|
$
|
2.21
|
|
|
$
|
2.45
|
|
|
$
|
2.74
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
85,679
|
|
|
$
|
146,440
|
|
|
$
|
122,482
|
|
|
$
|
184,188
|
|
|
|
290,050
|
|
Working capital
|
|
|
235,691
|
|
|
|
270,747
|
|
|
|
283,337
|
|
|
|
368,006
|
|
|
|
541,422
|
|
Total assets
|
|
|
1,046,828
|
|
|
|
1,149,576
|
|
|
|
1,176,413
|
|
|
|
1,505,803
|
|
|
|
1,977,355
|
|
Total debt
|
|
|
255,534
|
|
|
|
262,080
|
|
|
|
265,296
|
|
|
|
259,082
|
|
|
|
606,218
|
|
Stockholders investment
|
|
|
429,952
|
|
|
|
492,993
|
|
|
|
537,697
|
|
|
|
871,657
|
|
|
|
967,441
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
83,331
|
|
|
$
|
104,473
|
|
|
$
|
39,265
|
|
|
$
|
104,430
|
|
|
$
|
87,557
|
|
Net cash used in investing activities
|
|
|
(62,582
|
)
|
|
|
(46,539
|
)
|
|
|
(54,180
|
)
|
|
|
(264,335
|
)
|
|
|
(310,145
|
)
|
Net cash provided by (used in) financing activities
|
|
|
3,539
|
|
|
|
2,763
|
|
|
|
(5,394
|
)
|
|
|
215,682
|
|
|
|
328,860
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(8)
|
|
$
|
128,072
|
|
|
$
|
140,009
|
|
|
$
|
131,856
|
|
|
$
|
170,470
|
|
|
$
|
237,830
|
|
Capital expenditures
|
|
|
(67,855
|
)
|
|
|
(90,023
|
)
|
|
|
(139,572
|
)
|
|
|
(304,776
|
)
|
|
|
(338,003
|
)
|
Aircraft in fleet
|
|
|
332
|
|
|
|
320
|
|
|
|
331
|
|
|
|
345
|
|
|
|
406
|
|
Average revenue per aircraft
|
|
$
|
1,729
|
|
|
$
|
1,946
|
|
|
$
|
2,145
|
|
|
$
|
2,445
|
|
|
$
|
2,494
|
|
|
|
|
(1) |
|
Results for fiscal year 2004 include $21.7 million
($15.7 million, net of tax) of curtailment gain relating to
the pension plan, $7.9 million ($5.7 million, net of
tax) of foreign currency transaction losses and a
$6.2 million in loss on extinguishment of debt related to
notes redeemed in that fiscal year. |
S-35
|
|
|
(2) |
|
Results for fiscal year 2005 include $2.2 million
($1.4 million, net of tax) in costs associated with the
Internal Review, a $3.7 million reduction in our provision
for income taxes resulting from the resolution of tax
contingencies and $1.3 million ($0.9 million, net of
tax) of foreign currency transaction losses. |
|
(3) |
|
Results for fiscal year 2006 include $10.5 million
($6.8 million, net of tax) in costs associated with the
Internal Review, $2.6 million ($1.7 million, net of
tax) in costs associated with the DOJ antitrust investigation,
$1.0 million in an impairment charge to reduce the value of
our investment in a Brazilian joint venture as we expected at
that time that our investment would not be recoverable, a
$11.4 million reduction in our provision for income taxes
resulting from the resolution of tax contingencies and
$5.4 million ($3.5 million, net of tax) of foreign
currency transaction gains. |
|
(4) |
|
Results for fiscal year 2007 include $3.1 million
($2.0 million, net of tax) in costs associated with the
Internal Review, $1.9 million ($1.3 million, net of
tax) in costs associated with the DOJ antitrust investigation,
$2.5 million ($1.6 million, net of tax) in a gain
realized on the sale of our investment in a Brazilian joint
venture for which we had recorded an impairment charge in fiscal
year 2006 as we expected at that time that our investment would
not be recoverable, $2.5 million of additional tax expense
resulting from the sale of Turbo in November 2006 and
$9.8 million ($6.3 million, net of tax) of foreign
currency transaction losses. Diluted earnings per share for
fiscal year 2007 was also impacted by the impact of our issuance
of Preferred Stock in September and October 2006, which resulted
in a reduction of $0.30 per share. |
|
(5) |
|
Results for fiscal year 2008 include $1.0 million
($0.7 million, net of tax) in a reversal of costs accrued
for the Internal Review as we settled the SEC investigation,
$1.3 million ($0.8 million, net of tax) in costs
associated with the DOJ investigations, $10.7 million
($7.0 million, net of tax) in net interest incurred on the
71/2% Senior
Notes issued in June and November 2007 and $1.5 million
($1.0 million, net of tax) of foreign currency transaction
gains. Diluted earnings per share for fiscal year 2008 was also
impacted by our issuance of Preferred Stock in September and
October 2006, which resulted in a reduction of $0.96 per share.
Additionally, fiscal year 2008 includes the significant items as
discussed under Managements Discussion and Analysis
of Financial Condition and Results of Operations
Executive Overview Overview of Operating
Results Fiscal Year 2008 Compared to Fiscal Year
2007 included elsewhere in this prospectus supplement. |
|
(6) |
|
Amounts reflect our Grasso Production Management business as
discontinued operations. Grasso was sold on November 2,
2007. |
|
(7) |
|
Gross revenue includes reimbursable revenue of
$94.0 million, $86.2 million, $62.9 million,
$53.6 million and $52.2 million for fiscal years 2008,
2007, 2006, 2005 and 2004, respectively. Direct cost includes
reimbursable expense of $91.1 million, $85.9 million,
$61.9 million, $52.9 million and $52.2 million
for fiscal years 2008, 2007, 2006, 2005 and 2004, respectively. |
|
(8) |
|
Adjusted EBITDA means earnings before interest expense, taxes,
depreciation and amortization, loss on extinguishment of debt
and non-cash compensation adjusted for non-cash components of
net income (minority interest in earnings and equity in earnings
from unconsolidated affiliates (over) under dividends received).
Adjusted EBITDA is not a measure of financial performance or
liquidity under GAAP. Accordingly, it should not be considered
as a substitute for net income, operating income, net cash
provided by operating activities or any other operating or
liquidity measure prepared in accordance with GAAP.
Additionally, our Adjusted EBITDA computation may not be
comparable to other similarly titled measures of other
companies. We believe that Adjusted EBITDA provides additional
information regarding our ability to meet our future debt
service, capital expenditures and working capital requirements.
While we believe that Adjusted EBITDA may provide additional
information with respect to our ability to meet our future debt
service, capital expenditures and working capital requirements,
certain functional or legal requirements of our business may
require us to use our available funds for other purposes. |
S-36
The following table reconciles Adjusted EBITDA to net cash
provided by operating activities for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Adjusted EBITDA
|
|
$
|
128,072
|
|
|
$
|
140,009
|
|
|
$
|
131,856
|
|
|
$
|
170,470
|
|
|
$
|
237,830
|
|
Cash items (deducted from) added to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax
|
|
|
(7,059
|
)
|
|
|
(19,995
|
)
|
|
|
(15,191
|
)
|
|
|
(20,383
|
)
|
|
|
(36,917
|
)
|
Interest expense
|
|
|
(16,829
|
)
|
|
|
(15,665
|
)
|
|
|
(14,689
|
)
|
|
|
(10,940
|
)
|
|
|
(23,784
|
)
|
Losses (gains) on asset dispositions
|
|
|
(3,943
|
)
|
|
|
(8,039
|
)
|
|
|
(102
|
)
|
|
|
(10,618
|
)
|
|
|
(9,393
|
)
|
Gain on disposal of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,019
|
)
|
Loss on extinguishment of debt
|
|
|
(6,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
10,984
|
|
|
|
(8,612
|
)
|
|
|
(34,718
|
)
|
|
|
(1,428
|
)
|
|
|
(32,600
|
)
|
Inventories
|
|
|
(4,111
|
)
|
|
|
(5,127
|
)
|
|
|
(12,518
|
)
|
|
|
(10,225
|
)
|
|
|
(18,969
|
)
|
Prepaid expenses and other
|
|
|
5,232
|
|
|
|
(724
|
)
|
|
|
(5,925
|
)
|
|
|
(6,634
|
)
|
|
|
(18,249
|
)
|
Accounts payable
|
|
|
(5,156
|
)
|
|
|
6,889
|
|
|
|
15,944
|
|
|
|
(10,688
|
)
|
|
|
7,019
|
|
Accrued liabilities
|
|
|
(3,192
|
)
|
|
|
11,090
|
|
|
|
(35,397
|
)
|
|
|
5,771
|
|
|
|
(36,766
|
)
|
Other liabilities and deferred credits
|
|
|
795
|
|
|
|
(538
|
)
|
|
|
9,933
|
|
|
|
(811
|
)
|
|
|
17,725
|
|
Other non-cash items
|
|
|
(15,257
|
)
|
|
|
5,185
|
|
|
|
72
|
|
|
|
(84
|
)
|
|
|
2,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
83,331
|
|
|
$
|
104,473
|
|
|
$
|
39,265
|
|
|
$
|
104,430
|
|
|
$
|
87,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-37
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Managements Discussion and Analysis of Financial Condition
and Results of Operations, should be read in conjunction with
Special Note Regarding Forward-Looking Statements,
Risk Factors and our Consolidated Financial
Statements for fiscal years 2006, 2007 and 2008, and the related
notes thereto, all of which are included elsewhere in this
prospectus supplement.
Executive
Overview
This Executive Overview only includes what management considers
to be the most important information and analysis for evaluating
our financial condition and operating performance. It provides
the context for the discussion and analysis of the financial
statements which follow and does not disclose every item bearing
on our financial condition and operating performance.
See discussion of our business and the operations within our
Helicopter Services Segment under Business
Overview included elsewhere in this prospectus supplement.
Our
Strategy
Our goal is to advance our position as the leading helicopter
services provider to the offshore energy industry. We intend to
employ the following strategies to achieve this goal:
|
|
|
|
|
Grow our business. We plan to continue to grow
our business globally and increase our revenue, profitability
and fleet capacity. We have a footprint in most major oil and
gas producing regions of the world, and we have the opportunity
to expand and deepen our presence in many of these markets. We
anticipate this growth will result primarily from the deployment
of new aircraft into markets where we expect they will be most
profitably employed, as well as by executing opportunistic
acquisitions. Through our relationships with our existing
customers, we are aware of future business opportunities in a
broad range of the markets we currently serve that would require
capital expenditures of roughly double our current
$590 million capital expenditure budget plus the amount of
proceeds from this offering and the concurrent common stock
offering. Our acquisition-related growth may include increasing
our role and participation with existing unconsolidated
affiliates and may include increasing our position in existing
markets or expanding into new markets.
|
|
|
|
Strategically position our company as the preferred provider
of helicopter services. We position our company
as the preferred provider of helicopter services by maintaining
strong relationships with our customers and providing safe and
high-quality service. We focus on maintaining relationships with
our customers field operations and corporate management.
We believe that this focus helps us better anticipate customer
needs and provide our customers with the right aircraft in the
right place at the right time, which in turn allows us to better
manage our existing fleet and capital investment program. We
also leverage our close relationships with our customers to
establish mutually beneficial operating practices and safety
standards worldwide. By applying standard operating and safety
practices across our global operations, we are able to provide
our customers with consistent, high-quality service in each of
their areas of operation. By better understanding our
customers needs and by virtue of our global operations and
safety standards, we have effectively competed against other
helicopter service providers based on aircraft availability,
customer service, safety and reliability, and not just price.
|
|
|
|
Integrate our global operations. We are an
integrated global operator, and we intend to continue to
identify and implement further opportunities to integrate our
global organization. In the past several years, we have changed
our senior management team, integrated our operations among
previously independently managed businesses, created a global
flight and maintenance standards group; improved our global
asset allocation and made other changes in our corporate
operations. We anticipate that these improvements and further
integration opportunities will result in revenue growth, and may
also generate cost savings.
|
S-38
Consistent with our desire to maintain a conservative use of
leverage to fund growth, we raised $222.6 million of
capital through the sale of our Preferred Stock completed in
September and October 2006. Additionally, we raised
$344.7 million through the sale of
71/2% Senior
Notes completed in June and November 2007. As of March 31,
2008, we had commitments to purchase 16 large, 9 medium and 10
training aircraft and options to purchase an additional 17 large
and 33 medium aircraft. Depending on market conditions, we
expect to exercise some or all of these options to purchase
aircraft and may elect to expand our business through the
purchase of other aircraft not currently under option and
acquisition or investment in other helicopter operations,
including acquisitions currently under consideration.
As part of our global fleet management program, prior to an
aircraft coming off of a customer contract we evaluate our
alternatives for use of the aircraft, including factors such as
the cost and timing of future major maintenance, potential
contracts in existing or other markets and potential sale of the
aircraft.
Market
Outlook
We are currently experiencing significant demand for our
helicopter services. Based on our current contract level and
discussions with our customers about their needs for aircraft
related to their oil and gas production and exploration plans,
we anticipate the demand for helicopter services will continue
at a very high level for the near term. In addition, this high
level of demand has allowed us to increase the rates we charge
for our services over the past several years.
We expect to see growth in demand for additional helicopter
services, particularly in North and South America, West
Africa and Southeast Asia. We also expect that the relative
importance of our other business units will continue to increase
as oil and gas producers increasingly focus on prospects outside
of North America and the North Sea. This growth will provide us
with opportunities to add new aircraft to our fleet, as well as
opportunities to redeploy aircraft into markets that will
sustain higher rates for our services. Currently, helicopter
manufacturers are indicating very limited supply availability
for medium and large aircraft during the next two to three
years. We expect that this tightness in aircraft availability
from the manufacturers and the lack of suitable aircraft in the
secondary market, coupled with the increase in demand for
helicopter services, will result in upward pressure on the rates
we charge for our services. We believe that our recent aircraft
acquisitions and commitments position us to benefit from the
current market conditions and to deploy new aircraft on order or
under option at these favorable rates and contract terms.
S-39
Overview
of Operating Results
The following table presents our operating results and other
income statement information for the applicable periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
$
|
646,971
|
|
|
$
|
757,424
|
|
|
$
|
918,735
|
|
Reimbursable revenue
|
|
|
62,930
|
|
|
|
86,171
|
|
|
|
94,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross revenue
|
|
|
709,901
|
|
|
|
843,595
|
|
|
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
478,421
|
|
|
|
548,364
|
|
|
|
635,327
|
|
Reimbursable expense
|
|
|
61,889
|
|
|
|
85,938
|
|
|
|
91,106
|
|
Depreciation and amortization
|
|
|
42,060
|
|
|
|
42,459
|
|
|
|
54,140
|
|
General and administrative
|
|
|
59,167
|
|
|
|
66,321
|
|
|
|
92,833
|
|
Gain on disposal of assets
|
|
|
(103
|
)
|
|
|
(10,615
|
)
|
|
|
(9,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
|
|
641,434
|
|
|
|
732,467
|
|
|
|
864,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
68,467
|
|
|
|
111,128
|
|
|
|
148,748
|
|
Earnings from unconsolidated affiliates, net of losses
|
|
|
6,758
|
|
|
|
11,423
|
|
|
|
12,978
|
|
Interest income (expense), net
|
|
|
(10,643
|
)
|
|
|
(2,224
|
)
|
|
|
(11,054
|
)
|
Other income (expense), net
|
|
|
4,615
|
|
|
|
(8,998
|
)
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income
taxes and minority interest
|
|
|
69,197
|
|
|
|
111,329
|
|
|
|
152,257
|
|
Provision for income taxes
|
|
|
(14,668
|
)
|
|
|
(38,781
|
)
|
|
|
(44,526
|
)
|
Minority interest
|
|
|
(219
|
)
|
|
|
(1,200
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
54,310
|
|
|
|
71,348
|
|
|
|
107,814
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before provision for income
taxes
|
|
|
5,438
|
|
|
|
4,409
|
|
|
|
1,722
|
|
Provision for income taxes on discontinued operations
|
|
|
(1,939
|
)
|
|
|
(1,585
|
)
|
|
|
(5,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
3,499
|
|
|
|
2,824
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
74,172
|
|
|
$
|
103,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2008 Compared to Fiscal Year 2007
Our gross revenue increased to $1.0 billion for fiscal year
2008 from $843.6 million for fiscal year 2007, an increase
of 20.1%. The increase in gross revenue is due primarily to
improvements in our Europe, West Africa, Southeast Asia and
South and Central America business units as a result of
increases in rates for helicopter services, increased demand for
helicopter services from our existing customers and the addition
of new aircraft, as well as the impact of the acquisitions of
the Bristow Academy entities which generated $14.8 million
in revenue in fiscal year 2008. Our operating expense increased
to $864.0 million for fiscal year 2008 from
$732.5 million for fiscal year 2007, an increase of 18.0%.
The increase primarily resulted from higher costs associated
with higher activity levels, maintenance costs, and salaries and
benefits (associated with the addition of personnel and salary
increases), across a majority of our business units, as well as
the impact of the acquisitions of the Bristow Academy entities
which incurred $15.6 million in expense in fiscal year
2008. Primarily as a result of the improvement in rates, our
operating income and operating margin for
S-40
fiscal year 2008 increased to $148.7 million and 14.7%,
respectively, compared to $111.1 million and 13.2%,
respectively, for fiscal year 2007. Fiscal year 2008 included
the following significant items:
|
|
|
|
|
Costs in our Other International business unit related to a
claim by a former agent whom we terminated in connection with
the Internal Review, that decreased operating income by
$5.0 million, income from continuing operations by
$3.3 million and diluted earnings per share by $0.11.
|
|
|
|
Retirement related expenses for two of our corporate officers
that decreased operating income by $1.9 million
($1.1 million recorded in our North America business unit,
$0.3 million in our South and Central America business unit
and $0.5 million in our corporate results), income from
continuing operations by $1.2 million and diluted earnings
per share by $0.04.
|
|
|
|
Tax items that increased operating income by $8.3 million,
income from continuing operations by $11.4 million and
diluted earnings per share by $0.37. These tax items included:
|
|
|
|
|
|
A reversal of accruals for sales tax contingency and employee
taxes in West Africa of $5.4 million and $1.3 million,
respectively, and a reversal of accruals for employee taxes in
Europe of $1.6 million, which are included in direct cost
in our consolidated statement of income.
|
|
|
|
A $6.0 million reduction in our provision for income taxes
resulting from a benefit of $2.5 million associated with
the reduction in the corporate income tax rate in the U.K. and a
benefit of $3.5 million associated with an internal
reorganization completed during fiscal year 2008.
|
For further discussion of these items, see discussion of our
business units under Business Unit Operating
Results Fiscal Year 2008 Compared to Fiscal Year
2007 included elsewhere in this prospectus supplement.
Income from continuing operations for fiscal year 2008 of
$107.8 million represents a $36.5 million increase
from fiscal year 2007. This increase was driven by the
improvement in operating income discussed above and foreign
currency exchange gains of $1.5 million in fiscal year 2008
compared to foreign currency exchange losses of
$9.8 million in fiscal year 2007, partially offset by an
increase in interest expense and our provision for income taxes
(which resulted from an increase in pre-tax earnings, partially
offset by the tax items discussed above).
Fiscal
Year 2007 Compared to Fiscal Year 2006
Our gross revenue increased to $843.6 million for fiscal
year 2007 from $709.9 million for fiscal year 2006, an
increase of 18.8%. The increase in gross revenue relates to an
increase in gross revenue across all of our business units, most
significantly for North America (primarily resulting from
increases in rates for certain contracts and an increase in
utilization of our small aircraft in this market), Europe
(primarily resulting from new aircraft added to the market
during fiscal year 2006) and West Africa (primarily
resulting from an increase in rates under certain contracts and
three new contracts). The increase in gross revenue was also
attributable to an increase in out-of-pocket expenses rebilled
to our customers (reimbursable revenue) of $23.2 million.
Our operating expense increased to $732.5 million for
fiscal year 2007 from $641.4 million for fiscal year 2006,
an increase of 14.2%. Operating expense increased as a result of
the increase in operating activity and the increase in
out-of-pocket expense associated with reimbursable revenue, but
also as a result of a higher level of maintenance activity on
our aircraft and compensation costs driven by higher labor rates
and additional personnel. These additional operating expense
items resulted in a decline in operating income for our North
America business unit and a decline in operating margin for our
North America and Europe business units. However, improved
margins for most of our other business units and significant
gains on asset dispositions in fiscal year 2007 (compared to
only a small gain on asset dispositions in fiscal year
2006) resulted in increases in our operating income and
operating margin to $111.1 million and 13.2%, respectively,
for fiscal year 2007 from $68.5 million and 9.6%,
respectively, for fiscal year 2006.
Income from continuing operations for fiscal year 2007 of
$71.3 million represents a $17.0 million increase from
fiscal year 2006. This increase in income was driven by the
increase in operating income discussed above, increased earnings
from unconsolidated affiliates, an increase in interest income
and a decrease in interest expense, which was partially offset
by foreign exchange losses of $9.8 million in fiscal
S-41
year 2007 compared to foreign exchange gains of
$5.4 million in fiscal year 2006, and an increase in the
provision for income taxes due to the additional tax expense
related to the Turbo asset sale (see Business
Unit Operating Results Fiscal Year 2007 Compared to
Fiscal Year 2006 North America below), the
increase in income during fiscal year 2007 and from an increase
in the overall effective tax rate.
Business
Unit Operating Results
The following tables set forth certain operating information for
the eight business units comprising our Helicopter Services
segment. Intercompany lease revenue and expense are eliminated
from our segment reporting, and depreciation expense of aircraft
is presented in the segment that operates the aircraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Flight hours (excludes unconsolidated affiliates):
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
150,240
|
|
|
|
152,803
|
|
|
|
147,802
|
|
South and Central America
|
|
|
38,469
|
|
|
|
38,417
|
|
|
|
40,439
|
|
Europe
|
|
|
38,648
|
|
|
|
42,377
|
|
|
|
44,343
|
|
West Africa
|
|
|
34,185
|
|
|
|
36,124
|
|
|
|
38,170
|
|
Southeast Asia
|
|
|
12,119
|
|
|
|
12,668
|
|
|
|
16,029
|
|
Other International
|
|
|
6,711
|
|
|
|
9,318
|
|
|
|
8,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
|
280,372
|
|
|
|
291,707
|
|
|
|
295,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
216,482
|
|
|
$
|
239,978
|
|
|
$
|
237,658
|
|
South and Central America
|
|
|
42,869
|
|
|
|
52,820
|
|
|
|
63,863
|
|
Europe
|
|
|
245,294
|
|
|
|
297,934
|
|
|
|
361,744
|
|
West Africa
|
|
|
107,411
|
|
|
|
131,141
|
|
|
|
170,770
|
|
Southeast Asia
|
|
|
61,168
|
|
|
|
73,404
|
|
|
|
111,117
|
|
Other International
|
|
|
35,339
|
|
|
|
46,005
|
|
|
|
47,518
|
|
EH Centralized Operations
|
|
|
10,749
|
|
|
|
13,896
|
|
|
|
22,366
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
14,787
|
|
Intrasegment eliminations
|
|
|
(10,104
|
)
|
|
|
(12,058
|
)
|
|
|
(17,195
|
)
|
Corporate
|
|
|
693
|
|
|
|
475
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
709,901
|
|
|
$
|
843,595
|
|
|
$
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
185,765
|
|
|
$
|
210,768
|
|
|
$
|
205,099
|
|
South and Central America
|
|
|
36,207
|
|
|
|
36,995
|
|
|
|
49,011
|
|
Europe
|
|
|
196,602
|
|
|
|
245,115
|
|
|
|
284,396
|
|
West Africa
|
|
|
95,430
|
|
|
|
112,343
|
|
|
|
138,829
|
|
Southeast Asia
|
|
|
51,317
|
|
|
|
60,034
|
|
|
|
87,363
|
|
Other International
|
|
|
26,277
|
|
|
|
36,696
|
|
|
|
47,801
|
|
EH Centralized Operations
|
|
|
35,761
|
|
|
|
27,476
|
|
|
|
35,757
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
15,596
|
|
Intrasegment eliminations
|
|
|
(10,104
|
)
|
|
|
(12,058
|
)
|
|
|
(17,195
|
)
|
Gain on disposal of assets
|
|
|
(103
|
)
|
|
|
(10,615
|
)
|
|
|
(9,390
|
)
|
Corporate
|
|
|
24,282
|
|
|
|
25,713
|
|
|
|
26,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
641,434
|
|
|
$
|
732,467
|
|
|
$
|
864,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands, except percentages)
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
30,717
|
|
|
$
|
29,210
|
|
|
$
|
32,559
|
|
South and Central America
|
|
|
6,662
|
|
|
|
15,825
|
|
|
|
14,852
|
|
Europe
|
|
|
48,692
|
|
|
|
52,819
|
|
|
|
77,348
|
|
West Africa
|
|
|
11,981
|
|
|
|
18,798
|
|
|
|
31,941
|
|
Southeast Asia
|
|
|
9,851
|
|
|
|
13,370
|
|
|
|
23,754
|
|
Other International
|
|
|
9,062
|
|
|
|
9,309
|
|
|
|
(283
|
)
|
EH Centralized Operations
|
|
|
(25,012
|
)
|
|
|
(13,580
|
)
|
|
|
(13,391
|
)
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
(809
|
)
|
Gain on disposal of assets
|
|
|
103
|
|
|
|
10,615
|
|
|
|
9,390
|
|
Corporate
|
|
|
(23,589
|
)
|
|
|
(25,238
|
)
|
|
|
(26,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
68,467
|
|
|
|
111,128
|
|
|
|
148,748
|
|
Earnings from unconsolidated affiliates
|
|
|
6,758
|
|
|
|
11,423
|
|
|
|
12,978
|
|
Interest income
|
|
|
4,046
|
|
|
|
8,716
|
|
|
|
12,725
|
|
Interest expense
|
|
|
(14,689
|
)
|
|
|
(10,940
|
)
|
|
|
(23,779
|
)
|
Other income (expense), net
|
|
|
4,615
|
|
|
|
(8,998
|
)
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income
taxes and minority interest
|
|
|
69,197
|
|
|
|
111,329
|
|
|
|
152,257
|
|
Provision for income taxes
|
|
|
(14,668
|
)
|
|
|
(38,781
|
)
|
|
|
(44,526
|
)
|
Minority interest
|
|
|
(219
|
)
|
|
|
(1,200
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
54,310
|
|
|
$
|
71,348
|
|
|
$
|
107,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
14.2
|
%
|
|
|
12.2
|
%
|
|
|
13.7
|
%
|
South and Central America
|
|
|
15.5
|
%
|
|
|
30.0
|
%
|
|
|
23.3
|
%
|
Europe
|
|
|
19.9
|
%
|
|
|
17.7
|
%
|
|
|
21.4
|
%
|
West Africa
|
|
|
11.2
|
%
|
|
|
14.3
|
%
|
|
|
18.7
|
%
|
Southeast Asia
|
|
|
16.1
|
%
|
|
|
18.2
|
%
|
|
|
21.4
|
%
|
Other International
|
|
|
25.6
|
%
|
|
|
20.2
|
%
|
|
|
(0.6
|
)%
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
(5.5
|
)%
|
Consolidated total
|
|
|
9.6
|
%
|
|
|
13.2
|
%
|
|
|
14.7
|
%
|
|
|
|
(1) |
|
Operating expenses include depreciation and amortization in the
following amounts for the periods presented: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
North America
|
|
$
|
12,436
|
|
|
$
|
11,553
|
|
|
$
|
12,245
|
|
South and Central America
|
|
|
3,661
|
|
|
|
3,891
|
|
|
|
3,878
|
|
Europe
|
|
|
10,803
|
|
|
|
11,671
|
|
|
|
17,668
|
|
West Africa
|
|
|
5,741
|
|
|
|
6,601
|
|
|
|
8,090
|
|
Southeast Asia
|
|
|
3,681
|
|
|
|
3,497
|
|
|
|
4,090
|
|
Other International
|
|
|
3,031
|
|
|
|
3,511
|
|
|
|
5,161
|
|
EH Centralized Operations
|
|
|
2,612
|
|
|
|
1,510
|
|
|
|
753
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
1,840
|
|
Corporate
|
|
|
95
|
|
|
|
225
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
42,060
|
|
|
$
|
42,459
|
|
|
$
|
54,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Operating margin is calculated as gross revenue less operating
expense divided by gross revenue. |
S-43
Fiscal
Year 2008 Compared to Fiscal Year 2007
Set forth below is a discussion of the results of operations of
our business units. Our consolidated results are discussed under
Executive Overview Overview of Operating
Results above.
North
America
Gross revenue for North America decreased to $237.7 million
for fiscal year 2008 from $240.0 million for fiscal year
2007, and flight activity decreased by 3.3%. The decrease in
gross revenue is due to a reduction in technical services
revenue of $10.4 million resulting from the sale of Turbo,
partially offset by a favorable shift in the mix of aircraft
type utilized in the U.S. Gulf of Mexico in fiscal year
2008. Despite an overall decrease in flight activity in the
U.S. Gulf of Mexico in fiscal year 2008, revenue from
flight operations were higher than fiscal year 2007 as a result
of an increase in the usage of medium and large aircraft which
earn higher rates. As of March 31, 2008, there were 107
small aircraft operating in the U.S. Gulf of Mexico
compared to 124 small aircraft as of March 31, 2007.
Additionally, a rate increase for certain contracts contributed
to the increase in revenue from flight operations in fiscal year
2008.
Operating expense for North America decreased to
$205.1 million for fiscal year 2008 from
$210.8 million for fiscal year 2007. The decrease is due to
an $8.1 million reduction in operating expense attributable
to the sale of Turbo and an increase in maintenance cost
allocations to the South and Central America business unit,
partially offset by higher labor costs associated with increases
in salaries. During fiscal year 2008, Western Hemisphere
(WH) Centralized Operations incurred lower
maintenance costs than planned, which together with the
favorable mix of aircraft utilized and the increase in rates
discussed above, resulted in an increase in operating margin to
13.7% for fiscal year 2008 from 12.2% for fiscal year 2007.
Since fiscal year 2007, we have added four new medium aircraft
while disposing of 18 small aircraft (including two lease
terminations). We expect to continue disposing of our smaller
aircraft in the U.S. Gulf of Mexico and are currently
exploring alternatives for accelerating the disposition of
approximately 50 of such aircraft within the next eighteen
months. Any such aircraft dispositions will be subject to
obtaining terms acceptable to us and other factors which may
affect the timing or completion of the disposition. As medium
aircraft earn higher rates, we expect to continue to see the
benefit from these improved rates in future years. Operating
expense in fiscal year 2008 for the North America business unit
includes $1.1 million in retirement related expense for one
of our corporate officers. Excluding this item, operating margin
for fiscal year 2008 would have been 14.1%.
We completed the sale of certain of the assets of Turbo, our
aircraft engine overhaul business, to Timken Alcor
Aerospace Technologies, Inc. (Timken) on
November 30, 2006 for approximately $14.6 million
($14.3 million of which was received in fiscal year 2007
and $0.3 million of which was received in fiscal year
2008), including post-closing adjustments. Turbo represented
0.9% of our consolidated gross revenue for fiscal year 2007. See
discussion of this sale in Note 2 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus supplement.
South and
Central America
Gross revenue for South and Central America increased to
$63.9 million for fiscal year 2008 from $52.8 million
for fiscal year 2007, primarily due to a 13.6% increase in
flight activity in Trinidad resulting from the addition of
aircraft in this market since fiscal year 2007. Additionally,
flight hours and gross revenue in Mexico also increased by 24.0%
and 21.3%, respectively. The increases in revenue in Trinidad
and Mexico for fiscal year 2008 was partially offset by a 34.6%
decrease in flight activity in Brazil as six aircraft were sold
during fiscal year 2008. As discussed in Note 3 in the
Notes to Consolidated Financial Statements included
elsewhere in this prospectus supplement, we recognize revenue on
a cash basis from our 49% owned unconsolidated affiliates in
Mexico, Hemisco Helicopters International, Inc.
(Hemisco) and Heliservicio Campeche S.A. de C.V.
(Heliservicio and collectively with Hemisco,
HC). As of March 31, 2008, $1.8 million of
amounts billed but not collected from HC have not been
recognized in our results, and our 49% share of the equity in
earnings of Rotorwing Leasing Resources, LLC (RLR)
has been reduced by $3.5 million for amounts billed but not
collected from HC. During fiscal year 2008, we recognized
revenue of $0.6 million upon receipt of payment from HC for
amounts billed in fiscal year 2007 and recorded equity
S-44
earnings from RLR of $0.8 million related to receipt of
payment by RLR from HC for amounts billed in fiscal year 2007.
Operating expense for South and Central America increased to
$49.0 million for fiscal year 2008 from $37.0 million
for fiscal year 2007, primarily due to increased expenses in
Trinidad and Mexico resulting from the increase in flight
activity in those markets. Operating expense for the South and
Central America business unit includes $0.3 million in
allocation of retirement related expense for one of our
corporate officers. Operating margin for this business unit
decreased to 23.3% for fiscal year 2008 compared to 30.0% for
fiscal year 2007, primarily resulting from fixed costs in Brazil.
We have taken several actions which have improved the financial
condition and profitability of HC. In March 2008, HC was awarded
a five-year contract for five medium and two small helicopters
by a major customer in Mexico. Additionally, HC signed a
three-year contract to lease and operate eight medium
helicopters for the Comision Federal de Electricidad, the
national power supplier of Mexico. We have recently entered into
an agreement with our co-shareholders in HC and RLR to effect
changes to our ownership structure in these entities. Upon
completion of the transaction, which we expect to close in June
2008, our interest in HC will be reduced to 24% and our interest
in RLR will be increased to 70%. We currently account for RLR
under the equity method of accounting. We expect that we will
begin consolidating RLRs results and financial position
with our results from the effective date of the transaction,
including the $19.0 million remaining outstanding under
RLRs term loan that is secured by six aircraft which had a
net book value of $24.0 million as of March 31, 2008.
In March 2007, we sold our ownership interest in a Brazilian
joint venture, while we continued to lease aircraft to this
entity until the agreements expired in late fiscal year 2008. As
discussed above, we sold six of our owned aircraft in Brazil in
fiscal year 2008. However, we have contracted to provide two new
medium aircraft to another customer in Brazil commencing in June
and September 2008, which should partially offset the reduction
in business related to the sale of the prior partnership and
older aircraft. Helicopter Leasing Associates (HLA),
a Louisiana limited liability company, leases two aircraft from
a third party, which it leases to the former joint venture of
ours in Brazil.
Europe
Gross revenue for Europe increased to $361.7 million for
fiscal year 2008 from $297.9 million for fiscal year 2007.
The $63.8 million increase in gross revenue for Europe
includes a $20.6 million increase relating to foreign
exchange effects for fiscal year 2008. Excluding this effect,
the increase in gross revenue primarily relates to a 4.6%
increase in flight activity which is in large part due to new
aircraft added in the North Sea since fiscal year 2007.
Additionally, revenue improved as a result of increases in
monthly standing charge rates and annual rate escalations under
certain of our contracts.
Operating expense for Europe increased to $284.4 million
for fiscal year 2008 from $245.1 million for fiscal year
2007. This $39.3 million increase in operating expense
includes a $16.2 million increase relating to foreign
exchange effects for fiscal year 2008. The remaining increase in
operating expense is primarily due to an increase in salaries
and benefits (resulting from the increase in activity, additions
in personnel and salary increases), increases in maintenance
expense (resulting from the increase in activity and an increase
in allocations of maintenance from Eastern Hemisphere
(EH) Centralized Operations), other expense
(including third-party lease costs) and in reimbursable expense.
Operating expense included a favorable impact from the
resolution of an employee tax item resulting in a
$1.6 million benefit for fiscal year 2008. As a result of
new aircraft added to this market at higher margins and
increased rates on other contracts, our operating margin for
Europe increased to 21.4% for fiscal year 2008 from 17.7% for
fiscal year 2007. Excluding the impact of the resolution of the
employee tax item, operating margin for Europe would have been
20.9% in fiscal year 2008.
In October 2006, we were awarded an amendment and extension of
our existing contract in the North Sea with Integrated Aviation
Consortium for the provision of helicopter transportation
services to offshore facilities both east and west of the
Shetland Islands. The amendment extended the contract until June
2010 and called for the provision of five new Sikorsky
S-92
helicopters to replace six AS332L Super Puma helicopters. In
S-45
December 2006, the provision for a sixth Sikorsky
S-92 was
confirmed and a related aircraft option was exercised. The first
aircraft was delivered and went into service in the second
quarter of fiscal year 2008. Additionally, two aircraft were
delivered in the third quarter of fiscal year 2008 with the
final three aircraft delivered in the fourth quarter of fiscal
year 2008. Of the six AS332L Super Puma helicopters displaced,
four are being re-deployed to Southeast Asia and one is being
re-deployed to West Africa. One support aircraft remains in
Aberdeen.
We previously provided search and rescue services for the U.K.
Maritime Coastguard Agency (MCA). The four bases
under the contract were transitioned to another operator during
the period from July 1, 2007 until April 3, 2008. We
expect that we will either be able to employ these aircraft for
other customers, trade the aircraft in as partial consideration
towards the purchase of new aircraft or sell the aircraft. We
sold one of these aircraft in January 2008. In fiscal year 2007
and 2008, we had $32.7 million and $24.3 million,
respectively, in operating revenue associated with this contract.
West
Africa
Gross revenue for West Africa increased to $170.8 million
for fiscal year 2008 from $131.1 million for fiscal year
2007, primarily as a result of an increase in rates under our
contracts with customers and the addition of new aircraft in
Nigeria. In September 2007, we renegotiated two different
contracts with one of these customers that increased the rates
and extended the terms. One of the contracts is for helicopters
and the other contract for fixed-wing aircraft. The extension
period for the helicopter contract is from October 2007 through
September 2009 and calls for rate increases retroactive to
April 1, 2007. This agreement also includes an additional
rate escalation effective October 2008. The agreement for the
fixed-wing aircraft extends from August 2007 through December
2008 and includes rate increases effective August 2007 and
January 2008. In addition, a second major customer in Nigeria
extended its contract for helicopter services at higher rates
from October 2007 through September 2008. This contract calls
for a rate increase effective April 2008 for most of the
equipment involved. In November 2007, we renegotiated a
helicopter services contract with a third major customer, which
expires in February 2010 and includes a rate increase
retroactive to July 1, 2007 and rate escalations effective
July 2008 and July 2009. In December 2007, a major customer in
Nigeria notified us of termination of a contract effective
March 17, 2008 under which we operated and maintained
fixed-wing aircraft owned by the customer. In March 2007, we
negotiated a two year contract extension with a
major customer in Nigeria for two large and one medium aircraft,
which is effective April 1, 2008 and includes a rate
increase in the first year and an additional rate escalation in
the second year.
Operating expense for West Africa increased to
$138.8 million for fiscal year 2008 from
$112.3 million for fiscal year 2007. The increase was
primarily a result of safety and compensation related increases,
including severance accruals, wage increases and additional end
of service costs, increases in maintenance expense (resulting
from the increase in activity and an increase in allocations of
maintenance from EH Centralized Operations), and additional
costs related to training of local Nigerian personnel, which
were partially offset by the reversals of $6.7 million in
accruals for tax contingency items in fiscal year 2008 and
decreases in other expenses, including freight charges and
travel costs. $2.8 million of the accruals for tax
contingency items reversed in fiscal year 2008 were originally
accrued in fiscal year 2007. Compensation related increases in
fiscal year 2008 included approximately $2.5 million in
costs incurred to make employees of ours in Nigeria redundant.
The tax contingency items reversed included $5.4 million
associated with sales taxes and $1.3 million associated
with employee taxes. Operating margin for West Africa increased
to 18.7% for fiscal year 2008 from 14.3% for fiscal year 2007,
primarily as a result of the increases in rates and reversal of
the accruals for tax contingency items. Excluding the reversal
of the accruals for tax contingency items and the employee
redundancy costs, our operating margin for fiscal year 2008
would have been 16.2%.
In fiscal year 2007, we reorganized our Nigerian operations,
which included increased security, consolidation of management
of two operating businesses, expansion of several hangar
facilities, integration of finance and administrative functions,
and repositioning of major maintenance operations into our two
largest operating facilities. In fiscal year 2008, we completed
negotiations with the unions in Nigeria, which resulted in a
portion of the increase in salaries and benefits discussed
above. We also experience periodic disruption to
S-46
our operations related to civil unrest and violence. These
factors have made and are expected to continue to make our
operating results from Nigeria unpredictable.
Southeast
Asia
Gross revenue for Southeast Asia increased to
$111.1 million for fiscal year 2008 from $73.4 million
for fiscal year 2007, primarily due to higher revenue in
Australia and Malaysia. Australias flight activity and
revenue increased 18.2% and 54.1%, respectively, from fiscal
year 2007, primarily due to the addition of aircraft to this
market and rate increases. Malaysias revenue increased by
over 200% as a result of the addition of four medium aircraft
during fiscal year 2008.
Operating expense increased to $87.4 million for fiscal
year 2008 from $60.0 million for fiscal year 2007 as a
result of an increase in salary, maintenance and fuel costs
primarily driven by the increase in activity compared to fiscal
year 2007. As a result of new aircraft added at higher margins
and increased rates on other contracts in Australia and the
addition of aircraft in Malaysia in fiscal year 2008, operating
margin increased to 21.4% for fiscal year 2008 from 18.2% for
fiscal year 2007. In April 2008, we completed negotiations on
the collective bargaining agreement with the pilots union
in Australia, which resulted in a portion of the increase in
salary cost discussed above.
Other
International
Gross revenue for Other International increased marginally to
$47.5 million for fiscal year 2008 from $46.0 million
for fiscal year 2007. Fiscal year 2008 included increases in
flight activity in Egypt and India (which resulted from an
aircraft that was offline for maintenance for a portion of
fiscal year 2007 and an additional aircraft operating in fiscal
year 2008), rate increases for our operations in Russia, the
operation of new aircraft in Kazakhstan at higher rates than
aircraft previously operating in this market and a short-term
contract in Libya in fiscal year 2008, while fiscal year 2007
included the billing of an escalation charge in fiscal year 2007
on contracts in both Russia ($1.6 million in gross revenue)
and Mauritania ($0.5 million in gross revenue) and revenue
earned under a short-term contract in Kenya ($3.0 million
in gross revenue). Our most significant contract in Russia
expires at the end of May 2008, and if not renewed, there could
be a significant reduction in our revenue and operating income
for our Other International business unit in future periods.
Operating expense increased to $47.8 million for fiscal
year 2008 from $36.7 million for fiscal year 2007. The
increase in operating expense is primarily due to increased
operational costs associated with the increases in flight
activity in Egypt and India, the performance of a short-term
contract in Libya, increases in operating costs associated with
new aircraft operating in Kazakhstan, increased employee costs
in Russia and increased allocations of maintenance costs from EH
Centralized Operations. Additionally, our results include
$5.0 million in costs related to a claim by a former agent
who we terminated in connection with the Internal Review and
$1.5 million in additional expense during the fourth
quarter of fiscal year 2008 related to the price paid for an
acquisition in Russia in a prior period classified as a
intangible asset and amortized to expense. As a result of
increased costs in a number of markets, including for the former
agents claim and additional amortization costs, operating
margin for Other International decreased to a negative 0.6% for
fiscal year 2008 from a positive 20.2% for fiscal year 2007.
Excluding the costs associated with the former agents
claim and the additional amortization costs recorded in Russia,
our operating margin would have been 13.2%.
EH
Centralized Operations
Our EH Centralized Operations business unit is comprised of our
technical services business, other non-flight services business
in the Eastern Hemisphere (e.g., provision of maintenance and
supply chain parts and services to other Eastern Hemisphere
business units) and division level expenses for our Eastern
Hemisphere businesses.
Gross revenue for EH Centralized Operations increased to
$22.4 million for fiscal year 2008 from $13.9 million
for fiscal year 2007 as a result of increases in charges to
other business units for cost allocations and part sales,
partially offset by a decrease in third party technical services
revenue.
S-47
Operating expense increased to $35.8 million for fiscal
year 2008 from $27.5 million for fiscal year 2007,
primarily due to increases in salaries and benefits resulting
from additional personnel, increases in costs associated with
the increase in technical service operations (including the
costs of parts sold) and a $1.8 million impairment charge
related to inventory utilized on
S-61 search
and rescue configured aircraft.
Bristow
Academy
As discussed in Business Helicopter
Services Global Training included elsewhere in
this prospectus supplement, on April 2, 2007 we acquired
Bristow Academy and formed our Global Training division. In
November 2007, we expanded Bristow Academy through the
acquisition of Vortex, a flight training school in New Iberia,
Louisiana. For further discussion of these acquisitions, see
Executive Overview included elsewhere in
this prospectus supplement.
Gross revenue and operating expense for Bristow Academy were
$14.8 million and $15.6 million for fiscal year 2008,
respectively, resulting in a $0.8 million loss for the
fiscal year. The results for fiscal year 2008 were impacted by
depreciation on the
stepped-up
cost basis of assets resulting from purchase price accounting
for this acquisition. We expect Bristow Academy to be profitable
in future periods, although the primary strategic value to the
company from this business is the supply of pilots for use in
our global operations. During fiscal year 2008, approximately
200 pilots graduated from Bristow Academy, and we hired 47
pilots into our other business units who are recent graduates of
Bristow Academy.
Corporate
Corporate operating expense primarily represents costs of our
corporate office and other general and administrative costs not
allocated to our business units. Corporate operating expense
increased to $26.7 million for fiscal year 2008 compared to
$25.7 million for fiscal year 2007. The increase is
primarily due to a $4.4 million increase in salaries and
benefits associated with the addition of personnel and an
overall increase in salaries and a $0.8 million increase in
other general and administrative costs, partially offset by a
$4.6 million decrease in professional fees, primarily
resulting from lower costs associated with the Internal Review.
Salaries and benefits in fiscal year 2008 include
$0.5 million in expenses related to a retirement agreement
executed between the company and one of our corporate officers.
We incurred $0.6 million in legal and professional fees
related to the Internal Review in fiscal year 2008 compared to
$3.1 million in fiscal year 2007. Professional fees for
fiscal year 2008 were further reduced by a $1.0 million
reversal of previously accrued settlement costs in connection
with our settlement of the SEC investigation (see further
discussion of the Internal Review and SEC investigation in
Note 6 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus
supplement).
Earnings
from Unconsolidated Affiliates
Earnings from unconsolidated affiliates increased to
$13.0 million for fiscal year 2008 compared to
$11.4 million for fiscal year 2007, primarily due to an
increase in equity earnings from FB Heliservices Limited
(FBH) of $3.4 million (primarily resulting from
a gain recorded in the fiscal year 2008 by FBH upon loss of a
medium aircraft in an accident and reduced interest expense),
partially offset by a decrease in equity earnings from Norsk of
$2.1 million (primarily resulting from changes in estimates
in the fourth quarter of fiscal year 2008). We are in the
process of completing a restructuring of Norsk.
As discussed previously, in March 2007, FBH was awarded a
£9 million (approximately $18 million) extension
to its contract to provide helicopters and support to British
Forces Cyprus and the Sovereign Base Areas Administration until
March 31, 2010.
Interest
Expense, Net
Interest expense, net of interest income, increased to
$11.1 million during fiscal year 2008 compared to
$2.2 million during fiscal year 2008, primarily due to
additional interest expense of $21.0 million associated
with the
71/2% Senior
Notes issued in June and November 2007, partially offset by an
increase in capitalized interest from $6.4 million in
fiscal year 2007 to $12.9 million in fiscal year 2008 and a
$4.0 million increase
S-48
in interest income. More interest was capitalized in fiscal year
2008 as a result of the increase in the amount of construction
in progress related to helicopters being manufactured as
discussed under Liquidity and Capital
Resources Cash Flows Investing
Activities and in Note 1 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus supplement. The increase in interest income
primarily resulted from an increase in cash on hand during
fiscal year 2008 as a result of the issuance of the
71/2% Senior
Notes.
Other
Income (Expense), Net
Other income (expense), net, for fiscal year 2008 was income of
$1.6 million compared to expense of $9.0 million for
fiscal year 2007. The gains in fiscal year 2008 primarily
consist of $1.5 million in foreign currency transaction
gains, which resulted from revaluation of intercompany balances
between entities whose functional currencies are the
U.S. dollar and Nigerian naira and entities whose
functional currency is the British pound sterling. The expense
for fiscal year 2007 primarily consists of $9.8 million in
foreign currency transaction losses, which primarily arose from
operations performed by entities whose functional currency is
the British pound sterling that were denominated in
U.S. dollars as a result of the weakening of the
U.S. dollar in that period (see a discussion of foreign
currency transactions in Note 1 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus supplement). See Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk Foreign Currency Risk included in our
Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008, incorporated
herein by reference, for a discussion of how we manage these
risks. Additionally, fiscal year 2007 included a
$2.5 million gain resulting from the sale of our investment
in a Brazilian joint venture in March 2007 and a charge of
$1.9 million for acquisition costs previously deferred in
connection with an acquisition we were evaluating but determined
was no longer probable.
Taxes
Our effective income tax rates from continuing operations were
29.2% and 34.8% for fiscal years 2008 and 2007, respectively.
The effective tax rate for fiscal year 2008 was impacted by the
reduction in the U.K. corporate tax rate which resulted in a
$2.5 million decrease in our provision for income taxes and
a benefit of $3.5 million associated with transactions
completed during fiscal year 2008 in connection with an internal
reorganization completed on March 31, 2008 (see discussion
of these items in Note 7 in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus
supplement). Additional transactions related to the
reorganization completed on April 1, 2008 are expected to
result in a charge to other comprehensive income in the first
quarter of fiscal year 2009 as a result of a reduction of
approximately $10 million in deferred tax assets associated
with our net pension liability; however, we do not expect these
transactions to result in a material impact on net income.
Excluding these items, our effective tax rate from continuing
operations was 33.2%. The effective tax rate for fiscal year
2007 was impacted by additional tax expense of $2.5 million
recorded as a result of the sale of certain of the assets of
Turbo as discussed above. Excluding the tax recorded as a result
of the Turbo asset sale, our effective tax rate for fiscal year
2007 was 32.6%. During fiscal years 2007 and 2008, we benefited
from the resolution of tax contingencies of $3.4 million
and $2.2 million, respectively. Our effective tax rate was
also reduced by the permanent reinvestment outside the
U.S. of foreign earnings, upon which no U.S. tax has
been provided, and by the amount of our foreign source income
and our ability to realize foreign tax credits.
Discontinued
operations
Discontinued operations for fiscal year 2008 incurred a
$3.8 million after-tax loss compared to $2.8 million
income in fiscal year 2007. The loss for fiscal year 2008 is due
to taxes associated with non-deductible goodwill of
$4.9 million recorded in the provision for income taxes on
discontinued operations in our consolidated income statement, as
well as $1.5 million in transaction expenses partially
offset by the $1.0 million gain on sale and $2.2 million
pre-sale operating income. Additional details regarding
discontinued operations are provided in Note 2 in the
Notes to the Consolidated Financial Statements
included elsewhere in this prospectus supplement.
S-49
Fiscal
Year 2007 Compared to Fiscal Year 2006
Set forth below is a discussion of the results of operations of
our business units. Our consolidated results are discussed under
Executive Overview Overview of
Operating Results above.
North
America
Gross revenue for North America increased to $240.0 million
for fiscal year 2007 from $216.5 million for fiscal year
2006, and flight activity increased by 1.7%. This increase in
gross revenue is due to a rate increase in May 2005 of 8% (which
was phased in during fiscal year 2006), an additional 10% rate
increase for certain contracts (which was phased in beginning in
March 2006), and an increase in the number of aircraft on
month-to-month contracts in fiscal year 2007. Although less of
an impact in fiscal year 2007, another
8-10%
increase became effective in March 2007, which was phased in
during fiscal year 2008.
Operating expense for North America increased to
$210.8 million for fiscal year 2007 from
$185.8 million for fiscal year 2006. The increase was
primarily due to increased maintenance expense (largely
associated with the complete refurbishment of several aircraft
in fiscal year 2007), higher labor costs associated with the
increase in flight activity and from the adoption of the new
equity compensation accounting standard in fiscal year 2007, and
higher fuel costs associated with both the increase in flight
activity and a higher average cost per gallon (which we are
generally able to recover from our customers). Our operating
margin for North America decreased to 12.2% for fiscal year 2007
from 14.2% for fiscal year 2006 primarily due to the increase in
maintenance and labor costs, and a high level of utilization of
aircraft under contracts as opposed to ad hoc work (which earns
higher margins).
South and
Central America
Gross revenue for South and Central America increased to
$52.8 million for fiscal year 2007 from $42.9 million
for fiscal year 2006, primarily due to higher revenue recognized
in fiscal year 2007 upon receipt of cash from our joint venture
in Mexico and an increase in the number of aircraft operating in
Trinidad compared to fiscal year 2006. As discussed in
Fiscal Year 2008 Compared to Fiscal Year
2007 South and Central America included
elsewhere in this prospectus supplement, lease revenue from HC
is recognized as collected. As of March 31, 2007,
$0.7 million of revenue billed but not collected from HC
had not been recognized in our results, and our 49% share of the
equity in earnings of RLR had been reduced by $2.8 million
for revenue billed but not collected from HC. During fiscal year
2007, we recognized revenue of $1.8 million upon receipt of
payment from HC for amounts billed in fiscal year 2006 and
recorded equity earnings from RLR of $2.3 million related
to the receipt of payment by RLR from HC for amounts billed in
fiscal year 2006.
Operating expense for South and Central America increased to
$37.0 million for fiscal year 2007 from $36.2 million
for fiscal year 2006, primarily due to operating expense
increases in Trinidad as a result of additional aircraft in that
market, which was almost fully offset by lower operating expense
in other markets. The largest of these decreases was noted in
Mexico, where overall flight activity had declined due to the
conclusion of the Petróleos Mexicanos (PEMEX)
contract in February 2005. As a result of the increase in gross
revenue while operating expense was substantially unchanged, the
operating margin for this business unit increased significantly
to 30.0% for fiscal year 2007 from 15.5% for fiscal year 2006.
Europe
Gross revenue for Europe increased to $297.9 million for
fiscal year 2007 from $245.3 million for fiscal year 2006.
The $52.6 million increase in gross revenue for Europe
includes a $17.5 million increase relating to foreign
exchange effects for fiscal year 2007. Excluding this effect,
the increase in gross revenue primarily relates to a 9.6%
increase in flight activity and an $18.0 million increase
in out-of-pocket expenses rebilled to our customers. The
majority of the increase in flight hours related to new
contracts within the North Sea and an increase in our
utilization per airframe.
Operating expense for Europe increased to $245.1 million
for fiscal year 2007 from $196.6 million for fiscal year
2006. The $48.5 million increase in operating expense for
Europe includes a $14.4 million increase
S-50
relating to foreign exchange effects for fiscal year 2007.
Excluding this effect, the increase in operating expense
primarily relates to an increase in activity in the North Sea,
increased maintenance costs, higher fuel rates, the impact of
additions in personnel and salary increases, and the increase in
out-of-pocket expenses rebilled to our customers in fiscal year
2007 compared to fiscal year 2006. As a result of the increases
in maintenance costs and salaries and a higher level of
utilization of aircraft under contracts as opposed to ad hoc
work (which earns higher margins), operating margin for Europe
decreased to 17.7% for fiscal year 2007 from 19.9% for fiscal
year 2006.
In connection with the contract with the MCA, we had
$27.3 million and $32.7 million, respectively, in
operating revenue for fiscal years 2006 and 2007. For additional
information relating to the contract with MCA, see
Fiscal Year 2008 Compared to Fiscal Year
2007 Europe included elsewhere in this
prospectus supplement.
West
Africa
Gross revenue for West Africa increased to $131.1 million
for fiscal year 2007 from $107.4 million for fiscal year
2006, primarily as a result of a 5.7% increase in flight
activity in Nigeria from fiscal year 2006 (resulting from the
addition of three new contracts in fiscal year 2007), an
increase in rates under our contract with a major customer in
Nigeria (beginning October 1, 2006), increases in certain
of our standard monthly rates for other contracts, and a
$3.5 million increase in out-of-pocket expenses rebilled to
our customers.
Operating expense for West Africa increased to
$112.3 million for fiscal year 2007 from $95.4 million
in fiscal year 2006. The increase was primarily a result of
higher salary expense and maintenance costs associated with the
increase in activity, increases in freight charges on spare
parts, higher travel and security costs and the increase in
out-of-pocket expenses rebilled to our customers. Operating
margin for West Africa increased to 14.3% for fiscal year 2007
from 11.2% for fiscal year 2006 as a result of the increase in
gross revenue.
Southeast
Asia
Gross revenue for Southeast Asia increased to $73.4 million
for fiscal year 2007 from $61.2 million for fiscal year
2006, primarily due to higher revenue in Australia.
Australias flight activity and revenue increased 20.7% and
27.3%, respectively, from fiscal year 2006, primarily due to the
utilization of an additional large aircraft, increases in
certain rates and the billing of contract escalations.
Operating expense increased to $60.0 million for fiscal
year 2007 from $51.3 million for fiscal year 2006 primarily
as a result of an increase in salary, maintenance and fuel costs
related to the increase in activity compared to fiscal year
2006. As a result of higher gross revenue during fiscal year
2007, operating margin increased to 18.2% for fiscal year 2007
from 16.1% for fiscal year 2006.
Other
International
Gross revenue for Other International increased to
$46.0 million for fiscal year 2007 from $35.3 million
for fiscal year 2006, primarily due to an increase in flight
activity in Russia, the billing of escalation charges on
contracts in both Russia ($1.6 million in gross revenue)
and Mauritania ($0.5 million in gross revenue), the
commencement of flight operations in Kenya, and additional
revenue in Egypt resulting from an additional large aircraft
leased to our unconsolidated affiliate in that country, which
commenced in December 2005.
Operating expense increased to $36.7 million for fiscal
year 2007 from $26.3 million for fiscal year 2006. The
increase in operating expense is primarily due to increased
operational costs associated with the increases in flight
activity discussed above and increased general and
administrative costs associated with higher salaries, travel
expenses, and overhead cost allocations. As a result of the
increase in general and administrative costs discussed above,
our operating margin for Other International decreased to 20.2%
for fiscal year 2007 from 25.6% for fiscal year 2006.
S-51
EH
Centralized Operations
Gross revenue for EH Centralized Operations increased to
$13.9 million for fiscal year 2007 from $10.7 million
for fiscal year 2006 as a result of increased parts sales,
increased intercompany charges to other business units for
overhead costs and increased out-of-pocket costs rebilled to our
customers in fiscal year 2007 compared to fiscal year 2006.
Operating expense decreased to $27.5 million for fiscal
year 2007 from $35.8 million for fiscal year 2006,
primarily due to lower unrecovered maintenance costs, higher
maintenance costs in fiscal year 2006 for a large aircraft that
was being prepared for deployment to Malaysia and lower
professional fees incurred in fiscal year 2007, partially offset
by increased salaries for additional personnel and increased
costs of materials.
Corporate
Corporate operating expense increased to $25.7 million for
fiscal year 2007 compared to $24.3 million for fiscal year
2006. The increase is primarily due a $5.1 million increase
in salaries and benefits associated with the addition of
personnel, an overall increase in salaries and the adoption of
the new stock-based compensation standard on April 1, 2006,
and a $1.6 million increase in other general and
administrative costs associated with an increase in travel and
other general office costs. These increases were partially
offset by a $5.4 million decrease in professional fees,
primarily resulting from lower costs associated with the
Internal Review. We incurred $3.1 million in legal and
professional fees related to the Internal Review in fiscal year
2007 compared to $10.5 million in fiscal year 2006 (see
further discussion of the Internal Review in Note 6 in the
Notes to Consolidated Financial Statements included
elsewhere in this prospectus supplement).
Earnings
from Unconsolidated Affiliates
Earnings from unconsolidated affiliates increased to
$11.4 million for fiscal year 2007 compared to
$6.8 million for fiscal year 2006, primarily due to higher
equity earnings from FBS Limited (FBS) and RLR. The
FBS improvement of $3.5 million primarily resulted from
lower interest charges, an increase in activity and rates for a
manpower services contract, and a decrease in overhead costs
compared to fiscal year 2006. The RLR improvement of
$2.6 million resulted from an increase in the amount of
cash received from HC during fiscal year 2007 compared to fiscal
year 2006, as HCs results have improved as work lost upon
completion of the PEMEX contract has gradually been replaced.
The increase was partially offset by a $1.0 million
decrease in equity earnings from Norsk.
Interest
Expense, Net
Interest expense, net of interest income, totaled
$2.2 million for fiscal year 2007 compared to
$10.6 million for fiscal year 2006. The decrease in
interest expense, net, primarily resulted from higher interest
income earned in fiscal year 2007 relative to fiscal year 2006
due to higher short-term cash investment balances and returns
(primarily driven by the cash on hand as a result of our
Preferred Stock offering completed in September and October
2006). Additionally, interest expense for fiscal years 2007 and
2006 was reduced by approximately $6.4 million and
$2.4 million, respectively, of capitalized interest. More
interest was capitalized in fiscal year 2007 as a result of the
increase in the amount of construction in progress related to
helicopters being manufactured as discussed under
Liquidity and Capital Resources
Cash Flows Investing Activities and in
Note 1 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus
supplement.
Other
Income (Expense), Net
Other income (expense), net, for fiscal year 2007 was expense of
$9.0 million compared to income of $4.6 million for
fiscal year 2006, and primarily represents foreign currency
transaction losses and gains, respectively. These gains and
losses arose primarily from U.S. dollar-denominated
transactions entered into by Bristow Aviation (whose functional
currency is the British pound sterling). See Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk Foreign Currency Risk included in our
Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008 incorporated
herein by reference for a discussion of how we manage these
risks. Additionally, fiscal year 2007 included a
$2.5 million gain resulting from the sale of our investment
in a Brazilian joint venture in March 2007 and a charge of
$1.9 million for acquisition costs
S-52
previously deferred in connection with an acquisition we were
evaluating as we determined that the acquisition was no longer
probable.
Taxes
Our effective income tax rates from continuing operations were
34.8% and 21.2% for fiscal years 2007 and 2006, respectively.
The effective tax rate for fiscal year 2007 was impacted by
additional tax expense of $2.5 million recorded as a result
of the sale of certain of the assets of Turbo as discussed
above. Excluding the tax recorded as a result of the Turbo asset
sale, our effective tax rate for fiscal year 2007 was 32.6%.
During fiscal year 2007, we benefited from the resolution of tax
contingencies of $3.4 million. Our effective tax rate was
also reduced by the permanent reinvestment outside the
U.S. of foreign earnings, upon which no U.S. tax has
been provided, and by the amount of our foreign source income
and our ability to realize foreign tax credits. The significant
variance between the U.S. federal statutory rate and the
effective rate for fiscal year 2006 was due primarily to the
resolution of tax contingencies of $11.4 million during
that period, as a result of our evaluation of the need for such
reserves in light of the expiration of the related statutes of
limitations.
Discontinued
operations
Discontinued operations for fiscal year 2007 generated
$2.8 million income compared to $3.5 million income in
fiscal year 2006. The decrease in income was the result of a
significant customer of the Production Management Services
substantially reducing the scope of work under our services
contract beginning in October 2006. Additional details regarding
discontinued operations are provided in Note 2 in the
Notes to the Consolidated Financial Statements
included elsewhere in this prospectus supplement.
Liquidity
and Capital Resources
Cash
Flows
Operating
Activities
Net cash flows provided by operating activities totaled
$39.3 million, $104.4 million and $87.6 million
during fiscal years 2006, 2007 and 2008, respectively. Non-cash
working capital used $72.6 million, $23.2 million and
$99.6 million in cash flows from operating activities
during fiscal years 2006, 2007 and 2008, respectively. The
decrease in net cash provided by operations between fiscal years
2008 and 2007 was primarily due to cash used to fund working
capital requirements in fiscal year 2008 resulting from the
expansion of our business through purchases of additional
aircraft and increases in flight hours from our existing
aircraft fleet. Cash flows from operating activities improved
during fiscal year 2007 compared to fiscal year 2006 primarily
due to the favorable change in non-cash working capital, changes
in deferred income taxes and the improvement in net income
during fiscal year 2007 versus fiscal year 2006.
S-53
Investing
Activities
Cash flows used in investing activities were $54.2 million,
$264.3 million and $310.1 million for fiscal years
2006, 2007 and 2008, respectively, primarily for capital
expenditures as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Number of aircraft delivered:
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
15
|
|
|
|
4
|
|
|
|
4
|
|
Medium
|
|
|
9
|
|
|
|
17
|
|
|
|
14
|
|
Large
|
|
|
2
|
|
|
|
5
|
|
|
|
8
|
|
Fixed wing
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Training
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total aircraft(1)
|
|
|
26
|
|
|
|
26
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft and related equipment(2)
|
|
$
|
141,166
|
|
|
$
|
294,444
|
|
|
$
|
328,479
|
|
Other
|
|
|
13,096
|
|
|
|
10,332
|
|
|
|
9,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
154,262
|
|
|
$
|
304,776
|
|
|
$
|
338,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes one aircraft in fiscal year 2007 and two aircraft in
fiscal year 2008 that were not acquired through orders. |
|
(2) |
|
Includes expenditures financed with $3.2 million of
short-term notes during fiscal year 2006. |
Fiscal Year 2008 During fiscal year 2008, we
made final payments in connection with the delivery of aircraft,
progress payments on the construction of new aircraft to be
delivered in future periods in conjunction with our aircraft
commitments, and purchased one fixed wing aircraft, for a total
of $300.5 million. Also during fiscal year 2008, we spent
an additional $28.0 million to upgrade aircraft within our
existing aircraft fleet and to customize new aircraft delivered
for our operations.
During fiscal year 2008, we received proceeds of
$26.6 million from the disposal of 39 aircraft and certain
other equipment, resulting in a gain of $9.4 million.
Included in the $9.4 million gain is a total loss on one
medium aircraft from a crash in Nigeria, a total loss on two
small aircraft in the Gulf of Mexico in flight accidents and a
total loss from storm damage to one medium aircraft, resulting
in a net loss on asset disposals of $0.5 million. All of
these losses were insured. Additionally, in fiscal year 2008, we
settled an insurance claim on an aircraft that was damaged in
the North Sea in November 2006, which resulted in a gain of
$3.8 million. The proceeds from this claim totaling
$15.6 million were received in May 2008. The proceeds are
presented in non-cash investing activities in our consolidated
statements of cash flows for fiscal year 2008.
As discussed in Note 2 in the Notes to the
Consolidated Financial Statements included elsewhere in
this prospectus summary, during fiscal year 2008 we acquired all
of the common equity of Helicopter Adventures, Inc.
(HAI), a leading flight training provider with
operations in Titusville, Florida, and Concord, California, for
$15.0 million in cash. We also assumed $5.7 million in
debt as part of this transaction which was repaid during fiscal
year 2008. Additionally, we acquired Vortex for
$2.0 million in November 2007. We contributed capital of
approximately $2.0 million to RLR, and we loaned RLR
$4.1 million under a three-year term loan arrangement, the
funds of which were used by RLR towards the purchase of a medium
sized aircraft.
As discussed in Note 2 in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus
summary, on November 2, 2007, we sold Grasso for
approximately $22.5 million, subject to post-closing
adjustments, including $7.8 million received in fiscal year
2008.
Due to the significant investment in aircraft made in fiscal
years 2006, 2007 and 2008, net capital expenditures exceeded
cash flow from operations, and we expect this will continue to
be the case in fiscal
S-54
year 2009. Also, in fiscal year 2009, we expect to invest
approximately $60 million in various infrastructure
enhancements, including aircraft facilities, training centers
and technology.
Fiscal Year 2007 During fiscal year 2007, we
made final payments in connection with the delivery of aircraft
and progress payments on the construction of new aircraft to be
delivered in future periods in conjunction with our aircraft
commitments totaling $246.9 million. Also during fiscal
year 2007, we spent an additional $47.5 million to upgrade
aircraft within our existing aircraft fleet and to customize new
aircraft delivered for our operations.
As discussed in Note 2 in the Notes to the
Consolidated Financial Statements included elsewhere in
this prospectus supplement, during fiscal year 2007, we received
proceeds of $14.3 million (out of a total sales price of
$14.6 million) for the sale of certain of the assets of
Turbo to Timken, which closed on November 30, 2006 and
resulted in a small gain for book purposes. We received the
remaining $0.3 million due to us late in fiscal year 2008.
Additionally, we received proceeds of $26.2 million,
primarily from the disposal of 12 aircraft and certain other
equipment, which together resulted in a net gain of
$10.6 million.
Fiscal Year 2006 During fiscal year 2006, we
received proceeds of $16.8 million primarily from the
disposal of one aircraft and certain equipment, and from
insurance recoveries associated with hurricane Katrina damage,
which together resulted in a net gain of $0.1 million.
Additionally, on December 30, 2005, we sold nine aircraft
for $68.6 million in aggregate to a subsidiary of General
Electric Capital Corporation, and then leased back each of the
nine aircraft under separate operating leases with terms of ten
years expiring in January 2016. See discussion of this
arrangement in Note 6 in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus
summary.
Financing
Activities
Cash flows used by financing activities were $5.4 million
in fiscal year 2006 while cash flows provided by financing
activities were $215.7 million and $328.9 million for
fiscal years 2007 and 2008, respectively.
During fiscal year 2008, cash was provided by issuance of
71/2% Senior
Notes completed in June and November 2007 resulting in net
proceeds of $344.7 million and by our receipt of proceeds
of $5.8 million from the exercise of options to acquire
shares of our common stock primarily by our employees. Cash was
used for the payment of Preferred Stock dividends of
$12.7 million and the repayment of debt totaling
$10.1 million. During fiscal year 2007, cash was provided
by the issuance of Preferred Stock in September and October 2006
resulting in net proceeds of $222.6 million and by our
receipt of proceeds of $3.9 million from the exercise of
options to acquire shares of our common stock by our employees
and former directors. Cash was used for the payment of Preferred
Stock dividends of $6.1 million and the repayment of debt
totaling $5.7 million. During fiscal year 2006, cash was
used for the repayment of debt totaling $4.1 million and
was partially provided by our receipt of proceeds of
$1.4 million from the exercise of options to acquire shares
of our common stock by our employees. See further discussion of
outstanding debt as of March 31, 2008 and our debt
issuances and redemptions in Note 5 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus summary.
Preferred Stock Annual cumulative cash
dividends of $2.75 per share of Preferred Stock are payable
quarterly on the fifteenth day of each March, June, September
and December. If declared, dividends on the
4,600,000 shares of Preferred Stock would be
$3.2 million on each quarterly payment date through the
conversion date on September 15, 2009. For further
discussion of the terms and conditions of the Preferred Stock,
see Note 9 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus summary.
S-55
Future
Cash Requirements
Debt
Obligations
Total debt as of March 31, 2008 was $606.2 million, of
which $6.5 million was classified as current. Our
significant debt maturities relate to our $230 million of
61/8% Senior
Notes and $350 million of
71/2% Senior
Notes, which mature in 2013 and 2017, respectively.
See further discussion of outstanding debt as of March 31,
2008 and our debt issuances and our debt redemptions in
Note 5 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus summary.
Other
Obligations
Pension Plan As of March 31, 2008, we
had recorded on our balance sheet a $134.2 million pension
liability related to the Bristow Helicopters Group Limited
(Bristow Helicopters, a wholly-owned subsidiary of
Bristow Aviation) pension plan. The liability represents the
excess of the present value of the defined benefit pension plan
liabilities over the fair value of plan assets that existed at
that date. The minimum funding rules of the U.K. require us to
make scheduled contributions in amounts sufficient to bring the
plan up to 90% funded (as defined by U.K. legislation) within
three years and 100% funded within 10 years. In order to
meet our funding requirements, we increased the contributions to
the schemes to £7.3 million ($14.6 million) per
year beginning in fiscal year 2008 and continuing in fiscal year
2009. Nevertheless, regulatory agencies in the U.K. may require
us to further increase the contributions.
Contractual
Obligations, Commercial Commitments and Off Balance Sheet
Arrangements
We have various contractual obligations which are recorded as
liabilities in our consolidated financial statements. Other
items, such as certain purchase commitments, interest payments
and other executory contracts are not recognized as liabilities
in our consolidated financial statements but are included in the
table below. For example, we are contractually committed to make
certain minimum lease payments for the use of property and
equipment under operating lease agreements.
The following tables summarize our significant contractual
obligations and other commercial commitments on an undiscounted
basis as of March 31, 2008 and the future periods in which
such obligations are expected to be settled in cash. In
addition, the table reflects the timing of principal and
interest payments on
S-56
outstanding borrowings. Additional details regarding these
obligations are provided in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus
supplement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2010-
|
|
|
2012-
|
|
|
2014 and
|
|
|
|
|
|
|
Total
|
|
|
2009
|
|
|
2011
|
|
|
2013
|
|
|
Beyond
|
|
|
Other
|
|
|
|
(In thousands)
|
|
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and short-term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal(1)
|
|
$
|
605,617
|
|
|
$
|
6,484
|
|
|
$
|
4,973
|
|
|
$
|
4,602
|
|
|
$
|
589,558
|
|
|
$
|
|
|
Interest
|
|
|
332,084
|
|
|
|
41,644
|
|
|
|
82,578
|
|
|
|
81,961
|
|
|
|
125,901
|
|
|
|
|
|
Aircraft operating leases(2)
|
|
|
60,677
|
|
|
|
9,972
|
|
|
|
14,543
|
|
|
|
15,226
|
|
|
|
20,936
|
|
|
|
|
|
Other operating leases(3)
|
|
|
18,480
|
|
|
|
3,398
|
|
|
|
5,711
|
|
|
|
4,001
|
|
|
|
5,370
|
|
|
|
|
|
Pension obligations(4)
|
|
|
164,667
|
|
|
|
14,550
|
|
|
|
29,099
|
|
|
|
22,833
|
|
|
|
98,185
|
|
|
|
|
|
Aircraft purchase obligations(5)
|
|
|
349,278
|
|
|
|
262,200
|
|
|
|
87,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other purchase obligations(6)
|
|
|
38,462
|
|
|
|
36,175
|
|
|
|
2,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax reserves(7)
|
|
|
3,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
1,572,271
|
|
|
$
|
374,423
|
|
|
$
|
226,269
|
|
|
$
|
128,623
|
|
|
$
|
839,950
|
|
|
$
|
3,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt guarantees(8)
|
|
$
|
29,171
|
|
|
$
|
9,296
|
|
|
$
|
|
|
|
$
|
19,875
|
|
|
$
|
|
|
|
$
|
|
|
Other guarantees(9)
|
|
|
19,057
|
|
|
|
3,860
|
|
|
|
5,959
|
|
|
|
|
|
|
|
9,238
|
|
|
|
|
|
Letter of credit
|
|
|
1,365
|
|
|
|
1,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments
|
|
$
|
49,593
|
|
|
$
|
14,521
|
|
|
$
|
5,959
|
|
|
$
|
19,875
|
|
|
$
|
9,238
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes unamortized premium on the
71/2% Senior
Notes of $0.6 million. |
|
(2) |
|
Represents primarily separate operating leases for nine aircraft
with a subsidiary of General Electric Capital Corporation with
terms of ten years expiring in January 2016. Operating lease
expense attributable to aircraft leases was $12.6 million
in fiscal year 2008. |
|
(3) |
|
Represents minimum rental payments required under operating
leases that have initial or remaining non-cancelable lease terms
in excess of one year. |
|
(4) |
|
Represents expected funding for pension benefits in future
periods. These amounts are undiscounted and are based on the
expectation that the pension will be fully funded in
approximately 10 years. As of March 31, 2008, we had
recorded on our balance sheet a $134.2 million pension
liability associated with this obligation. Also, the timing of
the funding is dependent on actuarial valuations and resulting
negotiations with the plan trustees. |
|
(5) |
|
For further details on our aircraft purchase obligations, see
Note 6 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus
supplement. |
|
(6) |
|
Other purchase obligations primarily represent unfilled purchase
orders for aircraft parts, commitments associated with upgrading
facilities at our bases and amounts committed under a supply
agreement (See Note 2 in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus
supplement). |
|
(7) |
|
Represents gross unrecognized benefits in connection with the
adoption of FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109 (FIN 48) (see
discussion under Critical Accounting Policies
and Estimates Taxes included elsewhere in this
prospectus supplement) that may result in cash payments being
made to certain tax authorities. We are not able to reasonably
estimate in which future periods this amount will ultimately be
settled and paid. |
S-57
|
|
|
(8) |
|
We have guaranteed the repayment of up to £10 million
($19.9 million) of the debt of FBS and $9.3 million of
the debt of RLR, both unconsolidated affiliates. Additionally,
the lender has an option to put to us the remaining amount of
the RLR debt of $9.7 million, which we have guaranteed in
the event of default of the other RLR shareholder. This amount
is not included in the table above. |
|
(9) |
|
Relates to an indemnity agreement between us and Afianzadora
Sofimex, S.A. to support issuance of surety bonds on behalf of
HC from time to time. As of March 31, 2008, surety bonds
denominated in Mexican pesos with an aggregate value of
184.9 million Mexican pesos ($17.3 million) and a
surety bond denominated in U.S. dollars with a value of
$1.7 million were outstanding. |
We do not expect the guarantees shown in the table above to
become obligations that we will have to fund.
Financial
Condition and Sources of Liquidity
Our future cash requirements include the contractual obligations
discussed in the previous section and our normal operations.
Normally our operating cash flows are sufficient to fund our
cash needs. Although there can be no assurances, we believe that
our existing cash, future cash flows from operations and
borrowing capacity under the $100 million revolving credit
facility will be sufficient to meet our liquidity needs in the
foreseeable future based on existing commitments. However, the
expansion of our business through purchases of additional
aircraft and increases in flight hours from our existing
aircraft fleet may require additional cash in the future to fund
new aircraft purchases and working capital requirements.
Consistent with our desire to maintain a conservative use of
leverage to fund growth, we raised capital through the sale of
the Preferred Stock in September and October 2006. Additionally,
we raised $344.7 million through the sale of the
71/2% Senior
Notes completed in June and November 2007.
As of March 31, 2008, we had options to acquire an
additional 17 large aircraft and an additional 33 medium
aircraft. Depending on market conditions, we expect to exercise
some or all of these additional options to acquire aircraft and
purchase other aircraft, and we may elect to expand our business
through acquisition, including acquisitions under consideration
or negotiation. Cash on hand, cash flow from operations and
available capacity under the revolving credit facility are
estimated to provide sufficient capital to exercise a portion of
the aircraft purchase options or allow us to complete several
small acquisitions (under $50 million) over the next five
years. However, our ability to exercise the remainder of our
aircraft purchase options, make a major acquisition or purchase
substantially more aircraft would likely require us to raise
additional capital. See Risk Factors Risks
Related to Our Business In order to grow our
business, we may require additional capital in the future, which
may not be available to us included elsewhere in this
prospectus summary.
Cash and cash equivalents were $184.2 million and
$290.1 million, as of March 31, 2007 and 2008,
respectively. Working capital as of March 31, 2007 and 2008
was $368.0 million and $541.4 million, respectively.
The increase in working capital during fiscal year 2008 was
primarily a result of the $105.9 million increase in cash
and cash equivalents resulting from the sale of the
71/2% Senior
Notes completed in June and November 2007 and cash generated
from operations, partially offset by capital expenditures
primarily for aircraft.
Exposure
to Currency Fluctuations
See our discussion of the impact of market risk, including our
exposure to currency fluctuations, on our financial position and
results of operations discussed under Item 7A.
Quantitative and Qualitative Disclosures about Market
Risk included in our
Form 10-K
for the fiscal year ended March 31, 2008 incorporated
herein by reference.
Critical
Accounting Policies and Estimates
Our consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
U.S. In many cases, the accounting treatment of a
particular transaction is specifically dictated by generally
accepted accounting principles, whereas, in other circumstances,
generally
S-58
accepted accounting principles require us to make estimates,
judgments and assumptions that we believe are reasonable based
upon information available. We base our estimates and judgments
on historical experience, professional advice and various other
sources that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates
under different assumptions and conditions. We believe that of
our significant accounting policies, as discussed in Note 1
in the Notes to Consolidated Financial Statements
included elsewhere in this prospectus summary, the following
involve a higher degree of judgment and complexity. Our
management has discussed the development and selection of
critical accounting policies and estimates with the Audit
Committee of our board of directors and the Audit Committee has
reviewed the companys disclosure.
Taxes
Our annual tax provision is based on expected taxable income,
statutory rates and tax planning opportunities available to us
in the various jurisdictions in which we operate. The
determination and evaluation of our annual tax provision and tax
positions involves the interpretation of the tax laws in the
various jurisdictions in which we operate and requires
significant judgment and the use of estimates and assumptions
regarding significant future events such as the amount, timing
and character of income, deductions and tax credits. Changes in
tax laws, regulations, agreements, and treaties, foreign
currency exchange restrictions or our level of operations or
profitability in each jurisdiction would impact our tax
liability in any given year. We also operate in many
jurisdictions where the tax laws relating to the offshore
oilfield service industry are not well developed. While our
annual tax provision is based on the best information available
at the time, a number of years may elapse before the ultimate
tax liabilities in the various jurisdictions are determined.
We recognize foreign tax credits available to us to offset the
U.S. income taxes due on income earned from foreign
sources. These credits are limited by the total income tax on
the U.S. income tax return as well as by the ratio of
foreign source income in each statutory category to total
income. In estimating the amount of foreign tax credits that are
realizable, we estimate future taxable income in each statutory
category. These estimates are subject to change based on changes
in the market conditions in each statutory category and the
timing of certain deductions available to us in each statutory
category. We periodically reassess these estimates and record
changes to the amount of realizable foreign tax credits based on
these revised estimates. Changes to the amount of realizable
foreign tax credits can be significant given any material change
to our estimates on which the realizability of foreign tax
credits is based.
We maintain reserves for estimated tax exposures in
jurisdictions of operation, including reserves for income, value
added, sales and payroll taxes. The expenses reported for these
taxes, including our annual tax provision, include the effect of
reserve provisions and changes to reserves that we consider
appropriate, as well as related interest. Tax exposure items
primarily include potential challenges to intercompany pricing,
disposition transactions and the applicability or rate of
various withholding taxes. These exposures are resolved
primarily through the settlement of audits within these tax
jurisdictions or by judicial means, but can also be affected by
changes in applicable tax law or other factors, which could
cause us to conclude that a revision of past estimates is
appropriate. We believe that an appropriate liability has been
established for estimated exposures. However, actual results may
differ materially from these estimates. We review these
liabilities quarterly. During fiscal years 2006, 2007 and 2008,
we had net reversals of reserves for estimated income tax
exposures of $11.4 million, $3.4 million and
$2.2 million, respectively. These reversals were made in
the periods in which the statute of limitations for the related
exposures expired.
We do not believe it is possible to reasonably estimate the
potential effect of changes to the assumptions and estimates
identified because the resulting change to our tax liability, if
any, is dependent on numerous factors which cannot be reasonably
estimated. These include, among others, the amount and nature of
additional taxes potentially asserted by local tax authorities;
the willingness of local tax authorities to negotiate a fair
settlement through an administrative process; the impartiality
of the local courts; and the potential for changes in the tax
paid to one country to either produce, or fail to produce, an
offsetting tax change in other countries. Our experience has
been that the estimates and assumptions we have used to provide
for future tax assessments have proven to be appropriate.
However, past experience is only a guide and the potential
exists that the tax resulting from the resolution of current and
potential future tax controversies may differ materially from
the amounts accrued.
S-59
Judgment is required in determining whether deferred tax assets
will be realized in full or in part. When it is estimated to be
more likely than not that all or some portion of specific
deferred tax assets, such as foreign tax credit carryovers or
net operating loss carry forwards, will not be realized, a
valuation allowance must be established for the amount of the
deferred tax assets that are estimated to not be realizable. As
of March 31, 2007, our valuation allowance against certain
deferred tax assets, primarily U.S. foreign tax credit
carry forwards was $9.4 million. We decreased the valuation
allowance as of March 31, 2008 to $7.9 million. If our
facts or financial results were to change, thereby impacting the
likelihood of realizing the deferred tax assets, judgment would
have to be applied to determine changes to the amount of the
valuation allowance in any given period. Such changes could
result in either a decrease or an increase in our provision for
income taxes, depending on whether the change in judgment
resulted in an increase or a decrease to the valuation
allowance. We continually evaluate strategies that could allow
for the future utilization of our deferred tax assets.
We have not provided for U.S. deferred taxes on the
unremitted earnings of certain foreign subsidiaries as of
March 31, 2008 that are indefinitely reinvested abroad of
$90.5 million. Should we make a distribution from the
unremitted earnings of these subsidiaries, we could be required
to record additional taxes. At the current time, a determination
of the amount of unrecognized deferred tax liability is not
practical.
As discussed in Notes 1 and 7 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus summary, in April 2007 we adopted FASB
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes an interpretation of FASB Statement
No. 109 (FIN 48), which applies to
all tax positions related to income taxes subject to Statement
of Financial Accounting Standards (SFAS)
No. 109. FIN 48 requires a new evaluation process for
all tax positions taken, recognizing tax benefits when it is
more-likely-than-not that a tax position will be sustained upon
examination by the authorities. The benefit from a position that
has surpassed the more-likely-than-not threshold is the largest
amount of benefit that is more than 50% likely to be realized
upon settlement. We recognize interest and penalties accrued
related to unrecognized tax benefits as a component of income
tax expense. As of the April 1, 2007 date of adoption of
FIN 48 and March 31, 2008, we had $6.3 million
and $3.0 million, respectively, of unrecognized tax
benefits, all of which would have an impact on our effective tax
rate, if recognized.
We have not provided for deferred taxes in circumstances where
we expect that, due to the structure of operations and
applicable law, the operations in such jurisdictions will not
give rise to future tax consequences. Should our expectations
change regarding the expected future tax consequences, we may be
required to record additional deferred taxes that could have a
material adverse effect on our consolidated financial position,
results of operations and cash flows.
Property
and Equipment
Our net property and equipment represents 59% percent of our
total assets as of March 31, 2008. We determine the
carrying value of these assets based on our property and
equipment accounting policies, which incorporate our estimates,
assumptions, and judgments relative to capitalized costs, useful
lives and salvage values of our assets.
Our property and equipment accounting policies are also designed
to depreciate our assets over their estimated useful lives. The
assumptions and judgments we use in determining the estimated
useful lives and residual values of our aircraft reflect both
historical experience and expectations regarding future
operations, utilization and performance of our assets. The use
of different estimates, assumptions and judgments in the
establishment of property and equipment accounting policies,
especially those involving the useful lives and residual values
of our aircraft, would likely result in materially different net
book values of our assets and results of operations.
Useful lives of aircraft and residual values are difficult to
estimate due to a variety of factors, including changes in
operating conditions or environment, the introduction of
technological advances in aviation equipment, changes in market
or economic conditions including changes in demand for certain
types of aircraft and changes in laws or regulations affecting
the aviation or offshore oil and gas industry. We evaluate the
remaining useful lives of our aircraft when certain events occur
that directly impact our assessment of the remaining useful
lives of the aircraft.
S-60
We review our property and equipment for impairment when events
or changes in circumstances indicate that the carrying value of
such assets or asset groups may be impaired or when
reclassifications are made between property and equipment and
assets held for sale.
Asset impairment evaluations are based on estimated undiscounted
cash flows for the assets being evaluated. If the sum of the
expected future cash flows is less than the carrying amount of
the asset, we would be required to recognize an impairment loss.
When determining fair value, we utilize various assumptions,
including projections of future cash flows. A change in these
underlying assumptions will cause a change in the results of the
tests and, as such, could cause fair value to be less than the
carrying amounts. In such event, we would then be required to
record a corresponding charge, which would reduce our earnings.
We continue to evaluate our estimates and assumptions and
believe that our assumptions, which include an estimate of
future cash flows based upon the anticipated performance of the
underlying business units, are appropriate.
Supply and demand are the key drivers of aircraft idle time and
our ability to contract our aircraft at economical rates. During
periods of oversupply, it is not uncommon for us to have
aircraft idled for extended periods of time, which could be an
indication that an asset group may be impaired. In most
instances our aircraft could be used interchangeably. In
addition, our aircraft are generally equipped to operate
throughout the world. Because our aircraft are mobile, we may
move aircraft from a weak geographic market to a stronger
geographic market if an adequate opportunity arises to do so. As
such, our aircraft are considered to be interchangeable within
classes or asset groups and accordingly, our impairment
evaluation is made by asset group. Additionally, our management
periodically makes strategic decisions related to our fleet that
involve the possible removal of all or a substantial portion of
specific aircraft types from our fleet, at which time these
aircraft are reclassified to held for sale and subsequently sold
or otherwise disposed of.
An impairment loss is recorded in the period in which it is
determined that the aggregate carrying amount of assets within
an asset group is not recoverable. This requires us to make
judgments regarding long-term forecasts of future revenue and
cost related to the assets subject to review. In turn, these
forecasts are uncertain in that they require assumptions about
demand for our services, future market conditions and
technological developments. Significant and unanticipated
changes to these assumptions could require a provision for
impairment in a future period. Given the nature of these
evaluations and their application to specific asset groups and
specific times, it is not possible to reasonably quantify the
impact of changes in these assumptions.
Revenue
Recognition
In general, we recognize revenue when it is both realized or
realizable and earned. We consider revenue to be realized or
realizable and earned when the following conditions exist: the
persuasive evidence of an arrangement, generally a customer
contract; the services or products have been performed or
delivered to the customer; the sales price is fixed or
determinable within the contract; and collection is probable.
More specifically, revenue from Helicopter Services is
recognized based on contractual rates as the related services
are performed. The charges under these contracts are generally
based on a two-tier rate structure consisting of a daily or
monthly fixed fee plus additional fees for each hour flown.
These contracts are for varying periods and generally permit the
customer to cancel the contract before the end of the term. We
also provide services to customers on an ad hoc
basis, which usually entails a shorter notice period and shorter
duration. Our charges for ad hoc services are generally based on
an hourly rate or a daily or monthly fixed fee plus additional
fees for each hour flown. We estimate that our ad hoc services
have a higher margin than other helicopter contracts. In order
to offset potential increases in operating costs, our long-term
contracts may provide for periodic increases in the contractual
rates charged for our services. We recognize the impact of these
rate increases when the criteria outlined above have been met.
This generally includes written recognition from our customers
that they are in agreement with the amount of the rate
escalation. In addition, our standard rate structure is based on
fuel costs remaining at or below a predetermined threshold. Fuel
costs in excess of this threshold are generally reimbursed by
the customer. Cost reimbursements from customers are recorded as
reimbursable revenue in our consolidated statement of income.
S-61
Pension
Benefits
Pension obligations are actuarially determined and are affected
by assumptions including expected return on plan assets,
discount rates, compensation increases and employee turnover
rates. We evaluate our assumptions periodically and make
adjustments to these assumptions and the recorded liabilities as
necessary.
Three of the most critical assumptions are the expected
long-term rate of return on plan assets, the assumed discount
rate and the mortality rate. We evaluate our assumptions
regarding the estimated long-term rate of return on plan assets
based on historical experience and future expectations on
investment returns, which are calculated by our third-party
investment advisor utilizing the asset allocation classes held
by the plans portfolios. We utilize a British pound
sterling denominated AA corporate bond index as a basis for
determining the discount rate for our U.K. plans. We base
mortality rates utilized on actuarial research on these rates,
which are adjusted to allow for expected mortality within our
industry segment. Changes in these and other assumptions used in
the actuarial computations could impact our projected benefit
obligations, pension liabilities, pension expense and other
comprehensive income. We base our determination of pension
expense on a market-related valuation of assets that reduces
year-to-year volatility. This market-related valuation
recognizes investment gains or losses over the average remaining
lifetime of the plan members. Investment gains or losses for
this purpose are the difference between the expected return
calculated using the market-related value of assets and the
actual return based on the market-related value of assets.
Allowance
for Doubtful Accounts
We establish reserves for doubtful accounts on a
case-by-case
basis when we believe the payment of amounts owed to us is
unlikely to occur. In establishing these reserves, we consider
our historical experience, changes in our customers
financial position, restrictions placed on the conversion of
local currency to U.S. dollars, as well as disputes with
customers regarding the application of contract provisions to
our services. We derive a significant portion of our revenue
from services to international oil companies and
government-owned or government-controlled oil companies. Our
receivables are concentrated in certain oil-producing countries.
We generally do not require collateral or other security to
support client receivables. If the financial condition of our
clients was to deteriorate or their access to freely-convertible
currency was restricted, resulting in impairment of their
ability to make the required payments, additional allowances may
be required.
Inventory
Reserve
We maintain inventory that primarily consists of spare parts to
service our aircraft. We periodically review the condition and
continuing usefulness of the parts to determine whether the
realizable value of this inventory is lower than its book value.
Parts related to aircraft types that our management has
determined will no longer be included in our fleet or will be
substantially reduced in our fleet in future periods are
specifically reviewed. If our valuation of these parts is
significantly lower than the book value of the parts, an
additional provision may be required.
Insurance
We are self-insured for our group medical insurance plans in the
U.S. In addition, we have several medical plans covering
certain
non-U.S. employee
groups. We must make estimates to record the expenses related to
these plans. We also have workers compensation programs in
the U.S. for work-related injuries. In addition, we have
insurance for work-related injuries covering certain
non-U.S. employee
groups. We estimate the expenses related to the retained portion
of that risk. If actual experience under any of our insurance
plans is greater than our original estimates, we may have to
record charges to income when we identify the risk of additional
loss. Conversely, if actual costs are lower than our estimates
or return premiums are larger than originally projected, we may
have to record credits to income.
Contingent
Liabilities
We establish reserves for estimated loss contingencies when we
believe a loss is probable and the amount of the loss can be
reasonably estimated. Our contingent liability reserves relate
primarily to potential tax assessments, litigation, personal
injury claims and environmental liabilities. Income for each
reporting period
S-62
includes revisions to contingent liability reserves resulting
from different facts or information which becomes known or
circumstances which change that affect our previous assumptions
with respect to the likelihood or amount of loss. Such revisions
are based on information which becomes known after the reporting
date for the previous period through the reporting date of the
current period. Reserves for contingent liabilities are based
upon our assumptions and estimates regarding the probable
outcome of the matter. Should the outcome differ from our
assumptions and estimates or other events result in a material
adjustment to the accrued estimated reserves, revisions to the
estimated reserves for contingent liabilities would be required
to be recognized.
Goodwill
Impairment
We perform a test for impairment of our goodwill annually as of
March 31. Because our business is cyclical in nature,
goodwill could be significantly impaired depending on when the
assessment is performed in the business cycle. The fair value of
our reporting units is based on a blend of estimated discounted
cash flows, publicly traded company multiples and acquisition
multiples. Estimated discounted cash flows are based on
projected flight hours and rates. Publicly traded company
multiples and acquisition multiples are derived from information
on traded shares and analysis of recent acquisitions in the
marketplace, respectively, for companies with operations similar
to ours. Changes in the assumptions used in the fair value
calculation could result in an estimated reporting unit fair
value that is below the carrying value, which may give rise to
an impairment of goodwill. In addition to the annual review, we
also test for impairment should an event occur or circumstances
change that may indicate a reduction in the fair value of a
reporting unit below its carrying value.
Stock-Based
Compensation
We have historically compensated our directors, executives and
certain employees by awarding stock-based compensation,
including stock options and restricted stock units. We use a
Black-Scholes option pricing model to estimate the fair value of
share-based awards. The Black-Scholes option pricing model
incorporates various assumptions, including the risk-free
interest rate, volatility, dividend yield and the expected term
of the options, in order to determine the fair value of the
options on the date of grant. Judgment is also required in
estimating the amount of stock-based awards that are expected to
be forfeited. Additionally, the service period over which
compensation expense associated with awards of restricted stock
units are recorded in our consolidated statements of income
involve certain assumptions as to the expected vesting of the
restricted stock units, which is based on factors relating to
the future performance of our stock. As the determination of
these various assumptions is subject to significant management
judgment and different assumptions could result in material
differences in amounts recorded in our consolidated financial
statements, management believes that accounting estimates
related to the valuation of stock options and the service period
for restricted stock units are critical estimates.
The risk-free interest rate is based on the U.S. Treasury
yield curve in effect at the time of grant for a period equal to
the expected term of the option. Expected volatilities are based
on historical volatility of shares of our common stock, which
has not been adjusted for any expectation of future volatility
given uncertainty related to the future performance of our
common stock at this time. We also use historical data to
estimate the expected term of the options within the option
pricing model; separate groups of employees that have similar
historical exercise behavior are considered separately for
valuation purposes. The expected term of the options represents
the period of time that the options granted are expected to be
outstanding. For a detail of the assumptions used for fiscal
year 2008, see Note 8 in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus
supplement.
Recent
Accounting Pronouncements
See Note 1 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus
supplement for discussion of recent accounting pronouncements.
S-63
BUSINESS
Overview
We are the leading provider of helicopter services to the
worldwide offshore energy industry based on the number of
aircraft operated. We are one of two helicopter service
providers to the offshore energy industry with global
operations. We have major operations in most of the major
offshore oil and gas producing regions of the world, including
in the North Sea, the U.S. Gulf of Mexico, Nigeria and
Australia, and we generated 76% of our revenues from
international operations in fiscal year 2008. We have a long
history in the helicopter services industry through Bristow
Helicopters Ltd. and Offshore Logistics, Inc., having been
founded in 1955 and 1969, respectively.
As of March 31, 2008, we conduct our business in one
segment: Helicopter Services. The Helicopter Services segment
operations are conducted through three divisions, Western
Hemisphere, Eastern Hemisphere and Global Training, and through
eight business units within those divisions:
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North America
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South and Central America
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Europe
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West Africa
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Southeast Asia
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Other International
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EH Centralized Operations
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We provide helicopter services to a broad base of major,
independent, international and national energy companies.
Customers charter our helicopters to transport personnel between
onshore bases and offshore platforms, drilling rigs and
installations. A majority of our helicopter revenue is
attributable to oil and gas production activities, which have
historically provided a more stable source of revenue than
exploration and development related activities. As of
March 31, 2008, we operated 406 aircraft (including 373
aircraft owned, 25 leased aircraft and 8 aircraft operated for
one of our customers; 4 of the owned aircraft are held for sale)
and our unconsolidated affiliates operated 142 aircraft in
addition to those aircraft leased from us. Additionally, our
Global Training division is approved to provide helicopter
flight training to the commercial pilot and flight instructor
level by both the FAA and the European Joint Aviation Authority.
Bristow Academy, which forms the central core of our Global
Training division, operates 69 aircraft (including 59 owned and
10 leased aircraft) and employs 165 people, including 74
flight instructors. The Global Training division supports,
coordinates, standardizes, and in the case of the Bristow
Academy schools, directly manages our flight training activities.
We previously provided production management services, contract
personnel and medical support services in the U.S. Gulf of
Mexico to the domestic oil and gas industry under the Grasso
Production Management name. On November 2, 2007, we sold
our Grasso business, which comprised our entire Production
Management Services segment. The financial results for our
Production Management Services segment are classified as
discontinued operations. In conjunction with this sale, we
agreed to continue to provide helicopter services to Grasso
through December 31, 2010.
S-64
For additional information about our business units, see
Note 10 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus
supplement. For a description of certain risks affecting our
business and operations, see Risk Factors included
elsewhere in this prospectus supplement.
Helicopter
Services
Our customers charter our helicopters to transport personnel
from onshore bases to offshore drilling rigs, platforms and
other installations. To a lesser extent, customers also charter
our helicopters to transport time-sensitive equipment to these
offshore locations. Helicopters are generally classified as
small (four to eight passengers), medium (12 to 16 passengers)
and large helicopters (18 to 25 passengers), each of which
serves a different transportation need of the offshore energy
industry. Medium and large helicopters, which can fly in a wider
variety of operating conditions and over longer distances and
carry larger payloads than small helicopters, are most commonly
used for crew changes on large offshore production facilities
and drilling rigs. With their ability to carry greater payloads,
travel greater distances and move at higher speeds, medium and
large helicopters are preferred in international markets, where
the offshore facilities tend to be larger, the drilling
locations tend to be more remote and the onshore infrastructure
tends to be more limited. Small helicopters are generally used
for daytime flights on shorter routes and to reach production
facilities that cannot accommodate medium and large helicopters.
Our small helicopters operate primarily in the shallow waters of
the U.S. Gulf of Mexico and Nigeria. Worldwide there are
more than 8,800 production platforms and 660 rigs. As a result
of the greater distances offshore, demand for medium and large
helicopters is also driven by drilling, development and
production activity levels in deepwater locations throughout the
world. Additionally, some local governmental regulations in
certain international markets require us to operate twin-engine
medium and large aircraft in those markets.
We are able to deploy our aircraft to the regions with the
greatest demand, subject to the satisfaction of local
governmental regulations. There are also additional markets for
helicopter services beyond the offshore energy industry,
including agricultural support, air medical, tourism,
firefighting, corporate transportation, traffic monitoring,
police and military. The existence of these alternative markets
enables us to better manage our helicopter fleet by providing
potential purchasers for our excess aircraft during times of
reduced demand in the offshore energy industry.
We also have technical services operations that provide
helicopter repair services, engineering and design services,
technical manpower support and transmission testing from
facilities located in the U.S. and U.K. While most of this
work is performed on our own aircraft, some of these services
are performed for third parties.
Most countries in which we operate limit foreign ownership of
aviation companies. To comply with these regulations and yet
expand internationally, we have formed or acquired interests in
a number of foreign helicopter operations. These investments
typically combine a local ownership interest with our experience
in providing helicopter services to the offshore energy
industry. These arrangements have allowed us to expand
operations while diversifying the risks and reducing the capital
outlays associated with independent expansion. We refer to the
entities in which we do not own a majority of the equity,
maintain voting control or have the ability to control their
policies, management or affairs as unconsolidated affiliates. We
lease some of our aircraft to a number of these unconsolidated
affiliates which in turn provide helicopter services to
customers.
S-65
As of March 31, 2008, the aircraft in our fleet, the
aircraft which we expect to take delivery of in the future and
the aircraft which we have the option to acquire were as follows:
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Number of Aircraft
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Consolidated Affiliates
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Unconsolidated
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Maximum
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On
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Under
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Affiliates
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Passenger
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Speed
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Type
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In Fleet
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Order(1)
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Option(2)
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In Fleet
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Capacity
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(MPH)(3)
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Engine
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Small Helicopters:
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Bell 206L Series
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74
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7
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6
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115
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Turbine
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Bell 206B
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19
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4
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4
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100
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Turbine
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Bell 407
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41
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3
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6
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132
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Turbine
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BK-117
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2
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7
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160
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Twin Turbine
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BO-105
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2
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4
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125
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Twin Turbine
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EC120
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1
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4
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110
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Turbine
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EC135
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2
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2
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6
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143
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Twin Turbine
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Agusta 109
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2
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8
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177
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Twin Turbine
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AS 350BB
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37
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4
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161
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Turbine
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141
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55
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Medium Helicopters:
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Bell 212
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11
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18
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12
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115
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Twin Turbine
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Bell 412
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36
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33
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13
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125
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Twin Turbine
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EC155
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10
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13
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167
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Twin Turbine
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Sikorsky S-76
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61
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9
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21
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12
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145
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Twin Turbine
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EC AS 365N
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4
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14
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167
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Twin Turbine
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Agusta AW139
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1
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15
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181
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Twin Turbine
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EC175
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12
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16
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166
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Twin Turbine
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118
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9
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33
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56
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Large Helicopters:
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AS332L Super Puma
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30
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4
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18
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144
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Twin Turbine
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Bell 214ST
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4
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18
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144
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Twin Turbine
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Sikorsky S-61
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11
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18
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132
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Twin Turbine
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Sikorsky S-92
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10
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9
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8
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3
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19
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158
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Twin Turbine
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Mil Mi-8
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7
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1
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20
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138
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Twin Turbine
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EC225
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6
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7
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9
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25
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167
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Twin Turbine
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68
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16
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17
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8
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Training Helicopters:
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Robinson R22
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20
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|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
92
|
|
|
Piston
|
Schweizer 300CB/CBi
|
|
|
46
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
92
|
|
|
Piston
|
Bell 206B
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
100
|
|
|
Turbine
|
Fixed wing
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed wing
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(4)
|
|
|
406
|
|
|
|
35
|
|
|
|
50
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of the aircraft on order, 27 are expected to be delivered during
fiscal year 2009 (10 of which are training aircraft). 18 of the
non-training aircraft which are on order have been dedicated to
customers for specific |
S-66
|
|
|
|
|
projects, including 8 under signed contracts. For additional
information, see Managements Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources Future Cash
Requirements included elsewhere in this prospectus
supplement. |
|
(2) |
|
Represents aircraft which we have the option to acquire. If the
options are exercised, we anticipate that the large aircraft
would be delivered in fiscal years 2010 and 2011, while the
medium aircraft would be delivered over fiscal years 2010
through 2013, principally in the later portion of that period.
For additional information, see Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Future Cash Requirements included
elsewhere in this prospectus supplement. |
|
(3) |
|
Represents the approximate normal cruise speed flying at gross
weight and at sea level under standard operating conditions. |
|
(4) |
|
We own 373 of the 406 aircraft reflected in the table above,
hold 25 of the remaining aircraft under operating leases and
operate 8 of the aircraft for one of our customers. 4 of the
owned aircraft are held for sale. Unconsolidated affiliates
leased 25 of our 373 aircraft in addition to the 142 aircraft
they operate. |
The following table shows the distribution of our aircraft among
our business units as of March 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EH
|
|
|
|
|
|
|
|
|
|
North
|
|
|
Central
|
|
|
|
|
|
West
|
|
|
Southeast
|
|
|
Other
|
|
|
Cent.
|
|
|
Bristow
|
|
|
|
|
Type
|
|
America
|
|
|
America
|
|
|
Europe
|
|
|
Africa
|
|
|
Asia
|
|
|
Intl
|
|
|
Ops.
|
|
|
Academy
|
|
|
Total
|
|
|
Small
|
|
|
121
|
|
|
|
4
|
|
|
|
1
|
|
|
|
12
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
Medium
|
|
|
30
|
|
|
|
28
|
|
|
|
10
|
|
|
|
28
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
118
|
|
Large
|
|
|
4
|
|
|
|
1
|
|
|
|
38
|
|
|
|
3
|
|
|
|
13
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
Training
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
68
|
|
Other (includes fixed wing)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
1
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated affiliates
|
|
|
156
|
|
|
|
33
|
|
|
|
49
|
|
|
|
50
|
|
|
|
27
|
|
|
|
22
|
|
|
|
|
|
|
|
69
|
|
|
|
406
|
|
Unconsolidated affiliates
|
|
|
|
|
|
|
17
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
59
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
156
|
|
|
|
50
|
|
|
|
74
|
|
|
|
50
|
|
|
|
27
|
|
|
|
63
|
|
|
|
59
|
|
|
|
69
|
|
|
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of consolidated revenue for fiscal year 2008
|
|
|
23
|
%
|
|
|
6
|
%
|
|
|
36
|
%
|
|
|
17
|
%
|
|
|
11
|
%
|
|
|
5
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet
Capacity Expansion
We expect to incur additional capital expenditures over the next
three to five years to replace certain of our aircraft and
upgrade strategic base facilities. Our capital commitments in
future periods related to this fleet capacity expansion are
discussed under Managements Discussion and Analysis
of Financial Condition Liquidity and Capital
Resources Future Cash Requirements
Capital Commitments included elsewhere in this prospectus
supplement and are detailed in the table provided in that
section.
North
America
As of March 31, 2008, we conducted our North America
operations primarily from ten operating facilities along the
U.S. Gulf of Mexico, with additional operations in Alaska.
Among our strengths in the U.S. Gulf of Mexico region are
our ten operating facilities, our advanced flight-following
systems and our widespread and strategically located offshore
fuel stations. As of March 31, 2008, we operated 139
aircraft in the U.S. Gulf of Mexico and 17 aircraft in
Alaska. During fiscal year 2008, our North America business unit
contributed 23% of our gross revenue. We are one of the two
largest suppliers of helicopter services in the U.S. Gulf
of Mexico and a major supplier in Alaska, where we fly the
entire length of the TransAlaska pipeline. The U.S. Gulf of
Mexico is a major offshore oil and gas producing region with
approximately 4,000 production platforms. The shallow water
platforms are typically unmanned and are serviced by our small
aircraft. The deep water platforms are serviced by our medium
and large aircraft. The North America business unit includes our
WH Centralized Operations, which performs major maintenance on
aircraft operated by our Western Hemisphere
S-67
business units. Beginning in fiscal year 2009, the North America
business unit will be segregated into three separate business
units: Gulf of Mexico, Arctic and WH Centralized Operations.
South
and Central America
As of March 31, 2008, we conducted our South and Central
America operations in Brazil, Colombia, Mexico, Peru and
Trinidad. As of March 31, 2008, we operated 33 helicopters,
most of which are medium sized, in South and Central America (2
in Brazil, 4 in Colombia, 13 in Mexico, 2 in Peru and 12 in
Trinidad) and our unconsolidated affiliates operated 17
helicopters. In Trinidad, Bristow Caribbean Limited
(BCL), a joint venture, is the largest helicopter
services provider. In Mexico, we are the largest provider of
helicopter services through our joint venture partners,
conducting diverse operations ranging from seismic support to
offshore crew transfers. In Brazil, Colombia and Peru, we
provide dry lease and technical support services, typically to
the local operators. During fiscal year 2008, our South and
Central America business unit contributed 6% of our gross
revenue. Beginning in fiscal year 2009, the South and Central
America business unit will be referred to as the Latin America
business unit.
Brazil
We own a 50% interest in HLA. HLA leases two aircraft from
a third party, which it leases to the former joint venture of
ours in Brazil as mentioned below. We currently provide dry
lease and technical support to two Brazilian operators. Our
aircraft are located at the operators base locations of
Macae, Victoria and Uracu.
In March 2007, we sold our ownership interest in a joint venture
that operates in Brazil to our partners in the joint venture
while we and HLA continued to lease aircraft already in country
to this entity. We sold six of our owned aircraft in Brazil in
fiscal year 2008.
We have contracted to provide two new medium aircraft to another
customer in Brazil beginning in June and September 2008.
Mexico
We own a 49% interest in HC, which provide onshore helicopter
services to the Mexican Federal Electric Commission and offshore
helicopter transportation to PEMEX and other companies on a
contract and ad hoc basis. HC owns 3 aircraft and leases 7
aircraft from us, 13 aircraft from another affiliate of ours
(discussed below) and 5 aircraft from a third party to provide
helicopter services to its customers. HC services customers from
the primary bases located in Mexico City, Cuidad del Carmen,
Poza Rica, Tampico, Reynosa and Monterrey.
We own a 49% interest in RLR, which owns seven aircraft and
leases six aircraft from us, all of which it leases to HC.
We have recently entered into an agreement with our
co-shareholders in HC and RLR to effect changes to our ownership
structure in these entities. Upon completion of the transaction,
which we expect to close in June 2008, our interest in HC will
be reduced to 24% and our interest in RLR will be increased to
70%.
Trinidad
We own a 40% interest in BCL, a joint venture in Trinidad with a
local partner that holds the remaining 60% interest. BCL, the
largest helicopter services provider in Trinidad, provides
offshore helicopter services to customers of ours in Trinidad.
BCL has 12 medium aircraft used to service our customers which
are primarily engaged in oil and gas activities. Because we
control the significant management decisions of this entity,
including the payment of dividends to our partner, we account
for this entity as a consolidated subsidiary. We have one base
located at Trinidads airport at the Port of Spain where we
constructed five helipads during fiscal year 2008.
S-68
Europe
As of March 31, 2008, we operated 49 aircraft in Europe. We
operate from four bases in the U.K. and one base in Holland. Our
Europe operations are managed out of our facilities in Aberdeen,
Scotland. Based on the number of aircraft operating, we are the
second largest provider of helicopter services in the North Sea,
where there are harsh weather conditions and geographically
concentrated offshore facilities. The offshore facilities in the
North Sea are large and require frequent crew change flight
services. We deploy the majority of the large aircraft in our
consolidated fleet in this region. In addition to our oil and
gas helicopter services, we are a civil supplier of search and
rescue services to the Netherlands Oil and Gas Exploration and
Production Association. We also have an ownership interest in
and lease aircraft to our 49% owned Norwegian affiliate, Norsk,
for use in its North Sea operations (see discussion below).
During fiscal year 2008, our Europe business unit contributed
36% of our gross revenue.
During the period from July 1, 2007 to April 3, 2008,
we provided search and rescue services using seven
S-61
aircraft and operated four helicopter bases for the MCA under a
contract that was transitioned to another operator. The
conclusion of this contract ended a
24-year
association of providing critical search and rescue services to
the MCA. We are in a partnership with FBH, an unconsolidated
affiliate of ours, and two third parties, Serco Limited and
Agusta Westland, through which we are seeking to obtain the
future U.K.-wide search and rescue contract that will require
the provision of approximately 30 aircraft and is anticipated to
start in 2012. We submitted a first round bid in January 2008
and expect final selection in 2009. See further discussion under
Managements Discussion and Analysis of Financial
Condition Business Unit Operating
Results Fiscal Year 2008 Compared to Fiscal Year
2007 Europe included elsewhere in this
prospectus supplement.
The U.K., as do other countries in which we operate, limits
foreign ownership of aviation companies. To comply with these
restrictions, we own only 49% of the common stock of Bristow
Aviation. In addition, we have a put/call agreement with the
other two stockholders of Bristow Aviation which grants us the
right to buy all of their shares of Bristow Aviation common
stock (and grants them the right to require us to buy all of
their shares). Under U.K. regulations, to maintain Bristow
Aviations operating license, we would be required to find
a qualified European Union owner to acquire any of the Bristow
Aviation shares that we have the right or obligation to acquire
under the put/call agreement. In addition to our equity
investment in Bristow Aviation, we own subordinated debt issued
by Bristow Aviation.
We own a 49% interest in Norsk, a Norwegian corporation that
provides helicopter services in the Norwegian sector of the
North Sea. Norsk operates 12 aircraft, 6 of which are leased
from us. Norsk owns 100% of Lufttransport AS, a Norwegian
company, which operates 20 aircraft and is engaged in providing
air ambulance services in Scandinavia. As of March 31,
2008, Norsk and its subsidiary operated a total of 32 aircraft.
West
Africa
As of March 31, 2008, we operated 50 aircraft in West
Africa (all of which were operating in Nigeria). We have the
largest helicopter fleet and are the largest provider of
helicopter services to the oil and gas industry in the area. In
Nigeria, we deploy a combination of small, medium and large
aircraft and operate and service a diverse oil and gas customer
base from nine operational bases with the largest being our
bases in Escravos, Warri, Port Harcourt and Lagos. The
marketplace for such services had historically been concentrated
predominantly in the oil rich swamp and shallow waters of the
Niger Delta area. More recently we have been undertaking work
further offshore in support of deep water exploration. During
fiscal year 2008, our West Africa business unit contributed 17%
of our gross revenue.
Southeast
Asia
We conduct our Southeast Asia operations predominantly in
Australia and Malaysia. As of March 31, 2008, we operated
27 helicopters in our Southeast Asia business unit (23 of which
were operating in Australia). We have nine operational bases in
Australia: six are located in Western Australia and Victoria,
Queensland and the Solomon Islands each have one base. These
operations are managed from our Australian
S-69
head office facility in Perth, Western Australia. During fiscal
year 2008, our Southeast Asia business unit contributed 11% of
our gross revenue.
We are the largest provider of helicopter services to the oil
and gas industry in Australia. Our client base is largely
derived from large oil and gas operators. Our operating bases
are located in the vicinity of the major oil and gas exploration
and production fields in the North West Shelf, Browse and
Carnarvon basins of Western Australia where the fleet provides
helicopter services solely to offshore oil and gas operators.
These platforms are largely serviced by medium and large
aircraft. We provide engineering services to the Republic of
Singapore Air Force from their base in Oakey, Queensland and in
January 2008 began providing helicopter services to offshore oil
and gas producers in the Gippsland Basin off the coast of
Victoria.
Operations commenced in Malaysia in August 2007, and we
currently have four medium aircraft in Malaysia. The Malaysian
operations are serviced from bases in Kerteh and Bintulu with
large oil and gas companies as customers.
Other
International
We conduct our Other International operations in Egypt, India,
Ireland, Kazakhstan, Mauritania, Morocco, Russia and
Turkmenistan. As of March 31, 2008, we and our
unconsolidated affiliates operated 63 aircraft (including 1
aircraft held for sale as of March 31, 2008) in our
Other International business unit comprising a mixture of
medium, large and fixed wing aircraft. During fiscal year 2008,
our Other International business unit contributed 5% of our
gross revenue. The following is a description of operations in
our Other International business unit:
|
|
|
|
|
Egypt We operate through our 25% interest in
Petroleum Air Services (PAS), an Egyptian
corporation. PAS provides helicopter and fixed wing
transportation to the offshore energy industry. Additionally,
spare fixed-wing capacity is chartered to tourism operators. PAS
owns 40 aircraft and leases 1 aircraft from us.
|
|
|
|
India We lease two aircraft to an Indian
helicopter operator and operate from two locations.
|
|
|
|
Ireland We lease an aircraft to another
helicopter operator.
|
|
|
|
Kazakhstan We operate four aircraft through
our 49% interest in Atyrau Bristow Air Services
(ABAS), a Kazakhstan corporation. ABAS owns one
aircraft, and we lease the other three aircraft to them. ABAS
provides helicopter services to an international oil company
from a single location.
|
|
|
|
Mauritania We operate two aircraft and
provide services to an international oil company from a single
location.
|
|
|
|
Morocco We operate one aircraft and provide
helicopter services to an international oil company from a
single location.
|
|
|
|
Russia We operate nine aircraft from three
locations on Sakhalin Island and provide both helicopter and
fixed wing services to international oil companies and domestic
customers.
|
|
|
|
Turkmenistan We operate two aircraft through
our 51% interest in Turkmenistan Helicopters Limited
(THL), a Turkmenistan corporation. THL provides
helicopter services to an international oil company from a
single location.
|
EH
Centralized Operations
Our EH Centralized Operations business unit is comprised of our
technical services business, other non-flight services business
(e.g., provision of spare parts as well as maintenance and
supply chain services to other Eastern Hemisphere business
units) in the Eastern Hemisphere and division level expenses for
our Eastern Hemisphere businesses. These operations are not
included within any other business unit as they are managed
separate and apart from these other operations. During fiscal
year 2008, our EH Centralized Operations business unit
contributed 1% of our gross revenue.
S-70
Our technical services portion of this business unit provides
helicopter repair services from facilities located in Redhill,
England, and Aberdeen, Scotland. While most of this work is
performed on our own aircraft, some of these services are
performed for third parties and unconsolidated affiliates.
We own a 50% interest in each of FBS, FBH and FB Leasing Limited
(FBL) (collectively, the FB Entities),
U.K. corporations which principally provide pilot training,
maintenance and support services. Most of the FB Entities
revenue is earned under an agreement with the British military
that runs through March 31, 2012. The FB Entities provide
services to military organizations in other countries as well.
FBS and FBL own and operate a total of 59 aircraft.
Global
Training
On April 2, 2007, we acquired all of the common equity of
HAI, a leading flight training provider with operations in
Titusville, Florida, and Concord, California. Upon purchase, HAI
was renamed Bristow Academy, which, when combined with our
existing training facilities in Norwich, England, forms a
central core of our new Global Training division. Additionally,
we acquired Vortex, a flight training school in New Iberia,
Louisiana in November 2007.
We have made the strategic decision to expand our existing
training operations based upon the anticipated long-term demand
for skilled pilot and aircraft maintenance personnel in the
rotorwing aviation services business. This view is based upon
internal analysis of our existing pilot and aircraft maintenance
personnel compared to requirements to meet growing demand and
from public comments made by other participants in the rotorwing
aviation services industry (both relating to offshore energy
services and other sectors) regarding general shortages in
qualified, experienced personnel. We believe that entry into the
ab initio (beginning) aviation training
business provides us with a strategic advantage over
competitors. Bristow Academy represented 1% of consolidated
revenue for fiscal year 2008. We expect profitability of Bristow
Academy to improve in future periods, although the primary value
of this business is the supply of pilots for use in our global
operations. During fiscal year 2008, approximately 200 pilots
graduated from Bristow Academy, and we hired 47 pilots into our
other business units who are recent graduates of Bristow Academy.
Bristow Academy is a leading provider of aviation training
services with over 20 years experience. Bristow Academy
trains students from around the world to become helicopter
pilots. Our ab initio flight training program typically lasts
nine to twelve months and culminates with a student completing
approximately 200 hours of flight instruction, passing
written and flight exams and obtaining a commercial pilot
license with instrument rating and flight instructor
qualifications. Later, with 500 to 1,000 hours of flight
experience, these employees then become qualified for offshore
flight operations and have the opportunity to join
Bristows Helicopter Services operations. Alternatively,
graduates of Bristow Academy may pursue aviation careers in any
number of flight services sectors. Currently, Bristow Academy
has approximately 200 students enrolled in ab initio
flight training. Additionally, Bristow has historically
provided continuing education to its own staff of pilots and
aircraft maintenance personnel worldwide.
Customers
and Contracts
The principal customers for our Helicopter Services are national
and international oil and gas companies. During fiscal years
2006, 2007 and 2008, respectively, the Shell Companies accounted
for 10%, 18% and 21%, respectively, of our gross revenue. No
other customer accounted for 10% or more of our gross revenue
during those periods. During fiscal year 2008, our top ten
customers accounted for 57% of our gross revenue.
Our helicopter contracts are generally based on a two-tier rate
structure consisting of a daily or monthly fixed fee plus
additional fees for each hour flown. We also provide services to
customers on an ad hoc basis, which usually entails
a shorter notice period and shorter duration. Our charges for ad
hoc services are generally based on an hourly rate, or a daily
or monthly fixed fee plus additional fees for each hour flown.
Generally, our ad hoc services have a higher margin than our
other helicopter contracts due to supply and demand dynamics. In
addition, our standard rate structure is based on fuel costs
remaining at or below a predetermined threshold. Fuel costs in
excess of this threshold are generally charged to the customer.
We also derive revenue from reimbursements for third party out
of pocket cost such as certain landing and navigation
S-71
costs, consultant salaries, travel and accommodation costs, and
dispatcher charges. The costs incurred that are rebilled to our
customers are presented as reimbursable expense and the related
revenue is presented as reimbursable revenue in our consolidated
statements of income.
Our helicopter contracts are for varying periods and in certain
cases permit the customer to cancel the charter before the end
of the contract term. These contracts provide that the customer
will reimburse us for cost increases associated with the
contract and are cancelable by the customer with notice of
generally 30 days in the U.S. Gulf of Mexico, 90 to
180 days in Europe and 90 days in West Africa. In
North America, we generally enter into short-term contracts for
twelve months or less, although we occasionally enter into
longer-term contracts. In Europe, contracts are longer term,
generally between two and five years. In South and Central
America, West Africa, Southeast Asia and Other International,
contract length generally ranges from three to five years. At
the expiration of a contract, our customers often negotiate
renewal terms with us for the next contract period. In other
instances, customers solicit new bids at the expiration of a
contract. Contracts are generally awarded based on a number of
factors, including price, quality of service, operational
experience, record of safety, quality and type of equipment,
customer relationship and professional reputation. Incumbent
operators typically have a competitive advantage in the bidding
process based on their relationship with the customer, knowledge
of the site characteristics and understanding of the cost
structure of the operations.
Competition
The helicopter transportation business is highly competitive
throughout the world. We compete against several providers in
almost all of our regions of operation. We have several
significant competitors in the U.S. Gulf of Mexico, two
significant competitors in the North Sea and one significant
competitor in Nigeria. We believe that it is difficult for
additional significant competitors to enter our industry because
it requires considerable capital investment, working capital, a
complex system of onshore and offshore bases, personnel and
operating experience. However, these requirements can be
overcome with the appropriate level of customer support and
commitment. In addition, while not the predominant practice,
certain of our customers and potential customers in the offshore
energy industry perform their own helicopter services on a
limited basis.
Generally, customers charter helicopters on the basis of
competitive bidding. In some situations, our customers may renew
or extend existing contracts without employing a competitive bid
process. Contracts in our North America business unit are
generally renewable on an annual or shorter basis. For our
operations in the North Sea and other international locations,
contracts tend to be of longer duration. While price is a key
determinant in the award of a contract to a successful bidder,
quality of service, operational experience, record of safety,
quality and type of equipment, customer relationship and
professional reputation are also factors taken into
consideration. Since certain of our customers in the offshore
energy industry have the capability to perform their own
helicopter services, our ability to increase charter rates may
be limited under certain circumstances.
Safety,
Industry Hazards and Insurance
Hazards, such as harsh weather and marine conditions, mechanical
failures, crashes and collisions are inherent in the offshore
transportation industry and may cause losses of equipment and
revenue, and death or injury to personnel. We have an industry
leading safety record. Our air accident rate per 100,000 flight
hours is substantially less than that of both the
U.S. civil turbine engine helicopter average and the global
oil and gas production helicopter average over the past four
years for which data is published.
In fiscal year 2008, we had two helicopter crashes resulting in
fatalities, both of which are still under investigation, and one
other helicopter accident which resulted in no fatalities. In
fiscal year 2007, we had no accidents resulting in fatalities.
In fiscal year 2006, we had one helicopter accident in the
U.S. Gulf of Mexico that resulted in two fatalities. Our
accident rates have typically been significantly lower than the
industry average.
During the fourth quarter of fiscal year 2007, we launched a
global safety campaign to further improve and enhance safety. It
is called Target Zero, as our common safety vision
is to have zero accidents, zero harm to
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people, and zero harm to the environment. In conjunction with
this initiative, we completed a global safety culture survey
across most of our operations, providing us insight regarding
our employees views about safety. Safety leadership
workshops commenced in late April 2007 and have been delivered
to over 550 managers and supervisors throughout fiscal year
2008. In early fiscal year 2009, we have extended the Target
Zero program to ten additional seminars in which we are training
champions (line pilots, maintenance staff and supervisors) who
will continue to cascade the safety training to all line
employees.
We maintain hull and liability insurance, which generally
insures us against damage to our aircraft, as well as certain
legal liabilities to others. We also carry workers
compensation, employers liability, auto liability,
property and casualty coverages for most of our U.S. and
U.K. operations. We believe that our insurance coverage will be
adequate to cover any claims ultimately paid related to
accidents which have occurred in the past. It is also our policy
to carry insurance for, or require our customers to indemnify us
against, expropriation, war risk and confiscation of the
helicopters we use in our operations internationally.
Terrorist attacks, the continuing threat of terrorist activity
and economic and political uncertainties (including, but not
limited to, our operations in Nigeria), may significantly affect
our premiums for much of our insurance program. There is no
assurance that in the future we will be able to maintain our
existing coverage or that we will not experience substantial
increases in premiums, nor is there any assurance that our
liability coverage will be adequate to cover all potential
claims that may arise.
Employees
As of March 31, 2008, we employed
3,644 employees. The following table shows the number
of employees by business unit at March 31, 2008:
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North America
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1,044
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South and Central America
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177
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Europe
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604
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West Africa
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766
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Southeast Asia
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308
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Other International
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335
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EH Centralized Operations
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204
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Bristow Academy
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165
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Corporate
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41
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3,644
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We employ approximately 330 pilots in our North America business
unit who are represented by the Office and Professional
Employees International Union (OPEIU) under a
collective bargaining agreement. We and the pilots represented
by the OPEIU ratified an amended collective bargaining agreement
on April 4, 2005. The terms under the amended agreement are
fixed until October 3, 2008 and include wage increases for
the pilot group and improvements to several benefit plans. We do
not believe that these increases place us at a competitive,
financial or operational disadvantage.
Additionally, as of March 31, 2008, substantially all of
our employees in the U.K., Nigeria and Australia are represented
by collective bargaining or union agreements which are ongoing.
With respect to the U.K., these agreements have no specific
termination dates. The collective bargaining agreements in
Nigeria renew annually, typically on a retroactive basis.
We are currently involved in negotiations with unions
representing our pilots and engineers in the U.K. As a result of
the negotiations complete to date, labor rates under our
existing contracts increased 4-5% starting in July 2007, and the
new labor rates will continue through June 2008.
During the three months ended December 31, 2007, we
completed annual contract negotiations with the unions in
Nigeria, which resulted in increased labor costs.
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As part of a strategic review and reorganization that commenced
in 2007, our West Africa business unit embarked upon a plan to
indigenize the local work force in line with the federal
government targets for national development and content. A large
scale training program was embarked upon in collaboration with
air schools in South Africa and Bristow Academy in the
U.S. to train Nigerian pilots. In addition to the pilot
training, an initiative was put in place to foster and develop a
partnership with the Nigeria College of Aviation Technology to
train Nigerian engineers for the Nigerian Civil Aviation
Authority examinations.
In April 2008, an agreement was successfully negotiated with the
pilots union in Australia. The agreement extends to
June 30, 2010 and we do not anticipate any industrial
action by pilots prior to the expiration of the agreement. The
agreement was lodged with the relevant authorities to become
binding on all parties at the beginning of May 2008. As a result
of this agreement, labor rates increased 20.4%, portions of
which were retroactive to May 2007 and January 2008. Additional
increases of 5% will become effective in September 2008 and July
2009.
Many of the employees of our affiliates are represented by
collective bargaining agreements. Periodically, certain groups
of our employees who are not covered by a collective bargaining
agreement consider entering into such an agreement. We believe
that our relations with our employees are generally
satisfactory. We do not expect increased labor rates to result
in a decline in our operating margins over the long-term.
Government
Regulation
United
States
As a commercial operator of aircraft, our U.S. operations
are subject to regulations under the Federal Aviation Act of
1958, as amended, and other laws. We carry persons and property
in our helicopters under an Air Taxi Certificate granted by the
FAA. The FAA regulates our U.S. flight operations and, in
this respect, exercises jurisdiction over personnel, aircraft,
ground facilities and certain technical aspects of our
operations. The National Transportation Safety Board is
authorized to investigate aircraft accidents and to recommend
improved safety standards. Our U.S. operations are also
subject to the Federal Communications Act of 1934 because we use
radio facilities in our operations.
Under the Federal Aviation Act, it is unlawful to operate
certain aircraft for hire within the U.S. unless such
aircraft are registered with the FAA and the FAA has issued an
operating certificate to the operator. As a general rule,
aircraft may be registered under the Federal Aviation Act only
if the aircraft are owned or controlled by one or more citizens
of the U.S. and an operating certificate may be granted
only to a citizen of the U.S. For purposes of these
requirements, a corporation is deemed to be a citizen of the
U.S. only if at least 75% of its voting interests are owned
or controlled by U.S. citizens, the president of our
company is a U.S. citizen, two-thirds or more of our
directors are U.S. citizens and our company is under the
actual control of U.S. citizens. If persons other than
U.S. citizens should come to own or control more than 25%
of our voting interest or if any of the other requirements were
not met, we have been advised that our aircraft may be subject
to deregistration under the Federal Aviation Act, and we may
lose our ability to operate within the U.S. Deregistration
of our aircraft for any reason, including foreign ownership in
excess of permitted levels, would have a material adverse effect
on our ability to conduct operations within our North America
business unit. Therefore, our organizational documents currently
provide for the automatic suspension of voting rights of shares
of our outstanding voting capital stock owned or controlled by
non-U.S. citizens,
and our right to redeem those shares, to the extent necessary to
comply with these requirements. As of March 31, 2008,
approximately 1,970,000 shares of our common stock, par
value $.01 per share, were held by persons with foreign
addresses. These shares represented approximately 8.2% of our
total outstanding common stock as of March 31, 2008. Our
foreign ownership may fluctuate on each trading day because a
substantial portion of our common stock and our Preferred Stock
is publicly traded.
United
Kingdom
Our operations in the U.K. are subject to the Civil Aviation Act
1982 and other similar English and European statutes and
regulations. We carry persons and property in our helicopters
pursuant to an operating license issued by the Civil Aviation
Authority (CAA). The holder of an operating license
must meet the
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ownership and control requirements of Council
Regulation 2407/92. To operate under this license, the
company through which we conduct operations in the U.K., Bristow
Helicopters Ltd., must be owned directly or through majority
ownership by European Union nationals, and must at all times be
effectively controlled by them. Bristow Helicopters Ltd. is a
wholly owned subsidiary of Bristow Aviation. We own 49% and hold
certain put/call rights over additional shares of common stock
of Bristow Aviation.
The CAA regulates our U.K. flight operations and exercises
jurisdiction over personnel, aircraft, ground facilities and
certain technical aspects of those operations. The CAA often
imposes improved safety standards. Under the Licensing of Air
Carriers Regulations 1992, it is unlawful to operate certain
aircraft for hire within the U.K. unless such aircraft are
approved by the CAA. Changes in U.K. or European Union statutes
or regulations, administrative requirements or their
interpretation may have a material adverse effect on our
business or financial condition or on our ability to continue
operations in these areas.
Other
Our operations in areas other than the U.S. and the U.K.
also are subject to local governmental regulations that may
limit foreign ownership of aviation companies. Because of these
local regulations, we conduct some of our operations through
entities in which local citizens own a majority interest and we
hold only a minority interest, or under contracts that provide
for us to operate assets for the local companies or to conduct
their flight operations. This includes our operations in
Kazakhstan, Russia and Turkmenistan. Changes in local laws,
regulations or administrative requirements or their
interpretation may have a material adverse effect on our
business or financial condition or on our ability to continue
operations in these areas.
Environmental
All of our operations are subject to laws and regulations
controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. If we
fail to comply with these environmental laws and regulations,
administrative, civil and criminal penalties may be imposed, and
we may become subject to regulatory enforcement actions in the
form of injunctions and cease and desist orders. We may also be
subject to civil claims arising out of a pollution event. These
laws and regulations may expose us to strict, joint and several
liability for the conduct of or conditions caused by others or
for our own acts even though these actions were in compliance
with all applicable laws at the time they were performed. To
date, such laws and regulations have not had a material adverse
effect on our business, results of operations or financial
condition.
Increased public awareness and concern over the environment,
however, may result in future changes in the regulation of the
offshore energy industry, which in turn could adversely affect
us. The trend in environmental regulation is to place more
restrictions and limitations on activities that may affect the
environment, and thus there can be no assurance as to the effect
of such regulation on our operations or on the operations of our
customers. We try to anticipate future regulatory requirements
that might be imposed and plan accordingly to remain in
compliance with changing environmental laws and regulations and
to minimize the costs of such compliance. We do not believe that
compliance with federal, state or local environmental laws and
regulations will have a material adverse effect on our business,
financial position or results of operations. We cannot assure
you, however, that future events, such as changes in existing
laws, the promulgation of new laws, or the development or
discovery of new facts or conditions will not cause us to incur
significant costs. Below is a discussion of the material
U.S. environmental laws and regulations that relate to our
business. We believe that we are in substantial compliance with
all of these environmental laws and regulations.
Under the Comprehensive Environmental Response, Compensation and
Liability Act, referred to as CERCLA or the Superfund law, and
related state laws and regulations, strict, joint and several
liability can be imposed without regard to fault or the legality
of the original conduct on certain classes of persons that
contributed to the release of a hazardous substance into the
environment. These persons include the owner and operator of a
contaminated site where a hazardous substance release occurred
and any company that transported, disposed of or arranged for
the transport or disposal of hazardous substances, even from
inactive
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operations or closed facilities, that have been released into
the environment. In addition, neighboring landowners or other
third parties may file claims for personal injury, property
damage and recovery of response cost. We currently own, lease,
or operate properties and facilities that, in some cases, have
been used for industrial activities for many years. Hazardous
substances, wastes, or hydrocarbons may have been released on or
under the properties owned or leased by us, or on or under other
locations where such substances have been taken for disposal. In
addition, some of these properties have been operated by third
parties or by previous owners whose treatment and disposal or
release of hazardous substances, wastes, or hydrocarbons was not
under our control. These properties and the substances disposed
or released on them may be subject to CERCLA and analogous state
statutes. Under such laws, we could be required to remove
previously disposed substances and wastes, remediate
contaminated property, or perform remedial activities to prevent
future contamination. These laws and regulations may also expose
us to liability for our acts that were in compliance with
applicable laws at the time the acts were performed. We have
been named as a potentially responsible party in connection with
certain sites. See further discussion under Item 3.
Legal Proceedings included in our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008, incorporated
herein by reference.
In addition, since our operations generate wastes, including
some hazardous wastes, we may be subject to the provisions of
the Resource, Conservation and Recovery Act, or RCRA, and
analogous state laws that limit the approved methods of disposal
for some types of hazardous and nonhazardous wastes and require
owners and operators of facilities that treat, store or dispose
of hazardous waste and to clean up releases of hazardous waste
constituents into the environment associated with their
operations. Some wastes handled by us in our field service
activities that currently are exempt from treatment as hazardous
wastes may in the future be designated as hazardous
wastes under RCRA or other applicable statutes. If this
were to occur, we would become subject to more rigorous and
costly operating and disposal requirements.
The Federal Water Pollution Control Act, also known as the Clean
Water Act, and analogous state laws impose restrictions and
strict controls regarding the discharge of pollutants into state
waters or waters of the U.S. The discharge of pollutants
into jurisdictional waters is prohibited unless the discharge is
permitted by the U.S. Environmental Protection Agency, also
referred to as the EPA, or applicable state agencies. Some of
our properties and operations require permits for discharges of
wastewater
and/or
stormwater, and we have a system in place for securing and
maintaining these permits. In addition, the Oil Pollution Act of
1990 imposes a variety of requirements on responsible parties
related to the prevention of oil spills and liability for
damages, including natural resource damages, resulting from such
spills in the waters of the U.S. A responsible party
includes the owner or operator of a facility. The Clean Water
Act and analogous state laws provide for administrative, civil
and criminal penalties for unauthorized discharges and, together
with the Oil Pollution Act, impose rigorous requirements for
spill prevention and response planning, as well as substantial
potential liability for the costs of removal, remediation, and
damages in connection with any unauthorized discharges.
Some of our operations also result in emissions of regulated air
pollutants. The Federal Clean Air Act and analogous state laws
require permits for facilities that have the potential to emit
substances into the atmosphere that could adversely affect
environmental quality. Failure to obtain a permit or to comply
with permit requirements could result in the imposition of
substantial administrative, civil and even criminal penalties.
Our facilities and operations are also governed by laws and
regulations relating to worker health and workplace safety,
including the Federal Occupational Safety and Health Act, or
OSHA. We believe that appropriate precautions are taken to
protect our employees and others from harmful exposure to
potentially hazardous materials handled and managed at our
facilities, and that we operate in substantial compliance with
all OSHA or similar regulations.
Our operations outside of the U.S. are subject to similar
foreign governmental controls relating to protection of the
environment. We believe that, to date, our operations outside of
the U.S. have been in substantial compliance with existing
requirements of these foreign governmental bodies and that such
compliance has not had a material adverse effect on our
operations. There is no assurance, however, that future
expenditures to maintain compliance will not become material.
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DESCRIPTION
OF INDEBTEDNESS
The following is a summary of certain of our other indebtedness.
This summary does not purport to be complete and is qualified in
its entirety by reference to the provisions in the documents
governing such indebtedness, some of which are filed as exhibits
to our reports filed with the SEC. See Where You Can Find
More Information.
71/2% Senior
Notes
On June 13 and November 13, 2007, we completed offerings
totaling $350 million of
71/2% Senior
Notes, of which $50 million of the notes were issued for a
premium of $0.6 million which is being amortized over the
life of the notes as a reduction of interest expense. These
notes are unsecured senior obligations and rank effectively
junior in right of payment to all of the companys existing
and future secured indebtedness, rank equally in right of
payment with our existing and future senior unsecured
indebtedness and rank senior in right of payment to any of our
existing and future subordinated indebtedness. The
71/2% Senior
Notes are guaranteed by certain of our U.S. subsidiaries
(the guarantor subsidiaries), which are the same
subsidiaries that are guarantors of the $230 million
61/8% Senior
Notes. The indenture for the
71/2% Senior
Notes includes restrictive covenants which limit, among other
things, our ability to incur additional debt, issue disqualified
stock, pay dividends, repurchase stock, invest in other
entities, sell assets, incur additional liens or security, merge
or consolidate the company, and enter into transactions with
affiliates. In addition, holders of the
71/2% Senior
Notes may require us to repurchase all or part of their notes
following a change of control (as defined in the
indenture) of our company. Certain of these restrictions will
cease to apply following the
71/2% Senior
Notes receiving an investment grade rating from Moodys and
Standard & Poors, so long as no event of default
has occurred and is continuing. Interest on the
71/2% Senior
Notes is paid on March 15 and September 15 of each year, and the
71/2% Senior
Notes mature on September 15, 2017. The
71/2% Senior
Notes are redeemable at our option; however, any payment or
re-financing of these notes prior to September 15, 2012 is
subject to a make-whole premium, and any payment or re-financing
is subject to a prepayment premium of 103.75%, 102.50% and
101.25% if redeemed during the twelve-month period beginning on
September 15 of 2012, 2013 and 2014, respectively.
61/8% Senior
Notes
On June 20, 2003, we completed an offering of
$230 million
61/8% Senior
Notes. These notes are unsecured senior obligations and rank
effectively junior in right of payment to all the companys
existing and future secured indebtedness, rank equally in right
of payment with our existing and future senior unsecured
indebtedness and rank senior in right of payment to any of our
existing and future subordinated indebtedness. The
61/8% Senior
Notes are guaranteed by the guarantor subsidiaries. The
indenture to the
61/8% Senior
Notes includes restrictive covenants which limit, among other
things, our ability to pay cash dividends to stockholders; incur
additional debt, issue disqualified stock, repurchase stock,
invest in other entities, sell assets, incur additional liens or
security interests, merge or consolidate the company, and enter
into transactions with affiliates. In addition, holders of the
61/8% Senior
Notes may require us to repurchase all or part of their notes
following a change of control (as defined in the
indenture) of our company. Certain of these restrictions will
cease to apply following the
61/8% Senior
Notes receiving an investment grade rating from Moodys and
Standard & Poors, so long as no event of default
has occurred and is continuing. Interest on the
61/8% Senior
Notes is paid on June 15 and December 15 of each year, and the
61/8% Senior
Notes mature on June 15, 2013. The
61/8% Senior
Notes are redeemable at our option; however, any payment or
re-financing of these notes prior to June 15, 2008 is subject to
a make-whole premium and any payment or re-financing after June
15, 2008 but prior to June 15, 2011 is subject to a prepayment
premium (approximately 103%, 102% and 101% in June 15, 2008,
2009 and 2010, respectively).
Term
Loan
In May 2007, BriLog Leasing Ltd., a subsidiary of ours,
completed a new $18.7 million term loan financing, which is
repayable by BriLog in quarterly installments with the first
payment of $0.3 million in June 2007, followed by
thirty-two consecutive quarterly principal payments of
$0.6 million, the first of which
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was paid in September 2007. Interest is payable on the term loan
at LIBOR plus a margin of 1.25% (about 3.95% as of
March 31, 2008). The term loan is secured by the two
aircraft, and we have provided a parent guarantee of the loan.
Hemisco
Helicopters International, Inc. Note
As discussed in Note 3 in the Notes to the Consolidated
Financial Statements included elsewhere in this prospectus
supplement, in order to improve the financial condition of
Heliservicio, we and our joint venture partner, Compania
Inversora Corporativa, S.A de C.V (CIC), completed a
recapitalization of Heliservicio on August 19, 2005. As a
result of this recapitalization, Heliservicios two
shareholders, the company and CIC, have notes payable to Hemisco
of $4.4 million and $4.6 million, respectively, and
obligations of Heliservicio in the same amounts were cancelled
thereby increasing its capital. The $4.4 million note owed
by us to Hemisco bears interest at 3% annually and is due on
July 31, 2015.
Advance
From Customer
This advance was made in relation to value added tax items in
Kazakhstan and is non-interest bearing.
Sakhalin
Debt
On July 16, 2004, we assumed various existing debt
liabilities that were outstanding and secured against assets
purchased as part of our acquisition of a business in Sakhalin,
Russia. Two promissory notes totaling $0.8 million as of
March 31, 2008 are being repaid over five years at an
interest rate of 8.5% and are scheduled to be fully paid in 2009
and 2010. The other liabilities assumed include a finance lease
on an aircraft totaling $2.2 million as of March 31,
2008, with an interest rate of 8.5% and expiring in fiscal year
2009 with a final termination payment of $2.0 million; and
a note to the former owner of $0.2 million at
March 31, 2008 which will be repaid in fiscal year 2009.
Senior
Secured Credit Facilities
In August 2006, we entered into our syndicated senior secured
Credit Facilities which consist of a $100 million revolving
credit facility (with a subfacility of $25 million for
letters of credit) and a $25 million letter of credit
facility. Under the original agreement the aggregate commitments
under the revolving credit facility may be increased to
$200 million at our option following our
61/8% Senior
Notes receiving an investment grade credit rating from
Moodys or Standard & Poors (so long as the
rating of the other rating agency of such notes is no lower than
one level below investment grade). As of March 31, 2008,
our Moodys and Standard & Poors ratings
were Ba2 and BB, respectively, which are two levels below the
investment grade ratings of Baa3 and BBB-, respectively. In May
2007, November 2007 and June 2008 we amended the Credit
Facilities to increase the amount of permitted additional
indebtedness to $325 million, $375 million and
$625 million, respectively. The revolving credit facility
may be used for general corporate purposes, including working
capital and acquisitions. The letter of credit facility is used
to issue letters of credit supporting or securing performance of
statutory obligations, surety or appeal bonds, bid or
performance bonds and similar obligations.
Borrowings under the revolving credit facility bear interest at
an interest rate equal to, at our option, either the Base Rate
or LIBOR (or EURIBO, in the case of Euro-denominated borrowings)
plus the applicable margin. Base Rate means the
higher of (1) the prime rate and (2) the Federal Funds
rate plus 0.5% per annum. The applicable margin for borrowings
range from 0.0% and 2.5% depending on whether the Base Rate or
LIBOR is used, and is determined based on our credit rating.
Fees owed on letters of credit issued under either the revolving
credit facility or the letter of credit facility are equal to
the margin for LIBOR borrowings. Based on our current ratings,
the margins on Base Rate and LIBOR borrowings were 0.0% and
1.25%, respectively, as of March 31, 2008. There is also a
commitment fee of 0.20% on undrawn borrowing capacity. Interest
is payable at least quarterly, and the Credit Facilities mature
in August 2011. Our obligations under the Credit Facilities are
guaranteed by certain of our principal domestic subsidiaries and
secured by the accounts receivable, inventory and equipment
(excluding aircraft and their components) of Bristow Group Inc.
and the guarantor subsidiaries, and the capital stock of certain
of our principal foreign subsidiaries.
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In addition, the Credit Facilities include covenants which are
customary for these types of facilities, including certain
financial covenants and restrictions on the ability of Bristow
Group Inc. and its subsidiaries to enter into certain
transactions, including those that could result in the
incurrence of additional liens and indebtedness; the making of
loans, guarantees or investments; sales of assets; payments of
dividends or repurchases of our capital stock; and entering into
transactions with affiliates.
In addition, the Credit Facilities contain various financial
covenants, including, among others:
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a covenant to maintain a leverage ratio not greater than
4.00:1.00;
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a covenant to maintain an interest coverage ratio of not less
than 3.00:1.00;
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a covenant not to permit our consolidated net worth at any time
to be less than an amount equal to the sum of
(i) $485,216,000, plus (ii) as of the end of each
fiscal quarter, 50% of our positive cumulative consolidated net
income since March 31, 2006; plus (iii) 100% of the
amount by which our total stockholders investment is
increased as a result of any public or private offering of
capital stock;
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a covenant that during the time certain permitted investments
exceed 5% of our consolidated net tangible assets, we will
maintain a ratio of collateral asset value to senior secured
debt of at least 1.20:1.00;
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restrictions on conducting hedging transactions except in the
ordinary course of business;
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restrictions on amending our material agreements; and
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restrictions on making changes to our accounting practices.
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As of March 31, 2008, we had $0.4 million in letters
of credit outstanding under the letter of credit facility and no
borrowings or letters of credit outstanding under the revolving
credit facility.
U.K.
Facilities
As of March 31, 2008, Bristow Aviation had a
£3.0 million ($6.0 million) facility for bank
guarantees, of which £0.5 million ($1.0 million)
was outstanding, and a £1.0 million
($2.0 million) net overdraft facility, under which no
borrowings were outstanding. Both facilities are with a U.K.
bank. The letter of credit facility is provided on an
uncommitted basis, and outstanding letters of credit bear fees
at a rate of 0.7% per annum. Borrowings under the net overdraft
facility are payable upon demand and bear interest at the
banks base rate plus a spread that can vary between 1% and
3% per annum depending on the net overdraft amount. The net
overdraft facility will be reviewed by the bank annually on
August 31 and is cancelable at any time upon notification from
the bank. The facilities are guaranteed by certain of Bristow
Aviations subsidiaries and secured by a negative pledge of
Bristow Aviations assets.
RLR
Note
RLR financed 90% of the purchase price of six aircraft acquired
in July 2003 through a five-year $31.8 million term loan
(the RLR Note). The RLR Note has $19.0 million
remaining outstanding and is secured by the six aircraft which
have a cumulative carrying value of $24.0 million as of
March 31, 2008. The company and the other shareholder of
RLR have guaranteed 49% and 51%, respectively, of the RLR Note
outstanding. As of March 31, 2008, the company and the
other shareholder had guaranteed $9.3 million and
$9.7 million, respectively. In addition, the lender has a
put option concerning the RLR Note, which it may exercise if the
aircraft are not returned to the U.S. within 30 days
of a default on the RLR Note. Any such exercise would require us
to purchase 100% of the RLR Note from the lender. We
simultaneously entered into a similar agreement with the other
RLR shareholder which requires that, in event of exercise by the
lender of its put option to us, the other shareholder will be
required to purchase 51% of the RLR Note from us. As of
March 31, 2008, a liability of $0.6 million
representing the fair value of this guarantee was reflected in
our consolidated balance sheet in other accrued liabilities. The
fair value of the guarantee is being amortized over the term of
the RLR Note which matures in July 2008. We expect the RLR Note
to be refinanced prior to maturity.
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DESCRIPTION
OF THE NOTES
We will issue the notes as a series of debt securities under an
indenture, as supplemented by a supplemental indenture, to be
dated as of the closing date of this offering between us, the
subsidiary guarantors and U.S. Bank National Association,
as trustee. We refer to the indenture and any supplemental
indenture collectively as the indenture. The
indenture is governed by the Trust Indenture Act of 1939,
or the Trust Indenture Act. The terms of the
notes include those stated in the indenture and those made part
of the indenture by reference to the Trust Indenture Act.
We urge you to read the indenture because it, and not this
description, defines your rights as a holder of the notes.
In this description, the words we, us,
or our refer only to Bristow Group Inc. and not to
any of its subsidiaries.
You may request a copy of the indenture from us. See Where
You Can Find More Information.
General
We are offering $100,000,000 aggregate principal amount of
our % Convertible Senior Notes
due 2038 (or $115,000,000 if the underwriters exercise their
option to purchase additional notes in full), which we refer to
as the notes. We use the term note in
this prospectus supplement to refer to each $1,000 principal
amount of notes. The notes will mature on June 15, 2038,
subject to earlier conversion, redemption or repurchase.
The notes:
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will be general unsecured senior obligations;
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will be issued in denominations of $1,000 and integral multiples
of $1,000;
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will be represented by one or more registered notes in global
form, but in certain limited circumstances may be represented by
notes in certificated form as described below under
Book-Entry, Settlement and Clearance;
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will not be subject to defeasance or any sinking fund provision;
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will rank equally in right of payment to any of our existing or
future unsecured senior debt;
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will be unconditionally guaranteed on a senior basis by those of
our subsidiaries that currently provide guarantees of our other
senior notes or our revolving credit facility, as well as
certain future subsidiaries; and
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will effectively rank junior to any of our secured debt to the
extent of the value of the assets securing such indebtedness,
and will be structurally subordinated to all liabilities of our
subsidiaries that are not guarantors.
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On or prior to the business day immediately preceding the
maturity date, subject to certain conditions described herein,
the notes may be converted into cash and, if applicable, shares
of our common as described below under
Conversion Rights Payment Upon
Conversion. Holders will not receive any separate cash
payment for interest, if any, accrued and unpaid to the
conversion date except under the circumstances described below
under Conversion Rights Conversion
Procedures.
We may redeem the notes at our option, in whole or in part,
beginning on June 15, 2015, as described below under
Optional Redemption by Us.
The notes will be subject to repurchase by us at the
holders option on June 15, 2015, June 15, 2020,
June 15, 2025, June 15, 2030, and June 15, 2035,
on the terms and at the repurchase prices set forth below under
Repurchase of Notes by Us at Option of
Holder.
The notes will also be subject to repurchase by us at the
holders option upon the occurrence of a fundamental
change, on the terms and at the purchase prices set forth below
under Fundamental Change Permits Holders to
Require Us to Purchase Notes.
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If any interest payment date, maturity date, redemption date,
repurchase date or fundamental change repurchase date falls on a
day that is not a business day, then the required payment or
delivery will be made on the next succeeding business day with
the same force and effect as if made on the date that the
payment or delivery was due, and no additional interest will
accrue on that payment for the period from and after the
interest payment date, maturity date, redemption date,
repurchase date or fundamental change repurchase date, as the
case may be, to that next succeeding business day.
We may, without the consent of the holders, issue additional
notes under the indenture with the same terms and with the same
CUSIP numbers as the notes offered hereby in an unlimited
aggregate principal amount; provided that no such additional
notes will be treated as part of the same series as the notes
unless they will be fungible with the notes offered hereby for
U.S. federal income tax purposes. We may also from time to
time repurchase the notes in open market purchases or negotiated
transactions without prior notice to holders.
The registered holder of a note will be treated as the owner of
it for all purposes.
The indenture does not limit the amount of debt that may be
issued by us or our subsidiaries under the indenture or
otherwise. We may issue debt securities of other series from
time to time under the indenture.
Other than restrictions described under
Fundamental Change Permits Holders to Require
Us to Purchase Notes and Consolidation,
Merger and Sale of Assets below, and except for the
provisions set forth under Conversion
Rights Increase of Applicable Conversion Rate Upon
Conversion Upon Make-Whole Fundamental Change, the
indenture does not contain any covenants or other provisions
designed to afford holders of the notes protection in the event
of a change of control or highly leveraged transaction involving
us or in the event of a decline in our credit rating, including
as a result of a takeover, recapitalization, highly leveraged
transaction or similar restructuring involving us that could
adversely affect the holders of the notes.
Payments
on the Notes; Paying Agent and Registrar
We will pay the principal of certificated notes at the office or
agency designated by us in the United States. We have initially
designated a corporate trust office of U.S. Bank National
Association, as the paying agent and registrar of the notes and
its agency in New York, New York, as a place where notes may be
presented for payment or for registration of transfer. We may,
however, change the paying agent or registrar without prior
notice to the holders of the notes, and we may act as paying
agent or registrar. Interest on certificated notes will be
payable (1) to holders holding certificated notes having an
aggregate principal amount of $1,000,000 or less of notes by
check mailed to the holders of such notes and (2) to
holders holding certificated notes having an aggregate principal
amount of more than $1,000,000 of notes either by check mailed
to each holder or, upon application by a holder to the registrar
not later than the relevant record date, by wire transfer in
immediately available funds to that holders account within
the United States, which application shall remain in effect
until the holder notifies, in writing, the registrar to the
contrary.
We will pay principal of and interest on notes in global form
registered in the name of or held by The Depository
Trust Company or its nominee in immediately available funds
to The Depository Trust Company or its nominee, as the case
may be, as the registered holder of such global note.
Interest
The notes will bear interest at a rate
of % per year. Interest will accrue
from ,
2008, and will be payable semi-annually in arrears on June 15
and December 15 of each year, beginning December 15, 2008.
Interest will be paid to the person in whose name a note is
registered at the close of business on June 1 or December 1
(each a record date), as the case may be (whether or
not a business day), immediately preceding the relevant interest
payment date; provided, however, if notes are surrendered
for conversion after 5:00 p.m., New York City time, on a
regular record date but prior to 9:00 a.m., New York City
time, on the immediately following interest payment date,
holders of such notes at 5:00 p.m., New York City time, on
the
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record date will receive the interest, if any, payable on such
notes on the corresponding interest payment date notwithstanding
the conversion. Notes, upon surrender for conversion during the
period after 5:00 p.m., New York City time, on any regular
record date but prior to 9:00 a.m., New York City time, on
the immediately following interest payment date, must be
accompanied by funds equal to the amount of interest, if any,
payable on the notes so converted; provided that no such
payment need be made:
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if we have specified a redemption date or a fundamental change
repurchase date (as defined below) that is after a record date
and on or prior to the business day immediately following the
interest payment date;
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to the extent of any overdue interest, if any overdue interest
exists at the time of conversion with respect to such
note; or
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if the notes are surrendered for conversion after
5:00 p.m., New York City time, on the regular record date
immediately preceding the maturity date and before
5:00 p.m., New York City time, on the business day
immediately preceding the maturity date for the notes.
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Interest on the notes will be computed on the basis of a
360-day year
composed of twelve
30-day
months.
Unless the context requires otherwise, all references to the
term interest in this prospectus supplement are
deemed to include additional interest, if any, that accrues and
is payable in connection with our failure to comply with our
reporting obligations under the indenture as set forth below
under Events of Default.
Subsidiary
Guarantees
Our payment obligations under the notes will be jointly and
severally guaranteed (the subsidiary guarantees) by
all of our present material domestic and certain future
subsidiaries (the guarantors). Initially, the
guarantors will be the same subsidiaries who currently guarantee
our existing
61/8% Senior
Notes due 2013 and
71/2% Senior
Notes due 2017. In the circumstances described below, the
indenture may require certain of our other existing or future
subsidiaries to execute supplements to the indenture providing
for subsidiary guarantees. The obligations of each guarantor
under its subsidiary guarantee will be a general unsecured
obligation of such guarantor, ranking equal in right of payment
with all other senior indebtedness of such guarantor and senior
in right of payment to any subordinated indebtedness of such
guarantor.
The indenture will provide that if, after issuance of the notes,
any of our subsidiaries that is not a guarantor guarantees or
becomes a co-obligor with respect to any indebtedness for money
borrowed of us or another subsidiary guarantor, then such
subsidiary shall, within 15 days thereof, execute a
supplement to the indenture under which it shall become a
guarantor of the notes in accordance with the terms of the
indenture.
No guarantor may consolidate with or merge with or into (whether
or not such guarantor is the surviving person) another person
(other than us or another guarantor), whether or not affiliated
with such guarantor, unless
(1) subject to the provisions of the following paragraph,
the person formed by or surviving any such consolidation or
merger (if other than such guarantor) shall execute a supplement
to the indenture providing for a guarantee and deliver an
opinion of counsel in accordance with the terms of the indenture;
(2) immediately after giving effect to such transaction, no
default or event of default shall have occurred and be
continuing.
In the event of a sale or other disposition (including by way of
merger or consolidation) of all or substantially all of the
assets or all of the capital stock of any guarantor owned by us
our or subsidiaries, then such guarantor will be released and
relieved of any obligations under its subsidiary guarantee. In
addition, if no events of default have occurred and are
continuing and a guarantor ceases to guarantee or be a
co-obligor with respect to any indebtedness of us or another
subsidiary guarantor for borrowed money, other than the notes,
then upon delivery to the trustee of an officers
certificate to the foregoing effect, the subsidiary
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guarantees will be released and the obligations discussed under
Subsidiary Guarantees will cease to apply, subject
to reinstatement if the foregoing release condition is no longer
satisfied.
The obligations of any guarantor under its subsidiary guarantee
will be limited to the maximum amount that will not result in
the obligations of the guarantor under the subsidiary guarantee
constituting a fraudulent conveyance or fraudulent transfer
under federal or state law, after giving effect to any other
contingent and fixed liabilities of the guarantor. See
Risk Factors.
Ranking
The notes will be:
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our general unsecured senior obligations;
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equal (pari passu) in ranking with all of our
existing and future unsecured senior indebtedness; and
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senior in right of payment to all of our future subordinated
indebtedness.
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The subsidiary guarantees:
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will be general unsecured, senior obligations of the guarantors;
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will rank equally in right of payment to any other senior
indebtedness of the guarantors; and
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will rank senior in right of payment to any future subordinated
indebtedness of the guarantors.
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Not all of our subsidiaries will guarantee the notes. In the
event of a bankruptcy, liquidation or reorganization of any of
these non-guarantor subsidiaries, the non-guarantor subsidiaries
will pay the holders of their debt and their trade creditors
before they will be able to distribute any of their assets to
us. Revenue related to our non-guarantor subsidiaries
constituted 70% of our operating revenue during fiscal year 2008
(excluding intercompany revenues), and our non-guarantor
subsidiaries held approximately 57% of our consolidated assets
as of March 31, 2008. As of March 31, 2008, the notes
and the subsidiary guarantees would have ranked effectively
junior in right of payment to $358.4 million of
indebtedness and other liabilities, including trade payables, of
our non-guarantor subsidiaries.
The notes and the subsidiary guarantees will be effectively
subordinated in right of payment to all existing and future
secured indebtedness of us or the guarantors to the extent of
the value of the assets securing such indebtedness. As of
March 31, 2008, we and the guarantors had no outstanding
secured indebtedness.
Conversion
Rights
General
Subject to the restrictions described below, a holder may
convert any outstanding notes into cash and, if applicable,
shares of our common stock in accordance with the procedures
described below under Payment Upon
Conversion.
Prior to January 1, 2038, the notes will be convertible as
provided herein only in the circumstances described below under
Conversion Upon Satisfaction of Common Stock
Price Condition, Conversion Upon
Satisfaction of Trading Price Condition,
Conversion Upon Notice of Redemption or
Conversion Upon Specified Corporate
Transactions. On or after January 1, 2038, a holder
may surrender notes for conversion at any time prior to
5:00 p.m., New York City time, on the business day
immediately preceding the maturity date without regard to the
foregoing conditions. Notwithstanding the foregoing, a
holders right to convert a note called for redemption will
terminate at the close of business on the business day
immediately preceding the redemption date for that note, unless
we default in making the payment due upon redemption. In
addition, if a holder has exercised its right to require us to
repurchase its notes, subject to all other restrictions on
conversion, such holder may not convert its notes unless it
withdraws its repurchase notice prior to 5:00 p.m., New
York City time, on the business day immediately preceding such
repurchase date.
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Our delivery to the holder of the settlement amount (as defined
below under Payment Upon Conversion)
together with any cash payment for such holders fractional
shares, will be deemed to satisfy our obligation to pay the
principal amount of the notes and to satisfy our obligation to
pay accrued and unpaid interest through the conversion date,
except as provided above under Interest.
As a result, accrued interest is deemed paid in full rather than
cancelled, extinguished or forfeited.
Holders of our ordinary shares issued upon conversion, if any,
will not be entitled to receive any dividends payable to holders
of our ordinary shares as of any record time or date before the
applicable conversion date.
Conversion
Upon Satisfaction of Common Stock Price Condition
With respect to any calendar quarter commencing after
June 30, 2008, a holder may surrender any of its notes for
conversion during such calendar quarter (and only during such
quarter) if the last reported sale price of our common stock for
at least 20 trading days during the period of 30 consecutive
trading days ending on the last trading day of the immediately
preceding calendar quarter is greater than 120% of the base
conversion price (as defined below under
Payment Upon Conversion) on such last
trading day.
Trading day means a day during which trading
in our common stock generally occurs on the principal
U.S. national or regional securities exchange on which our
common stock is listed for trading and during which there is no
market disruption event; provided that if our common stock is
not listed for trading on a U.S. national or regional
securities exchange, trading day will mean a business day.
The term market disruption event means
(1) a failure by the primary exchange or quotation system
on which our common stock trades or is quoted to open for
trading during its regular trading session or (2) the
occurrence or existence on any trading day for our common stock
of any suspension or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by the stock
exchange or otherwise) in our common stock or in any options,
contracts or future contracts relating to our common stock for
an aggregate period in excess of one half hour.
Conversion
Upon Satisfaction of Trading Price Condition
A holder may surrender notes for conversion prior to maturity
during the five
business-day
period following any five consecutive
trading-day
period in which the trading price per $1,000 principal amount of
notes, as determined by the trustee following a request by a
holder of notes in accordance with the procedures described
below, for each trading day of such five
trading-day
period was less than 97% of the product of the last reported
sale price of our common stock for such trading day and the
applicable conversion rate (determined for this purpose in the
manner described below).
The trustee shall have no obligation to determine the trading
price of the notes for this purpose unless we have requested
such determination in writing, and we shall have no obligation
to make such request unless a holder of at least $2,000,000
principal amount of notes provides us with reasonable evidence
that the trading price of the notes on any date would be less
than 97% of the product of the last reported sale price and the
applicable conversion rate on such date. At such time, we shall
instruct the trustee to determine the trading price of the notes
beginning on the next trading day and on each successive trading
day until the trading price of the notes is greater than or
equal to 97% of the product of the last reported sale price and
the applicable conversion rate on such date.
For purposes of the foregoing, if the bid solicitation agent
cannot reasonably obtain at least one bid for $5,000,000
aggregate principal amount of the notes from an independent
nationally recognized securities dealer, then the trading price
of the notes will be deemed to be less than 97% of the product
of the last reported sale price of our common stock for such
trading day and the applicable conversion rate.
Trading price of the notes on any
determination date means the average of the secondary market bid
quotations per note obtained by the bid solicitation agent for
$5,000,000 aggregate principal amount of the
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notes at approximately 3:30 p.m., New York City time, on
the determination date from three independent nationally
recognized securities dealers we select; provided that if:
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three such bids cannot reasonably be obtained by the bid
solicitation agent, but two such bids are obtained, then the
average of the two bids shall be used, and
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only one such bid can reasonably be obtained by the bid
solicitation agent, that one bid shall be used.
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For purposes of the foregoing, the applicable conversion
rate on any day will be (i) if the last reported sale
price of our common stock on the trading day immediately
preceding such day is less than or equal to the base conversion
price, the base conversion rate and (ii) if such last
reported sale price of our common stock is greater than the base
conversion price, the base conversion rate plus a number of
shares equal to the product of (a) the incremental share
factor and (b) (1) the difference between such last
reported sale price and the base conversion price divided by
(2) such last reported sale price. The bid solicitation
agent will initially be the trustee. We may change the bid
solicitation agent, but the bid solicitation agent may not be an
affiliate of ours.
The last reported sale price of our common
stock on any date means the closing sale price per share (or if
no closing sale price is reported, the average of the bid and
ask prices or, if more than one in either case, the average of
the average bid and the average ask prices) on that date as
reported in composite transactions for the principal
U.S. national or regional securities exchange on which our
common stock is listed for trading. If our common stock is not
listed for trading on a U.S. national or regional
securities exchange on the relevant date, the last
reported sale price will be the last quoted bid price for
our common stock in the over-the-counter market on the relevant
date as reported by the National Quotation Bureau or similar
organization. If our common stock is not so quoted, the
last reported sale price will be the average of the
mid-point of the last bid and ask prices for our common stock on
the relevant date from each of at least three nationally
recognized independent investment banking firms selected by us
for this purpose.
Conversion
Upon Notice of Redemption
A holder may surrender for conversion any note called for
redemption at any time after we issue a notice of redemption and
prior to the close of business on the business day prior to the
redemption date, whether or not the notes are otherwise
convertible at such time.
Conversion
Prior to Maturity
A holder may surrender notes for conversion at any time during
the period beginning January 1, 2038, and ending at the
close of business on the business day immediately preceding the
maturity date.
Conversion
Upon Specified Corporate Transactions
If we elect to:
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distribute, to all or substantially all holders of our common
stock, rights, warrants or options entitling them to subscribe
for or purchase, for a period expiring not more than
45 days from the record date of the distribution, shares of
our common stock at a price per share less than the average of
the last reported sale price of our common stock for each of the
ten trading days immediately preceding the date that such
distribution was first publicly announced; or
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distribute, to all or substantially all holders of our common
stock, cash or other assets, debt securities or certain rights
or warrants to purchase our securities (excluding distributions
described in clauses (1) and (2) under
Conversion Rate Adjustments), which distribution has
a per share value exceeding 15% of the average of the last
reported sale price of our common stock for the ten trading days
immediately preceding the date that such distribution was first
publicly announced,
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we must notify the holders of notes at least 25 trading days
prior to the ex-dividend date for such distribution. Once we
have given such notice, holders may surrender their notes for
conversion until the earlier of the close of business on the
business day prior to the ex-dividend date or our announcement
that such distribution will not take place. If the distribution
does not occur as anticipated, we will issue a press release and
notify holders
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who have elected to convert their notes promptly after we
determine that the distribution will not occur and each such
holder may elect to withdraw any then pending election to
convert by a written notice of withdrawal delivered to the
conversion agent within ten business days after we make such
announcement. In such event, holders who do not make such a
withdrawal election will receive the applicable settlement
amount with respect to notes surrendered for conversion three
trading days following the later of (i) the end of the
applicable cash settlement averaging period, or (ii) the
expiration of the ten business day withdrawal period referred to
above. No adjustment to the ability of the holders to convert
will be made if the holders are entitled to participate in the
distribution without conversion.
In addition, if we are a party to a consolidation, merger, share
exchange, sale of all or substantially all of our assets or
other similar transaction (in each case other than with one of
our wholly-owned subsidiaries), in each case pursuant to which
the shares of our common stock would be converted into (or
holders of such shares would be entitled to receive) cash,
securities or other property, a holder may surrender its notes
for conversion at any time from and including the effective date
of such transaction until and including the date that is
30 days after the effective date of such transaction.
In the event of a make-whole fundamental change (as defined
below under Increase of Applicable Conversion
Rate Upon Conversion Upon Make-Whole Fundamental Change),
a holder may surrender its notes for conversion at any time from
and including the effective date of the make-whole fundamental
change (or 15 trading days prior to the date we have announced
as the anticipated effective date of such make-whole fundamental
change if such event constitutes a fundamental change as
described under clause (4) of the definition of fundamental
change as described below under Fundamental
Change Permits Holders to Require Us to Purchase Notes)
until and including the business day immediately preceding the
fundamental change repurchase date with respect to such
fundamental change; provided, however, we will have no
obligation to deliver any settlement amount in respect of any
such conversion prior to the effective date of such make-whole
fundamental change. However, in the case of a transaction
described in clause (4) of the definition of fundamental
change as described below under Fundamental Change Permits
Holders to Require Us to Purchase Notes, if such
transaction does not occur, we will not be obligated to increase
the applicable conversion rate in connection with such
transaction, regardless of the fact that holders may have
elected to convert notes in anticipation of the effective date
of such event and we will issue a press release and notify
holders who have so elected to convert their notes promptly
after we determine that the transaction in question will not
occur and each such holder may elect to withdraw any then
pending election to convert by a written notice of withdrawal
delivered to the conversion agent within ten business days after
we make such announcement. In such event, holders who do not
make such a withdrawal election will receive the applicable
settlement amount with respect to notes surrendered for
conversion three trading days following the later of
(i) the end of the applicable cash settlement averaging
period, or (ii) the expiration of the ten business day
withdrawal period referred to above.
If a transaction also constitutes a fundamental change (as
described below), such holder can instead require us to
repurchase all or a portion of its notes as described under
Fundamental Change Permits Holders to Require
Us to Purchase Notes.
Payment
Upon Conversion
Subject to certain exceptions described below under
Increase of Applicable Conversion Rate Upon
Conversion Upon Make-Whole Fundamental Change, we will
deliver to holders in respect of each $1,000 principal amount of
notes surrendered for conversion a settlement amount
equal to the sum of the daily settlement amounts for each of the
20 consecutive trading days during the applicable cash
settlement averaging period.
The cash settlement averaging period with
respect to any note being converted means the
20 consecutive
trading-day
period beginning on and including the second trading day after
the conversion date (as defined below), except that with respect
to any conversion date that is on or after the
24th scheduled trading day immediately preceding the
maturity date or a redemption date, as applicable, the cash
settlement averaging
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period means the 20 consecutive trading days beginning on and
including the 22nd scheduled trading day prior to the
maturity date or redemption date, as the case may be.
The daily settlement amount, for each of the
20 consecutive trading days during the cash settlement averaging
period, shall consist of:
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cash equal to $50 or, if less, the daily conversion
value; and
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to the extent the daily conversion value exceeds $50, a number
of shares of common stock (the daily share
amount) equal to (A) the difference between the
daily conversion value and $50, divided by (B) the
applicable stock price of our common stock for such day.
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The daily conversion value means, for each of
the 20 consecutive trading days during the cash settlement
averaging period, the product of (1) the daily conversion
rate fraction for such day and (2) the applicable stock
price of our common stock on such day. In addition, for purposes
of the foregoing, the daily conversion values of reference
property (as defined below under Conversion
Rate Adjustments Treatment of Reference
Property) will be determined by reference to (i) in
the case of reference property or part of reference property
that is traded on a United States national securities exchange,
including the NASDAQ Global Market or NASDAQ Global Select
Market, the applicable stock price of such security or common
stock, (ii) in the case of any other property other than
cash, the value thereof as determined by two independent
nationally recognized investment banks as of the effective date
of the transaction, and (iii) in the case of cash, at 100%
of the amount thereof.
The applicable conversion rate for any notes to be converted
will be equal to the sum of the daily conversion rate fractions
for each day during the 20 trading days in the relevant cash
settlement averaging period. The daily conversion rate fraction
for each trading day during the relevant cash settlement
averaging period will be determined as follows:
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if the applicable stock price (as defined below) of our common
stock on such trading day is less than or equal to the base
conversion price (as defined below), the daily conversion rate
fraction for such trading day will be equal to the base
conversion rate divided by 20; and
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if the applicable stock price of our common stock on such
trading day is greater than the base conversion price, the daily
conversion rate fraction for such trading day will be equal to
1/20th of the following:
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Base Conversion Rate
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+
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(Applicable Stock Price
of our Common Stock on such Trading Day
− Base Conversion Price)
Applicable
Stock Price
of our Common Stock on such Trading Day
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×
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Incremental Share Factor
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In no event, however, will the daily conversion rate fraction
for any day during the cash settlement averaging period exceed
1/20th of shares
of our common stock (the daily share cap), subject
to adjustment in the same manner as the base conversion rate as
described herein.
The base conversion rate is
initially shares
of our common stock, subject to adjustment as described under
Conversion Rate Adjustments. The daily
conversion rate fractions may also be adjusted in certain
corporate transactions. See Increase of
Applicable Conversion Rate Upon Conversion Upon Make-Whole
Fundamental Change.
The base conversion price is a dollar amount
(initially, approximately $ )
determined by dividing $1,000 by the base conversion rate.
The incremental share factor is
initially ,
subject to the same proportional adjustment as the base
conversion rate.
The applicable stock price per share of our
common stock on any trading day means the per share
volume-weighted average price as displayed under the heading
Bloomberg VWAP on Bloomberg (or any
S-87
successor service) page BRS.N <Equity> AQR (or
any equivalent successor page) in respect of the period from the
scheduled open of trading on the principal securities exchange
or market on which the common stock is traded on such trading
day, or, if such volume-weighted average price is not available,
the applicable stock price means the volume-weighted average
price per share of our common stock on such day as determined by
a nationally recognized investment banking firm retained for
this purpose by us. The applicable stock price of other
securities that constitute reference property and that are
traded on a national securities exchange shall be determined in
a manner substantially equivalent to the foregoing as determined
in good faith by us.
Scheduled trading day means any day that is
scheduled to be a trading day.
Except as otherwise provided below, we will deliver the
settlement amount to holders who have surrendered notes for
conversion on the third business day immediately following the
last day of the cash settlement averaging period in respect of
such notes.
No fractional shares of common stock or securities representing
fractional shares of common stock will be issued upon
conversion. Any fractional interest in a share of common stock
resulting from conversion will be paid in cash based on the
average of the applicable stock prices on each trading day
during the relevant cash settlement averaging period. For
purposes of the foregoing, fractional shares arising from the
calculation of the daily settlement amount for any day in the
cash settlement averaging period shall be aggregated with
fractional shares for all other days in such period in
determining the settlement amount, and any whole shares
resulting therefrom shall be issued and any remaining fractional
shares shall be paid in cash.
Settlement
Upon Conversion Upon Certain Corporate
Transactions
As described below under Conversion Rate
Adjustments Treatment of Reference Property,
upon effectiveness of specified corporate transactions, the
notes will be convertible into cash and reference property. We
will settle conversion with respect to such transactions as
described under Payment Upon Conversion
above (based on the applicable conversion rate as increased by
the additional shares described below under
Increase of Applicable Conversion Rate Upon
Conversion Upon Make-Whole Fundamental Change, if
applicable) on the later to occur of (i) the third trading
day immediately following the effective date of the transaction
and (ii) the third trading day immediately following the
last day of the applicable cash settlement averaging period;
provided that, if the reference property consists entirely of
cash or property other than publicly traded securities, we will
deliver the settlement amount to holders no later than the third
business day after the date of determination of the value of
such consideration, but no earlier than the third trading day
immediately following the effective date of the transaction.
Limitation
on Foreign Ownership of Our Common Stock
We are subject to the Federal Aviation Act, under which our
aircraft may be subject to deregistration, and we may lose our
ability to operate within the United States, if persons other
than citizens of the United States should come to own or control
more than 25% of our voting interest. Consistent with the
requirements of the Federal Aviation Act, our certificate of
incorporation, as amended, provides that persons or entities
that are not citizens of the United States (as
defined in the Federal Aviation Act) shall not collectively own
or control more than 25% of the voting power of our outstanding
capital stock (the Permitted Foreign Ownership
Percentage) and that, if at any time persons that are not
citizens of the United States nevertheless collectively own or
control more than the Permitted Foreign Ownership Percentage,
the voting rights of our outstanding voting capital stock in
excess of the Permitted Foreign Ownership Percentage owned by
certain stockholders who are not citizens of the United States
shall automatically be suspended. These voting rights will be
suspended in reverse chronological order by date of registry
until the number of voting shares held by persons that are not
citizens of the United States is less than or equal to the
Permitted Foreign Ownership Percentage. Our certificate of
incorporation, as amended, further authorizes us to redeem any
such suspended shares to the extent necessary for us to comply
with any present or future requirements of the Federal Aviation
Act.
S-88
Conversion
Procedures
If you hold a beneficial interest in a global note, to convert
you must comply with DTCs procedures for converting a
beneficial interest in a global note and, if required as
described above under General, pay funds
equal to interest payable on the next interest payment date and
all transfer or similar taxes, if any.
If you hold a certificated note, to convert you must:
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complete and manually sign the conversion notice on the back of
the note, or a facsimile of the conversion notice;
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deliver the conversion notice, which is irrevocable, and the
note to the conversion agent;
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if required, furnish appropriate endorsements and transfer
documents;
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if required, pay all transfer or similar taxes; and
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if required, pay funds equal to interest payable on the next
interest payment date.
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The date you comply with these requirements is the
conversion date under the indenture.
If a holder converts notes, we will pay any documentary, stamp
or similar issue or transfer tax due on the issue of any shares
of our common stock upon the conversion, unless the tax is due
because the holder requests any shares to be issued in a name
other than the holders name, in which case the holder will
pay that tax.
Exchange
in Lieu of Conversion
When a holder surrenders notes for conversion, we may, at our
election, direct in writing the conversion agent to surrender
such notes to a financial institution designated by us for
exchange in lieu of conversion. In order to accept any notes
surrendered for conversion, the designated financial institution
must agree to deliver, in exchange for such notes, the cash and
number of shares of our common stock, if any, due upon
conversion based upon the applicable conversion rate, as
determined above under Payment Upon
Conversion. If we make an exchange election, we will, by
the close of business on the scheduled trading day immediately
preceding the start of the cash settlement averaging period,
provide written notification to the holder surrendering notes
for conversion that we have directed the designated financial
institution to make an exchange in lieu of conversion. If the
designated financial institution accepts any such notes, it will
deliver the cash, and the number of shares of our common stock,
if any, due upon conversion to the conversion agent and the
conversion agent will deliver such cash and shares of our common
stock to the converting holder. Any notes exchanged by the
designated financial institution will remain outstanding. If
such designated financial institution does not accept the notes
for exchange, or if the designated financial institution agrees
to accept any notes for exchange but does not timely deliver the
related cash and shares of our common stock, we will, as
promptly as practical thereafter (but no later than the fourth
trading day immediately following the last trading day of the
relevant cash settlement averaging period) convert the notes
into cash and, if applicable, shares of our common stock due
upon conversion as set forth above under
Conversion Rights Payment Upon
Conversion. Our designation of a financial institution to
which the notes may be submitted for exchange does not require
the institution to accept any notes. We will not pay any
consideration to, or otherwise enter into any agreement with,
the designated financial institution for or with respect to such
designation.
Conversion
Rate Adjustments
Adjustment
Events
The base conversion rate will be subject to adjustment as
described below. The incremental share factor will be
proportionately adjusted on the same basis as the base
conversion rate.
S-89
(1) If we issue shares of our common stock as a dividend or
distribution on shares of our common stock, or if we effect a
share split or share combination, the base conversion rate will
be adjusted based on the following formula:
where,
CR0
= the base conversion rate in effect immediately prior to the
open of business on the ex-dividend date for such dividend or
distribution, or immediately prior to the open of business on
the effective date of such share split or share combination, as
the case may be;
CR = the new base conversion rate in effect
immediately after the open of business on the ex-dividend date
for such dividend or distribution, or immediately after the open
of business on the effective date of such share split or share
combination, as the case may be;
OS0
= the number of shares of our common stock outstanding
immediately prior to the open of business on the ex-dividend
date for such dividend or distribution, or immediately prior to
the open of business on the effective date of such share split
or share combination, as the case may be; and
OS = the number of shares of our common stock
outstanding immediately prior to the open of business on the
ex-dividend date for such dividend or distribution, or
immediately prior to the open of business on the effective date
of such share split or share combination, as the case may be,
assuming, for this purpose only, the completion of such
dividend, distribution, share split or share combination, as the
case may be, immediately prior to the open of business on such
date.
If any dividend or distribution described in this
clause (1) is declared but not so paid or made, the new
base conversion rate shall be readjusted to the base conversion
rate that would then be in effect if such dividend or
distribution had not been declared.
(2) If we distribute to all or substantially all holders of
our common stock any rights or warrants entitling them for a
period of not more than 45 days from the record date of
such distribution to subscribe for or purchase shares of our
common stock, at a price per share less than the average of the
last reported sale prices of our common stock on the ten trading
days immediately preceding the date that such distribution was
first publicly announced, the base conversion rate will be
adjusted based on the following formula:
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CR
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=
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CR0
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×
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OS0
+ X
OS0
+ Y
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where,
CR0
= the base conversion rate in effect immediately prior to the
open of business on the ex-dividend date for such distribution;
CR = the new base conversion rate in effect
immediately after the open of business on the ex-dividend date
for such distribution;
OS0
= the number of shares of our common stock outstanding
immediately prior to the open of business on the ex-dividend
date for such distribution;
X = the total number of shares of our common stock issuable
pursuant to such rights or warrants; and
Y = the number of shares of our common stock equal to the
aggregate price payable to exercise such rights or warrants
divided by the average of the last reported sale prices of our
common stock over the ten consecutive
trading-day
period ending on the trading day immediately preceding the
ex-dividend date for such distribution.
For purposes of this clause (2), in determining whether any
rights or warrants entitle the holders to subscribe for or
purchase common stock at less than the applicable last reported
sale prices of our common
S-90
stock, and in determining the aggregate exercise price payable
for such common stock, there shall be taken into account any
consideration received by us for such rights or warrants and any
amount payable upon exercise thereof, with the value of such
consideration, if other than cash, to be determined by our board
of directors. To the extent any rights or warrants described in
this clause (2) are not exercised or converted prior to the
expiration of the exercisability or convertability thereof, the
new base conversion rate shall be readjusted to the base
conversion rate that would then be in effect if such rights or
warrants had not been so issued.
(3) If we distribute shares of our capital stock, evidences
of our indebtedness or other assets or property of ours to all
or substantially all holders of our common stock, excluding:
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dividends or distributions referred to in clause (1) or
(2) above;
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dividends or distributions paid exclusively in cash; and
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spin-offs to which the provisions set forth below in this
paragraph (3) shall apply,
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then the base conversion rate will be adjusted based on the
following formula:
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CR
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=
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CR0
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×
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SP0
SP0
− FMV
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where,
CR0
= the base conversion rate in effect immediately prior to the
open of business on the ex-dividend date for such distribution;
CR = the new base conversion rate in effect
immediately after the open of business on the ex-dividend date
for such distribution;
SP0
= the average of the last reported sale prices of our common
stock over the ten consecutive
trading-day
period ending on the trading day immediately preceding the
ex-dividend date for such distribution; and
FMV = the fair market value (as determined by our board of
directors or a committee thereof) of the shares of capital
stock, evidences of indebtedness, assets or property distributed
with respect to each outstanding share of our common stock on
the ex-dividend date for such distribution.
With respect to an adjustment pursuant to this clause (3)
where there has been a payment of a dividend or other
distribution on our common stock of shares of capital stock of
any class or series, or similar equity interest, of or relating
to a subsidiary or other business unit, which we refer to as a
spin-off, the base conversion rate will be adjusted
based on the following formula:
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CR
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=
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CR0
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×
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FMV +
MP0
MP0
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where,
CR0
= the base conversion rate in effect immediately prior to the
open of business on the ex-dividend date of the spin-off;
CR = the new base conversion rate in effect
immediately after the open of business on the ex-dividend date
of the spin-off;
FMV = the average of the last reported sale prices of the
capital stock or similar equity interest distributed to holders
of our common stock applicable to one share of our common stock
over the first ten consecutive
trading-day
period immediately following, and including, the ex-dividend
date of the spin-off (the spin-off valuation
period); and
MP0
= the average of the last reported sale prices of our common
stock over the spin-off valuation period.
S-91
The adjustment to the base conversion rate under the preceding
paragraph will be deemed to occur at the open of business on the
ex-dividend date of the spin-off; provided that, for purposes of
determining the base conversion rate, in respect of any trading
day during a cash settlement averaging period during the ten
trading days following the effective date of any spin-off,
references within the portion of this paragraph (3) related
to spin-offs to ten trading days shall be deemed
replaced with such lesser number of trading days as have elapsed
between the effective date of such spin-off and such trading day.
If any such dividend or distribution described in this
clause (3) is declared but not paid or made, the new base
conversion rate shall be readjusted to be the base conversion
rate that would then be in effect if such dividend or
distribution had not been declared.
For the avoidance of doubt, the adjustment in this
clause (3) does not apply to any distributions to the
extent that the right to convert notes has been changed into the
right to convert into reference property in respect of such
distribution as described under Treatment of
Reference Property.
(4) If we pay any cash dividend to all or substantially all
holders of our common stock, the base conversion rate will be
adjusted based on the following formula:
where,
CR0
= the base conversion rate in effect immediately prior to the
open of business on the ex-dividend date for such distribution;
CR = the new base conversion rate in effect
immediately after the open of business on the ex-dividend date
for such distribution;
SP0
= the average of the last reported sale prices of our common
stock over the ten consecutive
trading-day
period ending on the trading day immediately preceding the ex-
dividend date for such distribution; and
C = the amount of such cash dividend applicable to one share of
common stock.
If any dividend or distribution described in this
clause (4) is declared but not so paid or made, the new
base conversion rate shall be readjusted to the base conversion
rate that would then be in effect if such dividend or
distribution had not been declared.
For the avoidance of doubt, the adjustment in this
clause (4) does not apply to any distributions to the
extent that the right to convert notes has been changed into the
right to convert into reference property in respect of such
distribution as described under Treatment of
Reference Property.
(5) If we or any of our subsidiaries makes a payment in
respect of a tender offer or exchange offer for our common
stock, if the cash and value of any other consideration included
in the payment per share of common stock exceeds the last
reported sale price of our common stock on the trading day next
succeeding the last date on which tenders or exchanges may be
made pursuant to such tender or exchange offer, the base
conversion rate will be increased based on the following formula:
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CR
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=
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CR0
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×
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AC + (SP × OS)
OS0
× SP
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where,
CR0
= the base conversion rate in effect immediately prior to the
close of business on the trading day next succeeding the date
such tender or exchange offer expires;
CR = the new base conversion rate in effect immediately
after the close of business on the trading day next succeeding
the date such tender or exchange offer expires;
S-92
AC = the aggregate value of all cash and any other consideration
(as determined by our board of directors or a committee thereof)
paid or payable for shares purchased in such tender or exchange
offer;
OS0
= the number of shares of our common stock outstanding
immediately prior to the date such tender or exchange offer
expires;
OS = the number of shares of our common stock outstanding
immediately after the date such tender or exchange offer expires
(after giving effect to the purchase of all shares accepted for
purchase or exchange pursuant to such tender offer or exchange
offer); and
SP = the average of the last reported sale prices of our
common stock over the ten consecutive
trading-day
period commencing on, and including, the trading day next
succeeding the date such tender or exchange offer expires.
The adjustment to the base conversion rate under the preceding
paragraph will occur on the trading day immediately following
the date such tender or exchange offer expires; provided
that, for purposes of determining the base conversion rate,
in respect of any trading day during a cash settlement averaging
period during the ten trading days immediately following, but
excluding, the date that any tender or exchange offer expires,
references within this paragraph (5) to ten trading days
shall be deemed replaced with such lesser number of trading days
as have elapsed between the date such tender or exchange offer
expires and such trading day. If we or one of our subsidiaries
is obligated to purchase our common stock pursuant to any such
tender or exchange offer but is permanently prevented by
applicable law from effecting any such purchase or all such
purchases are rescinded, the new base conversion rate shall be
readjusted to the base conversion rate that would be in effect
if such tender or exchange offer had not been made.
Treatment
of Rights
We have adopted a shareholder rights agreement, referred to as a
stockholder rights plan, pursuant to which rights,
referred to as Rights, are distributed to the
holders of our common stock. Our stockholder rights plan
provides that each share of common stock issued (including upon
conversion of the notes) at any time prior to the distribution
of separate certificates representing such Rights will be
entitled to receive such Rights. As a result, there shall not be
any adjustment to the conversion privilege, base conversion rate
or incremental share factor at any time based on our stockholder
rights plan, any amendment to that plan, or any further
stockholder rights plan we may adopt prior to the distribution
of separate certificates representing such Rights. If, however,
prior to any conversion, the Rights have separated from the
common stock, the base conversion rate and incremental share
factor shall be adjusted at the time of separation as if we
distributed to all holders of our common stock, shares of
capital stock, evidences of indebtedness, our assets, debt
securities or rights as described in clause (3) under
Adjustment Events above, subject to
readjustment in the event of the expiration, termination or
redemption of such Rights; provided, however, that no person
(including a participant in a group) whose actions or ownership
caused the separation of the Rights from the common stock shall
be entitled to such adjustments.
Treatment
of Reference Property
In the event of:
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any reclassification of our common stock (other than a change
only in par value, or from par value to no par value or from no
par value to par value, or a change as a result of a subdivision
or combination of our common stock);
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a consolidation, merger or combination involving us; or
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a sale or conveyance to another person of all or substantially
all of our property and assets,
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in each case as a result of which our common stock is converted
into, or exchanged for, stock, other securities, other property
or assets (including cash) or any combination thereof, then, at
the effective time of the transaction, the right to receive
shares of our common stock, if any, upon conversion of a note
with respect to the portion of the daily conversion value in
excess of $50 as provided under Conversion
Rights
S-93
Payment Upon Conversion, will be changed into the right to
receive the kind and amount of shares of stock, other securities
or other property and assets (including cash) or any combination
thereof (in the same proportions) that the holder would have
been entitled to receive (the reference property) in
such transaction in respect of such common stock, and the daily
conversion values and daily share amounts will be determined
based on the values and amounts, respectively, of one unit of
reference property (a unit of reference property
being the kind and amount (in the same proportions) of reference
property that a holder of one share of our common stock would
receive in such transaction) determined as provided under
Payment Upon Conversion and the daily
conversion rate fractions will relate to such units of reference
property.
If the transaction causes our common stock to be converted into
the right to receive more than a single type of consideration
(determined based in part upon any form of stockholder
election), the reference property into which the notes will be
convertible will be deemed to be the weighted average of the
types and amounts of such consideration received by the holders
of our common stock that affirmatively make such an election.
Voluntary
Increases in Conversion Rate
We are permitted to increase the base conversion rate of the
notes by any amount for a period of at least 20 business days.
We may also (but are not required to) increase the base
conversion rate to avoid or diminish income tax to holders of
our common stock or rights to purchase shares of our common
stock in connection with a dividend or distribution of shares
(or rights to acquire shares) or similar event.
Events
That Will Not Result in Adjustment
Except as stated herein, we will not adjust the base conversion
rate for the issuance or acquisition of shares of our common
stock or any securities convertible into or exchangeable for
shares of our common stock or the right to purchase shares of
our common stock or such convertible or exchangeable securities.
The base conversion rate will not be adjusted:
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upon the issuance of any shares of our common stock pursuant to
any present or future plan providing for the reinvestment of
dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan;
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upon the issuance of any shares of our common stock or
restricted stock units or options or rights (including
shareholder appreciation rights) to purchase those shares
pursuant to any present or future employee, director or
consultant benefit plan or program of or assumed by us or any of
our subsidiaries;
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upon the issuance of any shares of our common stock pursuant to
any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet and
outstanding as of the date the notes were first issued;
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upon the repurchase of any of our shares pursuant to an
open-market share repurchase program or other buy-back
transaction that is not a tender offer or exchange offer of the
nature described in Conversion
Rights Conversion Rate Adjustments
Adjustment Events;
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for a change in the par value of the common stock; or
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for accrued and unpaid interest, if any.
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Adjustments to the base conversion rate and incremental share
factor will be calculated to the nearest
1/10,000th.
Notwithstanding anything in this section
Conversion Rights Conversion Rate
Adjustments to the contrary, we will not be required to
adjust the base conversion rate unless the adjustment would
result in a change of at least 1% of the base conversion rate.
However, we will carry forward any adjustments that are less
than 1% of the base conversion rate and take them into account
when determining subsequent adjustments. In addition, we will
make any carry forward adjustments not otherwise effected
(1) upon conversion of the notes, (2) in connection
with a call for redemption, and (3) 25 scheduled trading
days prior to the maturity
S-94
date of the notes. No adjustment to the base conversion rate
will be made if it results in a base conversion price that is
less than the par value (if any) of our common stock.
If the effective date of any adjustment event described in this
section Conversion Rate Adjustments
occurs during a cash settlement averaging period for any notes,
then we will make proportional adjustments to the number of
deliverable shares for each trading day during the portion of
the cash settlement averaging period preceding the effective
date of such adjustment event.
A holder may, in some circumstances, including the distribution
of cash dividends to holders of our shares of common stock, be
deemed to have received a distribution or dividend subject to
U.S. federal income tax as a result of an adjustment or the
nonoccurrence of an adjustment to the base conversion rate. For
a discussion of the U.S. federal income tax treatment of an
adjustment to the base conversion rate, see Material
U.S. Federal Income and Estate Tax Considerations.
Increase
of Applicable Conversion Rate Upon Conversion Upon Make-Whole
Fundamental Change
If you elect to convert your notes in connection with a
make-whole fundamental change (as defined below), we
will increase the applicable conversion rate by a number of
shares (the additional shares) as described
below. Any conversion of the notes by a holder will be deemed
for these purposes to be in connection with such
make-whole fundamental change if it occurs during the period
that begins on the date on which such make-whole fundamental
change becomes effective (or 15 trading days prior to the date
we announce as the anticipated effective date of such make-whole
fundamental change if such event constitutes a fundamental
change as described under clause (4) of the definition of
fundamental change as described below under
Fundamental Change Permits Holders to Require
Us to Purchase Notes) and ends on (and includes) the
business day prior to the repurchase date relating to such
make-whole fundamental change as described below under
Fundamental Change Permits Holders to Require
Us to Purchase Notes. A make-whole fundamental
change means any transaction or event that occurs
prior to June 15, 2015, and constitutes a fundamental
change pursuant to clause (1) or clause (4) under the
definition of fundamental change as described below under
Fundamental Change Permits Holders to Require
Us to Purchase Notes. However, in the case of a
transaction described in clause (4) of the definition of
fundamental change as described below under
Fundamental Change Permits Holders to Require
Us to Purchase Notes, if such transaction does not occur,
we will not be obligated to increase the applicable conversion
rate in connection with such transaction, regardless of the fact
that holders may have elected to convert notes in anticipation
of the effective date of such event, and we will issue a press
release and notify holders who have so elected to convert their
notes promptly after we determine that the transaction in
question will not occur. Each such holder may elect to withdraw
any election to convert by a written notice of withdrawal
delivered to the conversion agent within ten business days after
we announce that the transaction will not occur as anticipated.
We will give notice of an anticipated make-whole fundamental
change to all record holders of the notes no later than the
15th scheduled trading day prior to the date on which a
make-whole fundamental change described under such
clause (4) is anticipated to become effective and no later
than two business days after we learn of a make whole
fundamental change described in such clause (1), to the extent
practicable.
The number of additional shares by which the applicable
conversion rate for the notes will be increased for conversions
in connection with a make-whole fundamental change will be
determined by reference to the table below, based on the date on
which the fundamental change occurs or becomes effective (the
effective date), and the stock price
described below. Any such increase in the applicable conversion
rate will be effected by adding to each of the daily conversion
rate fractions (determined as set forth above under
Payment Upon Conversion) 1/20th of
the applicable number of additional shares set forth in the
table below with respect to such make-whole fundamental change.
If holders of our common stock receive only cash in such
transaction, the stock price shall be the cash amount paid per
share. In all other cases, the stock price will be the average
of the last reported sale prices of our common stock over the
five consecutive trading days prior to but not including the
date of effectiveness of the make-whole fundamental change.
S-95
The stock prices set forth in the first row of the table below
(i.e., column headers) will be adjusted as of any date on which
the base conversion rate of the notes is otherwise adjusted. The
adjusted stock prices will equal the stock prices applicable
immediately prior to such adjustment, multiplied by a fraction,
the numerator of which is the base conversion rate in effect
immediately prior to the adjustment giving rise to the stock
price adjustment and the denominator of which is the base
conversion rate as so adjusted. The number of additional shares
will be adjusted in the same manner as the base conversion rate
as set forth above under Conversion Rate
Adjustments.
The following table sets forth the stock price, effective date
and number of additional shares by which the applicable
conversion rate will be increased upon a conversion in
connection with a make-whole fundamental change that occurs in
the corresponding period to be determined by reference to the
stock price and effective date of the make-whole fundamental
change:
Number of
Additional Shares
(per $1,000 principal amount of the notes)
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Effective Date
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Stock Price
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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June , 2008
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June 15, 2009
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June 15, 2010
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June 15, 2011
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June 15, 2012
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June 15, 2013
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June 15, 2014
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June 15, 2015
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The exact stock prices and effective dates may not be set forth
in the table above, in which case:
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if the stock price is between two stock prices in the table or
the effective date is between two effective dates in the table,
the number of additional shares will be determined by a
straight-line interpolation between the number of additional
shares set forth for the higher and lower stock prices and the
earlier and later effective dates, based on a
365-day
year, as applicable;
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if the stock price is greater than
$ per share (subject to adjustment
in the same manner as the stock prices set forth in the first
row of the table above), no additional shares will be issued
upon conversion; and
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if the stock price is less than $
per share (subject to adjustment in the same manner as the stock
prices set forth in the first row of the table above), no
additional shares will be issued upon conversion.
|
Our obligation to increase the applicable conversion rate as
described above could be considered a penalty, in which case the
enforceability thereof would be subject to general principles of
law and equity. In addition, in no event will the applicable
conversion rate after adjustment
exceed
per $1,000 principal amount of notes, subject to adjustments in
the same manner as the base conversion rate as set forth under
Conversion Rate Adjustments.
A holder may be deemed to have received a distribution or
dividend subject to U.S. federal income tax as a result of
an adjustment to the applicable conversion rate of notes
converted in connection with a make-whole fundamental change.
For a discussion of the U.S. federal income tax treatment
of an adjustment to the base conversion rate, see Material
U.S. Federal Income and Estate Tax Considerations.
Optional
Redemption by Us
Prior to June 15, 2015, the notes will not be redeemable at
our option. On or after June 15, 2015, we may redeem the
notes for cash, in whole or in part, at any time at a redemption
price equal to 100% of the principal amount of the notes to be
redeemed, plus any accrued and unpaid interest up to, but
excluding, the redemption date.
S-96
If the relevant redemption date occurs after a record date and
on or prior to the interest payment date to which that record
date relates, the full amount of accrued and unpaid interest
shall be paid on such interest payment date to the record holder
on the relevant record date, and the redemption price will be
equal to 100% of the principal amount of the notes to be
redeemed.
We will provide not less than 30 nor more than
60 days written notice of redemption by electronic
transmission or mail to each registered holder of notes to be
redeemed. If the redemption notice is given and funds are
deposited as required, then interest will cease to accrue on and
after the redemption date on those notes or portions of notes
called for redemption.
If we call the notes for redemption, notes or portions of notes
to be redeemed will be convertible by the holder until the close
of business on the business day before the redemption date.
If we decide to redeem fewer than all of the outstanding notes,
the trustee will select the notes to be redeemed (in principal
amounts of $1,000 or integral multiples thereof) by lot, on a
pro rata basis, at random, or by another method the trustee
considers fair and appropriate. If the trustee selects a portion
of a holders notes for partial redemption and the holder
converts a portion of its notes, the converted portion will be
deemed to be from the portion selected for redemption.
We may not redeem the notes on any date if the principal amount
of the notes has been accelerated, and such acceleration has not
been rescinded, on or prior to such date.
We may, to the extent permitted by applicable law, at any time
purchase the notes in the open market or by tender at any price
or by private agreement. Any note so purchased by us may, to the
extent permitted by applicable law, be reissued or resold or may
be surrendered to the trustee for cancellation. Any notes
surrendered to the trustee may not be reissued or resold and
will be canceled promptly.
Fundamental
Change Permits Holders to Require Us to Purchase Notes
If a fundamental change (as defined below in this section)
occurs at any time, you will have the right, at your option, to
require us to purchase any or all of your notes, or any portion
of the principal amount thereof that is equal to $1,000 or an
integral multiple of $1,000, on a date (the date being referred
to as the fundamental change repurchase date) of our
choosing that is not less than 20 or more than 35 business days
(or any longer period required by law) after the date we give
the notice of such fundamental change referred to below. The
price we are required to pay is equal to 100% of the principal
amount of the notes to be purchased plus accrued and unpaid
interest, to, but excluding, the fundamental change repurchase
date (unless the fundamental change repurchase date is after a
regular record date and on or prior to the interest payment date
to which it relates, in which case interest accrued to the
interest payment date will be paid to holders of the notes as of
the preceding record date and the price we are required to pay
will be equal to the principal amount of notes subject to
repurchase). Any notes purchased by us will be paid for in cash.
A fundamental change will be deemed to have
occurred at the time after the notes are originally issued that
any of the following occurs:
(1) a person or group
within the meaning of Section 13(d)(3) of the Exchange Act
becomes the direct or indirect beneficial owner, as
defined in
Rule 13d-3
under the Exchange Act, of shares of our common stock
representing more than 50% of the voting power of our common
stock entitled to vote generally in the election of directors
and (i) files a Schedule 13D or Schedule TO or
any other schedule, form or report under the Exchange Act
disclosing such beneficial ownership or (ii) we otherwise
become aware of any such person or group; provided that this
clause (1) shall not apply to a transaction covered in
clause (4) below, including any exception thereto; or
(2) the common stock into which the notes are then
convertible ceases to be listed for trading on the New York
Stock Exchange, the NASDAQ Global Select Market, the NASDAQ
Global Market or another national securities exchange for a
period of 20 consecutive trading days; or
(3) the first day on which a majority of the members of our
board of directors does not consist of continuing
directors; or
S-97
(4) we are a party to a consolidation, merger or binding
share exchange, or any conveyance, transfer, sale, lease or
other disposition in a single transaction or a series of related
transactions of all or substantially all of our properties and
assets other than any transaction that does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of our capital stock and pursuant to which
holders of our capital stock immediately prior to the
transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares
of capital stock entitled to vote generally in elections of
directors of the continuing or surviving or successor person (or
any parent thereof) immediately after giving effect to such
transaction; or
(5) our shareholders approve any plan or proposal for our
liquidation or dissolution.
For purposes of this fundamental change definition:
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board of directors means the board of
directors or other governing body charged with the ultimate
management of any person;
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continuing director means a director who
either was a member of our board of directors on the date the
notes are first issued or who becomes a member of our board of
directors subsequent to that date and whose initial election,
appointment or nomination for election by our shareholders is
duly approved by a majority of the continuing directors on our
board of directors at the time of such approval, either by a
specific vote or by approval of the proxy statement issued by us
on behalf of our entire board of directors in which such
individual is named as a nominee for director; and
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the term person includes any syndicate or
group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.
|
However, a fundamental change will be deemed not to have
occurred if more than 90% of the consideration in the
transaction or transactions (other than cash payments for
fractional shares and cash payments made in respect of
dissenters appraisal rights) which otherwise would
constitute a fundamental change under clause (4) above
consists of shares of common stock, depositary receipts or other
certificates representing common equity interests traded or to
be traded immediately following such transaction on a
U.S. national securities exchange and, as a result of the
transaction or transactions, the notes become convertible, upon
satisfaction of the conditions to conversion, into such common
stock, depositary receipts or other certificates representing
common equity interests (and any rights attached thereto) and
other applicable consideration.
This fundamental change repurchase feature may make more
difficult or discourage a takeover of us and the removal of
incumbent management. We are not, however, aware of any specific
effort to accumulate shares of our common stock or to obtain
control of us by means of a merger, tender offer, solicitation
or otherwise. In addition, the fundamental change repurchase
feature is not part of a plan by management to adopt a series of
antitakeover provisions. Instead, the fundamental change
repurchase feature is a result of negotiations between us and
the underwriters.
The term fundamental change is limited to specified transactions
and may not include other events that might adversely affect our
financial condition. In addition, the requirement that we offer
to purchase the notes upon a fundamental change may not protect
holders in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
We could, in the future, enter into certain transactions,
including mergers or recapitalizations, that would not
constitute a fundamental change but would increase the amount of
debt, including other senior indebtedness, outstanding or
otherwise adversely affect a holder. Neither we nor our
subsidiaries are prohibited from incurring debt, including other
senior indebtedness, under the indenture. The incurrence of
significant amounts of additional debt could adversely affect
our ability to service our debt, including the notes.
Our ability to repurchase notes may be limited by restrictions
on our ability to obtain funds for such repurchase through
dividends from our subsidiaries and the terms of our then
existing borrowing agreements.
S-98
Within 15 business days after a fundamental change, we will
provide to all holders of the notes and the trustee and paying
agent a written notice of the occurrence of the fundamental
change and of the resulting purchase right. Such notice shall
state, among other things:
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the events causing a fundamental change;
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the effective date of the fundamental change;
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the last date on which a holder may exercise the purchase right;
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the fundamental change purchase price;
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the fundamental change repurchase date;
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the name and address of the paying agent and the conversion
agent;
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if applicable, the base conversion rate and any adjustments to
the applicable conversion rate;
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if applicable, that the notes with respect to which a
fundamental change purchase notice has been delivered by a
holder may be converted only if the holder withdraws the
fundamental change purchase notice in accordance with the terms
of the indenture; and
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the procedures that holders must follow to require us to
purchase their notes.
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Simultaneously with providing such notice, we will publish a
notice containing this information in a newspaper of general
circulation in The City of New York or publish the information
on our website or through such other public medium as we may use
at that time.
To exercise the purchase right, you must deliver, on or before
the business day immediately preceding the fundamental change
repurchase date, the notes to be purchased, duly endorsed for
transfer, together with a written purchase notice and the form
entitled Form of Fundamental Change Purchase Notice
on the reverse side of the notes duly completed, to the paying
agent. Your purchase notice must state:
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if certificated notes have been issued, the certificate numbers
of your notes to be delivered for purchase, or if not
certificated, your notice must comply with appropriate DTC
procedures;
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the portion of the principal amount of notes to be purchased,
which must be $1,000 or an integral multiple thereof; and
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that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture.
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You may withdraw any purchase notice (in whole or in part) by a
written notice of withdrawal delivered to the paying agent prior
to 5:00 p.m., New York City time, on the business day
immediately preceding the fundamental change repurchase date.
The notice of withdrawal must state:
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the principal amount of the withdrawn notes;
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if certificated notes have been issued, the certificate numbers
of the withdrawn notes, or if not certificated, your notice must
comply with appropriate DTC procedures; and
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the principal amount, if any, which remains subject to the
purchase notice.
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We will be required to purchase the notes on the fundamental
change repurchase date. You will receive payment of the
fundamental change purchase price on the later of the business
day following the fundamental change repurchase date or the time
of book-entry transfer or the delivery of the notes. If the
paying agent holds money or securities sufficient to pay the
fundamental change purchase price of the notes on the business
day following the fundamental change repurchase date, then:
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the notes will cease to be outstanding and interest, if any,
will cease to accrue (whether or not book-entry transfer of the
notes is made or whether or not the note is delivered to the
paying agent); and
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all other rights of the holder will terminate (other than the
right to receive the fundamental change purchase price upon
delivery or transfer of the notes).
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No notes may be repurchased by us at the option of the holders
upon a fundamental change if the principal amount of the notes
has been accelerated, and such acceleration has not been
rescinded, on or prior to such date.
The definition of fundamental change includes a phrase relating
to the conveyance, transfer, sale, lease or disposition of
all or substantially all of our assets. There is no
precise, established definition of the phrase
substantially all under applicable law. Accordingly,
the ability of a holder of the notes to require us to purchase
its notes as a result of the conveyance, transfer, sale, lease
or other disposition of less than all of our assets may be
uncertain.
In connection with any purchase offer, we will, to the extent
applicable:
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comply with the provisions of
Rule 13e-4,
Rule 14e-1
and any other applicable tender offer rules under the Exchange
Act;
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file a Schedule TO or any successor or similar schedule, if
required, under the Exchange Act; and
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otherwise comply with all applicable federal and state
securities laws in connection with any offer by us to purchase
the notes.
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Repurchase
of Notes by Us at Option of Holder
On June 15, 2015, June 15, 2020, June 15, 2025,
June 15, 2030, and June 15, 2035 (each, a
repurchase date), any holder may require us to
repurchase for cash any outstanding notes for which that holder
has properly delivered and not withdrawn a written repurchase
notice. The repurchase price will equal 100% of the principal
amount of the notes to be repurchased plus any accrued and
unpaid interest to, but excluding, the repurchase date. We will
pay interest due on any such repurchase date to the holder of
record on the relevant record date, which may or may not be the
same person to whom we will pay the repurchase price, and the
repurchase price will not include such interest so paid.
At least 20 business days before any repurchase date, we are
required to give written notice to each holder and the trustee
of the repurchase date and of each holders repurchase
rights and the procedures that each holder must follow in order
to require us to repurchase its notes as described below.
A holder may submit a repurchase notice to the paying agent at
any time from the opening of business on the date that is 20
business days prior to the repurchase date until the close of
business on the business day immediately preceding the
repurchase date.
Any repurchase notice given by a holder electing to require us
to repurchase notes shall be given so as to be received by the
paying agent no later than the close of business on the business
day immediately preceding the repurchase date and must state:
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if certificated notes have been issued, the certificate numbers
of the holders notes to be delivered for repurchase, or if
not certificated, the notice of repurchase must comply with
appropriate DTC procedures;
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the portion of the principal amount of notes to be repurchased,
which must be $1,000 or an integral multiple thereof; and
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that the notes are to be repurchased by us pursuant to the
applicable provisions of the notes and the indenture.
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A holder may withdraw its repurchase notice (in whole or in
part) by a written notice of withdrawal delivered to the paying
agent prior to 5:00 p.m., New York City time, on the
business day immediately preceding the repurchase date. The
notice of withdrawal shall state:
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the principal amount of notes being withdrawn;
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if certificated notes have been issued, the certificate numbers
of the notes being withdrawn, or if not certificated, the notice
of withdrawal must comply with appropriate DTC
procedures; and
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the principal amount of the notes, if any, which remains subject
to the repurchase notice.
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If holders require us to repurchase any outstanding notes on any
repurchase date, we may not have enough funds to pay the
repurchase price. In addition, payment of the repurchase price
may be limited by law or the terms of our future debt agreements
or securities. See Risk Factors Risks Related
to Our Level of Indebtedness We may not be able to
pay interest on the notes or repurchase the notes at the option
of the holder on specified dates or upon a fundamental
change. If we fail to repurchase the notes when required,
we will be in default under the indenture. In addition, we have,
and may in the future incur, other indebtedness with similar
provisions permitting our holders to require us to repurchase
our indebtedness on some specific dates.
In connection with any repurchase, we will, to the extent
applicable:
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comply with the provisions of
Rule 13e-4,
Rule 14e-1
and any other applicable tender offer rules under the Exchange
Act;
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file a Schedule TO or any successor or similar schedule, if
required, under the Exchange Act; and
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otherwise comply with all applicable federal and state
securities laws in connection with any offer by us to purchase
the notes.
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Our obligation to pay the repurchase price for notes for which a
repurchase notice has been delivered and not validly withdrawn
is conditioned upon the holder effecting book-entry transfer of
the notes or delivering certificated notes, together with
necessary endorsements, to the paying agent at any time after
delivery of the repurchase notice. We will cause the repurchase
price for the notes to be paid promptly following the later of
the business day following the repurchase date and the time of
book-entry transfer or delivery of certificated notes, together
with such endorsements.
No notes may be purchased by us at the option of holders on a
repurchase date if the principal amount of the notes has been
accelerated, and such acceleration has not been rescinded, on or
prior to such date.
If, on the business day following the relevant repurchase date,
the paying agent holds money sufficient to pay the repurchase
price of the notes for which a repurchase notice has been
delivered and not validly withdrawn in accordance with the terms
of the indenture, then, immediately after the repurchase date,
the notes will cease to be outstanding and interest on the notes
will cease to accrue, whether or not the notes are transferred
by book entry or delivered to the paying agent. Thereafter, all
of the holders other rights shall terminate, other than
the right to receive the repurchase price upon book-entry
transfer of the notes or delivery of the notes.
Consolidation,
Merger and Sale of Assets
We may not consolidate with or merge into any other person or
convey, transfer or lease all or substantially all of our assets
to any successor person in a single transaction or series of
related transactions, unless:
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we are the continuing person or the resulting, surviving or
transferee person, if other than us, is organized and validly
existing under the laws of the United States of America, any
state thereof, or the District of Columbia and assumes our
obligations on the notes and under the indenture;
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immediately after giving effect to the transaction, no default
or event of default shall have occurred and be
continuing; and
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other conditions described in the indenture are met.
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When such a person assumes our obligations in such
circumstances, subject to certain exceptions, we shall be
discharged from all obligations under the notes and the
indenture. Although the indenture permits these transactions,
some of the transactions could constitute a fundamental change
of us and permit each holder to require us to repurchase the
notes of such holder as described under
Fundamental Change
S-101
Permits Holders to Require Us to Purchase Notes. An
assumption of our obligations under the notes and the indenture
by such person might be deemed for U.S. federal income tax
purposes to be an exchange of the notes for new notes by the
beneficial owners thereof, possibly resulting in recognition of
gain or loss for such purposes and other adverse tax
consequences to the beneficial owner. You should consult your
own tax advisors regarding the tax consequences of such an
assumption.
This covenant includes a phrase relating to the conveyance,
transfer, sale, lease or other disposition of all or
substantially all of our assets. There is no precise,
established definition of the phrase substantially
all under applicable law. Accordingly, the effect of this
covenant may be uncertain in connection with a conveyance,
transfer, sale, lease or other disposition of less than all of
our assets.
Events of
Default
The following are events of default with respect to the notes
under the indenture:
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our default in the payment of any principal amount or any
redemption price, purchase price or fundamental change purchase
price, in each case when due and payable, whether at the final
maturity date, upon redemption, required purchase, acceleration
or otherwise;
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our default in the payment of any interest under the notes,
which default continues for 30 days;
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our default in the delivery when due of all cash and any shares
of common stock or other consideration payable upon conversion
with respect to the notes, which default continues for
10 days;
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our failure to provide any notice of a fundamental change within
the time required to provide such notice;
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our failure to comply with the covenant described above under
Consolidation, Merger and Sale of Assets
upon our receipt of notice of such default from the trustee or
from holders of not less than 25% in aggregate principal amount
of the notes then outstanding, and the failure to cure (or
obtain a waiver of) such default within 30 days after
receipt of such notice;
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our failure to comply with any of our other agreements in the
notes or the indenture upon our receipt of notice of such
default from the trustee or from holders of not less than 25% in
aggregate principal amount of the notes then outstanding, and
the failure to cure (or obtain a waiver of) such default within
60 days after receipt of such notice;
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a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by us or any of
our subsidiaries (or the payment of which is guaranteed by us or
any of our subsidiaries), which default is caused by a failure
to pay principal of or premium or interest on such indebtedness
prior to the expiration of any grace period provided in such
indebtedness, including any extension thereof (a payment
default), or results in the acceleration of such
indebtedness prior to its stated maturity and, in each case, the
principal amount of any such indebtedness, together with the
principal amount of any other such indebtedness under which
there has been a payment default or the maturity of which has
been so accelerated, aggregates in excess of $25.0 million
and provided, further, that if any such default is cured or
waived or any such acceleration rescinded, or such indebtedness
is repaid, within a period of 10 days from the continuation
of such default beyond the applicable grace period or the
occurrence of such acceleration, as the case may be, such event
of default and any consequential acceleration of the notes shall
be automatically rescinded, so long as such rescission does not
conflict with any judgment or decree;
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failure by any guarantor to perform any covenant set forth in
its subsidiary guarantee, or the repudiation by any guarantor of
its obligations under its subsidiary guarantee or the
unenforceability of any subsidiary guarantee against a guarantor
for any reason; and
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certain events of bankruptcy, insolvency or reorganization
affecting us, any guarantor or any of our significant
subsidiaries (as defined in
Regulation S-X
under the Securities Act).
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S-102
Notwithstanding the foregoing, if we so elect, the sole remedy
of holders for an event of default relating to the failure to
comply with the reporting obligations in the indenture, which
are described below under Reports, will,
for the period beginning on the 91st day after the written
notice of the occurrence of such failure to report from the
trustee or holders of 25% of the outstanding principal amount of
the notes, consist exclusively of the right to receive
additional interest on the notes at an annual rate equal to
0.25% of the principal amount of the notes. This additional
interest will be payable in the same manner and on the same
dates as the stated interest payable on the notes. If we so
elect, this additional interest will accrue on all outstanding
notes from and including the 91st day following the date of
such written notice of the failure to comply with the reporting
obligations in the indenture to but not including the date on
which the event of default relating to the reporting obligations
shall have been cured or waived. On the 180th day after the
commencement of such additional interest (if such violation is
not cured or waived prior to such 180th day), the notes
will be subject to acceleration upon written notice from the
trustee or holders of 25% of the outstanding principal amount of
the notes.
In order to exercise the extension right and elect to pay the
additional interest as the sole remedy following the occurrence
of any event of default relating to the failure to comply with
the reporting obligations in accordance with the preceding
paragraph, we must notify all holders of notes and the trustee
and paying agent of our election prior to the close of business
on the 91st day after the written notice to us of such
failure to report (or, if such date is not a business day, on
the first business day thereafter). Upon our failure to timely
give such notice, the notes will be subject to acceleration as
provided in the indenture.
The provisions of the indenture described in the preceding
paragraphs will not affect the rights of holders of notes in the
event of an occurrence of any other event of default.
If an event of default shall have happened and be continuing,
either the trustee or the holders of not less than 25% in
aggregate principal amount of the notes then outstanding may
declare the principal of the notes and any accrued and unpaid
interest through the date of such declaration immediately due
and payable. Upon any such declaration, such principal, premium,
if any, and interest shall become due and payable immediately.
In the case of certain events of bankruptcy or insolvency
relating to us or a significant subsidiary, the principal amount
of the notes together with any accrued interest through the
occurrence of such event shall automatically become and be
immediately due and payable. A declaration of acceleration of
the notes may be rescinded subject to conditions specified in
the indenture. In addition, the holders of a majority in
principal amount of the notes may waive certain defaults under
the indenture.
Subject to the provisions of the indenture relating to the
duties of the trustee, in case an event of default occurs and is
continuing, the trustee will be under no obligation to exercise
any of the rights or powers under the indenture at the request
or direction of any of the holders of notes unless such holders
have offered to the trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the
right to receive payment of principal, premium (if any) or
interest when due, no holder of notes may pursue any remedy with
respect to the indenture or the notes unless:
(i) such holder has previously given the trustee notice
that an event of default is continuing;
(ii) holders of at least 25% in principal amount of the
outstanding notes have requested the trustee in writing to
pursue the remedy;
(iii) such holders have offered the trustee reasonable
security or indemnity against any loss, liability or expense;
(iv) the trustee has not complied with such request within
15 days after the receipt of the request and the offer of
security or indemnity; and
(v) the holders of a majority in principal amount of the
outstanding notes have not given the trustee a direction
inconsistent with such request within such 15 day period.
Subject to certain restrictions, the holders of a majority in
principal amount of the outstanding notes are given the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or of exercising any
trust or power conferred on the trustee. The trustee, however,
may refuse to
S-103
follow any direction that conflicts with law or the indenture or
that the trustee determines is unduly prejudicial to the rights
of any other holder or that would involve the trustee in
personal liability.
We are required to notify the trustee promptly upon becoming
aware of the occurrence of any default under the indenture known
to us. The trustee is then required within 30 calendar days of
becoming aware of the occurrence of any default to give to the
registered holders of the notes notice of all uncured defaults
known to it. However, the trustee may withhold notice to the
holders of the notes of any default, except defaults in payment
of principal or interest on the notes, if the trustee, in good
faith, determines that the withholding of such notice is in the
interests of the holders. We are also required to deliver to the
trustee, on or before a date not more than 120 calendar days
after the end of each fiscal year, a written statement as to
compliance with the indenture, including whether or not any
default has occurred.
Modification
and Waiver
The trustee and we may amend the indenture or the notes with the
consent of the holders of not less than a majority in aggregate
principal amount of the notes then outstanding. However, the
consent of the holder of each outstanding note affected is
required to:
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alter the manner of calculation or rate of accrual of interest
on the note or change the time of payment of any installment of
interest;
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make the note payable in money or securities other than that
stated in the note;
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change the stated maturity of the note;
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reduce the principal amount, redemption price, purchase price or
fundamental change purchase price with respect to the note;
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make any change that adversely affects the rights of a holder to
convert the note or, except as provided for in the indenture,
changes the consideration to be received upon any such
conversion;
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make any change that adversely affects the right to require us
to purchase the note;
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impair the right to institute suit for the enforcement of any
payment with respect to the note or with respect to conversion
of the note; or
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change the provisions in the indenture that relate to modifying
or amending the indenture or waiving any past defaults in the
payment of principal, premium, if any, or interest on the notes.
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Without providing notice to or obtaining the consent of any
holder of notes, the trustee and we may amend the indenture:
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to evidence a successor to us and the assumption by that
successor of our obligations under the indenture and the notes;
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to add to our covenants for the benefit of the holders of the
notes or to surrender any right or power conferred upon us;
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to secure our obligations in respect of the notes or to add a
guarantor of the notes;
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to evidence and provide the acceptance of the appointment of a
successor trustee under the indenture;
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to comply with the requirements of the SEC in order to effect or
maintain qualification of the indenture under the
Trust Indenture Act, as contemplated by the indenture or
otherwise;
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to provide for conversion rights of holders if any
reclassification or change of common stock or any consolidation,
merger or sale of all or substantially all of our property and
assets occurs or otherwise comply with the provisions of the
indenture in the event of such a transaction;
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to increase the conversion rate in accordance with the terms of
the notes;
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to cure any ambiguity, omission, defect or inconsistency in the
indenture; or
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to make any change that does not adversely affect the rights of
the holders of the notes in any material respect.
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The holders of a majority in aggregate principal amount of the
outstanding notes may, on behalf of all the holders of all notes:
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waive compliance by us with restrictive provisions of the
indenture, as detailed in the indenture; or
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waive any past default or event of default under the indenture
and its consequences, except a default or event of default in
the payment of any amount due, or in the obligation to deliver
consideration upon conversion or with respect to any note or in
respect of any provision which under the indenture cannot be
modified or amended without the consent of the holder of each
outstanding note affected.
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Discharge
of the Indenture
We may satisfy and discharge our obligations under the indenture
by delivering to the trustee for cancellation all outstanding
notes or by depositing with the trustee, the paying agent or the
conversion agent, if applicable, after all outstanding notes
have become due and payable, whether at stated maturity or any
redemption date, or any purchase date, or a fundamental change
purchase date, or upon conversion or otherwise, cash and shares
of common stock or other consideration (as applicable under the
terms of the indenture) sufficient to pay all amounts due under
the outstanding notes and paying all other sums payable under
the indenture.
Calculations
in Respect of Notes
Except as otherwise provided above, we will be responsible for
making all calculations called for under the notes. These
calculations include, but are not limited to, determinations of
the last reported sale prices and the applicable stock prices of
our common stock, accrued interest payable on the notes, the
daily conversion rate fractions and the settlement amounts. We
will make all these calculations in good faith and, absent
manifest error, our calculations will be final and binding on
holders of notes. We will provide a schedule of our calculations
to each of the trustee and the conversion agent, and each of the
trustee and conversion agent is entitled to rely conclusively
upon the accuracy of our calculations without independent
verification. The trustee will forward our calculations to any
holder of notes upon the request of that holder.
Trustee
U.S. Bank National Association, is the trustee and has been
appointed by us as registrar and paying agent with regard to the
notes. From time to time, we may have banking relationships in
the ordinary course of business with U.S. Bank National
Association, or its affiliates.
Reports
Notwithstanding that we may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, we
will file with the U.S. Securities and Exchange Commission
(the Commission) (unless the Commission will not
accept such a filing) within the time periods specified in the
Exchange Act and, within 15 days of filing, or attempting
to file, the same with the Commission, furnish to the trustee
and the holders of the outstanding notes:
(1) all quarterly and annual financial and other
information with respect to us and our subsidiaries that would
be required to be contained in a filing with the Commission on
Forms 10-Q
and 10-K if
we were required to file such forms, including a
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report thereon by our certified
independent accountants; and
(2) all current reports that would be required to be filed
with the Commission on
Form 8-K
if we were required to file such reports.
S-105
So long as we are required to file periodic reports under
Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, as amended, our obligation to deliver the
information referred to above shall be deemed satisfied upon the
filing of such information in the EDGAR system and the giving of
notice to the trustee as to the public availability of such
information from such source.
Governing
Law
The indenture provides that it and the notes and the subsidiary
guarantees will be governed by, and construed in accordance
with, the laws of the State of New York.
Book-Entry,
Settlement and Clearance
The
Global Notes
The notes will be initially issued in the form of one or more
registered notes in global form, without interest coupons, which
we refer to as the global notes. Upon issuance, each
of the global notes will be deposited with the trustee as
custodian for DTC and registered in the name of Cede &
Co., as nominee of DTC.
Ownership of beneficial interests in a global note will be
limited to persons who have accounts with DTC, which we refer to
as DTC participants, or persons who hold interests
through DTC participants. We expect that under procedures
established by DTC:
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upon deposit of a global note with DTCs custodian, DTC
will credit portions of the principal amount of the global note
to the accounts of the DTC participants designated by the
underwriter; and
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ownership of beneficial interests in a global note will be shown
on, and transfer of ownership of those interests will be
effected only through, records maintained by DTC (with respect
to interests of DTC participants) and the records of DTC
participants (with respect to other owners of beneficial
interests in the global note).
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Beneficial interests in global notes may not be exchanged for
notes in physical, certificated form except in the limited
circumstances described below.
Book-Entry
Procedures for the Global Notes
All interests in the global notes will be subject to the
operations and procedures of DTC. We provide the following
summary of those operations and procedures solely for the
convenience of investors. The operations and procedures of DTC
are controlled by that settlement system and may be changed at
any time. Neither we nor the underwriter are responsible for
those operations or procedures.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the
State of New York;
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a banking organization within the meaning of
the New York State Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of
the Uniform Commercial Code; and
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clearing agency registered under
Section 17A of the Exchange Act.
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DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities
transactions between its participants through electronic
book-entry changes to the accounts of its participants.
DTCs participants include securities brokers and dealers,
including the underwriter; banks and trust companies; clearing
corporations and other organizations. Indirect access to
DTCs system is also available to others such as banks,
brokers, dealers and trust companies; these indirect
participants clear through or maintain a custodial relationship
with a DTC participant, either directly or indirectly. Investors
who are not
S-106
DTC participants may beneficially own securities held by or on
behalf of DTC only through DTC participants or indirect
participants in DTC.
So long as DTCs nominee is the registered owner of a
global note, that nominee will be considered the sole owner or
holder of the notes represented by that global note for all
purposes under the indenture. Except as provided below, owners
of beneficial interests in a global note:
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will not be entitled to have notes represented by the global
note registered in their names;
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will not receive or be entitled to receive physical,
certificated notes; and
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will not be considered the owners or holders of the notes under
the indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the trustee
under the indenture.
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As a result, each investor who owns a beneficial interest in a
global note must rely on the procedures of DTC to exercise any
rights of a holder of notes under the indenture (and, if the
investor is not a participant or an indirect participant in DTC,
on the procedures of the DTC participant through which the
investor owns its interest).
Payments of principal, and interest with respect to the notes
represented by a global note will be made by the trustee to
DTCs nominee as the registered holder of the global note.
Neither we nor the trustee will have any responsibility or
liability for the payment of amounts to owners of beneficial
interests in a global note, for any aspect of the records
relating to or payments made on account of those interests by
DTC, or for maintaining, supervising or reviewing any records of
DTC relating to those interests.
Payments by participants and indirect participants in DTC to the
owners of beneficial interests in a global note will be governed
by standing instructions and customary industry practice and
will be the responsibility of those participants or indirect
participants and DTC.
Transfers between participants in DTC will be effected under
DTCs procedures and will be settled in
same-day
funds.
Certificated
Notes
Notes in physical, certificated form will be issued and
delivered to each person that DTC identifies as a beneficial
owner of the related notes only if:
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DTC notifies us at any time that it is unwilling or unable to
continue as depositary for the global notes and a successor
depositary is not appointed within 90 days;
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DTC ceases to be registered as a clearing agency under the
Exchange Act and a successor depositary is not appointed within
90 days; or
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an event of default in respect of the notes has occurred and is
continuing and any holder of notes requests that the notes be
issued in physical, certificated form.
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In addition, beneficial interests in a global note may be
exchanged for certificated notes upon request of a DTC
participant by written notice given to the trustee by or on
behalf of DTC in accordance with customary procedures of DTC.
S-107
MATERIAL
U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
Scope of
Discussion
The following discussion summarizes the material
U.S. federal income and, in the case of
non-U.S. holders
(as defined below), estate tax considerations relating to the
ownership and disposition of the notes and shares of common
stock into which the notes are convertible and represents the
opinion of our counsel, Baker Botts L.L.P., insofar as it
relates to matters of U.S. federal income tax law and legal
conclusions with respect to those matters.
This discussion is based upon the Internal Revenue Code of 1986,
as amended, Treasury Regulations promulgated under the Internal
Revenue Code, court decisions, published positions of the
Internal Revenue Service and other applicable authorities, all
as in effect on the date of this document and all of which are
subject to change or differing interpretations, possibly with
retroactive effect. This discussion is limited to holders of the
notes who purchase the notes at their issue price
and who hold the notes and the ordinary shares into which such
notes are convertible as capital assets. For this purpose only,
the issue price of the notes is the first price at
which a substantial amount of the notes are sold for cash to
persons other than bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement
agents or wholesalers. For purposes of this discussion,
holder means either a U.S. holder (as defined
below) or a
non-U.S. holder
(as defined below) or both, as the context may require.
This discussion does not address all of the U.S. federal
income tax consequences that may be relevant to holders in light
of their particular circumstances or to holders who may be
subject to special treatment under U.S. federal income tax
laws, such as:
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a financial institution,
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a tax-exempt organization,
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an S corporation or other pass-through entity,
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an insurance company,
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a mutual fund,
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a dealer in stocks and securities, or foreign currencies,
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a trader in securities who elects the mark-to-market method of
accounting for its securities,
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a holder who is subject to the alternative minimum tax
provisions of the Internal Revenue Code,
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certain expatriates or former long-term residents of the United
States or a United States person that has a functional currency
other than the U.S. dollar,
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a domestic personal holding company,
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a regulated investment company,
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a real estate investment trust, or
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a holder who holds the notes as part of a hedge, conversion or
constructive sale transaction, straddle, wash sale, or other
risk reduction transaction.
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Moreover, this discussion does not address any aspect of
non-income taxation (other than the discussion set forth below
in
Non-U.S. Holders
United States Federal Estate Tax) or state, local or
foreign taxation. No ruling has been or will be obtained from
the Internal Revenue Service regarding the U.S. federal tax
consequences relating to the purchase, ownership or disposition
of the notes or the shares of common stock into which the notes
are convertible. As a result, no assurance can be given that the
Internal Revenue Service will not assert, or that a court will
not sustain, a position contrary to the conclusions set forth
below.
S-108
If an entity classified as a partnership holds the notes or
common stock, the tax treatment of a partner will generally
depend on the status of the partner and the activities of the
partnership. If you are a partnership or a partner of a
partnership holding the notes or common stock, you should
consult your own tax advisors.
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF
THE TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP OR
DISPOSITION OF THE NOTES OR THE SHARES OF COMMON STOCK INTO
WHICH THE NOTES ARE CONVERTIBLE. WE URGE YOU TO CONSULT A TAX
ADVISOR REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP OR
DISPOSITION OF THE NOTES OR THE SHARES OF COMMON STOCK INTO
WHICH THE NOTES ARE CONVERTIBLE IN LIGHT OF YOUR OWN SITUATION.
U.S.
Holders
The following is a discussion of the material U.S. federal
income tax consequences that will apply to U.S. holders of
the notes. The discussion is subject to the assumptions and
limitations set forth above in Scope of
Discussion. As used in this discussion, a
U.S. holder is a beneficial owner of a note
who, for U.S. federal income tax purposes, is:
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an individual U.S. citizen or resident alien,
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized
under U.S. law (federal or state),
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an estate whose worldwide income is subject to U.S. federal
income tax, or
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United States
persons (as defined in the Internal Revenue Code) have the
authority to control all substantial decisions of the trust or
(2) has a valid election in effect under applicable
U.S. Treasury Regulations to be treated as a United States
person.
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Payments
of Interest on the Notes
In general, a U.S. holder will be required to include
interest received on a note as ordinary income at the time it
accrues or is received in accordance with the holders
regular method of accounting for U.S. federal income tax
purposes.
Additional
Interest Amounts
We intend to take the position that the possibility that holders
of the notes will be paid additional interest as described under
the heading Description of the Notes Events of
Default is a remote and incidental contingency as of the
issue date of the notes within the meaning of the applicable
Treasury Regulations. Accordingly, any such additional amount
should be taxable to U.S. holders as ordinary income only
at the time it accrues or is received in accordance with such
holders regular method of accounting for U.S. federal
income tax purposes. Our determination that the payment of
additional amounts is a remote and incidental contingency is
binding upon all holders of the notes, unless a holder properly
discloses to the Internal Revenue Service that it is taking a
contrary position.
Sale,
Exchange, Redemption or Other Taxable Disposition of the
Notes
Generally, the sale, exchange, redemption or other taxable
disposition of a note (other than a conversion of a note into
cash and shares of common stock described below under
Conversion of the Notes) will result in
taxable gain or loss to a U.S. holder equal to the
difference between (1) the amount of cash plus the fair
market value of any other property received by the
U.S. holder in the sale, exchange, redemption or other
taxable disposition (excluding amounts attributable to accrued
but unpaid interest, which will be taxed as described under
Payments of Interest on the Notes,
above) and (2) the holders adjusted tax basis in the
S-109
note. A U.S. holders adjusted tax basis in a note
will generally equal the holders original purchase price
for the note.
Gain or loss recognized on the sale, exchange, redemption or
other taxable disposition of a note will generally be capital
gain or loss and will be long-term capital gain or loss if the
note is held for more than one year. A reduced tax rate on
capital gain generally will apply to long term capital gain of a
non-corporate shareholder. There are limitations on the
deductibility of capital losses.
Exchange
in Lieu of Conversion
If a holder of notes surrenders notes for conversion, we may, at
our election, direct in writing the conversion agent to
surrender such notes to a financial institution designated by us
for exchange in lieu of conversion. In order to accept any notes
surrendered for conversion, the designated financial institution
must agree to deliver, in exchange for such notes, the cash and
number of shares of our common stock, if any, due upon
conversion based upon the applicable conversion rate. See
Description of the Notes Conversion
Rights Exchange in Lieu of Conversion, above.
If the designated financial institution accepts such notes and
delivers cash and any common stock in exchange for the notes,
the holder will be taxed on the transfer as a sale or exchange
of the notes, as described above under Sale,
Exchange, Redemption or Other Taxable Disposition of the
Notes, above.
Conversion
of the Notes
If a holder converts a note and we deliver solely cash in
satisfaction of our obligation, the holder will generally be
subject to the rules described under Sale,
Exchange, Redemption or Other Taxable Disposition of the
Notes, above.
If a holder converts a note and we deliver a combination of cash
and shares of common stock, the holder generally should
recognize gain, but not loss. Such gain generally should equal
the excess of the sum of the fair market value of the shares of
common stock and cash received (excluding amounts attributable
to accrued but unpaid interest, which will be taxable as
described under Payments of Interest on the
Notes, above, and cash received in lieu of a fractional
share) over the holders tax basis in the notes (excluding
the portion of the tax basis that is allocable to a fractional
share), except that in no event should the gain recognized
exceed the amount of cash the holder receives (other than cash
received in lieu of a fractional share or cash attributable to
accrued interest).
Cash received in lieu of a fractional share should be treated as
a payment in exchange for the fractional share. Accordingly, the
receipt of cash in lieu of a fractional share should generally
result in a holders recognition of gain or loss, if any,
measured by the difference between the cash received for the
fractional share and the portion of the holders tax basis
in the notes that is allocable to the fractional share.
Any gain recognized on the conversion or gain or loss recognized
on the receipt of cash in lieu of a fractional share would
generally be capital gain or loss, and would be taxable as
described under Sale, Exchange, Redemption or
Other Taxable Disposition of the Notes, above.
A holders tax basis in any shares of common stock received
upon conversion (other than shares attributable to accrued
interest, the tax basis of which would equal the amount of
accrued interest with respect to which the shares were received)
should generally equal the holders adjusted tax basis in
the note at the time of the conversion, subject to the following
adjustments:
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a reduction by an amount equal to that portion of the
holders tax basis in the note that is allocable to any
fractional share,
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a reduction by the amount of cash the holder received in the
conversion (other than cash received in lieu of a fractional
share or cash attributable to accrued interest) and
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an increase by the amount of gain, if any, recognized by the
holder on the conversion (other than gain with respect to a
fractional share).
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S-110
The holding period for common shares received on conversion
should generally include the holding period of the note
converted.
Notwithstanding the above, there is a possibility that the
conversion could be treated as a partial taxable sale of the
note and a partial tax-free conversion of the note. A holder
should consult its tax advisor regarding the U.S. federal
income tax consequences of the receipt of both cash and shares
of common stock upon conversion of a note.
Constructive
Distributions
Holders of convertible debt instruments such as the notes may,
in certain circumstances, be deemed to have received
distributions on shares if the conversion rate of such
instruments is adjusted. However, adjustments to the conversion
rate made pursuant to a bona fide reasonable adjustment formula
which has the effect of preventing the dilution of the interest
of the holders of the notes will generally not be deemed to
result in a constructive distribution of shares.
Certain of the possible adjustments provided in the notes may
not qualify as being pursuant to a bona fide reasonable
adjustment formula. For example, a constructive distribution
would result if the conversion rate were adjusted to compensate
holders of notes for distributions of cash to our shareholders.
The adjustment to the conversion rate of notes converted in
connection with certain changes in control, as described under
Description of the Notes Conversion
Rights Increase of Applicable Conversion Rate Upon
Conversion Upon Make-Whole Fundamental Change, may also be
treated as a constructive distribution.
If such adjustments are made, a holder may be deemed to have
received constructive distributions includible in its income in
the manner described below under Distributions
on and Sales of the Common Stock even though the holder
has not received any cash or property as a result of such
adjustments (although it is not entirely clear whether the lower
applicable capital gains rate described in
Distributions on and Sales of the Common
Stock would apply to such a constructive distribution).
In addition, in certain circumstances, the failure to provide
for such an adjustment may also result in a constructive
distribution to a holder. Generally, a holders tax basis
in the notes will be increased to the extent of any such
constructive distribution treated as a dividend.
It is unclear whether corporate holders would be entitled to
claim the dividends-received deduction with respect to any such
constructive dividends.
Distributions
on and Sales of the Common Stock
U.S. holders will be required to include in gross income as
ordinary income the gross amount of any distribution on the
shares of common stock to the extent that the distribution is
paid out of our current or accumulated earnings and profits as
determined for U.S. tax purposes (a dividend).
Under current law, dividends received by a non-corporate
shareholder will generally be subject to U.S. federal
income tax at a maximum rate of 15%, provided certain holding
period requirements are met. This reduced rate of tax on
dividends is scheduled to expire effective for taxable years
beginning after December 31, 2010. Dividends received by a
corporation may be eligible for a dividends-received deduction,
subject to applicable limitations.
Distributions in excess of current and accumulated earnings and
profits will be applied first to reduce the
U.S. holders tax basis in the shares. To the extent
that the distribution exceeds the holders tax basis, the
excess will constitute gain from a sale or exchange of the
shares.
A U.S. holder of our shares of common stock will generally
recognize gain or loss for U.S. tax purposes upon the sale
or exchange of such shares in an amount equal to the difference
between the amount realized from such sale or exchange and the
holders tax basis in such shares. Such gain or loss
generally will be capital gain or loss.
Under current law, long-term capital gain of non-corporate
shareholders is subject to tax at a maximum rate of 15%.
However, this reduced rate is scheduled to expire effective for
taxable years beginning after December 31, 2010. There are
limitations on the deductibility of capital losses.
S-111
Information
Reporting and Backup Withholding
Information reporting requirements generally will apply to
payments of interest on the notes and dividends on shares of
common stock and to the proceeds of a sale or other disposition
of a note or share of common stock paid to a U.S. holder
unless the holder is an exempt recipient, such as a corporation.
Backup withholding will apply to those payments if the
U.S. holder fails to provide the holders taxpayer
identification number, or certification of exempt status, or if
the holder otherwise fails to comply with applicable
requirements to establish an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against the
U.S. holders U.S. federal income tax liability
provided the required information is timely furnished to the
Internal Revenue Service.
Non-U.S.
Holders
The following is a discussion of the material U.S. federal
income tax consequences that will apply to
non-U.S. holders
of the notes or shares of common stock. The discussion is
subject to the assumptions and limitations set forth above in
Scope of Discussion. As used in this
discussion, a
non-U.S. holder
is a beneficial owner of the notes, other than an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes, that is not a U.S. holder.
Payments
of Interest on the Notes
The payment of interest on a note to a
non-U.S. holder
will not be subject to U.S. federal withholding tax under
the portfolio interest exemption, provided that:
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interest paid on the note is not effectively connected with the
non-U.S. holders
conduct of a trade or business in the United States;
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the
non-U.S. holder
does not actually or constructively own 10% or more of the total
combined voting power of all classes of our shares of stock
entitled to vote;
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the
non-U.S. holder
is not a controlled foreign corporation that is related to us
through stock ownership within the meaning of the Code; and
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the U.S. payor does not have actual knowledge or reason to
know that the holder is a U.S. person and either
(1) the beneficial owner of the note certifies to the
applicable payor or its agent, under penalties of perjury, that
it is not a U.S. holder and provides its name and address
on IRS
Form W-8BEN
(or a suitable substitute form), or (2) a securities
clearing organization, bank or other financial institution that
holds customers securities in the ordinary course of its
trade or business (a financial institution) and
holds the note, certifies under penalties of perjury that an IRS
Form W-8BEN
(or a substitute form) has been received from the beneficial
owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy of the form
or the U.S. payor otherwise possesses documentation upon
which it may rely to treat the payment as made to a
non-U.S. person
in accordance with U.S. Treasury Regulations.
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If the
non-U.S. holder
cannot satisfy the requirements described above, payments of
interest made to the holder will be subject to a 30%
U.S. federal withholding tax, unless the holder provides
the payor with either (i) a properly executed IRS
Form W-8BEN
(or suitable substitute form) claiming an exemption from or
reduction in withholding under an applicable income tax treaty
or (ii) a properly executed IRS
Form W-8ECI
(or suitable substitute form) stating that interest paid on the
notes is not subject to withholding tax because it is
effectively connected with the holders conduct of a trade
or business in the United States.
Except to the extent otherwise provided under an applicable tax
treaty, a
non-U.S. holder
generally will be taxed in the same manner as a U.S. holder
with respect to interest on a note if such interest is
effectively connected with the
non-U.S. holders
conduct of a U.S. trade or business and, where a treaty
applies, is attributable to a U.S. permanent establishment
of the
non-U.S. holder.
Effectively connected interest received
S-112
by a corporate
non-U.S. holder
may also, under certain circumstances, be subject to an
additional branch profits tax at a 30% rate (or, if
applicable, a lower treaty rate), subject to certain adjustments.
Distributions
(and Constructive Distributions) on Our Common
Stock
Except as provided below, any dividends paid to a
non-U.S. holder
with respect to the shares of common stock (and any deemed
dividends resulting from certain adjustments, or failure to make
adjustments, to the conversion rate including, without
limitation, adjustments in respect of taxable distributions to
holders of our common stock, see Conversion of
the Notes Constructive Distributions above)
will be subject to withholding tax at a 30% rate (or lower
applicable income tax treaty rate). Any withholding tax on a
deemed dividend may be withheld from interest, shares of common
stock or sales proceeds subsequently paid or credited to the
non-U.S. holder.
In order to obtain a reduced rate of withholding under an
applicable income tax treaty, the
non-U.S. holder
will be required to provide a properly executed IRS
Form W-8BEN
(or suitable substitute form) certifying the holders
entitlement to benefits under the treaty.
Dividends that are effectively connected with the conduct of a
trade or business of the
non-U.S. holder
within the United States and, where a tax treaty applies, are
attributable to a U.S. permanent establishment of the
non-U.S. holder,
are not subject to the withholding tax, but instead are subject
to U.S. federal income tax on a net income basis at
applicable graduated individual or corporate rates. A
non-U.S. holder
will be required to provide a properly executed IRS
Form W-8ECI
(or suitable substitute form) in order for the holders
effectively connected income to be exempt from withholding. Any
such effectively connected income received by a foreign
corporation may, under certain circumstances, be subject to an
additional branch profits tax at a 30% rate (or lower applicable
income tax treaty rate).
Sale,
Exchange, Redemption, Conversion or other Disposition of Notes
or Shares of Common Stock
A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
gain realized on the sale, exchange or retirement of a note,
including the exchange of a note for a combination of cash and
shares of common stock, or the sale or exchange of shares of
common stock, unless:
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the gain is effectively connected with the
non-U.S. holders
conduct of a U.S. trade or business (and, if required by an
applicable income tax treaty, is attributable to a
U.S. permanent establishment of the holder);
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the
non-U.S. holder
is an individual present in the United States for 183 days
or more in the year of such sale, exchange or retirement and
either (1) has a tax home in the United States
and certain other requirements are met, or (2) the gain
from the disposition is attributable to an office or other fixed
place of business the
non-U.S. holder
maintains in the United States; or
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we are or have been a U.S. real property holding
corporation, or a USRPHC, for U.S. federal income tax
purposes (i.e., a domestic corporation whose trade or business
and real property assets consist primarily of United
States real property interests).
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If the
non-U.S. holder
is an individual described in the first bullet point above, the
holder will be subject to tax on the net gain derived from the
sale, exchange, redemption, conversion or other taxable
disposition under regular graduated U.S. federal income tax
rates. If the
non-U.S. holder
is an individual described in the second bullet point above, the
holder will be subject to a flat 30% tax on the gain derived
from the sale, exchange, redemption, conversion or other taxable
disposition, which may be offset by U.S. source capital
losses, even though the
non-U.S. holder
is not considered a resident of the United States. If the
non-U.S. holder
is a foreign corporation that falls under the first bullet point
above, the holder will be subject to tax on the net gain in the
same manner as if the holder were a United States person as
defined under the Code, and, in addition, the holder may be
subject to the branch profits tax equal to 30% of the
holders effectively connected earnings and profits or at
such lower rate as may be specified by an applicable income tax
treaty.
With respect to third bullet point above, we believe that we
currently are not, and we do not expect to be for the
foreseeable future, a USRPHC.
S-113
Any cash or shares of common stock that a
non-U.S. holder
receives on the sale, exchange, redemption, conversion or other
disposition of a note which is attributable to accrued interest
will be subject to U.S. federal income tax in accordance
with the rules for taxation of interest described above under
Payments of Interest on the Notes.
United
States Federal Estate Tax
A
non-U.S. holders
estate will not be subject to United States federal estate tax
on notes beneficially owned by the holder at the time of the
holders death, provided that any payment to such holder on
the notes would be eligible for exemption from the 30%
U.S. federal withholding tax under the portfolio
interest exemption described above under
Payments of Interest on the Notes
without regard to the statement requirement described in the
last bullet point. However, shares of common stock held by a
non-U.S. holder
or an entity the property of which is potentially includible in
such holders gross estate for U.S. federal estate tax
purposes at the time of the holders death will be treated
as U.S. situs property subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
Information
Reporting and Backup Withholding
Generally, we must report to the Internal Revenue Service and to
the
non-U.S. holder
the amount of interest and dividends paid to such holder and the
amount of tax, if any, withheld with respect to those payments.
Copies of the information returns reporting such interest
payments and any withholding may also be made available to the
tax authorities in the country in which the
non-U.S. holder
resides under the provisions of an applicable income tax treaty.
In general, a
non-U.S. holder
will not be subject to backup withholding with respect to
payments of interest or dividends that we make to the holder
provided that we do not have actual knowledge or reason to know
that the holder is a United States person, as defined under the
Internal Revenue Code, and we have received from the
non-U.S. holder
the statement described above in the last bullet point under
Payments of Interest on the Notes.
In addition, no information reporting or backup withholding will
be required regarding the proceeds of the sale or other
disposition of a note made within the United States or conducted
through certain U.S.-related financial intermediaries, if the
payor receives the statement described above and does not have
actual knowledge or reason to know that the holder is a United
States person, as defined under the Internal Revenue Code, or
the holder otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against the
non-U.S. holders
U.S. federal income tax liability provided the required
information is timely furnished to the Internal Revenue Service.
S-114
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated June , 2008, we
have agreed to sell to the underwriters named below, for whom
Credit Suisse Securities (USA) LLC, Goldman, Sachs &
Co. and J.P. Morgan Securities Inc. are acting as joint
bookrunners, the following respective principal amounts of notes:
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Principal
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Amount
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Underwriter
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of Notes
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Credit Suisse Securities (USA) LLC
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$
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Goldman, Sachs & Co.
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J.P. Morgan Securities Inc.
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Total
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$
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100,000,000
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The underwriting agreement provides that the underwriters are
obligated to purchase all of the notes, if any are purchased,
other than those notes covered by the over-allotment option
described below. The underwriting agreement also provides that
if an underwriter defaults on its purchase commitments, the
purchase commitments of non-defaulting underwriters may be
increased or the offering may be terminated.
We have granted to the underwriters a
30-day
option to purchase an aggregate of not more than
$15 million additional principal amount of the notes at the
initial public offering price less the underwriting discounts
and commissions. The underwriters may exercise this option at
any time within the
30-day
period beginning on the date of this prospectus supplement.
The underwriters propose to offer the notes initially at the
public offering price on the cover page of this prospectus
supplement and to selling group members at that price less a
selling concession of % of the
principal amount per note. After the initial public offering the
representative may change the public offering price and
concession and discount to broker/dealers.
The following table summarizes the compensation and estimated
expenses we will pay:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Note
|
|
|
Total
|
|
|
|
Without
|
|
|
With
|
|
|
Without
|
|
|
With
|
|
|
|
Over-Allotment
|
|
|
Over-Allotment
|
|
|
Over-Allotment
|
|
|
Over-Allotment
|
|
|
Underwriting discounts and commissions payable by us
|
|
|
|
%
|
|
|
|
%
|
|
$
|
|
|
|
$
|
|
|
Expenses payable by us
|
|
|
|
%
|
|
|
|
%
|
|
$
|
|
|
|
$
|
|
|
The notes are a new issue of securities with no established
trading market. The underwriters have advised us that one or
more of the underwriters intends to make a secondary market for
the notes. However, they are not obligated to do so and may
discontinue making a secondary market for the notes at any time
without notice. No assurance can be given as to how liquid the
trading market for the notes will be.
We have agreed that we will not offer, sell, pledge, contract to
sell or otherwise dispose of, or grant any option, right or
warrant to purchase from us directly or indirectly, enter into
any swap, hedge or any other agreement that transfers, in whole
or in part, the economic consequences of ownership, establish or
increase a put equivalent position or liquidate or
decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act, or file with the
SEC a registration statement (other than a registration
statement relating to our director and employee stock plans in
effect on the date of this prospectus supplement) under the
Securities Act relating to, any securities substantially similar
to the notes, shares of our common stock, or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, or publicly disclose our intention to make
any offer, sale, disposition or filing, without the prior
written consent of Credit Suisse Securities (USA) LLC, Goldman,
Sachs & Co. and J.P. Morgan Securities Inc. for a
period of 90 days after the date of this prospectus
supplement, subject to certain exceptions, including exceptions
that permit us to offer and sell securities pursuant to our
proposed concurrent common stock offering, the Caledonia Private
Placement, any private sales of up to 2,000,000 shares of
our common stock or such other securities
S-115
convertible into or exchangeable or exercisable for such shares
in connection with acquisitions in which the purchaser agrees to
be bound by the restrictions described in this paragraph and our
director and employee stock plans existing on the date hereof
and awards thereunder, including the forfeiture to us of common
stock in satisfaction of tax withholding obligations arising in
connection with the issuance, vesting or exercise of an award
under any such plan.
Caledonia, our executive officers and our board of directors
have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
enter into a transaction that would have the same effect, offer,
sell, contract to sell, contract to purchase any option, right
or warrant to purchase any shares of our common stock or
securities convertible into or exchangeable or exercisable for
any shares of our common stock, enter into a transaction that
would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of our common stock, or
such other securities, whether any such aforementioned
transaction is to be settled by delivery of our common stock or
such other securities, in cash or otherwise, or publicly
disclose the intention to make any such offer, sale, pledge or
disposition, or to enter into any such transaction, swap, hedge
or other arrangement or make any demand for or exercise any
right with respect to, the registration of our common stock or
any security convertible into or exercisable or exchangeable for
our common stock, without, in each case, the prior written
consent of Credit Suisse Securities (USA) LLC, Goldman, Sachs
& Co. and J.P. Morgan Securities Inc. for a period of
90 days after the date of this prospectus supplement,
subject to certain exceptions, including exceptions that permit
transfers as bona fide gifts or by will or intestacy by our
executive officers and directors in which the transferee agrees
to be bound by the restrictions described in the paragraph above.
We have agreed to indemnify the underwriters against
liabilities, including liabilities under the Securities Act, or
to contribute to payments which the underwriters may be required
to make in that respect.
In connection with the offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions, and penalty bids and passive market
making in accordance with Regulation M under the Securities
Exchange Act of 1934 (the Exchange Act).
|
|
|
|
|
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
|
|
|
|
Over-allotment involves sales by the underwriters of notes in
excess of the principal amount of notes the underwriters are
obligated to purchase, which creates a syndicate short position.
The short position may be either a covered short position or a
naked short position. In a covered short position, the principal
amount of the notes over-allotted by the underwriters is not
greater than the principal amount of notes that they may
purchase in the over-allotment option. In a naked short
position, the principal amount of notes involved is greater than
the principal amount of the notes in the over-allotment option.
The underwriters may close out any short position by either
exercising their over-allotment option
and/or
purchasing notes in the open market.
|
|
|
|
Syndicate covering transactions involve purchases of the notes
in the open market after the distribution has been completed in
order to cover syndicate short positions. In determining the
source of notes to close out the short position, the
underwriters will consider, among other things, the price of
notes available for purchase in the open market as compared to
the price at which they may purchase notes through the
over-allotment option. If the underwriters sell more notes than
could be covered by the over-allotment option, a naked short
position, that position can only be closed out by buying notes
in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of the notes in the open market
after pricing that could adversely affect investors who purchase
in the offering.
|
|
|
|
Penalty bids permit the representative to reclaim a selling
concession from a syndicate member when the notes originally
sold by the syndicate member are purchased in a stabilizing
transaction or a syndicate covering transaction to cover
syndicate short positions.
|
S-116
|
|
|
|
|
In passive market making, market makers in the notes who are
underwriters or prospective underwriters may, subject to
limitations, make bids for or purchases of the notes until the
time, if any, at which a stabilizing bid is made.
|
These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of the notes or preventing or retarding a
decline in the market price of the notes. As a result the price
of the notes may be higher than the price that might otherwise
exist in the open market. These transactions, if commenced, may
be discontinued at any time.
A prospectus in electronic format may be made available on the
web sites maintained by one or more of the underwriters
participating in this offering and one or more of the
underwriters participating in this offering may distribute
prospectuses electronically. The representative may agree to
allocate securities to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet
distributions on the same basis as other allocations.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), each underwriter has
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the Relevant Implementation
Date) it has not made and will not make an offer of notes
which are the subject of the offering contemplated by this
prospectus to the public in that Relevant Member State other
than:
|
|
|
|
|
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
|
|
|
|
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
|
|
|
|
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to
obtaining the prior consent of the underwriter for any such
offer; or
|
|
|
|
in any other circumstances falling within Article 3(2) of
the Prospectus Directive, provided that no such offer of notes
shall require us or any underwriter to publish a prospectus
pursuant to Article 3 of the Prospectus Directive.
|
For the purposes of this provision, the expression an
offer of notes to the public in relation to any
notes in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the notes to be offered so as to enable an
investor to decide to purchase or subscribe to purchase the
notes, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member
State, and the expression Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
Each underwriter has represented and agreed that:
|
|
|
|
|
it has only communicated or caused to be communicated and will
only communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the Financial Services and Markets Act
(FSMA)) received by it in connection with the issue
or sale of the notes in circumstances in which
Section 21(1) of the FSMA does not apply to us; and
|
|
|
|
it has complied and will comply with all applicable provisions
of the FSMA with respect to anything done by it in relation to
the notes in, from or otherwise involving the United Kingdom.
|
All of the foregoing restrictions relating to the notes offered
hereby also apply to the common stock issuable upon conversion
of the notes.
The underwriters are also acting as underwriters in connection
with our proposed concurrent common stock offering. Certain of
the underwriters and their respective affiliates have, from time
to time, performed, and may in the future perform, various
financial advisory and investment banking services for the
company, for which they received or will receive customary fees
and expenses.
S-117
NOTICE TO
CANADIAN RESIDENTS
Resale
Restrictions
The distribution of the notes in Canada is being made only on a
private placement basis exempt from the requirement that we
prepare and file a prospectus with the securities regulatory
authorities in each province where trades of the notes are made.
Any resale of the notes in Canada must be made under applicable
securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made under
available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the notes.
Representations
of Purchasers
By purchasing in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the
purchase confirmation is received that:
|
|
|
|
|
the purchaser is entitled under applicable provincial securities
laws to purchase the notes without the benefit of a prospectus
qualified under those securities laws,
|
|
|
|
where required by law, that the purchaser is purchasing as
principal and not as agent,
|
|
|
|
the purchaser has reviewed the text above under Resale
Restrictions, and
|
|
|
|
the purchaser acknowledges and consents to the provision of
specified information concerning its purchase of the notes to
the regulatory authority that by law is entitled to collect the
information.
|
Further details concerning the legal authority for this
information is available on request.
Rights of
Action Ontario Purchasers Only
Under Ontario securities legislation, certain purchasers who
purchase a security offered by this prospectus during the period
of distribution will have a statutory right of action for
damages, or while still the owner of the notes, for rescission
against us in the event that this prospectus contains a
misrepresentation without regard to whether the purchaser relied
on the misrepresentation. The right of action for damages is
exercisable not later than the earlier of 180 days from the
date the purchaser first had knowledge of the facts giving rise
to the cause of action and three years from the date on which
payment is made for the notes. The right of action for
rescission is exercisable not later than 180 days from the
date on which payment is made for the notes. If a purchaser
elects to exercise the right of action for rescission, the
purchaser will have no right of action for damages against us.
In no case will the amount recoverable in any action exceed the
price at which the notes were offered to the purchaser and if
the purchaser is shown to have purchased the securities with
knowledge of the misrepresentation, we will have no liability.
In the case of an action for damages, we will not be liable for
all or any portion of the damages that are proven to not
represent the depreciation in value of the notes as a result of
the misrepresentation relied upon. These rights are in addition
to, and without derogation from, any other rights or remedies
available at law to an Ontario purchaser. The foregoing is a
summary of the rights available to an Ontario purchaser. Ontario
purchasers should refer to the complete text of the relevant
statutory provisions.
Enforcement
of Legal Rights
All of our directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may
not be possible for Canadian purchasers to effect service of
process within Canada upon us or those persons. All or a
substantial portion of our assets and the assets of those
persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against us or those
persons in Canada or to enforce a judgment obtained in Canadian
courts against us or those persons outside of Canada.
S-118
Taxation
and Eligibility for Investment
Canadian purchasers of the notes should consult their own legal
and tax advisors with respect to the tax consequences of an
investment in the notes in their particular circumstances and
about the eligibility of the notes for investment by the
purchaser under relevant Canadian legislation.
LEGAL
MATTERS
The validity of the notes offered in this prospectus supplement
will be passed upon for us by Baker Botts L.L.P., Houston,
Texas. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Vinson &
Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Bristow Group Inc. as
of March 31, 2008 and 2007, and for each of the years in
the three-year period ended March 31, 2008, and
managements assessment of the effectiveness of internal
control over financial reporting as of March 31, 2008, have
been incorporated by reference herein, in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The audit report covering the March 31, 2008, consolidated
financial statements refers to a change in the method of
accounting for uncertainty in income taxes as of April 1,
2007, the method of accounting for defined benefit plans as of
March 31, 2007, and the method of accounting for
stock-based compensation plans as of April 1, 2006.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the Public Reference Room of the SEC,
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. Our SEC
filings are also available to the public on the SECs
website at
http://www.sec.gov
and on our website at
http://www.bristowgroup.com.
However, the information on our website does not constitute a
part of this prospectus supplement and prospectus. Reports and
other information concerning us can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005. Our common stock is listed and traded
on the New York Stock Exchange under the trading symbol
BRS.
The SEC allows us to incorporate by reference the information we
file with them, which means that we can disclose important
information to you by referring you to those documents. The
information incorporated by reference is an important part of
this prospectus supplement, and information we file later with
the SEC will automatically update and supersede this
information. Except to the extent that information is deemed
furnished and not filed pursuant to securities laws and
regulations, we incorporate by reference the documents listed
below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until all of the notes offered hereby have
been sold or we have filed with the SEC an amendment to the
registration statement relating to this offering which
deregisters all securities then remaining unsold:
|
|
|
|
|
our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008, which was filed
with the SEC on May 21, 2008; and
|
|
|
|
|
|
the description of our common stock contained in our
Registration Statement on
Form 8-A/A,
filed on March 7, 2003, and any subsequent amendment
thereto filed for the purpose of updating such description.
|
You may request a copy of these filings at no cost, by writing
or telephoning us at the following address:
Bristow Group Inc.
2000 W. Sam Houston Pkwy S., Suite 1700
Houston, Texas 77042
Attention: Corporate Secretary
Telephone number is
(713) 267-7600
S-119
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Bristow Group Inc.:
We have audited the accompanying consolidated balance sheets of
Bristow Group Inc. (the Company) and subsidiaries as of
March 31, 2008 and 2007, and the related consolidated
statements of income, stockholders investment and cash
flows for each of the years in the three-year period ended
March 31, 2008. These consolidated financial statements are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Bristow Group Inc. and subsidiaries as of
March 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the years in the
three-year period ended March 31, 2008, in conformity with
U.S. generally accepted accounting principles.
As discussed in Notes 1, 8 and 9 respectively to the
consolidated financial statements, the Company changed its
method of accounting for uncertainty in income taxes as of
April 1, 2007, its method of accounting for defined benefit
plans as of March 31, 2007, and its method of accounting
for stock-based compensation plans as of April 1, 2006,
respectively.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
March 31, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated May 21, 2008
expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
Houston, Texas
May 21, 2008
F-2
BRISTOW
GROUP INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue from non-affiliates
|
|
$
|
595,139
|
|
|
$
|
709,254
|
|
|
$
|
868,929
|
|
Operating revenue from affiliates
|
|
|
51,832
|
|
|
|
48,170
|
|
|
|
49,806
|
|
Reimbursable revenue from non-affiliates
|
|
|
58,570
|
|
|
|
80,244
|
|
|
|
87,325
|
|
Reimbursable revenue from affiliates
|
|
|
4,360
|
|
|
|
5,927
|
|
|
|
6,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
709,901
|
|
|
|
843,595
|
|
|
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
478,421
|
|
|
|
548,364
|
|
|
|
635,327
|
|
Reimbursable expense
|
|
|
61,889
|
|
|
|
85,938
|
|
|
|
91,106
|
|
Depreciation and amortization
|
|
|
42,060
|
|
|
|
42,459
|
|
|
|
54,140
|
|
General and administrative
|
|
|
59,167
|
|
|
|
66,321
|
|
|
|
92,833
|
|
Gain on disposal of assets
|
|
|
(103
|
)
|
|
|
(10,615
|
)
|
|
|
(9,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641,434
|
|
|
|
732,467
|
|
|
|
864,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
68,467
|
|
|
|
111,128
|
|
|
|
148,748
|
|
Earnings from unconsolidated affiliates, net of losses
|
|
|
6,758
|
|
|
|
11,423
|
|
|
|
12,978
|
|
Interest income
|
|
|
4,046
|
|
|
|
8,716
|
|
|
|
12,725
|
|
Interest expense
|
|
|
(14,689
|
)
|
|
|
(10,940
|
)
|
|
|
(23,779
|
)
|
Other income (expense), net
|
|
|
4,615
|
|
|
|
(8,998
|
)
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income
taxes and minority interest
|
|
|
69,197
|
|
|
|
111,329
|
|
|
|
152,257
|
|
Provision for income taxes
|
|
|
(14,668
|
)
|
|
|
(38,781
|
)
|
|
|
(44,526
|
)
|
Minority interest
|
|
|
(219
|
)
|
|
|
(1,200
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
54,310
|
|
|
|
71,348
|
|
|
|
107,814
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before provision for income
taxes
|
|
|
5,438
|
|
|
|
4,409
|
|
|
|
1,722
|
|
Provision for income taxes on discontinued operations
|
|
|
(1,939
|
)
|
|
|
(1,585
|
)
|
|
|
(5,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
3,499
|
|
|
|
2,824
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
57,809
|
|
|
|
74,172
|
|
|
|
103,992
|
|
Preferred stock dividends
|
|
|
|
|
|
|
(6,633
|
)
|
|
|
(12,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
57,809
|
|
|
$
|
67,539
|
|
|
$
|
91,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2.33
|
|
|
$
|
2.75
|
|
|
$
|
4.00
|
|
Earnings (loss) from discontinued operations
|
|
|
0.15
|
|
|
|
0.12
|
|
|
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.48
|
|
|
$
|
2.87
|
|
|
$
|
3.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2.30
|
|
|
$
|
2.64
|
|
|
$
|
3.53
|
|
Earnings (loss) from discontinued operations
|
|
|
0.15
|
|
|
|
0.10
|
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.45
|
|
|
$
|
2.74
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
BRISTOW
GROUP INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
184,188
|
|
|
$
|
290,050
|
|
Accounts receivable from non-affiliates, net of allowance for
doubtful accounts of $1.8 million and $1.8 million,
respectively
|
|
|
147,608
|
|
|
|
204,599
|
|
Accounts receivable from affiliates, net of allowance for
doubtful accounts of $3.2 million and $4.0 million,
respectively
|
|
|
17,199
|
|
|
|
11,316
|
|
Inventories
|
|
|
157,563
|
|
|
|
176,239
|
|
Prepaid expenses and other
|
|
|
17,387
|
|
|
|
24,177
|
|
Current assets from discontinued operations
|
|
|
12,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
535,974
|
|
|
|
706,381
|
|
Investment in unconsolidated affiliates
|
|
|
46,828
|
|
|
|
52,467
|
|
Property and equipment at cost:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
51,785
|
|
|
|
60,056
|
|
Aircraft and equipment
|
|
|
1,139,781
|
|
|
|
1,428,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,191,566
|
|
|
|
1,489,052
|
|
Less Accumulated depreciation and amortization
|
|
|
(300,045
|
)
|
|
|
(316,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
891,521
|
|
|
|
1,172,538
|
|
Goodwill
|
|
|
6,630
|
|
|
|
15,676
|
|
Other assets
|
|
|
10,725
|
|
|
|
30,293
|
|
Long-term assets from discontinued operations
|
|
|
14,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,505,803
|
|
|
$
|
1,977,355
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
40,459
|
|
|
$
|
49,650
|
|
Accrued wages, benefits and related taxes
|
|
|
36,390
|
|
|
|
35,523
|
|
Income taxes payable
|
|
|
3,412
|
|
|
|
5,862
|
|
Other accrued taxes
|
|
|
9,042
|
|
|
|
1,589
|
|
Deferred revenues
|
|
|
16,283
|
|
|
|
15,415
|
|
Accrued maintenance and repairs
|
|
|
12,309
|
|
|
|
13,250
|
|
Accrued interest
|
|
|
4,511
|
|
|
|
5,656
|
|
Other accrued liabilities
|
|
|
17,151
|
|
|
|
22,235
|
|
Deferred taxes
|
|
|
17,611
|
|
|
|
9,238
|
|
Short-term borrowings and current maturities of long-term debt
|
|
|
4,852
|
|
|
|
6,541
|
|
Current liabilities from discontinued operations
|
|
|
5,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
167,968
|
|
|
|
164,959
|
|
Long-term debt, less current maturities
|
|
|
254,230
|
|
|
|
599,677
|
|
Accrued pension liabilities
|
|
|
113,069
|
|
|
|
134,156
|
|
Other liabilities and deferred credits
|
|
|
17,345
|
|
|
|
14,805
|
|
Deferred taxes
|
|
|
76,089
|
|
|
|
91,747
|
|
Minority interest
|
|
|
5,445
|
|
|
|
4,570
|
|
Commitments and contingencies (Note 6)
|
|
|
|
|
|
|
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
5.50% mandatory convertible preferred stock, $.01 par
value, authorized and outstanding 4,600,000 shares;
entitled in liquidation to $230 million; net of offering
costs of $7.4 million
|
|
|
222,554
|
|
|
|
222,554
|
|
Common stock, $.01 par value, authorized
35,000,000 shares as of March 31, 2007 and
90,000,000 shares as of March 31, 2008; outstanding
23,585,370 as of March 31, 2007 and 23,923,685 as of
March 31, 2008 (exclusive of 1,281,050 treasury shares)
|
|
|
236
|
|
|
|
239
|
|
Additional paid-in capital
|
|
|
169,353
|
|
|
|
186,390
|
|
Retained earnings
|
|
|
515,589
|
|
|
|
606,931
|
|
Accumulated other comprehensive loss
|
|
|
(36,075
|
)
|
|
|
(48,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
871,657
|
|
|
|
967,441
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,505,803
|
|
|
$
|
1,977,355
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
BRISTOW
GROUP INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
74,172
|
|
|
$
|
103,992
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
42,256
|
|
|
|
42,643
|
|
|
|
54,241
|
|
Deferred income taxes
|
|
|
1,488
|
|
|
|
21,031
|
|
|
|
17,571
|
|
Gain on disposal of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(1,019
|
)
|
Gain on asset dispositions
|
|
|
(102
|
)
|
|
|
(10,618
|
)
|
|
|
(9,393
|
)
|
Stock-based compensation expense
|
|
|
613
|
|
|
|
4,903
|
|
|
|
9,546
|
|
Equity in earnings from unconsolidated affiliates in excess of
dividends received
|
|
|
(337
|
)
|
|
|
(3,754
|
)
|
|
|
(3,720
|
)
|
Minority interest in earnings
|
|
|
219
|
|
|
|
1,200
|
|
|
|
(83
|
)
|
Tax benefit related to stock-based compensation
|
|
|
|
|
|
|
(1,132
|
)
|
|
|
(1,738
|
)
|
Increase (decrease) in cash resulting from changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(34,718
|
)
|
|
|
(1,428
|
)
|
|
|
(32,600
|
)
|
Inventories
|
|
|
(12,518
|
)
|
|
|
(10,225
|
)
|
|
|
(18,969
|
)
|
Prepaid expenses and other
|
|
|
(5,925
|
)
|
|
|
(6,634
|
)
|
|
|
(18,249
|
)
|
Accounts payable
|
|
|
15,944
|
|
|
|
(10,688
|
)
|
|
|
7,019
|
|
Accrued liabilities
|
|
|
(35,397
|
)
|
|
|
5,771
|
|
|
|
(36,766
|
)
|
Other liabilities and deferred credits
|
|
|
9,933
|
|
|
|
(811
|
)
|
|
|
17,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
39,265
|
|
|
|
104,430
|
|
|
|
87,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(139,572
|
)
|
|
|
(304,776
|
)
|
|
|
(338,003
|
)
|
Proceeds from asset dispositions
|
|
|
85,392
|
|
|
|
40,441
|
|
|
|
26,623
|
|
Acquisitions, net of cash received
|
|
|
|
|
|
|
|
|
|
|
(14,622
|
)
|
Net proceeds from sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
21,958
|
|
Note issued to unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
(4,141
|
)
|
Investment in unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
(1,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(54,180
|
)
|
|
|
(264,335
|
)
|
|
|
(310,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
|
|
|
|
|
|
|
|
350,622
|
|
Debt issuance costs
|
|
|
(2,564
|
)
|
|
|
|
|
|
|
(5,882
|
)
|
Issuance of Preferred Stock
|
|
|
|
|
|
|
223,550
|
|
|
|
|
|
Preferred Stock issuance costs
|
|
|
|
|
|
|
(996
|
)
|
|
|
|
|
Repayment of debt and debt redemption premiums
|
|
|
(4,070
|
)
|
|
|
(5,716
|
)
|
|
|
(10,054
|
)
|
Partial prepayment of put/call obligation
|
|
|
(129
|
)
|
|
|
(130
|
)
|
|
|
(163
|
)
|
Acquisition of minority interest
|
|
|
|
|
|
|
|
|
|
|
(507
|
)
|
Preferred Stock dividends paid
|
|
|
|
|
|
|
(6,107
|
)
|
|
|
(12,650
|
)
|
Issuance of common stock
|
|
|
1,369
|
|
|
|
3,949
|
|
|
|
5,756
|
|
Tax benefit related to stock-based compensation
|
|
|
|
|
|
|
1,132
|
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(5,394
|
)
|
|
|
215,682
|
|
|
|
328,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(3,649
|
)
|
|
|
5,929
|
|
|
|
(410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(23,958
|
)
|
|
|
61,706
|
|
|
|
105,862
|
|
Cash and cash equivalents at beginning of period
|
|
|
146,440
|
|
|
|
122,482
|
|
|
|
184,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
122,482
|
|
|
$
|
184,188
|
|
|
$
|
290,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-monetary exchange of assets
|
|
$
|
11,511
|
|
|
$
|
|
|
|
$
|
|
|
Capital expenditures funded by short-term notes
|
|
$
|
3,179
|
|
|
$
|
|
|
|
$
|
|
|
Recapitalization of Hemisco funded by note payable
|
|
$
|
4,380
|
|
|
$
|
|
|
|
$
|
|
|
Accrued proceeds on insurance claim
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,582
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
BRISTOW
GROUP INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands, except share amounts)
|
|
|
5.50% mandatory convertible Preferred Stock (shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
|
|
|
|
|
|
|
|
|
4,600,000
|
|
Preferred Stock issued
|
|
|
|
|
|
|
4,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
|
|
|
|
|
4,600,000
|
|
|
|
4,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.50% mandatory convertible Preferred Stock ($.01 Par):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
|
|
|
$
|
|
|
|
$
|
222,554
|
|
Preferred Stock issued, net of offering costs of
$7.4 million
|
|
|
|
|
|
|
222,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
|
|
|
$
|
222,554
|
|
|
$
|
222,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (shares, exclusive of treasury shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
|
23,314,708
|
|
|
|
23,385,473
|
|
|
|
23,585,037
|
|
Stock options exercised
|
|
|
70,765
|
|
|
|
196,672
|
|
|
|
230,570
|
|
Issuance of Common Stock
|
|
|
|
|
|
|
2,892
|
|
|
|
108,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
|
23,385,473
|
|
|
|
23,585,037
|
|
|
|
23,923,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock ($.01 Par):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
233
|
|
|
$
|
234
|
|
|
$
|
236
|
|
Stock options exercised
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
234
|
|
|
$
|
236
|
|
|
$
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
157,100
|
|
|
$
|
158,762
|
|
|
$
|
169,353
|
|
Stock options exercised
|
|
|
1,368
|
|
|
|
3,946
|
|
|
|
5,753
|
|
Tax benefit related to the exercise of employee stock options
|
|
|
294
|
|
|
|
1,131
|
|
|
|
1,738
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
4,903
|
|
|
|
9,546
|
|
Reclassified prior year stock-based compensation liability
|
|
|
|
|
|
|
611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
158,762
|
|
|
$
|
169,353
|
|
|
$
|
186,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
389,715
|
|
|
$
|
447,524
|
|
|
$
|
515,589
|
|
Net income
|
|
|
57,809
|
|
|
|
74,172
|
|
|
|
103,992
|
|
Preferred Stock dividends declared
|
|
|
|
|
|
|
(6,107
|
)
|
|
|
(12,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
447,524
|
|
|
$
|
515,589
|
|
|
$
|
606,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
(54,055
|
)
|
|
$
|
(68,823
|
)
|
|
$
|
(36,075
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
|
(20,729
|
)
|
|
|
27,084
|
|
|
|
4,087
|
|
Pension liability adjustment(1)
|
|
|
5,961
|
|
|
|
5,664
|
|
|
|
(20,030
|
)
|
Equity method investment other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
(360
|
)
|
Unrealized gain on cash flow hedges(2)
|
|
|
|
|
|
|
|
|
|
|
3,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(14,768
|
)
|
|
|
32,748
|
|
|
|
(12,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
(68,823
|
)
|
|
$
|
(36,075
|
)
|
|
$
|
(48,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
74,172
|
|
|
$
|
103,992
|
|
Other comprehensive income (loss)
|
|
|
(14,768
|
)
|
|
|
32,748
|
|
|
|
(12,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
43,041
|
|
|
$
|
106,920
|
|
|
$
|
91,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net of tax provision of $3.0 million, $2.6 million,
and $9.6 million for the fiscal years ended March 31,
2006, 2007 and 2008, respectively. |
|
(2) |
|
Net of tax provision of $2.0 million for the fiscal year
ended March 31, 2008. |
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
BRISTOW
GROUP INC. AND SUBSIDIARIES
Note 1
OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Operations
Bristow Group Inc., a Delaware corporation (together with its
consolidated entities and predecessors, unless the context
requires otherwise, Bristow Group, the
Company, we, us, or
our), is the leading provider of helicopter services
to the worldwide offshore energy industry based on the number of
aircraft operated. With a fleet of 548 aircraft as of
March 31, 2008, Bristow Group and its affiliates conduct
helicopter operations in most of the major offshore
oil-producing regions of the world. Certain of our affiliates
also provide helicopter military training, search and rescue
services and emergency medical transportation.
Basis
of Presentation
The consolidated financial statements include the accounts of
Bristow Group Inc. and its consolidated entities after
elimination of all significant intercompany accounts and
transactions. Investments in affiliates in which we own 50% or
less of the equity but have retained the majority of the
economic risk of the operating assets and related results are
consolidated. Certain of these entities are Variable Interest
Entities (VIEs) of which we are the primary
beneficiary. See discussion of these VIEs in Note 3. Other
investments in affiliates in which we own 50% or less of the
equity but have the ability to exercise significant influence
are accounted for using the equity method. Investments which we
do not consolidate or in which we do not exercise significant
influence are accounted for under the cost method whereby
dividends are recognized when declared.
The historical financial statements and footnote disclosures
have been revised to reflect our Grasso Production Management
(Grasso) business as discontinued operations as
discussed in Note 2.
Our fiscal year ends March 31, and we refer to fiscal years
based on the end of such period. Therefore, the fiscal year
ended March 31, 2008 is referred to as fiscal year 2008.
Summary
of Significant Accounting Policies
Use of Estimates The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates. Areas
where critical accounting estimates are made by management
include:
|
|
|
|
|
Taxes;
|
|
|
|
Property and equipment;
|
|
|
|
Revenue recognition;
|
|
|
|
Pension benefits;
|
|
|
|
Allowance for doubtful accounts;
|
|
|
|
Inventory reserve;
|
|
|
|
Insurance;
|
|
|
|
Contingent liabilities;
|
|
|
|
Goodwill impairment; and
|
|
|
|
Stock based compensation.
|
F-7
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cash and Cash Equivalents Our cash
equivalents include funds invested in highly-liquid debt
instruments with original maturities of 90 days or less.
Accounts Receivable Trade and other
receivables are stated at net realizable value. We grant
short-term credit to our customers, primarily major and
independent oil and gas companies. We establish reserves for
doubtful accounts on a
case-by-case
basis when a determination is made that the required payment is
unlikely to occur. In making the determination, we consider a
number of factors, including changes in the financial position
of the customer,restrictions placed on the conversion of local
currency into U.S. dollars and disputes with the customer.
During fiscal years 2006, 2007 and 2008 we reduced revenue for
reserves of $1.8 million, $6.6 million and
$10.0 million, respectively, against invoices billed to our
unconsolidated affiliate in Mexico, which have not been
recognized in our results. During fiscal years 2007 and 2008 we
recognized revenue and decreased our reserves for
$8.3 million and $8.8 million, respectively, collected
from this affiliate, including $1.8 million and
$0.6 million, respectively, related to amounts billed in
fiscal years 2006 and 2007. See Note 3 for a discussion of
receivables with unconsolidated affiliates.
The following table is a rollforward of the allowance for
doubtful accounts, including affiliates and non-affiliates, for
fiscal years 2006, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
8,961
|
|
|
$
|
8,923
|
|
|
$
|
5,009
|
|
Expense
|
|
|
3,263
|
|
|
|
7,842
|
|
|
|
12,370
|
|
Write-offs and collections
|
|
|
(2,884
|
)
|
|
|
(12,121
|
)
|
|
|
(11,662
|
)
|
Foreign currency effects
|
|
|
(417
|
)
|
|
|
365
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
8,923
|
|
|
$
|
5,009
|
|
|
$
|
5,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories Inventories are stated at the
lower of average cost or market and consist primarily of spare
parts. The following table is a rollforward of the valuation
reserve related to obsolete and excess inventory for fiscal
years 2006, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Balance beginning of fiscal year
|
|
$
|
10,325
|
|
|
$
|
13,147
|
|
|
$
|
10,993
|
|
Expense
|
|
|
3,769
|
|
|
|
5,485
|
|
|
|
3,269
|
|
Inventory disposed and scrapped
|
|
|
(429
|
)
|
|
|
(8,611
|
)
|
|
|
(2,529
|
)
|
Foreign currency effects
|
|
|
(518
|
)
|
|
|
972
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
13,147
|
|
|
$
|
10,993
|
|
|
$
|
11,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment Property and equipment
are stated at cost. Interest costs applicable to the
construction of qualifying assets are capitalized as a component
of the cost of such assets. Property and equipment includes
construction in progress, primarily consisting of progress
payments on aircraft purchases and facility construction, of
$167.8 million and $182.9 million as of March 31,
2007 and 2008, respectively. We account for exchanges of
productive assets at fair value, unless (1) neither the
asset received nor the asset surrendered has a fair value that
is determinable within reasonable limits or (2) the
transaction lacks commercial substance.
Depreciation and amortization are provided on the straight-line
method over the estimated useful lives of the assets. The
estimated useful lives of aircraft range from five to
15 years, and the residual value used in calculating
depreciation of aircraft ranges from 30% to 50% of cost. The
estimated useful lives for buildings
F-8
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
on owned properties range from 15 to 40 years. Other
depreciable assets are depreciated over estimated useful lives
ranging from three to 15 years, except for leasehold
improvements which are depreciated over the lesser of the useful
life of the improvement or the lease term (including any period
where we have options to renew if it is probable that we will
renew the lease). The costs and related accumulated depreciation
of assets sold or otherwise disposed of are removed from the
accounts and the resulting gains or losses are included in
income.
Goodwill and Other Intangible Assets Goodwill
represents the excess of cost over fair value of assets of
businesses acquired. Goodwill and other intangible assets
acquired in a business combination and determined to have an
indefinite useful life are not amortized. We test the carrying
amount of goodwill for impairment annually in the fourth quarter
and whenever events or circumstances indicate impairment may
have occurred. Intangible assets with finite useful lives are
amortized over their respective estimated useful lives to their
estimated residual values.
We had goodwill of $6.8 million and $8.9 million
relating to our West Africa and Bristow Academy business units,
respectively, as of March 31, 2008. As of March 31,
2007 and 2008, the goodwill impairment test on these balances,
which involved the use of estimates related to the fair market
value of our business units to which goodwill was allocated,
indicated no impairment. Goodwill totaling approximately
$4.8 million is expected to be deductible for tax purposes.
Included in other assets as of March 31, 2008 are
intangible assets of $2.7 million, net of $0.7 million
in amortization, related to a non-compete agreement which is
being amortized over its contractual life of five years. The
gross carrying value at March 31, 2008 was
$3.4 million, amortization for fiscal year 2008 was
$0.7 million, and estimated amortization per year is
$0.7 million for the four years remaining in the
contractual life.
Impairment of Long-Lived Assets Long-lived
assets, such as property, plant, and equipment, and purchased
intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the
carrying amount of an asset to be held and used exceeds its
estimated future cash flows, an impairment charge is recognized
in the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Assets to be disposed of are
classified as current assets in prepaid expenses and other
current assets in our consolidated balance sheet and recorded at
the lower of the carrying amount or fair value less costs to
sell, and are no longer depreciated. The assets and liabilities
of a disposed group classified as held for sale (if any) are
presented separately in the appropriate asset and liability
sections of the balance sheet.
Other Assets In addition to the intangible
asset discussed above, other assets as of March 31, 2007
and 2008 include debt issuance costs of $6.4 million and
$11.2 million, respectively, which are being amortized over
the life of the related debt.
Contingent Liabilities and Assets We
establish reserves for estimated loss contingencies when we
believe a loss is probable and the amount of the loss can be
reasonably estimated. Our contingent liability reserves relate
primarily to potential tax assessments, litigation, personal
injury claims and environmental liabilities. Income for each
reporting period includes revisions to contingent liability
reserves resulting from different facts or information which
become known or changes in circumstances that affect our
previous assumptions with respect to the likelihood or amount of
loss. Such revisions are based on information which becomes
known after the reporting date for the previous period through
the reporting date of the current period. Reserves for
contingent liabilities are based upon our assumptions and
estimates regarding the probable outcome of the matter. Should
the outcome differ from our assumptions and estimates or other
events result in a material adjustment to the accrued estimated
reserves, revisions to the estimated reserves for contingent
liabilities would be required to be recognized.
F-9
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Proceeds from casualty insurance settlements in excess of the
carrying value of damaged assets are recognized in other income
(expense), where we have received proof of loss documentation or
are otherwise assured of collection of these amounts.
Revenue Recognition In general, we recognize
revenue when it is both realized or realizable and earned. We
consider revenue to be realized or realizable and earned when
the following conditions exist: the persuasive evidence of an
arrangement, generally a customer contract; the services or
products have been performed or delivered to the customer; the
sales price is fixed or determinable within the contract; and
collection is probable. More specifically, revenue from
helicopter services is recognized based on contractual rates as
the related services are performed. The charges under these
contracts are generally based on a two-tier rate structure
consisting of a daily or monthly fixed fee plus additional fees
for each hour flown. These contracts are for varying periods and
generally permit the customer to cancel the contract before the
end of the term. We also provide services to customers on an
ad hoc basis, which usually entails a shorter notice
period and shorter duration. The charges for ad hoc services are
based on an hourly rate or a daily or monthly fixed fee plus
additional fees for each hour flown. In order to offset
potential increases in operating costs, our long-term contracts
may provide for periodic increases in the contractual rates
charged for our services. We recognize the impact of these rate
increases when the criteria outlined above have been met. This
generally includes written recognition from the customers that
they are in agreement with the amount of the rate escalation. In
addition, our standard rate structure is based on fuel costs
remaining at or below a predetermined threshold. Fuel costs in
excess of this threshold are generally reimbursed by the
customer. Cost reimbursements from customers are recorded as
reimbursable revenue in our consolidated statements of income.
Pension Benefits See Note 8 for a
discussion of our accounting for pension benefits.
Maintenance and Repairs We charge maintenance
and repair costs, including major aircraft component overhaul
costs, to earnings as the costs are incurred. However, certain
major aircraft components, primarily engines and transmissions,
are maintained by third-party vendors under contractual
arrangements. Under these agreements, we are charged an agreed
amount per hour of flying time. The costs charged under these
contractual arrangements are recognized in the period in which
the flight hours occur. To the extent that we have not yet been
billed for costs incurred under these arrangements, these costs
are included in accrued maintenance and repairs on our
consolidated balance sheets.
We capitalize betterments and improvements to our aircraft and
amortize such costs over the useful lives of the aircraft.
Betterments and improvements increase the life or utility of an
aircraft.
Taxes We follow the liability method of
accounting for income taxes. Under this method, deferred income
tax assets and liabilities are determined based upon temporary
differences between the carrying amount and tax basis of our
assets and liabilities and measured using enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. The effect on deferred tax assets and liabilities of a
change in the tax rates is recognized in income in the period in
which the change occurs. We record a valuation reserve when we
believe that it is more likely than not that any deferred tax
asset created will not be realized.
In assessing the realizability of deferred income tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred income tax assets will not
be realized. The ultimate realization of deferred income tax
assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become
deductible.
In April 2007, we adopted Financial Accounting Standards Board
(FASB) Interpretation No. 48, Accounting
for Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109 (FIN 48),
which applies to all tax positions related to income taxes
subject to Statement of Financial Accounting Standards
(SFAS) No. 109. FIN 48 requires a new
evaluation process for all tax positions taken, recognizing tax
benefits when it is more-likely-than-not that a tax position
will be sustained upon examination by the authorities. The
benefit from a position that has surpassed the
more-likely-than-not threshold is the largest
F-10
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
amount of benefit that is more than 50% likely to be realized
upon settlement. We recognize interest and penalties accrued
related to unrecognized tax benefits as a component of provision
for income tax expense. See Note 7 for further discussion
on the adoption of FIN 48.
In May 2007, the FASB issued FASB Staff Position
(FSP)
FIN 48-1,
an amendment to FIN 48, which provides guidance on how an
entity is to determine whether a tax position has effectively
settled for purposes of recognizing previously unrecognized tax
benefits. Specifically, this guidance states that an entity
would recognize a benefit when a tax position is effectively
settled using the following criteria: (1) the taxing
authority has completed its examination including all appeals
and administrative reviews; (2) the entity does not plan to
appeal or litigate any aspect of the tax position; and
(3) it is remote that the taxing authority would examine or
reexamine any aspect of the tax position, assuming the taxing
authority has full knowledge of all relevant information
relative to making their assessment on the position. We have
applied this guidance, as applicable.
Foreign Currency Translation In preparing our
financial statements, we must convert all
non-U.S. dollar
currencies to U.S. dollars. Balance sheet information is
presented based on the exchange rate as of the balance sheet
date, and income statement information is presented based on the
average conversion rate for the period. The various components
of stockholders investment are presented at their
historical average exchange rates. The resulting difference
after applying the different exchange rates is the cumulative
translation adjustment. Foreign currency translation gains and
losses result from the effect of changes in exchange rates on
transactions denominated in currencies other than a
companys functional currency, including transactions
between consolidated companies. An exception is made where an
intercompany loan or advance is deemed to be of a long-term
investment nature, in which instance foreign currency
transaction gains or losses are included with cumulative
translation gains and losses and are reported in
stockholders investment as accumulated other comprehensive
gains or losses. In the past three fiscal years our
stockholders investment has increased by
$10.4 million as a result of translation adjustments.
Changes in exchange rates could cause significant changes in our
financial position and results of operations in the future.
As a result of the changes in exchange rates during fiscal years
2006 and 2008, we recorded foreign currency transaction gains of
approximately $5.4 million and $1.5 million,
respectively, primarily related to the British pound sterling,
compared to foreign currency transaction losses of approximately
$9.8 million during fiscal year 2007. The significant gains
and losses in fiscal years 2006 and 2007 arose primarily from
the following U.S. dollar-denominated transactions entered
into by Bristow Aviation Holdings Limited (Bristow
Aviation) (whose functional currency is the British pound
sterling):
|
|
|
|
|
Cash and cash equivalents held in U.S. dollar-denominated
accounts. Beginning in July 2006, we reduced a portion of
Bristow Aviations U.S. dollar-denominated cash
balances.
|
|
|
|
U.S. dollar-denominated intercompany loans and
U.S. dollar-denominated receivables. On August 14,
2006, we entered into a derivative contract to mitigate our
exposure to exchange rate fluctuations on our
U.S. dollar-denominated intercompany loans. This derivative
contract provided us with a call option on
£12.9 million and a put option on $24.5 million,
with a strike price of 1.895 U.S. dollars per British pound
sterling, and was exercised by us prior to the scheduled
expiration on November 14, 2006, resulting in a net loss of
$0.3 million. On November 14, 2006, we entered into
another derivative contract for the same amount and strike price
that expired on May 14, 2007, resulting in a cumulative
gain of $0.6 million, of which $0.1 million related to
fiscal year 2008 and is included in other income (expense) net
in our consolidated statement of income. On April 1, 2007,
primarily as a result of changes in the manner in which certain
of our consolidated subsidiaries create and manage intercompany
balances, we changed the functional currency of two of our
consolidated subsidiaries, Bristow Helicopters (International)
Ltd. and Caledonia Helicopters Ltd., from the British pound
sterling to the U.S. dollar, which reduced our exposure to
U.S. dollar-denominated intercompany loans and advances.
The changes we made to the manner in which we manage
intercompany balances for these two entities
|
F-11
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
has simplified our business as it allows for a clearer view of
sales and purchases required to run these businesses and assists
in resource management.
|
|
|
|
|
|
Euro- and Nigerian Naira-denominated intercompany loans. The
economic effect of the foreign currency transaction losses
during fiscal year 2007 was offset by a corresponding benefit
during those periods reflected as a cumulative translation
adjustment in stockholders investment on our consolidated
balance sheet. Additionally, in April 2007 we significantly
reduced our euro-denominated intercompany loans, thereby
reducing our exposure to fluctuations in exchange rates for this
foreign currency.
|
The following table presents the applicable exchange rates (of
one British pound sterling into U.S. dollars) for the
indicated periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
High
|
|
$
|
1.92
|
|
|
$
|
1.99
|
|
|
$
|
2.11
|
|
Average
|
|
|
1.79
|
|
|
|
1.89
|
|
|
|
2.01
|
|
Low
|
|
|
1.71
|
|
|
|
1.74
|
|
|
|
1.94
|
|
As of March 31, 2006, 2007 and 2008 the exchange rate was
$1.74, $1.96 and $1.99, respectively.
In addition, certain of our contractual commitments, including
aircraft purchase commitments, are payable in currencies other
than the U.S. dollar, which exposes us to cash flow risk
during periods when the U.S. dollar weakens against those
currencies. During fiscal year 2008, the U.S. dollar has
weakened substantially against the euro exposing us to
significant cash flow risk related to euro-denominated aircraft
purchase commitments. The exchange rate (of one euro into
U.S. dollars) as of March 31, 2007 and 2008 was $1.32
and $1.58, respectively. In fiscal years 2007 and 2008, we
entered into forward contracts to mitigate our exposure to
exchange rate fluctuations.
Derivative Financial Instruments All
derivatives are recognized as either assets or liabilities and
measured at fair value. We do not speculate in derivatives and
hedge only existing economic exposures. We enter into forward
exchange contracts from time to time to hedge committed
transactions denominated in currencies other than the functional
currency of the business. Foreign currency contracts are
scheduled to mature at the anticipated currency requirement date
and rarely exceed one year. The purpose of our foreign currency
hedging activities is to protect us from the risk that foreign
currency outflows resulting from payments to foreign suppliers
will be adversely affected by changes in exchange rates.
Financial instruments are designated as a hedge at inception
where there is a direct relationship to the price risk
associated with the related hedged item. Hedge contracts are
recorded at cost and periodic adjustments to fair market value
are deferred and recorded as a component of stockholders
investment in other comprehensive income. Settlements of hedge
contracts are recorded to cost or revenue as they occur. If the
direct relationship to price risk ceases to exist, and a hedge
is no longer deemed effective at reducing the intended exposure,
fair value of a forward contract at that date is recognized over
the remaining term of the contract. Subsequent changes in the
fair value of ineffective contracts are recorded to current
earnings.
We entered into forward contracts in fiscal year 2008 to
mitigate our exposure to exchange rate fluctuations on our
euro-denominated aircraft purchase commitments, which have been
designated as cash flow hedges for accounting purposes. These
forward contracts allow us to purchase euros with delivery dates
ranging from March 2008 to May 2009 at rates ranging from 1.4615
U.S. dollars per euro to 1.5439 U.S. dollars per euro.
As of March 31, 2008, the fair value of the forward
contracts was an asset of $5.7 million. As of
March 31, 2008, an unrecognized gain of $3.7 million,
net of tax, on the open foreign currency forward contracts is
included as a component of accumulated other comprehensive loss
and a derivative asset of $5.7 million is included in
prepaid expenses and other ($4.5 million) and other assets
($1.2 million) in our consolidated balance sheet.
F-12
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Gains were recognized in earnings on other foreign currency
hedging contracts during fiscal years 2007 and 2008 of
$0.5 million and $0.1 million, respectively. No gains
or losses were recognized in fiscal year 2006. These contracts
related to hedging of changes in the U.S. dollar to British
pound exchange rate for U.S. dollars held by entities with
a British pound functional currency. These hedges were not
designated as hedges for accounting purposes.
Stock-Based Compensation See Note 8 for
a discussion of our accounting for stock-based compensation
arrangements.
Other Income (Expense), Net The amounts for
fiscal years 2006, 2007 and 2008 primarily include the foreign
currency transaction gains and losses described under
Foreign Currency Translation above. Additionally,
fiscal year 2007 includes a $2.5 million gain resulting
from the sale of our investment in a Brazilian joint venture in
March 2007 and a charge of $1.9 million for acquisition
costs previously deferred in connection with an acquisition we
were evaluating as we determined that the acquisition was no
longer probable (see Note 3).
Recent
Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value and requires enhanced disclosures about fair value
measurements. SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements,
but does not require any new fair value measurements. In
November 2007, the FASB deferred the effective date of
SFAS No. 157 by a full year for all nonfinancial
assets and liabilities except those that are recognized or
disclosed at fair value on a recurring basis.
SFAS No. 157 becomes effective for fiscal year 2009
and interim periods therein for assets and liabilities not
subject to the deferral and for fiscal year 2010 and interim
periods therein for assets and liabilities which are subject to
the deferral. We have not yet completed our evaluation of the
impact of SFAS No. 157.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of FASB Statement
No. 115. This pronouncement permits entities to use
the fair value method to measure certain financial assets and
liabilities by electing an irrevocable option to use the fair
value method at specified election dates. After election of the
option, subsequent changes in fair value would result in the
recognition of unrealized gains or losses as period costs during
the period the change occurs. SFAS No. 159 becomes
effective for fiscal year 2009. We have not yet completed our
evaluation of the impact of SFAS No. 159.
In December 2007, the FASB issued SFAS No. 141R,
Business Combinations. This pronouncement
establishes principles and requirements for how the acquirer
recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill
acquired in the business combination or a gain from a bargain
purchase, and also establishes disclosure requirements to enable
users of the financial statements to evaluate the nature and
financial effects of the business combination.
SFAS No. 141R becomes effective for business
combinations entered into during fiscal year 2010 and thereafter
and does not have any impact on business combinations prior to
such date.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51.
This pronouncement requires noncontrolling interests (previously
referred to as minority interests) to be reported as a component
of stockholders investment, which changes the accounting
for transactions with noncontrolling interest holders.
SFAS No. 160 becomes effective for fiscal year 2010
and interim periods therein. We have not yet completed our
evaluation of the impact of SFAS No. 160.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative and Hedging
Instruments an amendment of FASB Statements
No. 133. This pronouncement requires enhanced
F-13
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
disclosures about an entitys derivative and hedging
activities, but does not impact the accounting for such
activities. SFAS No. 161 becomes effective for fiscal
year 2010 and interim periods therein.
In May 2008, the FASB issued FSP APB
14-a,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion. This FSP requires
entities with cash settled convertibles to bifurcate the
securities into a debt component and an equity component and
accrete the debt component to par over the expected life of the
convertible. This FSP will be effective for fiscal year 2010.
Early adoption will not be permitted, and the FSP must be
applied retrospectively to all instruments. We do not currently
have any convertible debt instruments that would be impacted by
FSP APB14-a; however, this pronouncement could impact the
accounting for such instruments should we issue them in the
future.
|
|
Note 2
|
ACQUISITIONS
AND DISPOSITIONS
|
Grasso
Disposition
On November 2, 2007, we sold our Grasso business, which
comprised our entire Production Management Services segment, for
approximately $22.5 million, subject to post-closing
adjustments including $7.8 million received in fiscal year
2008. The financial results for our Production Management
Services segment through November 2, 2007 are classified as
discontinued operations. In conjunction with this sale, we
agreed to continue to provide helicopter services to Grasso
through December 31, 2010. In addition, we executed
supplemental indentures with the trustee for our
71/2%
and
61/8% Senior
Notes releasing Grasso Corporation and its subsidiaries as
guarantors under the Indentures. The obligations of Grasso and
its subsidiaries under our senior secured credit facilities were
also released in connection with the disposition.
The following table summarizes the after-tax loss on the Grasso
sale recorded in fiscal year 2008 (in thousands):
|
|
|
|
|
Sale price
|
|
$
|
22,500
|
|
Adjustment for working capital
|
|
|
7,801
|
|
|
|
|
|
|
Gross proceeds
|
|
|
30,301
|
|
Net assets sold
|
|
|
(29,282
|
)
|
|
|
|
|
|
|
|
|
1,019
|
|
Transaction expenses
|
|
|
(1,542
|
)
|
|
|
|
|
|
Pre-tax loss on sale
|
|
|
(523
|
)
|
Provision for income taxes(1)
|
|
|
(4,784
|
)
|
|
|
|
|
|
After-tax loss on sale of discontinued operations
|
|
$
|
(5,307
|
)
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $4.9 million of tax expense related to taxes on
non-deductible goodwill. |
Revenue related to Grasso was $59.0 million,
$54.3 million and $30.8 million for fiscal years 2006,
2007 and 2008, respectively. Net cash flows for discontinued
operations attributable to operating, investing and financing
activities were not significant for fiscal years 2006, 2007 and
2008.
Bristow
Academy Acquisitions
On April 2, 2007, we acquired all of the common equity of
Helicopter Adventures, Inc. (HAI), a leading flight
training provider with operations in Titusville, Florida, and
Concord, California, for approximately $15 million in cash.
We also assumed $5.7 million of debt as part of this
transaction. Upon purchase, HAI was renamed Bristow Academy Inc.
(Bristow Academy). In November 2007, Bristow Academy
acquired Vortex Helicopters, Inc. (Vortex), a flight
training school in New Iberia, Louisiana, for
$2.0 million.
F-14
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
When combined with our existing training facilities in Norwich,
England, Bristow Academy forms a central core of our new Global
Training division. As of the acquisition date, HAI operated 51
aircraft (including 38 owned and 13 leased aircraft) and
employed 122 people, including 48 flight instructors. As of
March 31, 2008, Bristow Academy operated 69 aircraft
(including 59 owned and 10 leased aircraft) and employed
165 people, including 74 flight instructors. Bristow
Academy is the only school approved to provide helicopter flight
training to the commercial pilot and flight instructor level by
both the U.S. Federal Aviation Administration
(FAA) and the European Joint Aviation Authority. The
Global Training division supports, coordinates, standardizes,
and in the case of the Bristow Academy schools, directly manages
all flight training activities.
The acquisition of HAI was accounted for under the purchase
method, and we have consolidated the results of Bristow Academy
from the date of acquisition. The purchase price has been
allocated based on estimates of the fair value of assets
acquired and liabilities assumed as of the acquisition date and
resulted in goodwill of approximately $8.9 million.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed at the date of
acquisition:
|
|
|
|
|
|
|
April 2, 2007
|
|
|
|
(In thousands)
|
|
|
Current assets
|
|
$
|
2,916
|
|
Property and equipment
|
|
|
8,743
|
|
Other assets
|
|
|
12,440
|
|
|
|
|
|
|
Total assets acquired
|
|
|
24,099
|
|
|
|
|
|
|
Current liabilities, including debt
|
|
|
9,068
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
9,068
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
15,031
|
|
|
|
|
|
|
The pro forma effect of operations of Bristow Academy presented
as of the beginning of each of the fiscal years presented was
approximately 1% of our consolidated gross revenue, operating
income and net income.
Aeroleo
Disposition
On March 30, 2007, we sold our 50% ownership interest in
Aeroleo Taxi Aereo S.A. (Aeroleo), resulting in a
pre-tax gain of $2.5 million. During fiscal year 2006, we
recorded an impairment charge of $1.0 million to reduce the
recorded value of our investment in the joint venture. During
fiscal years 2006 and 2007, we derived approximately
$8.0 million and $7.6 million, respectively, of
leasing and other revenue from this joint venture.
Turbo
Disposition
On November 30, 2006, we sold certain of the assets of our
aircraft engine overhaul business, Turbo Engines, Inc.
(Turbo), to Timken Alcor Aerospace Technologies,
Inc. (Timken) for approximately $14.6 million
($14.3 million of which was received in fiscal year 2007
and $0.3 million was received in late fiscal year 2008).
The sale was effective November 30, 2006 and resulted in a
pretax gain of $0.1 million. However, the transaction
resulted in additional tax expense of $2.5 million related
to non-deductible goodwill recorded at the time we acquired
Turbo in 2001. This additional tax expense resulted in an
increase in our tax rate for fiscal year 2007 (see Note 7).
In conjunction with this sale, we signed a supply agreement with
Timken through which we are obligated to purchase parts and
components and obtain repair services totaling
F-15
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$10.5 million over a three-year period beginning
December 1, 2006 at prices consistent with prior
arrangements with Timken. During fiscal years 2007 and 2008, we
purchased $0.6 million and $4.2 million, respectively,
under this agreement.
|
|
Note 3
|
INVESTMENTS
IN SIGNIFICANT AFFILIATES
|
Consolidated
Affiliates
Bristow Aviation On December 19, 1996,
we, along with one of our subsidiaries, acquired 49% of Bristow
Aviations common stock and a significant amount of its
subordinated debt as further discussed below. Bristow Aviation
is incorporated in England and holds all of the outstanding
shares in Bristow Helicopter Group Limited (Bristow
Helicopters). Bristow Aviation is organized with three
different classes of ordinary shares having disproportionate
voting rights. The Company, Caledonia Investments plc and its
subsidiary, Caledonia Industrial & Services Limited
(collectively, Caledonia) and a European Union
investor (the E.U. Investor) own 49%, 46% and 5%,
respectively, of Bristow Aviations total outstanding
ordinary shares, although Caledonia has voting control over the
E.U. Investors shares.
In addition to our ownership of 49% of Bristow Aviations
outstanding ordinary shares, in May 2004, we acquired eight
million shares of deferred stock, essentially a subordinated
class of stock with no voting rights, from Bristow Aviation for
£1 per share ($14.4 million in total). We also have
£91.0 million (approximately $181 million)
principal amount of subordinated unsecured loan stock (debt) of
Bristow Aviation bearing interest at an annual rate of 13.5% and
payable semi-annually. Payment of interest on such debt has been
deferred since its incurrence in 1996. Deferred interest accrues
at an annual rate of 13.5% and aggregated $535.7 million as
of March 31, 2008. No interest payments have been paid
through March 31, 2008.
The Company, Caledonia, the E.U. Investor and Bristow Aviation
have entered into a shareholders agreement respecting,
among other things, the composition of the board of directors of
Bristow Aviation. On matters coming before Bristow
Aviations board, Caledonias representatives have a
total of three votes and the two other directors have one vote
each. So long as Caledonia has a significant interest in the
shares of the common stock of Bristow Group Inc., par value $.01
per share (Common Stock), issued to it pursuant to
the transaction or maintains its voting control of Bristow
Aviation, Caledonia will have the right to nominate two persons
to our board of directors and to replace any such directors so
nominated.
Caledonia, the Company and the E.U. Investor also have entered
into a put/call agreement under which, upon giving specified
prior notice, we have the right to buy all the Bristow Aviation
shares held by Caledonia and the E.U. Investor, who, in turn,
each have the right to require us to purchase such shares. Under
current English law, we would be required, in order for Bristow
Aviation to retain its operating license, to find a qualified
European investor to own any Bristow Aviation shares we have the
right to acquire under the put/call agreement. The only
restriction under the put/call agreement limiting our ability to
exercise the put/call option is a requirement to consult with
the Civil Aviation Authority (CAA) regarding the
suitability of the new holder of the Bristow Aviation shares.
The put/call agreement does not contain any provisions should
the CAA not approve the new European investor. However, we would
work diligently to find a European investor suitable to the CAA.
The amount by which we could purchase the shares of the other
investors holding 51% of the equity of Bristow Aviation is fixed
under the terms of the call option, and we have reflected this
amount on our consolidated balance sheets as minority interest.
Furthermore, the call option provides a mechanism whereby the
economic risk for the other investors is limited should the
financial condition of Bristow Aviation deteriorate. The call
option price is the nominal value of the ordinary shares held by
the minority shareholders (£1.0 million as of
March 31, 2008) plus an annual guaranteed rate of
return less any prepayments of such call option price and any
dividends paid on the shares concerned. The Company can elect to
pre-pay the guaranteed return element of the call option price
wholly or in part without exercising the call option. No
dividends have been paid. We have accrued the annual return due
to the other shareholders at a rate of sterling LIBOR plus 3%
(prior to May 2004, the rate was fixed at 12%) by recognizing
minority interest expense in
F-16
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
our consolidated statements of income, with a corresponding
increase in minority interest on our consolidated balance
sheets. Prepayments of the guaranteed return element of the call
option are reflected as a reduction in minority interest on our
consolidated balance sheets. The other investors have an option
to put their shares in Bristow Aviation to the Company. The put
option price is calculated in the same way as the call option
price except that the guaranteed rate for the period to April
2004 was 10% per annum. If the put option is exercised, any
pre-payments of the call option price are set off against the
put option price. As a result of the death of the E.U. Investor,
Caledonia and the Company are in the process of nominating a
replacement investor suitable to U.K. authorities. We expect the
change of shareholder to be complete by the end of 2008.
Changes in the balance for the minority interest associated with
Bristow Aviation are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Balance beginning of fiscal year
|
|
$
|
2,130
|
|
|
$
|
1,804
|
|
|
$
|
2,042
|
|
Payments to minority interest shareholders
|
|
|
(156
|
)
|
|
|
(157
|
)
|
|
|
(189
|
)
|
Minority interest expense
|
|
|
155
|
|
|
|
163
|
|
|
|
192
|
|
Currency translation
|
|
|
(325
|
)
|
|
|
232
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal year
|
|
$
|
1,804
|
|
|
$
|
2,042
|
|
|
$
|
2,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During September and October 2006, we conducted a public
offering of 4,600,000 shares of our 5.50% mandatory
convertible preferred stock, par value $0.01 per share and
liquidation preference of $50.00 per share (the Preferred
Stock) (see Note 9). Caledonia purchased an aggregate
of 300,000 shares of the Preferred Stock in this offering
at a price equal to the public offering price. The underwriters
for this offering received no discount or commission on the sale
of these 300,000 shares to Caledonia.
Bristow Caribbean Ltd. Bristow Caribbean Ltd.
(BCL) is a joint venture in Trinidad, in which we
own a 40% interest with a local partner that holds the remaining
60% interest. BCL provides offshore helicopter services to
customers of ours in Trinidad. We control the significant
management decisions of this entity, including the payment of
dividends to our partner. We consolidate this VIE as the primary
beneficiary of the entity. BCL operates twelve aircraft in
Trinidad.
Aviashelf Aviation Co.
(Aviashelf) On July 15, 2004,
Bristow Aviation, through certain wholly-owned subsidiaries,
acquired an interest in an operation in Russia in an
arms-length transaction with previously unrelated parties.
This transaction included the purchase of a 48.5% interest in
Aviashelf, a Russian helicopter company that owns five large
twin-engine helicopters. Simultaneously, through two newly
formed 51%-owned U.K. joint venture companies, Bristow
Helicopters Leasing Ltd. (BHL) and Sakhalin Bristow
Air Services Ltd.(SBAS), Bristow Aviation purchased
two large twin-engine helicopters and two fixed-wing aircraft.
These two U.K. companies hold the contracts for our Russian
operations and lease aircraft to Aviashelf. The acquisition was
accounted for under the purchase method, and we have
consolidated the results of Aviashelf from the date of
acquisition. Aviashelf has been consolidated based on the
ability of certain consolidated subsidiaries of Bristow Aviation
to control the vote on a majority of the shares of Aviashelf,
rights to manage the day to day operations of the company which
were granted under a shareholders agreement, and our
ability to acquire an additional 8.5% interest in Aviashelf
under a put/call option agreement.
On May 25, 2007, we acquired an additional 9% interest in
each of BHL and SBAS for $300,000 in accordance with a put/call
option agreement. In addition, on May 25, 2007, we entered
into an agreement for grant of a new call option under which we
can acquire an additional 8.5% interest in Aviashelf. This
agreement replaces the previous put/call option agreement.
F-17
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Bristow Helicopters Nigeria Ltd. and Pan African Airlines
Nigeria Ltd. Bristow Helicopters Nigeria Ltd.
(BHNL) and Pan African Airlines Nigeria Ltd.
(PAAN) are joint ventures in Nigeria with local
partners, in which we own interests of 40% and 50.17%,
respectively. BHNL and PAAN provide helicopter services to
customers in Nigeria. These entities are VIEs that we
consolidate as the primary beneficiary.
Heliair Leasing Limited Heliair Leasing
Limited (Heliair) is a Cayman Islands company that
as of March 31, 2007 owned two aircraft that it leased to
BriLog Leasing Ltd. (BriLog), a wholly-owned
subsidiary of ours. In fiscal year 1999, Heliair purchased the
aircraft with proceeds from two limited recourse term loans with
a U.K. bank. The term loans were secured by both aircraft and
our guarantee of the underlying lease obligations. In addition,
we provided asset value guarantees totaling up to
$3.8 million, which were payable at expiration of the
leases depending on the value received for the aircraft at the
time of disposition. The sole purpose of Heliair was to finance
the purchase of the two aircraft. As a result of the guarantees
and the terms of the underlying leases, for financial statement
purposes, the aircraft and associated term loans had been
reflected on our consolidated balance sheets, effectively
consolidating Heliair.
As discussed in Note 5, in May 2007, we completed a
long-term financing, the proceeds of which were used to purchase
the two aircraft discussed above from Heliair in May and July
2007. Heliair used the sales proceeds to repay the term loans
concurrently. As a result of the sale of the aircraft and
repayment of the term loans, Heliair has no assets and
liabilities and no longer leases any aircraft to BriLog.
Additionally, as we no longer guarantee any obligations of
Heliair, we no longer consolidate this entity as of July 2,
2007 upon repayment of the second term loan.
Unconsolidated
Affiliates
We have investments in three unconsolidated affiliates that are
accounted for under the cost method as we are unable to exert
significant influence over their operations: Hemisco Helicopters
International, Inc. (Hemisco) and Heliservicio
Campeche S.A. de C.V. (Heliservicio) (collectively,
HC); and Petroleum Air Services (PAS).
We also have investments in several unconsolidated affiliates
that we account for under the equity method: FBS Limited
(FBS), FB Heliservices Limited (FBH), FB
Heliservices Limited (FBL), collectively referred to
as the FB Entities; Helicopter Leasing Associates, L.L.C.
(HLA); Norsk Helikopter AS (Norsk); and
Rotorwing Leasing Resources, L.L.C. (RLR). Each of
these entities is principally involved in the provision of
helicopter transportation services to the offshore oil and gas
industry, with the exception of the FB Entities, whose
activities are described in further detail below, and Norsk,
whose subsidiary provides air ambulance services.
HC We own a 49% interest in each of Hemisco,
a Panamanian corporation, and Heliservicio, a Mexican
corporation, which provide onshore helicopter services to the
Mexican Federal Electric Commission and offshore helicopter
transportation to Petróleos Mexicanos (PEMEX)
and other companies on a contract and ad hoc basis. HC owns 3
aircraft and leases 7 aircraft from us, 13 aircraft from RLR and
5 aircraft from a third party to provide helicopter services to
its customers.
In order to improve the financial condition of Heliservicio, we
and our joint venture partner, Compania Inversora Corporativa,
S.A de C.V (CIC), completed a recapitalization of
Heliservicio on August 19, 2005. As a result of this
recapitalization, Heliservicios two shareholders, the
Company and CIC, have notes payable to Hemisco of
$4.4 million and $4.6 million, respectively, and
obligations of Heliservicio in the same amounts were cancelled
thereby increasing its capital. The $4.4 million note owed
by us to Hemisco bears interest at 3% annually and is due on
July 31, 2015. This transaction was a non-cash investing
activity as disclosed in the supplemental disclosure of non-cash
investing activities on the consolidated statement of cash flows
for fiscal year 2006.
After the conclusion of the contract with PEMEX in February
2005, HC experienced difficulties during fiscal year 2006 in
meeting its obligations to make lease rental payments to us and
to RLR. During fiscal year
F-18
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2006, RLR and we made a determination that, because of the
uncertainties as to collectibility, lease revenue from HC would
be recognized as they were collected. As of March 31, 2008,
$1.8 million of amounts billed but not collected from HC
have not been recognized in our results, and our 49% share of
the equity in earnings of RLR has been reduced by
$3.5 million for amounts billed but not collected from HC.
During fiscal year 2008, we recognized revenue of
$0.6 million upon receipt of payment from HC for amounts
billed in fiscal year 2007 and recorded equity earnings from RLR
of $0.8 million related to receipt of payment by RLR from
HC for amounts billed in fiscal year 2007. We have taken several
actions which have improved the financial condition and
profitability of HC, and we will continue to evaluate the
improving results for HC to determine if and when we will change
our accounting for this joint venture from the cash to accrual
basis.
PAS In Egypt, we operate through our 25%
interest in PAS, an Egyptian corporation. PAS provides
helicopter and fixed wing transportation to the offshore energy
industry. Additionally, spare fixed-wing capacity is chartered
to tourism operators. PAS owns 40 aircraft and leases 1 aircraft
from us.
FB Entities We own a 50% interest in each of
the FB Entities, U.K. corporations which principally provide
pilot training, maintenance and support services to the British
military under an agreement that runs through March 31,
2012. FBS and FBL own and operate a total of 59 aircraft.
The FB Entities originated in 1996 when Bristow Aviation was
awarded a contract to provide pilot training and maintenance
services to the Defence Helicopter Flying School, a then newly
established training school for all branches of the British
military, under a fifteen-year contract valued at approximately
£500 million over the full term. FBS purchased and
specially modified 47 aircraft dedicated to conducting these
training activities, which began in May 1997. Bristow Aviation
and its partner have given joint and several guarantees of up to
£15.0 million ($29.8 million) related to the
performance of this contract. Bristow Aviation has also
guaranteed repayment of up to £10 million
($19.9 million) of FBSs outstanding debt obligation,
which is primarily collateralized by the 47 aircraft discussed
above. Since May 1997, the FB Entities have been awarded
additional government work. These entities together have
purchased and modified 12 additional aircraft and maintain a
staff of approximately 575 employees.
HLA We own a 50% interest in HLA, a Louisiana
limited liability company. HLA leases two aircraft from a third
party, which it leases to Aeroleo.
Norsk We own a 49% interest in Norsk, a
Norwegian corporation that provides helicopter transportation
services in the Norwegian sector of the North Sea. Norsk
operates 12 aircraft, 6 of which are leased from us. Norsk owns
100% of Lufttransport AS, a Norwegian company which operates 20
aircraft and is engaged in providing air ambulance services in
Scandinavia. As of March 31, 2008, Norsk and its subsidiary
operated a total of 32 aircraft.
RLR We own a 49% interest in RLR, a Louisiana
limited liability company. RLR owns seven aircraft and leases
six aircraft from us, all of which it leases to HC.
In July 2003, we sold six aircraft, at cost, to RLR. RLR
financed 90% of the purchase price of these aircraft through a
five-year $31.8 million term loan (the RLR
Note). The RLR Note has $19.0 million remaining
outstanding and is secured by the six aircraft which have a
cumulative carrying value of $24.0 million as of
March 31, 2008. The Company and other shareholder of RLR
have provided guarantees of 49% and 51%, respectively, of the
RLR Note outstanding as of the most recent July anniversary
date. As of March 31, 2008, the Company and other
shareholder of RLR had guaranteed $9.3 million and
$9.7 million, respectively. In addition, the lender has a
put option concerning the RLR Note which it may exercise if the
aircraft are not returned to the U.S. within 30 days
of a default on the RLR Note. Any such exercise would require us
to purchase 100% of the RLR Note from the lender. We
simultaneously entered into a similar agreement with the other
RLR shareholder which requires that, in event of exercise by the
lender of its put option to us, the other shareholder will be
required to purchase 51% of the RLR Note from us. As of
March 31, 2008, a liability of $0.6 million
representing the fair value of this guarantee was reflected in
our
F-19
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consolidated balance sheet in other accrued liabilities. The
fair value of the guarantee is being amortized over the term of
the RLR Note which matures in July 2008. We expect the RLR Note
to be refinanced prior to maturity.
During September 2007, we and the other RLR shareholder each
contributed additional capital of approximately
$2.0 million to RLR and we loaned RLR $4.1 million
under a three-year term loan arrangement which is included in
other assets in the consolidated balance sheet as of
March 31, 2008. The funds were used by RLR to purchase an
aircraft delivered in September 2007 which was leased to HC.
Aeroleo In March 2007, we sold our 50%
interest in Aeroleo, a Brazilian corporation, to our partners in
the joint venture. We continued to lease aircraft already in
country to this entity until the agreements expired in late
fiscal year 2008. Aeroleo provides offshore helicopter
transportation services primarily to the Brazilian national oil
company and also serves other oil and gas companies. Aeroleo
leases two aircraft from another unconsolidated affiliate of
ours (discussed under HLA) under agreements that
expire in fiscal year 2009.
Other Historically, in addition to the
expansion of our business through purchases of new and used
aircraft, we have also established new joint ventures with local
partners or purchased significant ownership interests in
companies with ongoing helicopter operations, particularly in
countries where we have no operations or our operations are
limited in scope, and we continue to evaluate similar
opportunities which could enhance our operations. Where we
believe that it is probable that an investment will result, the
costs associated with such investment evaluations are deferred
and included in investment in unconsolidated affiliates in our
consolidated balance sheets. For each investment evaluated, an
impairment of the deferred costs is recognized in the period in
which we determine that it is no longer probable that an
investment will be made. In December 2006, we recorded expense
of $1.9 million in other income (expense), net, in our
consolidated statements of income for acquisition costs
previously deferred in connection with an acquisition we were
evaluating as we determined that the acquisition was no longer
probable. As of March 31, 2008, other costs associated with
investment evaluations were not significant.
Our percentage ownership and investment balance for the
unconsolidated affiliates is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
March 31,
|
|
|
|
Ownership
|
|
|
2007
|
|
|
2008
|
|
|
Cost Method:
|
|
|
|
|
|
|
|
|
|
|
|
|
HC
|
|
|
49
|
%
|
|
$
|
7,017
|
|
|
$
|
7,017
|
|
PAS
|
|
|
25
|
%
|
|
|
6,286
|
|
|
|
6,286
|
|
Other
|
|
|
|
|
|
|
1,046
|
|
|
|
933
|
|
Equity Method:
|
|
|
|
|
|
|
|
|
|
|
|
|
FB Entities
|
|
|
50
|
%
|
|
|
20,011
|
|
|
|
24,296
|
|
Norsk
|
|
|
49
|
%
|
|
|
10,323
|
|
|
|
9,912
|
|
RLR
|
|
|
49
|
%
|
|
|
1,724
|
|
|
|
3,541
|
|
Other
|
|
|
|
|
|
|
421
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
46,828
|
|
|
$
|
52,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Earnings from unconsolidated affiliates were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Dividends from entities accounted for on the cost method:
|
|
|
|
|
|
|
|
|
|
|
|
|
PAS
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
2,750
|
|
Other
|
|
|
180
|
|
|
|
137
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,680
|
|
|
|
2,637
|
|
|
|
2,929
|
|
Earnings (losses) from entities accounted for on the equity
method:
|
|
|
|
|
|
|
|
|
|
|
|
|
FB Entities
|
|
|
3,694
|
|
|
|
7,154
|
|
|
|
10,573
|
|
Norsk
|
|
|
2,675
|
|
|
|
1,635
|
|
|
|
(467
|
)
|
RLR
|
|
|
(2,744
|
)
|
|
|
(187
|
)
|
|
|
(142
|
)
|
Other
|
|
|
453
|
|
|
|
184
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,078
|
|
|
|
8,786
|
|
|
|
10,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,758
|
|
|
$
|
11,423
|
|
|
$
|
12,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of combined financial information of our
unconsolidated affiliates accounted for under the equity method
of accounting is set forth below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Current assets
|
|
$
|
129,428
|
|
|
$
|
143,506
|
|
Non-current assets
|
|
|
304,940
|
|
|
|
311,215
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
434,368
|
|
|
$
|
454,721
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
80,191
|
|
|
$
|
119,298
|
|
Non-current liabilities
|
|
|
292,049
|
|
|
|
268,968
|
|
Equity
|
|
|
62,128
|
|
|
|
66,455
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
434,368
|
|
|
$
|
454,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
|
|
$
|
248,576
|
|
|
$
|
318,589
|
|
|
$
|
342,458
|
|
Gross profit
|
|
$
|
31,590
|
|
|
$
|
45,906
|
|
|
$
|
48,375
|
|
Net income
|
|
$
|
8,282
|
|
|
$
|
18,357
|
|
|
$
|
23,048
|
|
|
|
Note 4
|
PROPERTY
AND EQUIPMENT
|
During fiscal year 2008, we received proceeds of
$26.6 million from the disposal of 39 aircraft and certain
other equipment, resulting in a gain of $9.4 million.
Included in the $9.4 million gain is a total loss on one
medium aircraft from a crash in Nigeria, a total loss on two
small aircraft in the Gulf of Mexico in flight accidents and a
total loss from storm damage to one medium aircraft, resulting
in a net loss on asset disposals of $0.5 million. All of
these losses were insured. Additionally, in fiscal year 2008, we
settled an insurance claim on an aircraft that was damaged in
the North Sea in November 2006, which resulted in a gain of
$3.8 million. The proceeds from this claim totaling
$15.6 million were received in May 2008. The proceeds are
presented in non-cash investing activities in our consolidated
statement of cash flows for fiscal year 2008.
F-21
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During fiscal year 2007, we received proceeds of
$26.2 million, primarily from the disposal of 12 aircraft
and certain other equipment, which together resulted in a net
gain of $10.6 million.
During fiscal year 2006, we received proceeds of
$16.8 million, primarily from the disposal of one aircraft
and certain equipment and from insurance recoveries associated
with hurricane Katrina damage, which together resulted in a gain
of $0.1 million.
Additionally, on December 30, 2005, we sold nine aircraft
for $68.6 million in aggregate to a subsidiary of General
Electric Capital Corporation, and then leased back each of the
nine aircraft under separate operating leases with terms of ten
years expiring in January 2016. See further discussion of this
transaction in Note 6.
In January 2004, we entered into a purchase agreement with
Eurocopter for two new large aircraft to be delivered in
calendar year 2005. In connection with this purchase agreement,
Eurocopter found a purchaser for five of our used large
aircraft. Two of these aircraft were not ready for trade-in upon
execution of the contract, ultimately resulting in our issuance
of two short-term promissory notes to Eurocopter in August 2005
for the remaining purchase price of these aircraft. The
promissory notes totaled 12.1 million
($14.7 million) in aggregate, which was due to Eurocopter
in the event that the two aircraft were not provided to
Eurocopter. In February 2006, the two aircraft were traded in
for a value of 9.4 million ($11.5 million),
leaving 2.7 million ($3.2 million) outstanding
on these notes as of March 31, 2006. In April 2006, we paid
the remaining balance due on these notes, thereby settling the
obligation for these aircraft with Eurocopter. During fiscal
year 2006, this transaction was accounted for as a non-monetary
exchange of productive assets based on the recorded amount of
the non-monetary asset relinquished, and no gain or loss was
recorded. As such, the transaction is included as a non-cash
investing activity on our statement of cash flows.
As of March 31, 2007 and 2008, prepaid expense and other
current assets included $8.5 million and $6.4 million,
respectively, associated with 12 and 4 aircraft, respectively,
classified as held for sale. We recorded impairment charges of
$0.5 million and $0.1 million during fiscal years 2006
and 2007, respectively, related to the reduction of the carrying
value of aircraft to their fair values. No impairment charges
were recorded in fiscal year 2008 to reduce the carrying value
of aircraft to their fair values.
Debt as of March 31, 2007 and 2008 consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
71/2% Senior
Notes due 2017, including $0.6 million of unamortized
premium
|
|
$
|
|
|
|
$
|
350,601
|
|
61/8% Senior
Notes due 2013
|
|
|
230,000
|
|
|
|
230,000
|
|
Term loans
|
|
|
18,848
|
|
|
|
16,683
|
|
Hemisco Helicopters International, Inc. note
|
|
|
4,380
|
|
|
|
4,380
|
|
Advance from customer
|
|
|
1,400
|
|
|
|
1,400
|
|
Sakhalin debt
|
|
|
4,454
|
|
|
|
3,154
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
259,082
|
|
|
|
606,218
|
|
Less short-term borrowings and current maturities of long-term
debt
|
|
|
(4,852
|
)
|
|
|
(6,541
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
254,230
|
|
|
$
|
599,677
|
|
|
|
|
|
|
|
|
|
|
71/2% Senior
Notes due 2017 On June 13 and November 13,
2007, we completed offerings totaling $350 million of
71/2% Senior
Notes due 2017
(71/2% Senior
Notes). $50 million of the notes were issued for a
premium of $0.6 million which is being amortized over the
life of the notes as a reduction of interest
F-22
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
expense. These notes are unsecured senior obligations and rank
effectively junior in right of payment to all of the
Companys existing and future secured indebtedness, rank
equally in right of payment with our existing and future senior
unsecured indebtedness and rank senior in right of payment to
any of our existing and future subordinated indebtedness. The
71/2% Senior
Notes are guaranteed by certain of our U.S. subsidiaries
(the Guarantor Subsidiaries), which are the same
subsidiaries that are guarantors of the $230 million
61/8% Senior
Notes due 2013 (discussed below). We have used and expect to
continue using the net proceeds from the offerings to fund
additional aircraft purchases, including aircraft under options,
and for general corporate purposes. The indenture for the
71/2% Senior
Notes includes restrictive covenants which limits, among other
things, our ability to incur additional debt, issue disqualified
stock, pay dividends, repurchase stock, invest in other
entities, sell assets, incur additional liens or security, merge
or consolidate the Company and enter into transactions with
affiliates. Interest on the
71/2% Senior
Notes is paid on March 15 and September 15 of each year,
beginning on September 15, 2007, and the
71/2% Senior
Notes mature on September 15, 2017. The
71/2% Senior
Notes are redeemable at our option; however, any payment or
re-financing of these notes prior to September 15, 2012 is
subject to a make-whole premium, and any payment or re-financing
is subject to a prepayment premium of 103.75%, 102.50% and
101.25% if redeemed during the twelve-month period beginning on
September 15 of 2012, 2013 and 2014, respectively.
Pursuant to a registration rights agreement with the holders of
our
71/2% Senior
Notes, we exchanged their notes for publicly registered notes
with identical terms on March 3, 2008.
61/8% Senior
Notes due 2013 On June 20, 2003, we
completed an offering of $230 million
61/8% Senior
Notes due 2013
(61/8% Senior
Notes). These notes are unsecured senior obligations and
rank effectively junior in right of payment to all the
Companys existing and future secured indebtedness, rank
equally in right of payment with our existing and future senior
unsecured indebtedness and rank senior in right of payment to
any of our existing and future subordinated indebtedness. The
61/8% Senior
Notes are guaranteed by the Guarantor Subsidiaries. The
indenture to the
61/8% Senior
Notes includes restrictive covenants which limits, among other
things, our ability to incur additional debt, issue disqualified
stock, pay dividends, repurchase stock, invest in other
entities, sell assets, incur additional liens or security, merge
or consolidate the Company and enter into transactions with
affiliates. The
61/8% Senior
Notes are redeemable at our option; however, any payment or
re-financing of these notes prior to June 2008 is subject to a
make-whole premium and any payment or re-financing after June
2008 but prior to June 2011 is subject to a prepayment premium
(approximately 103%, 102% and 101% in June 2008, 2009 and 2010,
respectively).
Term Loans As discussed further in
Note 3, two limited recourse term loans were created in
connection with sale and lease transactions for two aircraft
entered into with Heliair in fiscal year 1999. In May 2007,
BriLog completed a new $18.7 million term loan financing,
the proceeds of which were used to purchase the two aircraft
from Heliair in May and July 2007. Heliair used the sales
proceeds to repay the limited recourse term loans concurrently.
This financing and aircraft purchase did not involve the
transfer of cash. See Note 3 for a discussion of our
relationship with Heliair.
The new term loan is repayable by BriLog in quarterly
installments with the first payment of $0.3 million in June
2007, followed by thirty-two consecutive quarterly principal
payments of $0.6 million, the first of which was paid in
September 2007. Interest is payable on the new term loan at
LIBOR plus a margin of 1.25% (about 3.95% as of March 31,
2008). The new term loan is secured by the two aircraft, and we
have provided a parent guarantee of the loan.
Hemisco Helicopters International, Inc.
note As discussed in Note 3 above, in
order to improve the financial condition of Heliservicio, we and
our joint venture partner, CIC, completed a recapitalization of
Heliservicio on August 19, 2005. As a result of this
recapitalization, Heliservicios two shareholders, the
Company and CIC, have notes payable to Hemisco of
$4.4 million and $4.6 million, respectively, and
obligations of Heliservicio in the same amounts were cancelled
thereby increasing its capital. The $4.4 million note owed
by us to Hemisco bears interest at 3% annually and is due on
July 31, 2015.
F-23
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Advance from customer This advance was made
in relation to value added tax items in Kazakhstan and is
non-interest bearing.
Sakhalin Debt On July 16, 2004, we
assumed various existing liabilities that were outstanding and
secured against assets purchased as part of our acquisition of a
business in Sakhalin, Russia. Two promissory notes totaling
$0.8 million as of March 31, 2008 are being repaid
over five years at an interest rate of 8.5% and are scheduled to
be fully paid in fiscal years 2009 and 2010. The other
liabilities assumed include a finance lease on an aircraft which
was fully repaid in fiscal year 2008; a finance lease on an
aircraft totaling $2.2 million as of March 31, 2008,
with an interest rate of 8.5% and expiring in fiscal year 2009
with a final termination payment of $2.0 million; and a
note to the former owner of $0.2 million at March 31,
2008 which will be repaid in fiscal year 2009.
Senior Secured Credit Facilities In August
2006, we entered into syndicated senior secured credit
facilities which consist of a $100 million revolving credit
facility (with a subfacility of $25 million for letters of
credit) and a $25 million letter of credit facility (the
Credit Facilities). The aggregate commitments under
the revolving credit facility may be increased to
$200 million at our option following our
61/8% Senior
Notes receiving an investment grade credit rating from
Moodys or Standard & Poors (so long as the
rating of the other rating agency of such notes is no lower than
one level below investment grade). As of March 31, 2008,
our Moodys and Standard & Poors ratings
were Ba2 and BB, respectively, which are two levels below the
investment grade ratings of Baa3 and BBB, respectively. In
May and November 2007, we amended the Credit Facilities to
increase the amount of permitted additional indebtedness to
$325 million and $375 million, respectively. The
revolving credit facility may be used for general corporate
purposes, including working capital and acquisitions. The letter
of credit facility is used to issue letters of credit supporting
or securing performance of statutory obligations, surety or
appeal bonds, bid or performance bonds and similar obligations.
Borrowings under the revolving credit facility bear interest at
an interest rate equal to, at our option, either the Base Rate
or LIBOR (or EURIBO, in the case of Euro-denominated borrowings)
plus the applicable margin. Base Rate means the
higher of (1) the prime rate and (2) the Federal Funds
rate plus 0.5% per annum. The applicable margin for borrowings
range from 0.0% and 2.5% depending on whether the Base Rate or
LIBOR is used, and is determined based on our credit rating.
Fees owed on letters of credit issued under either the revolving
credit facility or the letter of credit facility are equal to
the margin for LIBOR borrowings. Based on our current ratings,
the margins on Base Rate and LIBOR borrowings were 0.0% and
1.25%, respectively, as of March 31, 2008. There is also a
commitment fee of 0.20% on undrawn borrowing capacity. Interest
is payable at least quarterly, and the Credit Facilities mature
in August 2011. Our obligations under the Credit Facilities are
guaranteed by certain of our principal domestic subsidiaries and
secured by the accounts receivable, inventory and equipment
(excluding aircraft and their components) of Bristow Group and
the Guarantor Subsidiaries, and the capital stock of certain of
our principal foreign subsidiaries.
In addition, the Credit Facilities include covenants which are
customary for these types of facilities, including certain
financial covenants and restrictions on the ability of Bristow
Group and its subsidiaries to enter into certain transactions,
including those that could result in the incurrence of
additional liens and indebtedness; the making of loans,
guarantees or investments; sales of assets; payments of
dividends or repurchases of our capital stock; and entering into
transactions with affiliates.
As of March 31, 2008, we had $0.4 million in letters
of credit outstanding under the letter of credit facility and no
borrowings or letters of credit outstanding under the revolving
credit facility.
U.K. Facilities As of March 31, 2008,
Bristow Aviation had a £3.0 million
($6.0 million) facility for bank guarantees, of which
£0.5 million ($1.0 million) was outstanding, and
a £1.0 million ($2.0 million) net overdraft
facility, under which no borrowings were outstanding. Both
facilities are with a U.K. bank. The letter of credit facility
is provided on an uncommitted basis, and outstanding letters of
credit bear fees at a rate of
F-24
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
0.7% per annum. Borrowings under the net overdraft facility are
payable upon demand and bear interest at the banks base
rate plus a spread that can vary between 1% and 3% per annum
depending on the net overdraft amount. The net overdraft
facility will be reviewed by the bank annually on August 31 and
is cancelable at any time upon notification from the bank. The
facilities are guaranteed by certain of Bristow Aviations
subsidiaries and secured by a negative pledge of Bristow
Aviations assets.
RLR Note As discussed in Note 3 above,
we guaranteed 49% of the RLR Note ($9.3 million as of
March 31, 2008). In addition, we have given the lender a
put option concerning the RLR Note which it may exercise if the
aircraft are not returned to the U.S. within 30 days
of a default on the RLR Note. The RLR Note matures in July 2008.
We expect the RLR Note to be refinanced prior to maturity.
Surety Bond We have provided an indemnity
agreement to Afianzadora Sofimex, S.A. to support issuance of
surety bonds on behalf of HC from time to time. As of
March 31, 2008, surety bonds denominated in Mexican pesos
with an aggregate value of 184.9 million Mexican pesos
($17.3 million) and a surety bond denominated in
U.S. dollars with a value of $1.7 million were
outstanding.
Other Matters Aggregate annual maturities
(which excludes unamortized premium of $0.6 million) for
all debt for the next five fiscal years and thereafter are as
follows (in thousands):
|
|
|
|
|
Fiscal Year ending March 31
|
|
|
|
|
2009
|
|
$
|
6,484
|
|
2010
|
|
|
2,631
|
|
2011
|
|
|
2,342
|
|
2012
|
|
|
2,301
|
|
2013
|
|
|
2,301
|
|
Thereafter
|
|
|
589,558
|
|
|
|
|
|
|
|
|
$
|
605,617
|
|
|
|
|
|
|
Interest paid in fiscal years 2006, 2007 and 2008 was
$16.2 million, $16.1 million and $34.1 million,
respectively. Capitalized interest was $2.4 million,
$6.4 million and $12.9 million in fiscal years 2006,
2007 and 2008, respectively.
The estimated fair value of our total debt as of March 31,
2007 and 2008 was $241.8 million and $600.5 million,
respectively, based on quoted market prices for the publicly
listed
71/2% Senior
Notes,
61/8% Senior
Notes and the carrying value for all our other debt, which
approximates fair value.
F-25
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 6
|
COMMITMENTS
AND CONTINGENCIES
|
Aircraft Purchase Contracts As shown in the
table below, we expect to make additional capital expenditures
over the next five fiscal years to purchase additional aircraft.
As of March 31, 2008, we had 35 aircraft on order and
options to acquire an additional 50 aircraft. Although a similar
number of our existing aircraft may be sold during the same
period, the additional aircraft on order will provide
incremental fleet capacity in terms of revenue and operating
margin.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Total
|
|
|
Commitments as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Large
|
|
|
11
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Training
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
(1)
|
|
|
8
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures (in thousands)(3)
|
|
$
|
262,200
|
|
|
$
|
87,078
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
349,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium
|
|
|
|
|
|
|
3
|
|
|
|
6
|
|
|
|
11
|
|
|
|
13
|
|
|
|
33
|
|
Large
|
|
|
|
|
|
|
6
|
|
|
|
10
|
|
|
|
1
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
16
|
|
|
|
12
|
|
|
|
13
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures (in thousands)(3)
|
|
$
|
63,628
|
|
|
$
|
229,972
|
|
|
$
|
226,283
|
|
|
$
|
155,407
|
|
|
$
|
127,086
|
|
|
$
|
802,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Signed customer contracts are currently in place for 8 of these
17 non-training aircraft. |
|
(2) |
|
No signed customer contracts are currently in place for these 8
aircraft. |
|
(3) |
|
Includes progress payments on aircraft scheduled to be delivered
in future periods. |
The following chart presents an analysis of our aircraft orders
and options during fiscal years 2006, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending
|
|
|
|
March 31, 2006
|
|
|
March 31, 2007
|
|
|
March 31, 2008
|
|
|
|
Orders
|
|
|
Options
|
|
|
Orders
|
|
|
Options
|
|
|
Orders
|
|
|
Options
|
|
|
Beginning of fiscal year
|
|
|
14
|
|
|
|
|
|
|
|
51
|
|
|
|
24
|
|
|
|
31
|
|
|
|
52
|
|
Aircraft delivered(1)
|
|
|
(12
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
Aircraft ordered
|
|
|
49
|
|
|
|
|
|
|
|
17
|
|
|
|
(9
|
)
|
|
|
20
|
|
|
|
(19
|
)
|
New options
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
17
|
|
Training aircraft
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Orders converted to options
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
Expired options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of fiscal year
|
|
|
51
|
|
|
|
24
|
|
|
|
31
|
|
|
|
52
|
|
|
|
35
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes nine training aircraft delivered during fiscal year
2008. |
Sale and Leaseback Financing On
December 30, 2005, we sold nine aircraft for
$68.6 million in aggregate to a subsidiary of General
Electric Capital Corporation, and then leased back each of the
nine
F-26
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
aircraft under separate operating leases with terms of ten years
expiring in January 2016. Each net lease agreement
requires us to be responsible for all operating costs and has an
effective interest rate of approximately 5% for the first
60 months. Rent payments under each lease are payable
monthly and total $6.3 million and $7.6 million
annually during the first 60 months and second
60 months, respectively, for all nine leases in aggregate.
Each lease has a purchase option upon expiration and an early
purchase option at 60 months (December 2010). The early
purchase option price for the nine aircraft at 60 months is
approximately $52 million in aggregate. There was a
deferred gain on the sale of the aircraft in the amount of
$10.8 million in aggregate. The deferred gain is being
amortized as a reduction in lease expense over the 10 year
lease in proportion to the rent payments. Additional collateral
in the amount of $11.8 million, which consists of five
aircraft and a $2.5 million letter of credit, was released
in fiscal year 2008 following the conclusion of the
U.S. Securities and Exchange Commission (SEC)
investigation related to the Internal Review (see discussion
below). The leases contain terms customary in transactions of
this type, including provisions that allow the lessor to
repossess the aircraft and require the lessee to pay a
stipulated amount if the lessee defaults on its obligations
under the leases.
Operating Leases We have noncancelable
operating leases in connection with the lease of certain
equipment, land and facilities, including the leases with a
subsidiary of General Electric Capital Corporation discussed
above. Rental expense incurred under all operating leases
included in income from continuing operations, except for those
with terms of a month or less that were not renewed, was
$9.8 million, $17.5 million and $22.8 million in
fiscal years 2006, 2007 and 2008, respectively. As of
March 31, 2008, aggregate future payments under
noncancelable operating leases that have initial or remaining
terms in excess of one year are as follows (in thousands):
|
|
|
|
|
Fiscal year ending March 31,
|
|
|
|
|
2009
|
|
$
|
13,370
|
|
2010
|
|
|
10,578
|
|
2011
|
|
|
9,676
|
|
2012
|
|
|
9,856
|
|
2013
|
|
|
9,371
|
|
Thereafter
|
|
|
26,306
|
|
|
|
|
|
|
|
|
$
|
79,157
|
|
|
|
|
|
|
Collective Bargaining Agreement We employ
approximately 330 pilots in our North America operations who are
represented by the Office and Professional Employees
International Union (OPEIU) under a collective
bargaining agreement. We and the pilots represented by the OPEIU
ratified an amended collective bargaining agreement on
April 4, 2005. The terms under the amended agreement are
fixed until October 3, 2008 and include wage increases for
the pilot group and improvements to several other benefit plans.
We are currently involved in negotiations with unions
representing our pilots and engineers in the U.K. As a result of
the negotiations complete to date, labor rates under our
existing contracts increased 4-5% starting in July 2007, and the
new labor rates will continue through June 2008.
During the three months ended December 31, 2007, we
completed annual contract negotiations with the unions in
Nigeria, which resulted in increased labor costs.
In April 2008, an agreement was successfully negotiated with the
pilots union in Australia. The agreement extends to
June 30, 2010 and we do not anticipate any action by pilots
prior to the expiration of the agreement. The agreement was
lodged with the relevant authorities to become binding on all
parties at the beginning of May 2008. As a result of this
agreement, labor rates increased 20.4%, portions of which were
F-27
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
retroactive to May 2007 and January 2008. Additional increases
of 5% will become effective in September 2008 and July 2009.
Internal Review In February 2005, we
voluntarily advised the staff of the SEC that the Audit
Committee of our board of directors had engaged special outside
counsel to undertake a review of certain payments made by two of
our affiliated entities in a foreign country. The review of
these payments, which initially focused on Foreign Corrupt
Practices Act matters, was subsequently expanded by the Audit
Committee to cover operations in other countries and other
issues (the Internal Review). As a result of the
findings of the Internal Review (which was completed in late
2005), our quarter ended December 31, 2004 and prior
financial statements were restated. We also provided the SEC
with documentation resulting from the Internal Review which
eventually resulted in a formal SEC investigation. In September
2007, we consented to the issuance of an administrative
cease-and-desist
order by the SEC, in final settlement of the SEC investigation.
The SEC did not impose any fine or other monetary sanction upon
the Company. Without admitting or denying the SECs
findings, we consented to be ordered not to engage in future
violations of certain provisions of the federal securities laws
involving improper foreign payments, internal controls and books
and records. For further information on the restatements, see
our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2005.
Following the previously disclosed settlement with the SEC
regarding improper payments made by foreign affiliates of the
Company in Nigeria, outside counsel to the Company was contacted
by the U.S. Department of Justice (the DOJ) and
was asked to provide certain information regarding the Audit
Committees related Internal Review. We previously provided
disclosure regarding the Internal Review in our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2005. We have entered
into an agreement with the DOJ that tolls the statute of
limitations relating to these matters. We intend to continue to
be responsive to the DOJs requests. At this time, it is
not possible to predict what the outcome of the DOJs
investigation into these matters will be for the Company.
As a result of the disclosure and remediation of a number of
activities identified in the Internal Review, we may encounter
difficulties conducting business in certain foreign countries
and retaining and attracting additional business with certain
customers. We cannot predict the extent of these difficulties;
however, our ability to continue conducting business in these
countries and with these customers and through agents may be
significantly impacted. We could still face legal and
administrative proceedings, the institution of administrative,
civil injunctive or criminal proceedings involving us
and/or
current or former employees, officers
and/or
directors who are within the jurisdictions of such authorities,
the imposition of fines and other penalties, remedies
and/or
sanctions, including precluding us from participating in
business operations in their countries. It is also possible that
we may become subject to claims by third parties, possibly
resulting in litigation. The matters identified in the Internal
Review and their effects could have a material adverse effect on
our business, financial condition and results of operations.
In addition, we face legal actions relating to remedial actions
which we have taken as a result of the Internal Review, and may
face further legal action of this type in the future. In
November 2005, two of our consolidated foreign affiliates were
named in a lawsuit filed with the High Court of Lagos State,
Nigeria by Mr. Benneth Osita Onwubalili and his affiliated
company, Kensit Nigeria Limited, which allegedly acted as agents
of our affiliates in Nigeria. The claimants allege that an
agreement between the parties was terminated without
justification and seek damages of $16.3 million. We have
responded to this claim and are continuing to investigate this
matter.
As we continue to operate our compliance program, other
situations involving foreign operations, similar to those
matters disclosed to the SEC in February 2005 and described
above, could arise that warrant further investigation and
subsequent disclosures. As a result, new issues may be
identified that may impact our financial statements and lead us
to take other remedial actions or otherwise adversely impact us.
F-28
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During fiscal years 2006 and 2007, we incurred approximately
$10.5 million and $3.1 million in professional fees
related to the Internal Review and related matters. During
fiscal year 2008, we reversed $1.0 million of previously
accrued settlement costs due to the fact that we settled the
investigation with the SEC and incurred $0.6 million for
legal fees related to the DOJ investigation relating to the
Internal Review.
Document Subpoena Relating to DOJ Antitrust
Investigation In June 2005, one of our
subsidiaries received a document subpoena from the Antitrust
Division of the DOJ. The subpoena related to a grand jury
investigation of potential antitrust violations among providers
of helicopter transportation services in the U.S. Gulf of
Mexico. The subpoena focused on activities during the period
from January 1, 2000 to June 13, 2005. We believe
we have submitted to the DOJ substantially all documents
responsive to the subpoena. We have had discussions with the DOJ
and provided documents related to our operations in the
U.S. as well as internationally. We intend to continue to
provide additional information as required by the DOJ in
connection with the investigation. There is no assurance that,
after review of any information furnished by us or by third
parties, the DOJ will not ultimately conclude that violations of
U.S. antitrust laws have occurred. The period of time
necessary to resolve the DOJ antitrust investigation is
uncertain, and this matter could require significant management
and financial resources that could otherwise be devoted to the
operation of our business.
The outcome of the DOJ antitrust investigation and any related
legal proceedings in other countries could include civil
injunctive or criminal proceedings involving us or our current
or former officers, directors or employees, the imposition of
fines and other penalties, remedies
and/or
sanctions, including potential disbarments, and referrals to
other governmental agencies. In addition, in cases where
anti-competitive conduct is found by the government, there is
greater likelihood for civil litigation to be brought by third
parties seeking recovery. Any such civil litigation could have
serious consequences for our Company, including the costs of the
litigation and potential orders to pay restitution or other
damages or penalties, including potentially treble damages, to
any parties that were determined to be injured as a result of
any impermissible anti-competitive conduct. Any of these adverse
consequences could have a material adverse effect on our
business, financial condition and results of operations. The DOJ
antitrust investigation, any related proceedings in other
countries and any third-party litigation, as well as any
negative outcome that may result from the investigation,
proceedings or litigation, could also negatively impact our
relationships with customers and our ability to generate revenue.
In connection with this matter, we incurred $2.6 million,
$1.9 million and $0.7 million in legal and other
professional fees in fiscal years 2006, 2007 and 2008,
respectively, and significant expenditures may continue to be
incurred in the future.
Environmental Contingencies The
U.S. Environmental Protection Agency, also referred to as
the EPA, has in the past notified us that we are a potential
responsible party, or PRP, at four former waste disposal
facilities that are on the National Priorities List of
contaminated sites. Under the federal Comprehensive
Environmental Response, Compensation and Liability Act, also
known as the Superfund law, persons who are identified as PRPs
may be subject to strict, joint and several liability for the
costs of cleaning up environmental contamination resulting from
releases of hazardous substances at National Priorities List
sites. We were identified by the EPA as a PRP at the Western
Sand and Gravel Superfund site in Rhode Island in 1984, at the
Sheridan Disposal Services Superfund site in Waller County,
Texas, in 1989, at the Gulf Coast Vacuum Services Superfund site
near Abbeville, Louisiana, in 1989, and at the Operating
Industries, Inc. Superfund site in Monterey Park, California, in
2003. We have not received any correspondence from the EPA with
respect to the Western Sand and Gravel Superfund site since
February 1991, nor with respect to the Sheridan Disposal
Services Superfund site since 1989. Remedial activities at the
Gulf Coast Vacuum Services Superfund site were completed in
September 1999 and the site was removed from the National
Priorities List in July 2001.
F-29
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The EPA has offered to submit a settlement offer to us in return
for which we would be recognized as a de minimis party in regard
to the Operating Industries Superfund site, but we have not yet
received this settlement proposal. Although we have not obtained
a formal release of liability from the EPA with respect to any
of these sites, we believe that our potential liability in
connection with these sites is not likely to have a material
adverse effect on our business, financial condition or results
of operations.
Hurricanes Katrina and Rita As a result of
hurricanes Katrina and Rita in the fall of 2005, several of our
shorebase facilities located along the U.S. Gulf Coast
sustained significant hurricane damage. In particular, hurricane
Katrina caused a total loss of our Venice, Louisiana, shorebase
facility, and hurricane Rita severely damaged the Creole,
Louisiana, base and flooded the Intracoastal City, Louisiana,
base. These facilities have since been reopened. We recorded a
$0.2 million net gain during fiscal year 2006,
($2.8 million in probable insurance recoveries offset by
$2.6 million of involuntary conversion losses) related to
property damage to these facilities. During fiscal year 2008, we
settled our claim for $0.3 million less than anticipated
resulting in a pre-tax net loss of $0.1 million. Total
insurance recoveries received relating to the hurricanes were
$2.5 million.
Supply Agreement with Timken As discussed in
Note 2, in conjunction with the sale of certain of the
assets of Turbo to Timken, we signed a supply agreement with
Timken through which we are obligated to purchase parts and
components and obtain repair services totaling
$10.5 million over a three-year period beginning
December 1, 2006 at prices consistent with prior
arrangements with Timken. In fiscal years 2007 and 2008, we
purchased $0.6 million and $4.2 million, respectively,
under this agreement.
Guarantees We have guaranteed the repayment
of up to £10 million ($19.9 million) of the debt
of FBS and $9.3 million of the debt of RLR, both
unconsolidated affiliates. See discussion of these commitments
in Note 3. As of March 31, 2008, we have recorded a
liability of $0.6 million representing the fair value of
the guarantee of the RLR Note, which is reflected in our
consolidated balance sheet in other accrued liabilities.
Additionally, we provided an indemnity agreement to Afianzadora
Sofimex, S.A. to support issuance of surety bonds on behalf of
HC from time to time; as of March 31, 2008, surety bonds
denominated in Mexican pesos with an aggregate value of
184.9 million Mexican pesos ($17.3 million) and a
surety bond denominated in U.S. dollars with a value of
$1.7 million were outstanding.
The following table summarizes our commitments under these
guarantees as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Expiration per Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
Fiscal Year
|
|
|
Fiscal Years
|
|
|
Fiscal Years
|
|
|
2014 and
|
|
Total
|
|
|
2009
|
|
|
2010-2011
|
|
|
2012-2013
|
|
|
Thereafter
|
|
(In thousands)
|
|
|
$
|
49,220
|
|
|
$
|
14,150
|
|
|
$
|
5,959
|
|
|
$
|
19,875
|
|
|
$
|
9,238
|
|
Other Matters Although infrequent, aircraft
accidents have occurred in the past, and the related losses and
liability claims have been covered by insurance subject to a
deductible. We are a defendant in certain claims and litigation
arising out of operations in the normal course of business. In
the opinion of management, uninsured losses, if any, will not be
material to our financial position, results of operations or
cash flows.
F-30
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of deferred tax assets and liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Foreign tax credits
|
|
$
|
35,910
|
|
|
$
|
15,502
|
|
Accrued pension liability
|
|
|
61,658
|
|
|
|
70,518
|
|
Maintenance and repair
|
|
|
9,898
|
|
|
|
13,852
|
|
Accrued equity compensation
|
|
|
|
|
|
|
4,662
|
|
Deferred revenues
|
|
|
3,028
|
|
|
|
2,992
|
|
Other
|
|
|
7,048
|
|
|
|
6,787
|
|
Valuation allowance
|
|
|
(9,417
|
)
|
|
|
(7,865
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
108,125
|
|
|
|
106,448
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(169,957
|
)
|
|
|
(173,249
|
)
|
Inventories
|
|
|
(13,172
|
)
|
|
|
(12,700
|
)
|
Investments in unconsolidated affiliates
|
|
|
(14,889
|
)
|
|
|
(17,298
|
)
|
Other
|
|
|
(3,807
|
)
|
|
|
(4,186
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(201,825
|
)
|
|
|
(207,433
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(93,700
|
)
|
|
$
|
(100,985
|
)
|
|
|
|
|
|
|
|
|
|
Companies may use foreign tax credits to offset the
U.S. income taxes due on income earned from foreign
sources. However, the credit that may be claimed for a
particular taxable year is 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, 2007 and 2008, we did not believe it was more
likely than not that we would generate sufficient foreign
sourced income within the appropriate period to utilize all of
our excess foreign tax credits. Therefore, the valuation
allowance was established for the deferred tax asset related to
foreign tax credits.
A portion of the above foreign tax credit asset represents the
expected U.S. foreign tax credit that would result from the
recognition of foreign deferred tax liabilities. As such, the
credit may not be claimed on the U.S. income tax return
until such time that the related foreign deferred tax
liabilities become current. As of March 31, 2007 and 2008,
$27.9 million and $11.1 million, respectively, of the
above foreign deferred tax asset represent credits that relate
to deferred foreign tax liabilities with respect to which the
limitation on utilization and timing of carryovers have yet to
begin.
As of March 31, 2008, our U.S. foreign tax credit
carryovers generated by fiscal year and the related expiration
dates of those credits if they were to expire unutilized are as
follows:
|
|
|
|
|
|
|
Fiscal Year Generated
|
|
Amount of Carryover
|
|
|
Expiration Date
|
|
|
(In thousands)
|
|
|
|
|
2004
|
|
$
|
3,392
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
Total carryover to fiscal year 2009
|
|
$
|
3,392
|
|
|
|
|
|
|
|
|
|
|
F-31
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of income from continuing operations before
provision for income taxes and minority interest for fiscal
years 2006, 2007 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
3,986
|
|
|
$
|
27,376
|
|
|
$
|
29,455
|
|
Foreign
|
|
|
65,211
|
|
|
|
83,953
|
|
|
|
122,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
69,197
|
|
|
$
|
111,329
|
|
|
$
|
152,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes from continuing operations for
fiscal years 2006, 2007 and 2008 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
816
|
|
|
$
|
(2,764
|
)
|
|
$
|
4,321
|
|
Foreign
|
|
|
12,225
|
|
|
|
21,824
|
|
|
|
27,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,041
|
|
|
|
19,060
|
|
|
|
31,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(1,117
|
)
|
|
|
18,352
|
|
|
|
16,312
|
|
Foreign
|
|
|
3,616
|
|
|
|
5,332
|
|
|
|
(2,033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,499
|
|
|
|
23,684
|
|
|
|
14,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in valuation allowance
|
|
|
(872
|
)
|
|
|
(3,963
|
)
|
|
|
(1,552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,668
|
|
|
$
|
38,781
|
|
|
$
|
44,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of U.S. Federal statutory tax rate to
the effective income tax rate for the provision of income taxes
from continuing operations is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Foreign earnings taxed at rates other than the U.S. rate
|
|
|
5.6
|
%
|
|
|
11.1
|
%
|
|
|
7.2
|
%
|
Foreign earnings indefinitely reinvested abroad
|
|
|
(24.5
|
)%
|
|
|
(8.7
|
)%
|
|
|
(11.2
|
)%
|
Foreign earnings repatriated at reduced U.S. rate
|
|
|
5.8
|
%
|
|
|
|
%
|
|
|
|
%
|
Change in valuation allowance
|
|
|
(1.2
|
)%
|
|
|
(3.5
|
)%
|
|
|
(1.0
|
)%
|
State taxes provided
|
|
|
1.8
|
%
|
|
|
0.2
|
%
|
|
|
(0.3
|
)%
|
Taxes related to goodwill recognized upon the disposition of
Turbo (Note 2)
|
|
|
|
%
|
|
|
2.2
|
%
|
|
|
|
%
|
Effect of reduction in U.K. corporate income tax rate
|
|
|
|
%
|
|
|
|
%
|
|
|
(1.7
|
)%
|
Release of deferred tax on entity restructuring
|
|
|
|
%
|
|
|
|
%
|
|
|
(2.3
|
)%
|
Other, net
|
|
|
(1.3
|
)%
|
|
|
(1.5
|
)%
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
21.2
|
%
|
|
|
34.8
|
%
|
|
|
29.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The U.S. Internal Revenue Service has examined our
U.S. Federal income tax returns for all years through 1996.
All tax years through 2003 have been closed, either through
settlement or expiration of the statute of limitations. An
examination of the Companys U.S. income tax return
for fiscal years 2004 and 2005 began in late 2006. The
examination has yet to be concluded, but a number of proposed
adjustments have been agreed to, and those adjustments have been
reflected in the current year tax provision.
Effective April 1, 2008, the corporation income tax rate in
the U.K. decreases from 30% to 28%. As such, the portion of our
deferred tax assets and liabilities related to the U.K. were
revalued based on the 28% rate to be effective in prospective
periods, resulting in a tax benefit of $2.5 million in our
tax provision for fiscal year 2008.
On April 1, 2008, we completed an internal reorganization
that restructured our holdings in Bristow Aviation in an effort
to simplify our legal entity structure and reduce administrative
costs associated with our ownership in Bristow Aviation. In late
March 2008, we completed part of this overall restructuring that
resulted in the need to release $3.5 million of previously
provided U.S. deferred tax on the assets subject to the
restructuring. The additional transactions completed on
April 1, 2008 are expected to result in a charge to other
comprehensive income in the first quarter of fiscal year 2009 as
a result of a reduction of approximately $10 million in
deferred tax assets associated with our net pension liability;
however, we do not expect these transactions to result in a
material impact on net income.
Our operations are subject to the jurisdiction of multiple tax
authorities, which impose various types of taxes on us,
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, we are subject to tax assessments in
such jurisdictions including the re-determination of taxable
amounts by tax authorities that may not agree with our
interpretations and positions taken. The following table
summarizes the years open by jurisdiction at March 31, 2008:
|
|
|
Jurisdiction
|
|
Years Open
|
|
U.S.
|
|
2004 to present
|
U.K.
|
|
1998 to present
|
Nigeria
|
|
2000 to present
|
As discussed under Recent Accounting Pronouncements
in Note 1, on April 1, 2007 we adopted FIN 48,
which prescribes a recognition threshold and measurement
attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return and provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 requires
enterprises to evaluate tax positions using a two-step process
consisting of recognition and measurement. The effects of a tax
position are recognized in the period in which we determine 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.
We have analyzed filing positions in the federal, state and
foreign jurisdictions where we are required to file income tax
returns for all open tax years. The adoption of FIN 48 on
April 1, 2007 did not affect our beginning retained
earnings because we had previously reserved for uncertain tax
positions. We believe that the settlement of any tax
contingencies would not have a significant impact on our
consolidated financial position, results of operations
and/or
liquidity. In fiscal years 2006, 2007 and 2008, we had net
reversals of $11.4 million, $3.4 million and
$2.2 million, respectively, of reserves for tax
contingencies as a result of the expiration of the related
statutes of limitations or resolution of matters with tax
authorities. Our policy is to accrue interest and penalties
associated with uncertain tax positions in our provision for
income taxes. As of
F-33
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
March 31, 2007 and 2008, $0.3 million and
$0.4 million, respectively, in interest and penalties were
accrued in connection with uncertain tax positions.
As of the April 1, 2007 date of adoption of FIN 48 and
March 31, 2008, we had $6.3 million and
$3.0 million, respectively, of unrecognized tax benefits,
all of which would have an impact on our effective tax rate, if
recognized.
The activity associated with our unrecognized tax benefit during
fiscal year 2008 is as follows (in thousands):
|
|
|
|
|
Unrecognized tax benefits at April 1, 2007
|
|
$
|
6,310
|
|
Increases for tax positions taken in prior years
|
|
|
1,487
|
|
Decreases for tax positions taken in prior years
|
|
|
(4,380
|
)
|
Decreases related to settlements with tax authorities
|
|
|
(411
|
)
|
|
|
|
|
|
Unrecognized tax benefits at March 31, 2008
|
|
$
|
3,006
|
|
|
|
|
|
|
Unremitted foreign earnings reinvested abroad upon which
U.S. income taxes have not been provided aggregated
approximately $56.6 million and $90.5 million as of
March 31, 2007 and 2008, respectively. Due to the timing
and circumstances of repatriation of such earnings, if any, it
is not practicable to determine the unrecognized deferred tax
liability relating to such amounts. Therefore, no accrual of
income tax has been made for fiscal year 2008 related to these
indefinitely reinvested earnings as there was no plan in place
to repatriate any of these foreign earnings to the U.S. as
of the end of the fiscal year. Withholding taxes, if any, upon
repatriation would not be significant.
The American Jobs Creation Act of 2004 (the Jobs
Act), enacted in October 2004, included a provision
creating a temporary incentive for U.S. corporations to
repatriate foreign earnings by providing an 85% deduction for
certain dividends paid by controlled foreign corporations of
U.S. corporations. The favorable U.S. tax treatment of
repatriations under the Jobs Act applied to qualifying
distributions of $46.1 million that we received through
March 31, 2006. After consideration of the 85% dividends
received deduction, $11.4 million of the distribution is
taxable in the U.S. resulting in a current tax liability of
$4.0 million, which has been reflected in our tax position
for fiscal year 2006.
We receive a tax benefit that is generated by certain employee
stock benefit plan transactions. This benefit is recorded
directly to additional
paid-in-capital
on our consolidated balance sheets and does not reduce our
effective income tax rate. The tax benefit for fiscal years
2006, 2007 and 2008 totaled approximately $0.3 million,
$1.1 million and $1.7 million, respectively.
Income taxes paid during fiscal years 2006, 2007 and 2008 were
$31.3 million, $21.6 million and $33.8 million,
respectively.
Other
Taxes
During fiscal year 2008, we reversed $5.4 million and
$1.3 million in accruals for sales tax contingency and
employee taxes in West Africa, respectively, and
$1.6 million in accruals for employee taxes in Europe, all
of which was included as a reduction in direct costs in our
consolidated statement of income.
F-34
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 8
|
EMPLOYEE
BENEFIT PLANS
|
Savings
and Retirement Plans
We currently have two qualified defined contribution plans,
which cover substantially all employees other than Bristow
Aviation employees.
The Bristow Group Inc. Employee Savings and Retirement Plan
(Bristow Plan) covers corporate and Air Logistics
employees. Under the Bristow Plan, we match each
participants contributions up to 3% of the employees
compensation. In addition, under the Bristow Plan, we contribute
an additional 3% of the employees compensation at the end
of each calendar year.
Bristow Helicopters (a wholly owned subsidiary of Bristow
Aviation) and Bristow International Aviation (Guernsey) Limited
(BIAGL) have a defined contribution plan. A defined
contribution plan has replaced the defined benefit pension plans
for future accrual. The defined benefit pension plans, which
covered all full-time employees of Bristow Aviation and BIAGL
employed on or before December 31, 1997, are closed to
future accrual and any deficits are funded by contributions by
Bristow Helicopters and BIAGL. The defined benefits were based
on the employees annualized average last three years
pensionable salaries up to the date of closure for future
accrual. Plan assets are held in separate funds administered by
the trustees (the Trustees), which are primarily
invested in equities and bonds in the U.K. This plan limits the
rate of annual increases in pensionable salary to the lesser of
annual increases in a retail price index or 5%. For members of
the two closed defined benefits pension plans, since January
2005, Bristow Helicopters contributes a maximum of 7% of a
participants non-variable salary, and since April 2006,
the maximum employer contribution into the scheme 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 benefit
plans, two of which are closed to new members.
Our contributions to our defined contribution plans were
$7.2 million, $8.2 million and $10.2 million for
fiscal years 2006, 2007 and 2008, respectively.
We adopted SFAS No. 158 Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans an amendment of FASB Statements No. 87,
88, 106 and 132(R) on March 31, 2007. The adoption of
SFAS No. 158 had no impact on our net income or
comprehensive income. The primary impact was the reflection of a
net accrued pension liability ($113.1 million as of
March 31, 2007) versus the prior presentation of
showing the prepaid pension costs separately from the accrued
pension liability.
F-35
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 a detail of the components of net periodic pension cost
calculated. The measurement date adopted is March 31. For
the purposes of amortizing gains and losses, the 10% corridor
approach has been adopted and assets are taken at fair market
value. Any such gains or losses are amortized over the average
remaining life expectancy of the plan members.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Projected benefit obligation (PBO) at beginning of period
|
|
$
|
429,085
|
|
|
$
|
499,387
|
|
Service cost
|
|
|
261
|
|
|
|
285
|
|
Interest cost
|
|
|
22,703
|
|
|
|
26,521
|
|
Actuarial gain (loss)
|
|
|
9,162
|
|
|
|
(2,776
|
)
|
Benefit payments and expenses
|
|
|
(17,547
|
)
|
|
|
(17,603
|
)
|
Effect of exchange rate changes
|
|
|
55,723
|
|
|
|
6,166
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation (PBO) at end of period
|
|
$
|
499,387
|
|
|
$
|
511,980
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Market value of assets at beginning of period
|
|
$
|
329,771
|
|
|
$
|
386,318
|
|
Actual return on assets
|
|
|
20,347
|
|
|
|
(10,556
|
)
|
Employer contributions
|
|
|
10,832
|
|
|
|
14,703
|
|
Benefit payments and expenses
|
|
|
(17,547
|
)
|
|
|
(17,603
|
)
|
Effect of exchange rate changes
|
|
|
42,915
|
|
|
|
4,962
|
|
|
|
|
|
|
|
|
|
|
Market value of assets at end of period
|
|
$
|
386,318
|
|
|
$
|
377,824
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status:
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation (ABO)
|
|
$
|
499,387
|
|
|
$
|
511,980
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation (PBO)
|
|
$
|
499,387
|
|
|
$
|
511,980
|
|
Fair value of assets
|
|
|
(386,318
|
)
|
|
|
(377,824
|
)
|
|
|
|
|
|
|
|
|
|
Net recognized pension liability
|
|
$
|
113,069
|
|
|
$
|
134,156
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss
|
|
$
|
163,096
|
|
|
$
|
195,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Components of net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost for benefits earned during the period
|
|
$
|
280
|
|
|
$
|
261
|
|
|
$
|
285
|
|
Interest cost on PBO
|
|
|
21,326
|
|
|
|
22,703
|
|
|
|
26,521
|
|
Expected return on assets
|
|
|
(19,401
|
)
|
|
|
(23,490
|
)
|
|
|
(27,454
|
)
|
Amortization of unrecognized losses
|
|
|
3,649
|
|
|
|
3,641
|
|
|
|
4,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
5,854
|
|
|
$
|
3,115
|
|
|
$
|
3,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The amount in accumulated other comprehensive loss as of
March 31, 2008 expected to be recognized as a component of
net periodic pension cost in fiscal year 2009 is
$3.4 million, net of tax, and represents amortization of
the net actuarial losses.
Actuarial assumptions used to develop these components were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Discount rate
|
|
|
4.95
|
%
|
|
|
5.30
|
%
|
|
|
6.20
|
%
|
Expected long-term rate of return on assets
|
|
|
6.90
|
%
|
|
|
6.60
|
%
|
|
|
7.10
|
%
|
Rate of compensation increase
|
|
|
2.70
|
%
|
|
|
3.00
|
%
|
|
|
3.50
|
%
|
The expected rate of return assumptions have been determined
following consultation with our 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. legislation, it is the Trustees who are responsible
for the investment strategy of the two plans, although
day-to-day management of the assets is delegated to a team of
regulated investment fund managers. The Trustees of the Bristow
Staff Pension Scheme (the Scheme) have the following
three stated primary objectives when determining investment
strategy:
(i) to ensure that sufficient assets are available to pay
out members benefits as and when they arise;
(ii) to ensure that, should the Scheme be discontinued at
any point in time, there would be sufficient assets to meet the
discontinued liabilities (on actuarial advice) at the cost of
securing benefits for pensioners with an insurance company, and
provide deferred members with the cash equivalent of their
deferred benefits; and
(iii) subject to these constraints, the Trustees
investment objective is to maximize the return on the assets
held.
The types of investment are held, and the relative allocation of
assets to investments is selected, in light of the liability
profile of the plan, its cash flow requirements and the funding
level. In addition, in order to avoid an undue concentration of
risk, a spread of assets is held, this diversification being
within and across asset classes.
In determining the overall investment strategy for the plans,
the Trustees undertake regular asset and liability modeling
(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 us, the Trustees determine the benchmark allocation for the
plans assets.
The market value of the plan assets as of March 31, 2007
and 2008 was allocated between asset classes as follows. Details
of target allocation percentages under the Trustees
investment strategies as of the same dates are also included.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Allocation
|
|
|
Actual Allocation
|
|
|
|
As of March 31,
|
|
|
as of March 31,
|
|
Asset Category
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Equity securities
|
|
|
66.0
|
%
|
|
|
68.0
|
%
|
|
|
67.8
|
%
|
|
|
64.8
|
%
|
Debt securities
|
|
|
34.0
|
%
|
|
|
31.7
|
%
|
|
|
31.7
|
%
|
|
|
34.3
|
%
|
Other assets
|
|
|
0.0
|
%
|
|
|
0.3
|
%
|
|
|
0.5
|
%
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-37
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Estimated future benefit payments over each of the next five
fiscal years from March 31, 2008 and in aggregate for the
following five fiscal years after fiscal year 2013, including
life assurance premiums, are as follows:
|
|
|
|
|
Projected Benefit Payments by the Plan for Fiscal Years
Ending March 31,
|
|
Payments
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
20,074
|
|
2010
|
|
|
21,465
|
|
2011
|
|
|
23,453
|
|
2012
|
|
|
25,440
|
|
2013
|
|
|
27,030
|
|
Aggregate 2014 2018
|
|
|
162,975
|
|
We expect to fund these payments with our cash contributions to
the plans, plan assets and earnings on plan assets.
In May 2006, the Pensions Regulator (TPR) in the
U.K. published a statement on regulating the funding of defined
benefit schemes. In this statement, TPR focused on a number of
items including the use of triggers to determine the level of
funding of the schemes. Our contributions to the plans for the
fiscal year ending March 31, 2009 are expected to be
$14.6 million.
StockBased
Compensation
Incentive and Stock Option Plans Stock-based
awards are currently made under the Bristow Group Inc. 2007
Long-Term Incentive Plan (2007 Plan).
1,200,000 shares of Common Stock are reserved, including
1,168,183 available for incentive awards under the 2007 Plan.
Awards granted under the 2007 Plan may be in the form of stock
options, stock appreciation rights, shares of restricted stock,
other stock-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.
The 2003 Non-qualified Stock Option Plan for Non-employee
Directors (2003 Director Plan) provides for a
maximum of 250,000 shares of Common Stock to be issued
pursuant to such plan. As of the date of each annual meeting,
each non-employee director who meets certain attendance criteria
is automatically granted an option to purchase 5,000 shares
of our Common Stock. The exercise price of the options granted
is equal to the fair market value of the Common Stock on the
date of grant, and the options are exercisable not earlier than
six months after the date of grant and expire no more than ten
years after the date of grant. 25,000 shares remain for
future grants under this plan.
In addition, the Company has the following incentive and stock
plans which have awards outstanding as of March 31, 2008
but under which we no longer make future grants:
|
|
|
|
|
The 1994 Long-Term Management Incentive Plan, as amended
(1994 Plan), which provided for awards to officers
and key employees in the form of stock options, stock
appreciation rights, restricted stock, deferred stock, other
stock-based awards or any combination thereof. Options become
exercisable at such time or times as determined at the date of
grant and expire no more than ten years after the date of grant.
This plan expired in 2005.
|
|
|
|
The 2004 Stock Incentive Plan (2004 Plan), which
provided for awards to officers and key employees in the form of
stock options, stock appreciation rights, restricted stock,
other stock-based awards or any combination thereof. Options
become exercisable at such time or times as determined at the
date of grant and expire no more than ten years after the date
of grant. This plan expired in 2007.
|
F-38
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
The 1991 Non-qualified Stock Option Plan for Non-employee
Directors, as amended, (1991 Director Plan),
which provided that as of the date of each annual meeting, each
non-employee director who meets certain attendance criteria was
automatically granted an option to purchase 2,000 shares of
our Common Stock. The exercise price of the options granted is
equal to the fair market value of the Common Stock on the date
of grant, and the options are exercisable not earlier than six
months after the date of grant and have an indefinite term. This
plan expired in 2003.
|
On December 5, 2007, our board of directors established a
new program to allow vesting of outstanding stock options and
restricted stock grants and to waive forfeitures of outstanding
performance restricted stock units in retirement if the employee
has achieved no less than five consecutive years of employment
with the Company, voluntarily terminates employment after the
age of 62 and enters into a noncompetition/nonsolicitation
agreement in the form approved and provided by the Company. Upon
termination of employment, any unexercised options to purchase
Common Stock and shares of restricted stock under the 1994, 2004
and 2007 Plans will automatically vest and options will remain
exercisable for the remainder of the term specified in the
applicable award document and any outstanding performance
restricted stock units granted under the 2004 or 2007 Plans will
not be forfeited solely due to termination of employment so that
the right remains to receive shares of Common Stock if the
applicable performance measures are achieved in accordance with
the 2004 or 2007 Plans. This change affected 19 employees
and resulted in additional stock-based compensation expense of
$0.4 million for fiscal year 2008.
Prior to April 1, 2006, we accounted for these stock-based
compensation plans in accordance with Accounting Principles
Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees. Under APB No. 25, no
compensation expense was reflected in net income for stock
options that we had issued to our employees, as all options
granted under those plans had an exercise price equal to the
market value of the underlying shares on the date of grant.
Additionally, as required under the disclosure provisions of
SFAS No. 123, Accounting for Stock-Based
Compensation, we provided pro forma net income and
earnings per share for each period as if we had applied the fair
value method to measure stock-based compensation expense.
Compensation expense related to awards of restricted stock units
was recorded in our statements of income over the vesting period
of the awards.
Effective April 1, 2006, we adopted the provisions of
SFAS No. 123(R), Share-Based Payment, and
related interpretations, to account for stock-based compensation
using the modified prospective transition method and therefore
did not restate our prior period results.
SFAS No. 123(R) supersedes and revises guidance in APB
No. 25 and SFAS No. 123. Among other things,
SFAS No. 123(R) requires that compensation expense be
recognized in the financial statements for share-based awards
based on the grant date fair value of those awards. The modified
prospective transition method applies to (1) unvested stock
options under our stock option plans as of March 31, 2006
based on the grant date fair value estimated in accordance with
the pro forma provisions of SFAS No. 123, and
(2) any new share-based awards granted subsequent to
March 31, 2006 (including restricted stock units), based on
the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123(R). Additionally,
stock-based compensation expense includes an estimate for
pre-vesting forfeitures and is recognized over the requisite
service periods of the awards on a straight-line basis, which is
commensurate with the vesting term.
The adoption of SFAS No. 123(R) on April 1, 2006
had the effect of reducing our income before provision for
income taxes and minority interest and net income in fiscal year
2007 as follows:
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Reduction in income before provision for income taxes and
minority interest
|
|
$
|
2,527
|
|
Reduction in net income
|
|
|
1,643
|
|
F-39
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Basic and diluted earnings per share in fiscal year 2007 were
impacted by the adoption of SFAS No. 123(R) as follows:
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2007
|
|
|
Decrease in earnings per share:
|
|
|
|
|
Basic
|
|
$
|
(0.07
|
)
|
Diluted
|
|
|
(0.06
|
)
|
Total share-based compensation expense, which includes stock
options, restricted stock and restricted stock units was
$0.6 million, $4.9 million and $9.5 million for
fiscal years 2006, 2007 and 2008, respectively. Stock-based
compensation expense has been allocated to our various business
units.
Under our incentive and stock option plans there are
2,450,218 shares of Common Stock reserved for issuance as
of March 31, 2008, of which 1,193,183 shares are
available for future grants.
A summary of our stock option activity for fiscal year 2008 is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Prices
|
|
|
of Shares
|
|
|
Life
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
(In years)
|
|
|
(In thousands)
|
|
|
Outstanding at March 31, 2007
|
|
$
|
28.42
|
|
|
|
763,301
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
46.84
|
|
|
|
246,960
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
25.11
|
|
|
|
(230,570
|
)
|
|
|
|
|
|
|
|
|
Expired or forfeited
|
|
|
35.37
|
|
|
|
(17,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
35.40
|
|
|
|
761,865
|
|
|
|
8.30
|
|
|
$
|
13,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2008
|
|
|
31.19
|
|
|
|
437,451
|
|
|
|
7.97
|
|
|
$
|
10,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options granted to employees under the 1994, 2004 and 2007
Plans during fiscal years 2006, 2007 and 2008 vest ratably over
three years on each anniversary from the date of grant and
expire ten years from the date of grant. Stock options granted
to non-employee directors under the 1991 and 2003 Director
Plans vest after six months.
We use a Black-Scholes option pricing model to estimate the fair
value of share-based awards under SFAS No. 123(R). The
Black-Scholes option pricing model incorporates various
assumptions, including the risk-free interest rate, volatility,
dividend yield and the expected term of the options.
The risk-free interest rate is based on the U.S. Treasury
yield curve in effect at the time of grant for a period equal to
the expected term of the option. Expected volatilities are based
on the historical volatility of shares of our Common Stock,
which has not been adjusted for any expectation of future
volatility given uncertainty related to the future performance
of our Common Stock at this time. We also use historical data to
estimate the expected term of the options within the option
pricing model; groups of employees that have similar historical
exercise behavior are considered separately for valuation
purposes. The expected term of the options represents the period
of time that the options granted are expected to be outstanding.
Additionally, SFAS No. 123(R) requires us to estimate
pre-vesting option forfeitures at the time of grant and
periodically revise those estimates in subsequent periods if
actual
pre-vesting
forfeitures differ from those estimates. We record stock-based
compensation expense only for those awards expected to vest
using an estimated forfeiture rate based on our historical
forfeiture data.
F-40
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table shows the assumptions we used to compute the
stock-based compensation expense for stock option grants issued
during fiscal years 2007 and 2008.
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Risk free interest rate
|
|
5.0% - 5.2%
|
|
3.0% - 4.7%
|
Expected life (years)
|
|
4
|
|
4
|
Volatility
|
|
30% - 34%
|
|
34% - 45%
|
Dividend yield
|
|
|
|
|
Weighted average grant-date fair value of options granted
|
|
$12.01
|
|
$18.94
|
Unrecognized stock-based compensation expense related to
nonvested stock options was approximately $3.5 million as
of March 31, 2008, relating to a total of 324,414 unvested
stock options under our stock option plans. We expect to
recognize this stock-based compensation expense over a weighted
average period of approximately 1.94 years. The total fair
value of options vested during fiscal years 2006, 2007 and 2008
was approximately $1.3 million, $1.7 million and
$2.6 million, respectively.
The total intrinsic value, determined as of the date of
exercise, of options exercised during fiscal years 2006, 2007
and 2008 was $0.8 million, $3.2 million and
$6.1 million, respectively. The total amount of cash that
we received from option exercises during fiscal years 2006, 2007
and 2008 was $1.4 million, $3.9 million and
$5.8 million, respectively. The total tax benefit
attributable to options exercised during fiscal years 2007 and
2008 was $1.1 million and $1.7 million, respectively.
SFAS No. 123(R) requires the benefits associated with
tax deductions in excess of recognized compensation cost to be
reported as a financing cash flow rather than as an operating
cash flow as previously required. The excess tax benefits from
stock-based compensation for fiscal years 2007 and 2008 of
$1.1 million and $1.7 million, respectively, are
reported on our consolidated statements of cash flows in
financing activities. This represents the reduction in income
taxes otherwise payable during the period attributable to the
actual gross tax benefits in excess of the expected tax benefits
for options exercised in current and prior periods.
Bristow Group has two forms of restricted stock units that vest
under different conditions. The first form of restricted stock
units fully vest on the third anniversary from the date of grant
if the Cumulative Annual Shareholder Return as
defined in the restricted stock unit agreement
(CASR) equals or exceeds 15%, or partially vests if
the CASR is less than 15% but greater than or equal to 10%. Any
unvested restricted stock units will vest on the fourth
anniversary from the date of grant under the same conditions as
outline above, or on the fifth anniversary from the date of
grant if the CASR equals or exceeds 3%. Any restricted stock
units that do not vest on the fifth anniversary from the date of
grant will expire.
The second form of restricted stock units fully vest on the
third anniversary from the date of grant if the CASR equals or
exceeds 3%. Any unvested restricted stock units will vest on the
fifth anniversary date from the date of grant if the CASR equals
or exceeds 3%. Any restricted stock units that do not vest on
the fifth anniversary from the date of grant will expire.
Additionally, we have restricted stock awards that cliff vest on
the third anniversary from the date of grant provided the
grantee is still employed by the Company, subject to the
Companys retirement policy.
We record compensation expense for restricted stock units based
on an estimate of the service period related to the awards,
which is tied to the future performance of our stock over
certain time periods under the terms of the award agreements.
The estimated service period is reassessed quarterly. Changes in
this estimate may cause the timing of expense recognized in
future periods to accelerate. Compensation expense related to
awards of restricted stock and restricted stock units for fiscal
years 2006, 2007 and 2008 was $0.6 million,
$2.4 million and $6.4 million, respectively.
F-41
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of non-vested restricted stock and
restricted stock units as of March 31, 2008 and changes
during fiscal year 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
Value
|
|
|
|
Units
|
|
|
per Unit
|
|
|
Non-vested as of March 31, 2007
|
|
|
371,940
|
|
|
$
|
32.20
|
|
Granted
|
|
|
214,610
|
|
|
|
45.17
|
|
Forfeited
|
|
|
(34,030
|
)
|
|
|
35.63
|
|
Vested
|
|
|
(57,350
|
)
|
|
|
33.02
|
|
|
|
|
|
|
|
|
|
|
Non-vested as of March 31, 2008
|
|
|
495,170
|
|
|
|
37.47
|
|
|
|
|
|
|
|
|
|
|
Unrecognized stock-based compensation expense related to
non-vested restricted stock and restricted stock units was
approximately $12.3 million as of March 31, 2008,
relating to a total of 495,170 unvested restricted stock and
restricted stock units. We expect to recognize this stock-based
compensation expense over a weighted average period of
approximately 2.61 years.
Prior Period Pro Forma Presentation The
following table illustrates the effect on net income and
earnings per share for fiscal year 2006 as if we had applied the
fair value method to measure stock-based compensation, as
required under the disclosure provisions of
SFAS No. 123:
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2006
|
|
|
|
(In thousands,
|
|
|
|
except per share amounts)
|
|
|
Net income, as reported
|
|
$
|
57,809
|
|
Stock-based employee compensation expense included
in reported net income, net of tax
|
|
|
476
|
|
Stock-based employee compensation expense, net of tax
|
|
|
(1,758
|
)
|
|
|
|
|
|
Pro forma net income
|
|
$
|
56,527
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
Earnings per common share, as reported
|
|
$
|
2.48
|
|
Stock-based employee compensation expense, net of tax
|
|
|
(0.06
|
)
|
|
|
|
|
|
Pro forma basic earnings per common share
|
|
$
|
2.42
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
Earnings per common share, as reported
|
|
$
|
2.45
|
|
Stock-based employee compensation expense, net of tax
|
|
|
(0.06
|
)
|
|
|
|
|
|
Pro forma diluted earnings per common share
|
|
$
|
2.39
|
|
|
|
|
|
|
For purposes of determining compensation expense using the
provision of SFAS No. 123, the fair value of option
grants was determined using the Black-Scholes option pricing
method. The key input variables used in valuing options granted
in fiscal year 2006 were: risk-free interest rate of 4.0% to
5.2%; dividend yield of zero; stock price volatility of 30%; and
expected option lives of four years. The weighted average
grant-date fair value of options granted during fiscal year 2006
was $9.24.
F-42
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Compensation Plans
The Annual Incentive Compensation Plan (Annual Plan)
provides for an annual award of cash bonuses to key employees
based primarily on pre-established objective measures of Company
and subsidiary performance. The bonuses related to this plan
were $3.9 million, $4.9 million and $6.6 million
for fiscal years 2006, 2007 and 2008, respectively.
In January 2004, we instituted a new non-qualified deferred
compensation plan for our senior executives. Under the terms of
the plan, participants can elect to defer a portion of their
compensation for distribution at a later date. In addition, we
have the discretion to make annual tax deferred contributions to
the plan on the participants behalf. We contributed
$0.2 million, $0.4 million and $0.6 million to
this plan in fiscal years 2006, 2007 and 2008, respectively. The
assets of the plan are held in a rabbi trust and are subject to
our general creditors. As of March 31, 2008, the amount
held in trust was $3.0 million.
|
|
Note 9
|
STOCKHOLDERS
INVESTMENT AND EARNINGS PER SHARE
|
Stockholders
Investment
Preferred Stock In September and October
2006, we issued 4,600,000 shares of Preferred Stock, in a
public offering, for net proceeds of $222.6 million. We
used the net proceeds from this offering to acquire aircraft and
for working capital and other general corporate purposes,
including acquisitions.
Unless converted earlier pursuant to the terms discussed below,
on September 15, 2009, the Preferred Stock will convert
into Common Stock based on the following conversion rates:
|
|
|
|
|
|
|
Number of Shares of
|
|
Total Number of Shares of
|
Market Value of
|
|
Common Stock Issued
|
|
Common Stock Issued
|
Common Stock on
|
|
for Each Share of
|
|
for 4,600,000 Shares of
|
September 15, 2009
|
|
Preferred Stock
|
|
Preferred Stock
|
|
$35.26 or less
|
|
1.4180
|
|
6,522,800
|
Between $35.26 and $43.19
|
|
1.4180 to 1.1577
|
|
6,522,799 to 5,324,961
|
$43.19 or greater
|
|
1.1576
|
|
5,324,960
|
The Market Value of our Common Stock is the average
of the closing price per share of Common Stock on each of the 20
consecutive trading days ending on the third trading day
immediately preceding the mandatory conversion date. Each share
of Preferred Stock is convertible at the holders option at
any time into approximately 1.1576 shares of our Common
Stock based on a conversion price of $43.19 per share, subject
to specified adjustments; however, upon such optional conversion
of Preferred Stock, we will make no payment of any future
dividends. If, at any time prior to the mandatory conversion
date, the closing price per share of our Common Stock exceeds
$64.785, subject to anti-dilution requirements, for at least
20 days within a period of 30 consecutive trading days, we
may elect to cause the conversion of all of the Preferred Stock
then outstanding at the conversion rate of 1.1576 shares of
Common Stock (or a total of 5,324,960 shares of Common
Stock upon conversion of 4,600,000 shares of Preferred
Stock), subject to specified adjustments including payment of
unpaid future dividends. There are also conversion and other
requirements applicable upon the cash acquisition of our Company.
Annual cumulative cash dividends of $2.75 per share of Preferred
Stock are payable quarterly on the fifteenth day of each March,
June, September and December. Holders of the Preferred Stock on
the mandatory conversion date will have the right to receive the
dividend due on such date (including any accrued, cumulated and
unpaid dividends), whether or not declared, to the extent we are
legally permitted to pay such dividends at such time.
Common Stock On August 2, 2007, our
stockholders approved an increase to the number of authorized
shares of our Common Stock from 35,000,000 to 90,000,000.
F-43
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The total number of authorized shares of Common Stock reserved
as of March 31, 2008 was 9,886,311. These shares are
reserved in connection with our Preferred Stock and our
stock-based compensation plans. We no longer have any authorized
shares of Common Stock reserved in connection with prior
acquisitions.
Restrictions on Foreign Ownership of Common
Stock Under the Federal Aviation Act, it is
unlawful to operate certain aircraft for hire within the
U.S. unless such aircraft are registered with the FAA and
the FAA has issued an operating certificate to the operator. As
a general rule, aircraft may be registered under the Federal
Aviation Act only if the aircraft are owned or controlled by one
or more citizens of the U.S. and an operating certificate
may be granted only to a citizen of the U.S. For purposes
of these requirements, a corporation is deemed to be a citizen
of the U.S. only if, among other things, at least 75% of
its voting interests are owned or controlled by
U.S. citizens. If persons other than U.S. citizens
should come to own or control more than 25% of our voting
interest, we have been advised that our aircraft may be subject
to deregistration under the Federal Aviation Act, and we may
lose our ability to operate within the U.S. Deregistration
of our aircraft for any reason, including foreign ownership in
excess of permitted levels, would have a material adverse effect
on our ability to conduct operations within our
North America business unit. Therefore, our organizational
documents currently provide for the automatic suspension of
voting rights of shares of our Common Stock owned or controlled
by
non-U.S. citizens,
and our right to redeem those shares, to the extent necessary to
comply with these requirements. As of March 31, 2008,
approximately 1,970,000 shares of our Common Stock were
held by persons with foreign addresses. These shares represented
approximately 8.2% of our total outstanding common shares as of
March 31, 2008. Our foreign ownership may fluctuate on each
trading day because a substantial portion of our Common Stock
and our Preferred Stock is publicly traded.
Other We adopted a stockholder rights plan on
February 9, 1996, as amended on May 6, 1997 and on
January 10, 2003, designed to assure that our stockholders
receive fair and equal treatment in the event of any proposed
takeover of the Company and to guard against partial tender
offers, squeeze-outs, open market accumulations and other
abusive tactics to gain control without paying all stockholders
a fair price. The rights plan was not adopted in response to any
specific takeover proposal. Under the rights plan, we declared a
dividend of one right (Right) on each share of our
Common Stock. Each Right entitles the holder to purchase one
one-hundredth of a share of a new Series A Junior
Participating Preferred Stock, par value $1.00 per share, at an
exercise price of $50.00. Each Right entitles its holder to
purchase a number of common shares of the Company having a
market value of twice the exercise price. The Rights are not
currently exercisable and will become exercisable only in the
event a person or group acquires beneficial ownership of ten
percent or more of our Common Stock (except that certain
institutional investors may hold up to 12.5%). The dividend
distribution was made on February 29, 1996 to stockholders
of record on that date. In February 2006, the stockholder rights
plan was amended to extend the expiration date of the Rights
from February 28, 2006 to February 28, 2009.
F-44
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Earnings
Per Share
Basic earnings per common share was computed by dividing income
available to common stockholders by the weighted average number
of shares of Common Stock outstanding during the period. Diluted
earnings per common share for fiscal years 2006, 2007 and 2008
excluded options to purchase 100,235, 256,773 and
409,229 shares, respectively, at weighted average exercise
prices of $33.70, $34.14 and $38.16, respectively, which were
outstanding during the period but were anti-dilutive. Diluted
earnings per share for fiscal years 2007 and 2008 also included
weighted average shares resulting from the assumed conversion of
the Preferred Stock at the conversion rate that results in the
most dilution, which is 1.4180 shares of Common Stock for
each share of Preferred Stock. The following table sets forth
the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
Earnings (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders basic
|
|
$
|
54,310
|
|
|
$
|
64,715
|
|
|
$
|
95,164
|
|
Preferred Stock dividends
|
|
|
|
|
|
|
6,633
|
|
|
|
12,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders diluted
|
|
$
|
54,310
|
|
|
$
|
71,348
|
|
|
$
|
107,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to common stockholders basic
and diluted
|
|
$
|
3,499
|
|
|
$
|
2,824
|
|
|
$
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders basic
|
|
$
|
57,809
|
|
|
$
|
67,539
|
|
|
$
|
91,342
|
|
Preferred Stock dividends
|
|
|
|
|
|
|
6,633
|
|
|
|
12,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders diluted
|
|
$
|
57,809
|
|
|
$
|
74,172
|
|
|
$
|
103,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
basic
|
|
|
23,341,315
|
|
|
|
23,496,253
|
|
|
|
23,772,425
|
|
Assumed conversion of Preferred Stock outstanding during the
period
|
|
|
|
|
|
|
3,420,621
|
|
|
|
6,522,800
|
|
Net effect of dilutive stock options and restricted stock units
based on the treasury stock method
|
|
|
262,877
|
|
|
|
137,880
|
|
|
|
218,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
diluted
|
|
|
23,604,192
|
|
|
|
27,054,754
|
|
|
|
30,513,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2.33
|
|
|
$
|
2.75
|
|
|
$
|
4.00
|
|
Earnings (loss) from discontinued operations
|
|
|
0.15
|
|
|
|
0.12
|
|
|
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.48
|
|
|
$
|
2.87
|
|
|
$
|
3.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2.30
|
|
|
$
|
2.64
|
|
|
$
|
3.53
|
|
Earnings (loss) from discontinued operations
|
|
|
0.15
|
|
|
|
0.10
|
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.45
|
|
|
$
|
2.74
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 10
|
SEGMENT
INFORMATION
|
As of March 31, 2008, we conducted our business in one
segment: Helicopter Services. The Helicopter Services segment
operations are conducted through three divisions, Western
Hemisphere, Eastern Hemisphere and Global Training, and through
eight business units within those divisions: North America and
South and Central America within the Western Hemisphere
division; Europe, West Africa, Southeast Asia, Other
International and Eastern Hemisphere (EH)
Centralized Operations within the Eastern Hemisphere division;
and Bristow Academy within the Global Training division. Our EH
Centralized Operations business unit is comprised of our
technical services business and other non-flight services
business (e.g., provision of maintenance and supply chain parts
and services to other Eastern Hemisphere business units) in the
Eastern Hemisphere and division level expenses for our Eastern
Hemisphere businesses. These operations are not included within
any other business unit as they are managed centrally by our
Eastern Hemisphere management separate and apart from these
other operations. Our EH Centralized Operations expense
maintenance costs as incurred and charge the other business
units maintenance cost based on a rate per flight hour. These
charges are reflected as a reduction in direct costs for EH
Centralized Operations and an increase in direct costs of the
other business units.
We previously provided production management services, contract
personnel and medical support services in the U.S. Gulf of
Mexico to the domestic oil and gas industry under the Grasso
name. As discussed in Note 2, on November 2, 2007, we
sold Grasso, and therefore the financial results for our
Production Management Services segment are classified as
discontinued operations.
Amounts presented in the capital expenditures table for fiscal
years 2006 and 2007, and in the identifiable assets and
long-lived assets tables as of March 31, 2007, have been
reclassified from our prior presentation to conform to current
period presentation.
The following shows reportable segment information for the
fiscal years ended March 31, 2006, 2007 and 2008,
reconciled to consolidated totals, and prepared on the same
basis as our consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Segment gross revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
211,469
|
|
|
$
|
235,178
|
|
|
$
|
234,717
|
|
South and Central America
|
|
|
42,869
|
|
|
|
52,820
|
|
|
|
63,863
|
|
Europe
|
|
|
241,750
|
|
|
|
292,705
|
|
|
|
359,706
|
|
West Africa
|
|
|
107,411
|
|
|
|
131,141
|
|
|
|
170,770
|
|
Southeast Asia
|
|
|
61,168
|
|
|
|
73,404
|
|
|
|
111,117
|
|
Other International
|
|
|
33,934
|
|
|
|
45,876
|
|
|
|
46,737
|
|
EH Centralized Operations
|
|
|
10,607
|
|
|
|
11,996
|
|
|
|
10,931
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
14,787
|
|
Corporate
|
|
|
693
|
|
|
|
475
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment gross revenue
|
|
$
|
709,901
|
|
|
$
|
843,595
|
|
|
$
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Intrasegment gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
5,013
|
|
|
$
|
4,800
|
|
|
$
|
2,941
|
|
South and Central America
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
3,544
|
|
|
|
5,229
|
|
|
|
2,038
|
|
West Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
Other International
|
|
|
1,405
|
|
|
|
129
|
|
|
|
781
|
|
EH Centralized Operations
|
|
|
142
|
|
|
|
1,900
|
|
|
|
11,435
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intrasegment gross revenue
|
|
$
|
10,104
|
|
|
$
|
12,058
|
|
|
$
|
17,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Consolidated gross revenue reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
216,482
|
|
|
$
|
239,978
|
|
|
$
|
237,658
|
|
South and Central America
|
|
|
42,869
|
|
|
|
52,820
|
|
|
|
63,863
|
|
Europe
|
|
|
245,294
|
|
|
|
297,934
|
|
|
|
361,744
|
|
West Africa
|
|
|
107,411
|
|
|
|
131,141
|
|
|
|
170,770
|
|
Southeast Asia
|
|
|
61,168
|
|
|
|
73,404
|
|
|
|
111,117
|
|
Other International
|
|
|
35,339
|
|
|
|
46,005
|
|
|
|
47,518
|
|
EH Centralized Operations
|
|
|
10,749
|
|
|
|
13,896
|
|
|
|
22,366
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
14,787
|
|
Intrasegment eliminations
|
|
|
(10,104
|
)
|
|
|
(12,058
|
)
|
|
|
(17,195
|
)
|
Corporate
|
|
|
693
|
|
|
|
475
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated gross revenue
|
|
$
|
709,901
|
|
|
$
|
843,595
|
|
|
$
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income (loss) reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
30,717
|
|
|
$
|
29,210
|
|
|
$
|
32,559
|
|
South and Central America
|
|
|
6,662
|
|
|
|
15,825
|
|
|
|
14,852
|
|
Europe
|
|
|
48,692
|
|
|
|
52,819
|
|
|
|
77,348
|
|
West Africa
|
|
|
11,981
|
|
|
|
18,798
|
|
|
|
31,941
|
|
Southeast Asia
|
|
|
9,851
|
|
|
|
13,370
|
|
|
|
23,754
|
|
Other International
|
|
|
9,062
|
|
|
|
9,309
|
|
|
|
(283
|
)
|
EH Centralized Operations
|
|
|
(25,012
|
)
|
|
|
(13,580
|
)
|
|
|
(13,391
|
)
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
(809
|
)
|
Gain on disposal of assets
|
|
|
103
|
|
|
|
10,615
|
|
|
|
9,390
|
|
Corporate
|
|
|
(23,589
|
)
|
|
|
(25,238
|
)
|
|
|
(26,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated operating income
|
|
$
|
68,467
|
|
|
$
|
111,128
|
|
|
$
|
148,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
16,541
|
|
|
$
|
29,064
|
|
|
$
|
34,518
|
|
South and Central America
|
|
|
537
|
|
|
|
30,025
|
|
|
|
9,007
|
|
Europe
|
|
|
39,521
|
|
|
|
88,400
|
|
|
|
107,212
|
|
West Africa
|
|
|
28,716
|
|
|
|
1,892
|
|
|
|
15,823
|
|
Southeast Asia
|
|
|
1,349
|
|
|
|
221
|
|
|
|
4,355
|
|
Other International
|
|
|
1,007
|
|
|
|
1,861
|
|
|
|
8,974
|
|
EH Centralized Operations
|
|
|
4
|
|
|
|
63
|
|
|
|
297
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
7,073
|
|
Corporate(1)
|
|
|
66,480
|
|
|
|
153,080
|
|
|
|
150,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures(2)
|
|
$
|
154,155
|
|
|
$
|
304,606
|
|
|
$
|
337,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
12,436
|
|
|
$
|
11,553
|
|
|
$
|
12,245
|
|
South and Central America
|
|
|
3,661
|
|
|
|
3,891
|
|
|
|
3,878
|
|
Europe
|
|
|
10,803
|
|
|
|
11,671
|
|
|
|
17,668
|
|
West Africa
|
|
|
5,741
|
|
|
|
6,601
|
|
|
|
8,090
|
|
Southeast Asia
|
|
|
3,681
|
|
|
|
3,497
|
|
|
|
4,090
|
|
Other International
|
|
|
3,031
|
|
|
|
3,511
|
|
|
|
5,161
|
|
EH Centralized Operations
|
|
|
2,612
|
|
|
|
1,510
|
|
|
|
753
|
|
Bristow Academy
|
|
|
|
|
|
|
|
|
|
|
1,840
|
|
Corporate
|
|
|
95
|
|
|
|
225
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
42,060
|
|
|
$
|
42,459
|
|
|
$
|
54,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
249,084
|
|
|
$
|
301,494
|
|
South and Central America
|
|
|
109,279
|
|
|
|
132,038
|
|
Europe
|
|
|
416,447
|
|
|
|
509,413
|
|
West Africa
|
|
|
167,826
|
|
|
|
252,458
|
|
Southeast Asia
|
|
|
92,173
|
|
|
|
165,431
|
|
Other International
|
|
|
79,385
|
|
|
|
99,185
|
|
EH Centralized Operations
|
|
|
47,049
|
|
|
|
51,291
|
|
Bristow Academy
|
|
|
|
|
|
|
33,966
|
|
Corporate(3)
|
|
|
318,406
|
|
|
|
432,079
|
|
|
|
|
|
|
|
|
|
|
Total identifiable assets(4)
|
|
$
|
1,479,649
|
|
|
$
|
1,977,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $66.1 million, $152.9 million and
$150.4 million of construction in progress payments that
were not allocated to business units in fiscal years 2006, 2007
and 2008, respectively. |
F-48
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(2) |
|
Excludes $0.1 million, $0.2 million and
$0.1 million of capital expenditures for discontinued
operations for fiscal years 2006, 2007 and 2008, respectively. |
|
(3) |
|
Includes $167.8 million and $182.9 million in progress
payments on aircraft scheduled to be delivered in future periods
for fiscal years 2007 and 2008, respectively, which is included
in construction in progress within property and equipment on our
consolidated balance sheets as of March 31, 2007 and 2008. |
|
(4) |
|
Excludes $26.2 million in identifiable assets from
discontinued operations as of March 31, 2007. |
We attribute revenue to various countries based on the location
where helicopter services are actually performed. Long-lived
assets consist primarily of helicopters and are attributed to
various countries based on the physical location of the asset at
a given fiscal year end. Entity-wide information by geographic
area is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
$
|
250,304
|
|
|
$
|
304,669
|
|
|
$
|
357,706
|
|
United States
|
|
|
158,135
|
|
|
|
186,187
|
|
|
|
249,641
|
|
Nigeria
|
|
|
107,411
|
|
|
|
131,141
|
|
|
|
170,770
|
|
Australia
|
|
|
52,382
|
|
|
|
66,679
|
|
|
|
102,774
|
|
Trinidad
|
|
|
24,659
|
|
|
|
30,355
|
|
|
|
37,441
|
|
Mexico
|
|
|
10,849
|
|
|
|
14,021
|
|
|
|
17,014
|
|
Other countries
|
|
|
106,161
|
|
|
|
110,543
|
|
|
|
77,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
709,901
|
|
|
$
|
843,595
|
|
|
$
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Long-lived assets
|
|
|
|
|
|
|
|
|
United States(1)
|
|
$
|
141,963
|
|
|
$
|
194,482
|
|
United Kingdom
|
|
|
234,710
|
|
|
|
333,686
|
|
Nigeria
|
|
|
114,916
|
|
|
|
132,935
|
|
Norway
|
|
|
59,004
|
|
|
|
95,651
|
|
Australia
|
|
|
59,027
|
|
|
|
74,533
|
|
Trinidad
|
|
|
40,813
|
|
|
|
46,179
|
|
Other countries
|
|
|
73,298
|
|
|
|
112,190
|
|
Construction in progress attributable to aircraft(2)
|
|
|
167,790
|
|
|
|
182,882
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
891,521
|
|
|
$
|
1,172,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes $0.4 million in long-lived assets from discontinued
operations as of March 31, 2007. |
|
(2) |
|
These costs have been disclosed separately as the physical
location where the aircraft will ultimately be operated is
subject to change. |
Goodwill was $6.6 million and $15.7 million as of
March 31, 2007 and 2008, respectively. The increase in
goodwill between March 31, 2007 and March 31, 2008 is
primarily the result of the acquisition of HAI in fiscal year
2008, which had $8.9 million in goodwill (see Note 2).
F-49
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During fiscal year 2008, we conducted operations in over 20
countries including the U.S. and the U.K. Due to the nature
of our principal assets, aircraft are regularly and routinely
moved between operating areas (both domestic and foreign) to
meet changes in market and operating conditions. During fiscal
years 2006, 2007 and 2008, the aggregate activities of one
international oil company customer accounted for 10%, 18% and
21%, respectively, of consolidated gross revenue. During fiscal
year 2008, our top ten customers accounted for 57% of
consolidated gross revenue.
|
|
Note 11
|
QUARTERLY
FINANCIAL INFORMATION (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
June 30
|
|
|
September 30(1)
|
|
|
December 31(2)
|
|
|
March 31(3)(4)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
206,280
|
|
|
$
|
209,629
|
|
|
$
|
211,009
|
|
|
$
|
216,677
|
|
Operating income(5)(6)
|
|
|
29,641
|
|
|
|
29,470
|
|
|
|
20,241
|
|
|
|
31,776
|
|
Income from continuing operations(5)(6)(7)
|
|
|
16,289
|
|
|
|
18,145
|
|
|
|
9,934
|
|
|
|
26,980
|
|
Income from discontinued operations(8)
|
|
|
940
|
|
|
|
930
|
|
|
|
517
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.70
|
|
|
$
|
0.76
|
|
|
$
|
0.29
|
|
|
$
|
1.01
|
|
Earnings from discontinued operations
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.74
|
|
|
$
|
0.80
|
|
|
$
|
0.31
|
|
|
$
|
1.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.69
|
|
|
$
|
0.75
|
|
|
$
|
0.29
|
|
|
$
|
0.89
|
|
Earnings from discontinued operations
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.73
|
|
|
$
|
0.79
|
|
|
$
|
0.31
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
231,151
|
|
|
$
|
259,808
|
|
|
$
|
261,520
|
|
|
$
|
260,285
|
|
Operating income(5)(6)
|
|
|
28,786
|
|
|
|
49,718
|
|
|
|
36,748
|
|
|
|
33,496
|
|
Income from continuing operations(5)(6)(7)(9)
|
|
|
21,910
|
|
|
|
33,335
|
|
|
|
26,234
|
|
|
|
26,335
|
|
Income (loss) from discontinued operations(8)
|
|
|
762
|
|
|
|
615
|
|
|
|
(6,086
|
)
|
|
|
887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.80
|
|
|
$
|
1.27
|
|
|
$
|
0.97
|
|
|
$
|
0.97
|
|
Earnings (loss) from discontinued operations
|
|
|
0.03
|
|
|
|
0.03
|
|
|
|
(0.26
|
)
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.83
|
|
|
$
|
1.30
|
|
|
$
|
0.71
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.73
|
|
|
$
|
1.10
|
|
|
$
|
0.86
|
|
|
$
|
0.86
|
|
Earnings (loss) from discontinued operations
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
(0.20
|
)
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.75
|
|
|
$
|
1.12
|
|
|
$
|
0.66
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Operating income and income from continuing operations for the
fiscal quarter ended September 30, 2007 included
$5.4 million in reversal of accrual for sales tax
contingency ($2.8 million of which was originally accrued
in the fiscal quarter ended December 31, 2006) in West
Africa which is included in direct costs in our consolidated
statements of income. |
|
(2) |
|
Income from continuing operations for the fiscal quarter ended
December 31, 2006 included expense of $1.2 million,
net of taxes, for acquisition costs previously deferred in
connection with an acquisition we were |
F-50
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
evaluating as we determined that the acquisition was no longer
probable. This quarter also included additional tax expense of
$2.5 million related to the sale of certain assets of Turbo
completed in November 2006. See discussion of the Turbo asset
sale in Note 2. |
|
(3) |
|
Income from continuing operations for the fiscal quarter ended
March 31, 2007 included an after-tax gain on the sale of
our investment in Aeroleo of $1.6 million on March 30,
2007, which is included in other income (expense), net in our
consolidated statements of income. See discussion in Note 3. |
|
(4) |
|
Income from continuing operations for the fiscal quarters ended
March 31, 2007 and 2008 included dividend income received
from an unconsolidated affiliate, net of taxes, of
$1.7 million and $1.8 million, respectively. Operating
income and income from continuing operations for the fiscal
quarter ended March 31, 2008 included expense of
$2.9 million, net of taxes, related to a claim by a former
agent who we terminated in connection with the Internal Review.
These costs are included in general and administrative expenses
in our consolidated statements of income. Also for the fiscal
quarter ended March 31, 2008, operating income and income
from continuing operations included reversals of accruals for
tax items of $1.0 million and $0.8 million, net of
taxes, in Europe and West Africa, respectively, and
$6.0 million in tax benefit which directly reduced our
provision of income taxes associated with reduced U.K. corporate
tax rates and an internal reorganization (see Note 7). The
reversals of accruals in Europe and West Africa are included in
direct costs in our consolidated statements of income. Operating
income and income from continuing operations for the fiscal
quarter ended March 31, 2008 included $1.2 million,
net of taxes, of retirement related expenses for retirement
agreements executed between the Company and two of our corporate
officers, which were recorded in general and administrative
expenses in our consolidated statements of income. |
|
(5) |
|
Operating income and income from continuing operations included
legal and professional costs in connection with the Internal
Review and DOJ investigation totaling $0.7 million and
$0.5 million, respectively, for the fiscal quarter ended
June 30, 2006; $0.3 million and $0.2 million,
respectively, for the fiscal quarter ended September 30,
2006; $3.7 million and $2.4 million, respectively, for
the fiscal quarter ended December 31, 2006; and
$0.4 million and $0.3 million, respectively, for the
fiscal quarter ended March 31, 2007. Operating income and
income from continuing operations included legal and
professional costs in connection with the Internal Review and
DOJ investigation totaling; $0.5 million and
$0.3 million, respectively, for the fiscal quarter ended
September 30, 2007; $0.3 million and
$0.2 million, respectively, for the fiscal quarter ended
December 31, 2007; and $0.5 million and
$0.3 million, respectively, for the fiscal quarter ended
March 31, 2008. Income from continuing operations amounts
are presented on an after-tax basis. In December 2006, we
recorded a pre-tax charge of $3.0 million for costs and
fees we expected to incur in connection with the resolution of
the SEC investigation regarding findings resulting from the
Internal Review, a substantial portion of which related to legal
fees in connection with the investigation. We reversed
$1.0 million ($0.7 million, net of taxes) of this
charge in September 2007 upon settlement of the investigation
with the SEC. |
|
(6) |
|
Operating income and income from continuing operations for the
fiscal quarters ended June 30, September 30 and
December 31, 2006 and March 31, 2007 included
$0.7 million, $2.4 million, $0.7 million and
$3.2 million, respectively, in gains on disposal of assets,
net of taxes. Operating income and income from continuing
operations for the fiscal quarters ended June 30, September
30 and December 31, 2007 and March 31, 2008 included
$0.4 million, $(0.5) million, $2.7 million and
$3.5 million, respectively, in gains (losses) on disposal
of assets, net of taxes. |
|
(7) |
|
Income from continuing operations for the fiscal quarters ended
June 30, September 30 and December 31, 2006 and
March 31, 2007 included $3.1 million,
$0.9 million, $2.2 million and $0.1 million,
respectively, of foreign currency transaction losses, net of
taxes. Income from continuing operations for fiscal quarters
ended June 30, September 30 and December 31, 2007 and
March 31, 2008 included $0.4 million,
$0.2 million, $0.6 million, and $(0.2) million,
respectively, of foreign currency transaction gains (losses),
net of taxes. |
|
(8) |
|
On November 2, 2007, we sold our Grasso business, which
comprised our entire Production Management Services segment. The
financial results for our Production Management Services segment
through |
F-51
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
November 2, 2007 are classified as discontinued operations.
Income from discontinued operations for the fiscal quarter ended
December 31, 2007 included an after-tax loss of
$5.3 million related to the sale. |
|
(9) |
|
Income from continuing operations for the fiscal quarters ended
June, September and December 2007 and March 31, 2008
included $0.2 million, $1.5 million, $2.0 million
and $2.8 million, respectively, of interest expense, net of
interest income from invested proceeds, from issuance of the
71/2% Senior
Notes in June and November 2007, net of taxes. See a discussion
of the
71/2% Senior
Notes in Note 5. |
|
|
Note 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
|
In connection with the sale of the
71/2% Senior
Notes and the
61/8% Senior
Notes, the Guarantor Subsidiaries jointly, severally and
unconditionally guaranteed the payment obligations under these
notes. The following supplemental financial information sets
forth, on a consolidating basis, the balance sheet, statement of
income and cash flow information for Bristow Group Inc.
(Parent Company Only), for the Guarantor
Subsidiaries and for our other subsidiaries (the
Non-Guarantor Subsidiaries). We have not presented
separate financial statements and other disclosures concerning
the Guarantor Subsidiaries because management has determined
that such information is not material to investors.
The supplemental condensed consolidating financial information
has been prepared pursuant to the rules and regulations for
condensed financial information and does not include all
disclosures included in annual financial statements, although we
believe that the disclosures made are adequate to make the
information presented not misleading. The principal eliminating
entries eliminate investments in subsidiaries, intercompany
balances and intercompany revenue and expense.
The allocation of the consolidated income tax provision was made
using the with and without allocation method.
F-52
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Fiscal Year Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
692
|
|
|
$
|
236,543
|
|
|
$
|
472,666
|
|
|
$
|
|
|
|
$
|
709,901
|
|
Intercompany revenue
|
|
|
|
|
|
|
8,263
|
|
|
|
8,831
|
|
|
|
(17,094
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692
|
|
|
|
244,806
|
|
|
|
481,497
|
|
|
|
(17,094
|
)
|
|
|
709,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
16
|
|
|
|
172,047
|
|
|
|
368,247
|
|
|
|
|
|
|
|
540,310
|
|
Intercompany expenses
|
|
|
|
|
|
|
8,831
|
|
|
|
7,823
|
|
|
|
(16,654
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
95
|
|
|
|
17,559
|
|
|
|
24,406
|
|
|
|
|
|
|
|
42,060
|
|
General and administrative
|
|
|
24,168
|
|
|
|
12,246
|
|
|
|
23,193
|
|
|
|
(440
|
)
|
|
|
59,167
|
|
Gain on disposal of assets
|
|
|
4
|
|
|
|
(589
|
)
|
|
|
482
|
|
|
|
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,283
|
|
|
|
210,094
|
|
|
|
424,151
|
|
|
|
(17,094
|
)
|
|
|
641,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(23,591
|
)
|
|
|
34,712
|
|
|
|
57,346
|
|
|
|
|
|
|
|
68,467
|
|
Earnings (losses) from unconsolidated affiliates, net
|
|
|
35,737
|
|
|
|
(2,534
|
)
|
|
|
9,500
|
|
|
|
(35,945
|
)
|
|
|
6,758
|
|
Interest income
|
|
|
54,920
|
|
|
|
90
|
|
|
|
4,244
|
|
|
|
(55,208
|
)
|
|
|
4,046
|
|
Interest expense
|
|
|
(14,597
|
)
|
|
|
(11
|
)
|
|
|
(55,289
|
)
|
|
|
55,208
|
|
|
|
(14,689
|
)
|
Other income net
|
|
|
(515
|
)
|
|
|
10
|
|
|
|
5,120
|
|
|
|
|
|
|
|
4,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income
taxes and minority interest
|
|
|
51,954
|
|
|
|
32,267
|
|
|
|
20,921
|
|
|
|
(35,945
|
)
|
|
|
69,197
|
|
Allocation of consolidated income taxes
|
|
|
6,010
|
|
|
|
(458
|
)
|
|
|
(20,220
|
)
|
|
|
|
|
|
|
(14,668
|
)
|
Minority interest
|
|
|
(155
|
)
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
(219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
57,809
|
|
|
|
31,809
|
|
|
|
637
|
|
|
|
(35,945
|
)
|
|
|
54,310
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before provision for income
taxes
|
|
|
|
|
|
|
5,438
|
|
|
|
|
|
|
|
|
|
|
|
5,438
|
|
Provision for income taxes on discontinued operations
|
|
|
|
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
3,499
|
|
|
|
|
|
|
|
|
|
|
|
3,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
35,308
|
|
|
$
|
637
|
|
|
$
|
(35,945
|
)
|
|
$
|
57,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-53
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
42,235
|
|
|
$
|
48,593
|
|
|
$
|
16,797
|
|
|
$
|
(68,360
|
)
|
|
$
|
39,265
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(520
|
)
|
|
|
(109,618
|
)
|
|
|
(29,434
|
)
|
|
|
|
|
|
|
(139,572
|
)
|
Proceeds from asset dispositions
|
|
|
73
|
|
|
|
61,581
|
|
|
|
23,738
|
|
|
|
|
|
|
|
85,392
|
|
Investments
|
|
|
|
|
|
|
2,000
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(447
|
)
|
|
|
(46,037
|
)
|
|
|
(7,696
|
)
|
|
|
|
|
|
|
(54,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
20,691
|
|
|
|
|
|
|
|
|
|
|
|
(20,691
|
)
|
|
|
|
|
Debt issuance costs
|
|
|
(2,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,564
|
)
|
Repayment of debt and debt redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(4,070
|
)
|
|
|
|
|
|
|
(4,070
|
)
|
Increases (decreases) in cash related to intercompany advances
and debt
|
|
|
(10,501
|
)
|
|
|
(4,600
|
)
|
|
|
(6,804
|
)
|
|
|
21,905
|
|
|
|
|
|
Partial prepayment of put/call obligation
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(129
|
)
|
Dividends paid
|
|
|
|
|
|
|
(4,500
|
)
|
|
|
(62,646
|
)
|
|
|
67,146
|
|
|
|
|
|
Issuance of common stock
|
|
|
1,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) by financing activities
|
|
|
8,866
|
|
|
|
(9,100
|
)
|
|
|
(73,520
|
)
|
|
|
68,360
|
|
|
|
(5,394
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(3,649
|
)
|
|
|
|
|
|
|
(3,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
50,654
|
|
|
|
(6,544
|
)
|
|
|
(68,068
|
)
|
|
|
|
|
|
|
(23,958
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
23,947
|
|
|
|
7,907
|
|
|
|
114,586
|
|
|
|
|
|
|
|
146,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
74,601
|
|
|
$
|
1,363
|
|
|
$
|
46,518
|
|
|
$
|
|
|
|
$
|
122,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Fiscal Year Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
475
|
|
|
$
|
275,606
|
|
|
$
|
567,514
|
|
|
$
|
|
|
|
$
|
843,595
|
|
Intercompany revenue
|
|
|
|
|
|
|
15,705
|
|
|
|
12,173
|
|
|
|
(27,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475
|
|
|
|
291,311
|
|
|
|
579,687
|
|
|
|
(27,878
|
)
|
|
|
843,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
9
|
|
|
|
196,920
|
|
|
|
437,373
|
|
|
|
|
|
|
|
634,302
|
|
Intercompany expenses
|
|
|
|
|
|
|
12,161
|
|
|
|
15,667
|
|
|
|
(27,828
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
225
|
|
|
|
18,435
|
|
|
|
23,799
|
|
|
|
|
|
|
|
42,459
|
|
General and administrative
|
|
|
25,480
|
|
|
|
13,464
|
|
|
|
27,427
|
|
|
|
(50
|
)
|
|
|
66,321
|
|
Gain on disposal of assets
|
|
|
|
|
|
|
(1,110
|
)
|
|
|
(9,505
|
)
|
|
|
|
|
|
|
(10,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,714
|
|
|
|
239,870
|
|
|
|
494,761
|
|
|
|
(27,878
|
)
|
|
|
732,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(25,239
|
)
|
|
|
51,441
|
|
|
|
84,926
|
|
|
|
|
|
|
|
111,128
|
|
Earnings from unconsolidated affiliates, net
|
|
|
37,626
|
|
|
|
25
|
|
|
|
11,613
|
|
|
|
(37,841
|
)
|
|
|
11,423
|
|
Interest income
|
|
|
70,711
|
|
|
|
115
|
|
|
|
3,957
|
|
|
|
(66,067
|
)
|
|
|
8,716
|
|
Interest expense
|
|
|
(11,652
|
)
|
|
|
|
|
|
|
(65,355
|
)
|
|
|
66,067
|
|
|
|
(10,940
|
)
|
Other income net
|
|
|
(1,927
|
)
|
|
|
(111
|
)
|
|
|
(6,960
|
)
|
|
|
|
|
|
|
(8,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income
taxes and minority interest
|
|
|
69,519
|
|
|
|
51,470
|
|
|
|
28,181
|
|
|
|
(37,841
|
)
|
|
|
111,329
|
|
Allocation of consolidated income taxes
|
|
|
4,816
|
|
|
|
(5,239
|
)
|
|
|
(38,358
|
)
|
|
|
|
|
|
|
(38,781
|
)
|
Minority interest
|
|
|
(163
|
)
|
|
|
|
|
|
|
(1,037
|
)
|
|
|
|
|
|
|
(1,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
74,172
|
|
|
|
46,231
|
|
|
|
(11,214
|
)
|
|
|
(37,841
|
)
|
|
|
71,348
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before provision for income
taxes
|
|
|
|
|
|
|
4,409
|
|
|
|
|
|
|
|
|
|
|
|
4,409
|
|
Provision for income taxes on discontinued operations
|
|
|
|
|
|
|
(1,585
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
2,824
|
|
|
|
|
|
|
|
|
|
|
|
2,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
74,172
|
|
|
$
|
49,055
|
|
|
$
|
(11,214
|
)
|
|
$
|
(37,841
|
)
|
|
$
|
74,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Balance Sheet
As of March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
133,010
|
|
|
$
|
3,434
|
|
|
$
|
47,744
|
|
|
$
|
|
|
|
$
|
184,188
|
|
Accounts receivable
|
|
|
32,103
|
|
|
|
51,331
|
|
|
|
123,453
|
|
|
|
(42,080
|
)
|
|
|
164,807
|
|
Inventories
|
|
|
|
|
|
|
72,527
|
|
|
|
85,036
|
|
|
|
|
|
|
|
157,563
|
|
Prepaid expenses and other
|
|
|
830
|
|
|
|
9,391
|
|
|
|
7,166
|
|
|
|
|
|
|
|
17,387
|
|
Current assets from discontinued operations
|
|
|
|
|
|
|
12,029
|
|
|
|
|
|
|
|
|
|
|
|
12,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
165,943
|
|
|
|
148,712
|
|
|
|
263,399
|
|
|
|
(42,080
|
)
|
|
|
535,974
|
|
Intercompany investment
|
|
|
297,113
|
|
|
|
1,046
|
|
|
|
|
|
|
|
(298,159
|
)
|
|
|
|
|
Investment in unconsolidated affiliates
|
|
|
4,643
|
|
|
|
1,611
|
|
|
|
40,574
|
|
|
|
|
|
|
|
46,828
|
|
Intercompany notes receivable
|
|
|
825,203
|
|
|
|
|
|
|
|
11,980
|
|
|
|
(837,183
|
)
|
|
|
|
|
Property and equipment at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
263
|
|
|
|
36,624
|
|
|
|
14,898
|
|
|
|
|
|
|
|
51,785
|
|
Aircraft and equipment
|
|
|
2,259
|
|
|
|
548,814
|
|
|
|
588,708
|
|
|
|
|
|
|
|
1,139,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,522
|
|
|
|
585,438
|
|
|
|
603,606
|
|
|
|
|
|
|
|
1,191,566
|
|
Less: Accumulated depreciation and amortization
|
|
|
(1,471
|
)
|
|
|
(121,892
|
)
|
|
|
(176,682
|
)
|
|
|
|
|
|
|
(300,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,051
|
|
|
|
463,546
|
|
|
|
426,924
|
|
|
|
|
|
|
|
891,521
|
|
Goodwill
|
|
|
|
|
|
|
4,745
|
|
|
|
1,774
|
|
|
|
111
|
|
|
|
6,630
|
|
Other assets
|
|
|
9,348
|
|
|
|
224
|
|
|
|
1,153
|
|
|
|
|
|
|
|
10,725
|
|
Long-term assets from discontinued operations
|
|
|
|
|
|
|
14,125
|
|
|
|
|
|
|
|
|
|
|
|
14,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,303,301
|
|
|
$
|
634,009
|
|
|
$
|
745,804
|
|
|
$
|
(1,177,311
|
)
|
|
$
|
1,505,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,043
|
|
|
$
|
14,744
|
|
|
$
|
36,028
|
|
|
$
|
(11,356
|
)
|
|
$
|
40,459
|
|
Accrued liabilities
|
|
|
10,736
|
|
|
|
15,945
|
|
|
|
103,141
|
|
|
|
(30,724
|
)
|
|
|
99,098
|
|
Deferred taxes
|
|
|
217
|
|
|
|
|
|
|
|
17,394
|
|
|
|
|
|
|
|
17,611
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
4,852
|
|
|
|
|
|
|
|
4,852
|
|
Current liabilities from discontinued operations
|
|
|
|
|
|
|
5,948
|
|
|
|
|
|
|
|
|
|
|
|
5,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
11,996
|
|
|
|
36,637
|
|
|
|
161,415
|
|
|
|
(42,080
|
)
|
|
|
167,968
|
|
Long-term debt, less current maturities
|
|
|
234,379
|
|
|
|
|
|
|
|
19,851
|
|
|
|
|
|
|
|
254,230
|
|
Intercompany notes payable
|
|
|
14,569
|
|
|
|
230,773
|
|
|
|
591,841
|
|
|
|
(837,183
|
)
|
|
|
|
|
Accrued pension liabilities
|
|
|
|
|
|
|
|
|
|
|
113,069
|
|
|
|
|
|
|
|
113,069
|
|
Other liabilities and deferred credits
|
|
|
4,529
|
|
|
|
9,644
|
|
|
|
3,172
|
|
|
|
|
|
|
|
17,345
|
|
Deferred taxes
|
|
|
42,655
|
|
|
|
2,295
|
|
|
|
31,139
|
|
|
|
|
|
|
|
76,089
|
|
Minority interest
|
|
|
2,042
|
|
|
|
|
|
|
|
3,403
|
|
|
|
|
|
|
|
5,445
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
222,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,554
|
|
Common stock
|
|
|
236
|
|
|
|
4,062
|
|
|
|
35,426
|
|
|
|
(39,488
|
)
|
|
|
236
|
|
Additional
paid-in-capital
|
|
|
169,353
|
|
|
|
51,170
|
|
|
|
8,015
|
|
|
|
(59,185
|
)
|
|
|
169,353
|
|
Retained earnings
|
|
|
515,589
|
|
|
|
299,428
|
|
|
|
(82,414
|
)
|
|
|
(217,014
|
)
|
|
|
515,589
|
|
Accumulated other comprehensive
income (loss)
|
|
|
85,399
|
|
|
|
|
|
|
|
(139,113
|
)
|
|
|
17,639
|
|
|
|
(36,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
993,131
|
|
|
|
354,660
|
|
|
|
(178,086
|
)
|
|
|
(298,048
|
)
|
|
|
871,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,303,301
|
|
|
$
|
634,009
|
|
|
$
|
745,804
|
|
|
$
|
(1,177,311
|
)
|
|
$
|
1,505,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(15,795
|
)
|
|
$
|
52,987
|
|
|
$
|
76,739
|
|
|
$
|
(9,501
|
)
|
|
$
|
104,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(643
|
)
|
|
|
(215,728
|
)
|
|
|
(88,405
|
)
|
|
|
|
|
|
|
(304,776
|
)
|
Proceeds from asset dispositions
|
|
|
14,241
|
|
|
|
3,872
|
|
|
|
22,328
|
|
|
|
|
|
|
|
40,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
13,598
|
|
|
|
(211,856
|
)
|
|
|
(66,077
|
)
|
|
|
|
|
|
|
(264,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Preferred Stock
|
|
|
223,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223,550
|
|
Preferred Stock issuance costs
|
|
|
(996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(996
|
)
|
Repayment of debt and debt redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(5,716
|
)
|
|
|
|
|
|
|
(5,716
|
)
|
Increases (decreases) in cash related to intercompany advances
and debt
|
|
|
(160,940
|
)
|
|
|
160,940
|
|
|
|
(2,760
|
)
|
|
|
2,760
|
|
|
|
|
|
Partial prepayment of put/call obligation
|
|
|
(130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(130
|
)
|
Preferred Stock dividends paid
|
|
|
(6,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,107
|
)
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(6,741
|
)
|
|
|
6,741
|
|
|
|
|
|
Issuance of common stock
|
|
|
3,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,949
|
|
Tax benefit related to exercise of stock options
|
|
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
60,458
|
|
|
|
160,940
|
|
|
|
(15,217
|
)
|
|
|
9,501
|
|
|
|
215,682
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
148
|
|
|
|
|
|
|
|
5,781
|
|
|
|
|
|
|
|
5,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
58,409
|
|
|
|
2,071
|
|
|
|
1,226
|
|
|
|
|
|
|
|
61,706
|
|
Cash and cash equivalents at beginning of period
|
|
|
74,601
|
|
|
|
1,363
|
|
|
|
46,518
|
|
|
|
|
|
|
|
122,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
133,010
|
|
|
$
|
3,434
|
|
|
$
|
47,744
|
|
|
$
|
|
|
|
$
|
184,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Fiscal Year Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
271
|
|
|
$
|
302,510
|
|
|
$
|
709,983
|
|
|
$
|
|
|
|
$
|
1,012,764
|
|
Intercompany revenue
|
|
|
|
|
|
|
23,220
|
|
|
|
25,694
|
|
|
|
(48,914
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271
|
|
|
|
325,730
|
|
|
|
735,677
|
|
|
|
(48,914
|
)
|
|
|
1,012,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
144
|
|
|
|
203,962
|
|
|
|
522,327
|
|
|
|
|
|
|
|
726,433
|
|
Intercompany expenses
|
|
|
|
|
|
|
25,845
|
|
|
|
23,069
|
|
|
|
(48,914
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
291
|
|
|
|
21,357
|
|
|
|
32,492
|
|
|
|
|
|
|
|
54,140
|
|
General and administrative
|
|
|
27,651
|
|
|
|
12,832
|
|
|
|
52,350
|
|
|
|
|
|
|
|
92,833
|
|
Gain on disposal of assets
|
|
|
2
|
|
|
|
(3,967
|
)
|
|
|
(5,425
|
)
|
|
|
|
|
|
|
(9,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,088
|
|
|
|
260,029
|
|
|
|
624,813
|
|
|
|
(48,914
|
)
|
|
|
864,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(27,817
|
)
|
|
|
65,701
|
|
|
|
110,864
|
|
|
|
|
|
|
|
148,748
|
|
Earnings (losses) from unconsolidated affiliates, net
|
|
|
85,395
|
|
|
|
68
|
|
|
|
12,910
|
|
|
|
(85,395
|
)
|
|
|
12,978
|
|
Interest income
|
|
|
87,441
|
|
|
|
224
|
|
|
|
2,268
|
|
|
|
(77,208
|
)
|
|
|
12,725
|
|
Interest expense
|
|
|
(26,643
|
)
|
|
|
|
|
|
|
(74,344
|
)
|
|
|
77,208
|
|
|
|
(23,779
|
)
|
Other income (expense), net
|
|
|
1,080
|
|
|
|
(997
|
)
|
|
|
1,502
|
|
|
|
|
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before provision for income
taxes and minority interest
|
|
|
119,456
|
|
|
|
64,996
|
|
|
|
53,200
|
|
|
|
(85,395
|
)
|
|
|
152,257
|
|
Allocation of consolidated income taxes
|
|
|
(15,272
|
)
|
|
|
1,893
|
|
|
|
(31,147
|
)
|
|
|
|
|
|
|
(44,526
|
)
|
Minority interest
|
|
|
(192
|
)
|
|
|
|
|
|
|
275
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
103,992
|
|
|
|
66,889
|
|
|
|
22,328
|
|
|
|
(85,395
|
)
|
|
|
107,814
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before provision for income
taxes
|
|
|
|
|
|
|
1,722
|
|
|
|
|
|
|
|
|
|
|
|
1,722
|
|
Provision for income taxes on discontinued operations
|
|
|
|
|
|
|
(5,544
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
103,992
|
|
|
$
|
63,067
|
|
|
$
|
22,328
|
|
|
$
|
(85,395
|
)
|
|
$
|
103,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Balance Sheet
Fiscal Year Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
226,494
|
|
|
$
|
361
|
|
|
$
|
63,195
|
|
|
$
|
|
|
|
$
|
290,050
|
|
Accounts receivable
|
|
|
34,679
|
|
|
|
73,023
|
|
|
|
155,232
|
|
|
|
(47,019
|
)
|
|
|
215,915
|
|
Inventories
|
|
|
|
|
|
|
76,706
|
|
|
|
99,533
|
|
|
|
|
|
|
|
176,239
|
|
Prepaid expenses and other
|
|
|
1,145
|
|
|
|
2,856
|
|
|
|
20,176
|
|
|
|
|
|
|
|
24,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
262,318
|
|
|
|
152,946
|
|
|
|
338,136
|
|
|
|
(47,019
|
)
|
|
|
706,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investment
|
|
|
602,282
|
|
|
|
1,047
|
|
|
|
16,990
|
|
|
|
(620,319
|
)
|
|
|
|
|
Investment in unconsolidated affiliates
|
|
|
4,433
|
|
|
|
3,639
|
|
|
|
44,395
|
|
|
|
|
|
|
|
52,467
|
|
Intercompany notes receivable
|
|
|
875,856
|
|
|
|
|
|
|
|
(15,145
|
)
|
|
|
(860,711
|
)
|
|
|
|
|
Property and equipment at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
212
|
|
|
|
44,230
|
|
|
|
15,614
|
|
|
|
|
|
|
|
60,056
|
|
Aircraft and equipment
|
|
|
2,957
|
|
|
|
552,429
|
|
|
|
873,610
|
|
|
|
|
|
|
|
1,428,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,169
|
|
|
|
596,659
|
|
|
|
889,224
|
|
|
|
|
|
|
|
1,489,052
|
|
Less: Accumulated depreciation and amortization
|
|
|
(1,146
|
)
|
|
|
(139,100
|
)
|
|
|
(176,268
|
)
|
|
|
|
|
|
|
(316,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,023
|
|
|
|
457,559
|
|
|
|
712,956
|
|
|
|
|
|
|
|
1,172,538
|
|
Goodwill
|
|
|
|
|
|
|
4,755
|
|
|
|
10,921
|
|
|
|
|
|
|
|
15,676
|
|
Other assets
|
|
|
14,183
|
|
|
|
4,457
|
|
|
|
11,653
|
|
|
|
|
|
|
|
30,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,761,095
|
|
|
$
|
624,403
|
|
|
$
|
1,119,906
|
|
|
$
|
(1,528,049
|
)
|
|
$
|
1,977,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
686
|
|
|
$
|
14,486
|
|
|
$
|
47,986
|
|
|
$
|
(13,508
|
)
|
|
$
|
49,650
|
|
Accrued liabilities
|
|
|
10,893
|
|
|
|
15,780
|
|
|
|
106,368
|
|
|
|
(33,511
|
)
|
|
|
99,530
|
|
Deferred taxes
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
11,147
|
|
|
|
|
|
|
|
9,238
|
|
Short-term borrowings and current maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
6,541
|
|
|
|
|
|
|
|
6,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
9,670
|
|
|
|
30,266
|
|
|
|
172,042
|
|
|
|
(47,019
|
)
|
|
|
164,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current maturities
|
|
|
584,981
|
|
|
|
|
|
|
|
14,696
|
|
|
|
|
|
|
|
599,677
|
|
Intercompany notes payable
|
|
|
|
|
|
|
190,498
|
|
|
|
670,213
|
|
|
|
(860,711
|
)
|
|
|
|
|
Accrued pension liabilities
|
|
|
|
|
|
|
|
|
|
|
134,156
|
|
|
|
|
|
|
|
134,156
|
|
Other liabilities and deferred credits
|
|
|
3,834
|
|
|
|
9,379
|
|
|
|
1,592
|
|
|
|
|
|
|
|
14,805
|
|
Deferred taxes
|
|
|
52,190
|
|
|
|
3,669
|
|
|
|
35,888
|
|
|
|
|
|
|
|
91,747
|
|
Minority interest
|
|
|
2,072
|
|
|
|
|
|
|
|
2,498
|
|
|
|
|
|
|
|
4,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
222,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,554
|
|
Common stock
|
|
|
239
|
|
|
|
4,996
|
|
|
|
68,986
|
|
|
|
(73,982
|
)
|
|
|
239
|
|
Additional
paid-in-capital
|
|
|
186,390
|
|
|
|
23,100
|
|
|
|
242,983
|
|
|
|
(266,083
|
)
|
|
|
186,390
|
|
Retained earnings
|
|
|
606,931
|
|
|
|
362,495
|
|
|
|
(60,086
|
)
|
|
|
(302,409
|
)
|
|
|
606,931
|
|
Accumulated other comprehensive income (loss)
|
|
|
92,234
|
|
|
|
|
|
|
|
(163,062
|
)
|
|
|
22,155
|
|
|
|
(48,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,108,348
|
|
|
|
390,591
|
|
|
|
88,821
|
|
|
|
(620,319
|
)
|
|
|
967,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,761,095
|
|
|
$
|
624,403
|
|
|
$
|
1,119,906
|
|
|
$
|
(1,528,049
|
)
|
|
$
|
1,977,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(418
|
)
|
|
$
|
83,358
|
|
|
$
|
7,803
|
|
|
$
|
(3,186
|
)
|
|
$
|
87,557
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(164
|
)
|
|
|
(270,819
|
)
|
|
|
(67,020
|
)
|
|
|
|
|
|
|
(338,003
|
)
|
Proceeds from asset dispositions
|
|
|
|
|
|
|
19,376
|
|
|
|
7,247
|
|
|
|
|
|
|
|
26,623
|
|
Acquisitions, net of cash received
|
|
|
(16,990
|
)
|
|
|
|
|
|
|
2,368
|
|
|
|
|
|
|
|
(14,622
|
)
|
Net proceeds from sale of discontinued operations
|
|
|
21,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,958
|
|
Notes issued to unconsolidated affiliate
|
|
|
|
|
|
|
(4,141
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,141
|
)
|
Investment in unconsolidated affiliate
|
|
|
|
|
|
|
(1,960
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
4,804
|
|
|
|
(257,544
|
)
|
|
|
(57,405
|
)
|
|
|
|
|
|
|
(310,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
350,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,622
|
|
Debt issuance costs
|
|
|
(5,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,882
|
)
|
Repayment of debt and debt redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(10,054
|
)
|
|
|
|
|
|
|
(10,054
|
)
|
Increases (decreases) in cash related to intercompany advances
and debt
|
|
|
(250,586
|
)
|
|
|
171,113
|
|
|
|
76,287
|
|
|
|
3,186
|
|
|
|
|
|
Partial prepayment of put/call obligation
|
|
|
(163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(163
|
)
|
Acquisition of minority interest
|
|
|
|
|
|
|
|
|
|
|
(507
|
)
|
|
|
|
|
|
|
(507
|
)
|
Preferred Stock dividends paid
|
|
|
(12,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,650
|
)
|
Issuance of common stock
|
|
|
5,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,756
|
|
Tax benefit related to exercise of stock options
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
88,835
|
|
|
|
171,113
|
|
|
|
65,726
|
|
|
|
3,186
|
|
|
|
328,860
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
263
|
|
|
|
|
|
|
|
(673
|
)
|
|
|
|
|
|
|
(410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
93,484
|
|
|
|
(3,073
|
)
|
|
|
15,451
|
|
|
|
|
|
|
|
105,862
|
|
Cash and cash equivalents at beginning of period
|
|
|
133,010
|
|
|
|
3,434
|
|
|
|
47,744
|
|
|
|
|
|
|
|
184,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
226,494
|
|
|
$
|
361
|
|
|
$
|
63,195
|
|
|
$
|
|
|
|
$
|
290,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
Prospectus
Bristow Group Inc.
Senior Debt Securities
Subordinated Debt Securities
Common Stock
Preferred Stock
Warrants
Guarantees of Debt Securities
We may offer and sell the securities listed above from time to
time in one or more classes or series and in amounts, at prices
and on terms that we will determine at the time of the offering.
Any debt securities we issue under this prospectus may be
guaranteed by Air Logistics, L.L.C., Air Logistics of Alaska,
Inc. and Airlog International, Ltd., our wholly owned
subsidiaries.
We will provide the specific terms of the securities in
supplements to this prospectus. You should read this prospectus
and any supplement carefully before you invest.
Our common stock is listed on the New York Stock Exchange under
the symbol BRS.
You should consider carefully the risk factors on page 2
of this prospectus and in any applicable prospectus supplement
before purchasing any of our securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is June 9, 2008.
Table of
Contents
About
This Prospectus
This prospectus is part of a registration statement that we have
filed with the U.S. Securities and Exchange Commission
(SEC) using a shelf registration
process. Using this process, we may offer any combination of the
securities described in this prospectus in one or more
offerings. This prospectus provides you with a general
description of the securities we may offer. Each time we use
this prospectus to offer securities, we will provide a
prospectus supplement and, if applicable, a pricing supplement
that will describe the specific terms of the offering. The
prospectus supplement and any pricing supplement may also add
to, update or change the information contained in this
prospectus. If there is any inconsistency between the
information in this prospectus and any prospectus supplement,
you should rely on the information in the prospectus supplement.
Please carefully read this prospectus, the prospectus supplement
and any pricing supplement, in addition to the information
contained in the documents we refer to under the heading
Where You Can Find More Information.
You should rely only on the information contained in or
incorporated by reference into this prospectus, the prospectus
supplement and any pricing supplement. We have not authorized
anyone to provide you with different information. You should
assume that the information appearing in or incorporated by
reference into this prospectus, any prospectus supplement and
any pricing supplement is accurate only as of the date on its
cover page and that any information we have incorporated by
reference is accurate only as of the date of the document
incorporated by reference. Our business, financial condition,
results of operations and prospects may have changed since such
dates.
i
Bristow
Group Inc.
We are the leading provider of helicopter services to the
worldwide offshore energy industry based on the number of
aircraft operated. We are one of two helicopter service
providers to the offshore energy industry with global
operations. We have operations in most of the major offshore oil
and gas producing regions of the world, including in the North
Sea, the U.S. Gulf of Mexico, Nigeria and Australia. We
have a long history in the helicopter services industry through
Bristow Helicopters Ltd. and Offshore Logistics, Inc., having
been founded in 1955 and 1969, respectively.
We provide helicopter services to a broad base of major,
independent, international and national energy companies.
Customers charter our helicopters to transport personnel between
onshore bases and offshore platforms, drilling rigs and
installations. A majority of our helicopter revenue is
attributable to oil and gas production activities, which have
historically provided a more stable source of revenue than
exploration and development related activities. Additionally,
our Global Training division is approved to provide helicopter
flight training to the commercial pilot and flight instructor
level by both the U.S. Federal Aviation Administration and
the European Joint Aviation Authority. The Global Training
division supports, coordinates, standardizes, and in the case of
the Bristow Academy schools, directly manages our flight
training activities.
We use the pronouns we, our and
us and the terms Bristow Group and the
Company to refer collectively to Bristow Group Inc.
and its consolidated subsidiaries and affiliates, unless the
context indicates otherwise. We also own interests in other
entities that we do not consolidate for financial reporting
purposes, which we refer to as unconsolidated affiliates, unless
the context indicates otherwise. Bristow Group, Bristow Aviation
Holdings Limited, its consolidated subsidiaries and affiliates,
and the unconsolidated affiliates are each separate
corporations, limited liability companies or other legal
entities, and our use of the terms we,
our and us does not suggest that we have
abandoned their separate identities or the legal protections
given to them as separate legal entities. The term
you refers to a prospective investor.
Our principal executive offices are located at
2000 W. Sam Houston Pkwy. S., Suite 1700,
Houston, Texas, 77042. Our telephone number is
(713) 267-7600.
Our website address is www.bristowgroup.com. Information
contained on our website does not constitute part of this
prospectus.
1
Risk
Factors
An investment in our securities involves risks. You should
carefully consider all of the information contained in or
incorporated by reference in this prospectus and other
information which may be incorporated by reference in this
prospectus or any prospectus supplement as provided under
Where You Can Find More Information, including the
risks described under Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Reports
on
Form 10-K
and our Quarterly Reports on
Form 10-Q.
This prospectus also contains forward-looking statements that
involve risks and uncertainties. Please read
Forward-Looking Statements. Our actual results could
differ materially from those anticipated in the forward-looking
statements as a result of certain factors, including the risks
described elsewhere in this prospectus or any prospectus
supplement and in the documents incorporated by reference into
this prospectus or any prospectus supplement. If any of these
risks occur, our business, financial condition or results of
operations could be adversely affected. Additional risks not
currently known to us or that we currently deem immaterial may
also have a material adverse effect on us.
Forward-Looking
Statements
This prospectus and the documents incorporated by reference in
this prospectus contain forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are statements about our future
business, strategy, operations, capabilities and results; use of
proceeds; financial projections; plans and objectives of our
management; expected actions by us and by third parties,
including our customers, competitors and regulators; and other
matters. Some of the forward-looking statements can be
identified by the use of words such as believes,
belief, expects, plans,
anticipates, intends,
projects, estimates, may,
might, would, could or other
similar words; however, all statements in this prospectus, other
than statements of historical fact or historical financial
results are forward-looking statements.
Our forward-looking statements reflect our views and assumptions
on the date we are filing this prospectus regarding future
events and operating performance. We believe that they are
reasonable, but they involve known and unknown risks,
uncertainties and other factors, many of which may be beyond our
control, that may cause actual results to differ materially from
any future results, performance or achievements expressed or
implied by the forward-looking statements. Accordingly, you
should not put undue reliance on any forward-looking statements.
Factors that could cause our forward-looking statements to be
incorrect and actual events or our actual results to differ from
those that are anticipated include all of the following:
|
|
|
|
|
the risks and uncertainties described under Risk
Factors in this prospectus, in any prospectus supplement
and in the Risk Factors and other sections of the
documents that we incorporated by reference into this
prospectus, including our Annual Reports on
Form 10-K
and Quarterly Reports on
Form 10-Q
and in our other reports filed with the SEC;
|
|
|
|
the level of activity in the oil and natural gas industry is
lower than anticipated;
|
|
|
|
production-related activities become more sensitive to variances
in commodity prices;
|
|
|
|
the major oil companies do not continue to expand
internationally;
|
|
|
|
market conditions are weaker than anticipated;
|
|
|
|
we are unable to acquire additional aircraft due to limited
availability;
|
|
|
|
we are not able to re-deploy our aircraft to regions with the
greater demand;
|
|
|
|
we do not achieve the anticipated benefit of our fleet capacity
expansion program;
|
|
|
|
the outcome of the United States Department of Justice
(DOJ) investigation relating to our internal review
of Foreign Corrupt Practices Act and other matters, which is
ongoing, has a greater than anticipated financial or business
impact; and
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the outcome of the DOJ antitrust investigation, which is
ongoing, has a greater than anticipated financial or business
impact.
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2
All forward-looking statements in this prospectus are qualified
by these cautionary statements and are only made as of the date
of this prospectus. We do not undertake any obligation, other
than as required by law, to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise.
Use of
Proceeds
Unless we inform you otherwise in the prospectus supplement, the
net proceeds from the sale of the securities will be used for
general corporate purposes, including:
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helicopter purchases,
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acquisitions,
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working capital,
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capital expenditures,
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repayment or refinancing of debt, and
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repurchases and redemptions of securities.
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Pending any specific application, we may initially invest funds
in short-term marketable securities or apply them to the
reduction of other short-term indebtedness.
Ratio of
Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and
Preferred Stock Dividends
The following table sets forth our consolidated ratio of
earnings to fixed charges and ratio of earnings to combined
fixed charges and preferred stock dividends for the periods
indicated:
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Fiscal Year Ended March 31,
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2004
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2005
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2006
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2007
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2008
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Ratio of Earnings to Fixed Charges
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4.1
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x
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5.0
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x
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4.3
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x
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5.4
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x
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4.5
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x
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Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
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4.1
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x
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5.0
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x
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4.3
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x
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3.7
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x
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3.2
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x
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For purposes of this table, earnings are defined as
income from continuing operations before provision for income
taxes and minority interest, undistributed earnings of
unconsolidated equity affiliates, amortization of capitalized
interest and fixed charges, less capitalized interest.
Fixed charges consist of interest (whether expensed
or capitalized), amortization of debt issuance costs, and the
estimated interest portion of rental expense deemed to be
representative of interest.
Description
of Debt Securities
The debt securities will be senior debt securities or
subordinated debt securities. We will describe in a supplement
to this prospectus the specific terms of each series of debt
securities being offered, including the terms, if any, on which
a series of debt securities may be convertible into or
exchangeable for our common stock, preferred stock or other debt
securities and the name of the trustee under the applicable
indenture. The debt securities will be issued under a senior
indenture or a subordinated indenture. The forms of these
indentures are filed as exhibits to the registration statement
of which this prospectus forms a part. The statements and
descriptions in this prospectus or in any prospectus supplement
regarding provisions of the indentures and debt securities are
summaries thereof, do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of
the provisions of the indentures (and any amendments or
supplements we may enter into from time to time which are
permitted under each indenture) and the debt securities,
including the definitions therein of certain terms.
3
Unless otherwise specified in a prospectus supplement, the debt
securities will be direct unsecured obligations of Bristow Group
Inc. The senior debt securities will rank equally with any of
our other senior and unsubordinated debt. The subordinated debt
securities will be subordinate and junior in right of payment to
any senior indebtedness. The indentures do not limit the
aggregate principal amount of debt securities that we may issue
and provide that we may issue debt securities from time to time
in one or more series, in each case with the same or various
maturities, at par or at a discount. Unless indicated in a
prospectus supplement, we may issue additional debt securities
of a particular series without the consent of the holders of the
debt securities of such series outstanding at the time of the
issuance. Any such additional debt securities, together with all
other outstanding debt securities of that series, will
constitute a single series of debt securities under the
applicable indenture.
Description
of Guarantees of the Debt Securities
If specified in the applicable prospectus supplement, one or
more of our subsidiaries Air Logistics, L.L.C., Air Logistics of
Alaska, Inc. or Airlog International, Ltd. will guarantee the
debt securities. The particular terms of any guarantee will be
described in the related prospectus supplement.
Description
of Capital Stock
The following description of our common stock, our preferred
stock, our certificate of incorporation, as amended, our amended
and restated bylaws and our stockholder rights agreement, as
amended, are summaries thereof and are qualified by reference to
our certificate of incorporation, as amended, our amended and
restated bylaws and rights agreement, as amended. For more
detail, please see our certificate of incorporation and the
amendments thereto, our amended and restated bylaws and our
rights agreement, as amended, and the amendments thereto, each
of which is incorporated herein by reference.
General
We are authorized to issue 90,000,000 shares of common
stock, par value $.01 per share, 8,000,000 shares of
preferred stock, par value $.01 per share, of which
1,000,000 shares have been designated as Series A
Junior Participating Preferred Stock and 4,600,000 shares
have been designated as 5.50% Mandatory Convertible Preferred
Stock. We are authorized to issue capital stock in certificated
or uncertificated form.
Common
Stock
Holders of our common stock are entitled to one vote per share
on all matters submitted to a vote of stockholders. Our common
stock has non cumulative voting rights, meaning that the holders
of more than 50% of the voting power of the shares voting for
the election of directors can elect 100% of the directors if
they choose to do so. In such event, the holders of the
remaining less-than-50% of the voting power of the shares voting
for the election of directors will not be able to elect any
directors. Subject to any preferential rights of any outstanding
shares of preferred stock, the holders of the common stock are
entitled to such dividends as may be declared from time-to-time
at the discretion of the board of directors out of funds legally
available therefore. Holders of common stock are entitled to
share ratably in our net assets upon liquidation after payment
or provision of all liabilities and any preferential liquidation
rights of any preferred stock then outstanding. The holders of
common stock have no preemptive rights to purchase additional
shares of our capital stock. Shares of common stock are not
subject to any redemption or sinking fund provisions and are not
convertible into any other of our securities. Our common stock
is subject to certain restrictions and limitations on ownership
by
non-U.S. citizens.
See Certificate of Incorporation and
Bylaws Foreign Ownership.
BNY Mellon Shareowner Services is the registrar and transfer
agent for our common stock. Our common stock is listed on the
New York Stock Exchange under the symbol BRS.
4
Preferred
Stock
The rights of holders of common stock are subject to the rights
of holders of any preferred stock. Our board of directors is
empowered, without approval of the stockholders, to cause shares
of preferred stock to be issued in one or more series, with the
number of shares of each series and the rights, preferences and
limitations of each series to be determined by it.
Among the specific matters that may be determined by the board
of directors, and may be included in any prospectus supplement
relating to any series of preferred stock we are offering, are
the following:
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the number of shares that shall constitute any such series and
whether the number of shares may be increased or decreased by
action of our board of directors;
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whether the shares of any such series shall be convertible into
or exchangeable for shares of stock of any other class or
classes or shares of any other series of the same class;
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the price or prices, or the rate or rates, of conversion if our
board of directors determines that the shares of any such series
shall be convertible;
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any limitations or restrictions to be effective while any shares
of any such series are outstanding upon the payment of dividends
or the making of other distributions or upon the acquisition in
any manner by the company or any of our subsidiaries of any of
the shares of the companys common, preferred, or other
class or classes of stock;
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any conditions or any restrictions upon the creation of
indebtedness of the company or any of our subsidiaries or upon
the issuance of any additional stock of any kind while the
shares of any series are outstanding;
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the annual rate of dividends, if any, payable on the shares of
any such series and the conditions upon which such dividends
shall be payable;
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whether dividends, if authorized, shall be cumulative and, if
so, the date from which such dividends shall be cumulative;
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voting rights, if any;
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when and at what price or prices (whether in cash or in
debentures of the company) the shares of any such series shall
be redeemable or, at the option of the company, exchangeable or
both;
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whether the shares of any such series shall be subject to the
operation of any purchase, retirement or sinking fund or funds
and, if so, the terms and provisions relative to the operation
of any such fund or funds; and
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the amount payable on the shares of any such series in the event
of voluntary liquidation, dissolution or winding up of the
affairs of the company; and any other powers, preferences and
relative, participating, option and other special rights, and
any qualifications, limitations and restrictions thereof.
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Our board of directors may change the designation, rights,
preferences, descriptions and terms of, and the number of shares
in, any series of which no shares thereof have been issued. We
will file the form of preferred stock with the SEC before
issuance, and you should read the form of preferred stock for
provisions that may be important to you. Our preferred stock is
subject to certain restrictions and limitations on ownership by
non-U.S. citizens.
See Certificate of Incorporation and
Bylaws Foreign Ownership.
The issuance of preferred stock, while providing us with
flexibility in connection with possible acquisitions and other
corporate purposes, could reduce the relative voting power of
holders of our common stock. It could also affect the likelihood
that holders of our common stock will receive dividend payments
and payments upon liquidation.
The issuance of shares of preferred stock, or the issuance of
rights to purchase shares of preferred stock, could be used to
discourage an attempt to obtain control of our company. For
example, if, in the exercise of its fiduciary obligations, our
board of directors were to determine that a takeover proposal
was not in the best
5
interest of our stockholders, the Board could authorize the
issuance of a series of preferred stock containing class voting
rights that would enable the holder or holders of this series to
prevent a change of control transaction or make it more
difficult. Alternatively, a change of control transaction deemed
by the Board to be in the best interest of our stockholders
could be facilitated by issuing a series of preferred stock
having sufficient voting rights to provide a required percentage
vote of the stockholders.
5.50%
Mandatory Convertible Preferred Stock
The following is a summary of certain provisions of the
certificate of designations for the 4,600,000 shares of
5.50% Mandatory Convertible Preferred Stock issued in a public
offering in September and October 2006 for net proceeds of
$222.6 million.
Conversion. Unless converted earlier pursuant
to the terms discussed below, on September 15, 2009, the
5.50% Mandatory Convertible Preferred Stock will convert into
common stock based on the following conversion rates:
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Market Value of
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Number of Shares of
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Total Number of Shares of
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Common Stock on
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Common Stock Issued
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Common Stock Issued
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September 15,
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for Each Share of
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for 4,600,000 Shares of
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2009
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Preferred Stock
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Preferred Stock
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$35.26 or less
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1.4180
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6,522,800
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Between $35.26 and $43.19
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1.4180 to 1.1577
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6,522,799 to 5,324,961
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$43.19 or greater
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1.1576
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5,324,960
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The Market Value of our common stock is the
average of the closing price per share of our common stock on
each of the 20 consecutive trading days ending on the third
trading day immediately preceding the mandatory conversion date.
Each share of 5.50% Mandatory Convertible Preferred Stock is
convertible at the holders option at any time into
approximately 1.1576 shares of our common stock based on a
conversion price of $43.19 per share, subject to specified
adjustments; however, upon such optional conversion of 5.50%
Mandatory Convertible Preferred Stock, we will make no payment
of any future dividends. If, at any time prior to the mandatory
conversion date, the closing price per share of our common stock
exceeds $64.785, subject to anti-dilution requirements, for at
least 20 days within a period of 30 consecutive trading
days, we may elect to cause the conversion of all of the 5.50%
Mandatory Convertible Preferred Stock then outstanding at the
conversion rate of 1.1576 shares of common stock (or a
total of 5,324,960 shares of common stock upon conversion
of 4,600,000 shares of 5.50% Mandatory Convertible
Preferred Stock), subject to specified adjustments including
payment of unpaid future dividends. There are also conversion
and other requirements applicable upon the cash acquisition of
our company.
Dividends. Annual cumulative cash dividends of
$2.75 per share of 5.50% Mandatory Convertible Preferred Stock
are payable quarterly on the fifteenth day of each March, June,
September and December. Holders of the 5.50% Mandatory
Convertible Preferred Stock on the mandatory conversion date
will have the right to receive the dividend due on such date
(including any accrued, cumulated and unpaid dividends), whether
or not declared, to the extent we are legally permitted to pay
such dividends at such time.
Ranking. With respect to both dividend rights
and rights upon liquidation,
winding-up
or dissolution, the 5.50% Mandatory Convertible Preferred Stock
will rank senior to all classes of common stock of the company
and the Series A Junior Participating Preferred Stock and
each other class of capital stock or series of preferred stock
established subsequently unless provided otherwise by our board
of directors. The 5.50% Mandatory Convertible Preferred Stock
will rank junior to, or on parity with, any class of capital
stock or series of preferred stock established subsequently by
our board of directors, the terms of which expressly provide
that such class or series will rank senior to, or on parity
with, as applicable, the 5.50% Mandatory Convertible Preferred
Stock.
Voting. The shares of the 5.50% Mandatory
Convertible Preferred Stock shall have no voting rights except
as required by Delaware law from time to time or as follows:
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upon a Voting Rights Triggering Event, which is
generally defined as our failure to pay dividends on the 5.50%
Mandatory Convertible Preferred Stock with respect to six or
more dividend periods, the
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6
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5.50% Mandatory Convertible Preferred Stock, voting as a single
class with any other securities on parity with similar voting
rights (the Voting Rights Class), will be entitled
to elect two additional directors of our company;
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we shall not, without the affirmative vote or consent of the
holders of at least
662/3%
of the voting power of the outstanding 5.50% Mandatory
Convertible Preferred Stock and the Voting Rights Class, create,
authorize or issue any class of series of securities senior
thereto; and
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we shall not, without the affirmative vote or consent of the
holders of at least
662/3%
of the voting power of the outstanding 5.50% Mandatory
Convertible Preferred Stock, amend, alter or repeal any of the
provisions of our certificate of incorporation or any
certificate of designation that would adversely affect the
rights, preferences or voting powers of the 5.50% Mandatory
Convertible Preferred Stock.
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In exercising any voting rights, each share of 5.50% Mandatory
Convertible Preferred Stock shall be entitled to one vote.
Certificate
of Incorporation and Bylaws
Stockholder
Meetings
Our bylaws provide that special meetings of our stockholders may
be called only by our president or by a resolution of our
directors.
Certain
Limitations on Stockholder Actions
Our bylaws also impose some procedural requirements on
stockholders who wish to:
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make nominations in the election of directors;
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propose that a director be removed;
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propose any repeal or change in our bylaws; or
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propose any other business to be brought before an annual or
special meeting of stockholders.
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In order to bring a proposal before an annual meeting of
stockholders, our bylaws require that a stockholder deliver
timely notice of a proposal pertaining to a proper subject for
presentation at the meeting to our corporate secretary
containing the following information:
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a description of the business or nomination to be brought before
the meeting and the reasons for conducting such business at the
meeting;
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any material interest of the stockholder in the proposal and the
beneficial owner, if any, on whose behalf the proposal is made;
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the name, address and number of shares owned beneficially and of
record by the stockholder or the beneficial owner on whose
behalf the nomination or proposal is being made, if any; and
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with respect to each person nominated for election to our board
of directors, all information relating to such person that is
required to be disclosed in proxy statements with respect to the
election of directors by Section 14A of the Exchange Act
and the related rules of the SEC.
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Our bylaws provide that only such business may be conducted at a
special meeting of stockholders as has been brought before the
meeting by the companys notice of meeting. Nominations of
persons for election to our board of directors may be made at a
special meeting by our board of directors or, provided that our
board has determined that directors shall be elected at such
meeting, by our stockholders. In order to nominate a person for
election to our board of directors at a special meeting of
stockholders, a stockholder must deliver timely notice of such
nomination to our corporate secretary. Such notice must contain
the information described above with respect to notices of
nomination of persons for election to our board of directors at
annual meetings of stockholders.
7
To be timely, a stockholder must generally deliver notice:
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in connection with an annual meeting of stockholders, not
earlier than the close of business on the 90th day prior to
and not later than the close of business on the 60th day
prior to the first anniversary of the preceding years
annual meeting. However, if the date of the annual meeting is
more than 30 days before or more than 60 days after
such anniversary date, notice is required not earlier than the
90th day prior to such annual meeting and not later than
the later of the 60th day prior to the annual meeting or
the 10th day following the day on which we first publicly
announce the date of such meeting; or
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in connection with the election of a director at a special
meeting of stockholders, not earlier than the close of business
on the 90th day prior to and not later than the close of
business on the later of the 60th day prior to such special
meeting or the 10th day following the day on which we first
publicly announce the date of such meeting.
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Limitation
of Liability of Directors
Our certificate of incorporation provides that no director will
be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability as a result of any of the following:
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any breach of the directors duty of loyalty to our company
or our stockholders;
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any act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law;
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unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware
General Corporation Law; and
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any transaction from which the director derived an improper
personal benefit.
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As a result, neither we nor our stockholders have the right,
through stockholders derivative suits on our behalf, to
recover monetary damages against a director for breach of
fiduciary duty as a director, including breaches resulting from
grossly negligent behavior, except in the situations described
above. Furthermore, our certificate of incorporation provides
that, if the Delaware General Corporation Law is amended to
authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of our
directors shall be limited or eliminated to the extent permitted
by the Delaware General Corporation Law, as then amended.
Our bylaws provide that, to the fullest extent permitted by law,
we will indemnify any officer or director of our company against
all expenses (including attorneys fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred
and arising out of the fact that the person is or was our
director or officer, or served any other enterprise at our
request as a director or officer. We will pay such expenses in
advance of the final disposition of such action only when we
receive an undertaking to repay such amounts if it is ultimately
determined that the person is not entitled to be indemnified by
us. Amending this provision will not reduce our indemnification
obligations relating to actions taken before an amendment. We
have entered into indemnification agreements with each of our
directors that provide that we will indemnify the indemnitee
against, and advance certain expenses relating to, liabilities
incurred in the performance of such indemnitees duties on
our behalf to the fullest extent permitted under Delaware law
and our bylaws.
Foreign
Ownership
We are subject to the Federal Aviation Act, under which our
aircraft may be subject to deregistration, and we may lose our
ability to operate within the United States, if persons other
than citizens of the United States should come to own or control
more than 25% of our voting interest. Consistent with the
requirements of the Federal Aviation Act, our certificate of
incorporation, as amended, provides that persons or entities
that are not citizens of the United States (as
defined in the Federal Aviation Act) shall not collectively own
or control more than 25% of the voting power of our outstanding
capital stock (the Permitted Foreign Ownership
Percentage) and that, if at any time persons that are not
citizens of the United States nevertheless collectively
8
own or control more than the Permitted Foreign Ownership
Percentage, the voting rights of our outstanding voting capital
stock in excess of the Permitted Foreign Ownership Percentage
owned by certain stockholders who are not citizens of the United
States shall automatically be suspended. These voting rights
will be suspended in reverse chronological order by date of
registry until the number of voting shares held by persons that
are not citizens of the United States is less than or equal to
the Permitted Foreign Ownership Percentage. Our certificate of
incorporation, as amended, further authorizes us to redeem any
such suspended shares to the extent necessary for us to comply
with any present or future requirements of the Federal Aviation
Act.
Stockholder
Rights Plan
We adopted the Rights Plan on February 9, 1996. The Rights
Plan was amended in May 1997, January 2003 and February 2006.
The Rights Plan is designed to assure that our stockholders
receive fair and equal treatment in the event of any proposed
takeover of our company and to guard against partial tender
offers, squeeze-outs, open market accumulations and other
abusive tactics to gain control without paying all stockholders
a fair price. The Rights Plan was not adopted in response to any
specific takeover proposal.
The following is a description of the terms of the preferred
share purchase rights (the Rights) as set forth in
the Rights Agreement, as amended to the date of this prospectus.
This description is only a summary, and is not complete, and
should be read together with the Rights Plan and each amendment
thereto, each of which has been filed as an exhibit to the
registration statement of which this prospectus is a part.
On February 8, 1996, our board of directors declared a
dividend of one Right for each share of our common stock. The
dividend distribution was made on February 29, 1996 to
stockholders of record on that date. Each Right entitles the
registered holder to purchase from us one one-hundredth of a
share of Series A Junior Participating Preferred Stock, par
value $.01 per share (the Preferred Shares), of our
company at a price of $50.00 per one one-hundredth of a
Preferred Share (the Purchase Price), subject to
adjustment.
Until the earlier to occur of (1) 10 days following a
public announcement that a person or group of affiliated or
associated persons (an Acquiring Person) have
acquired beneficial ownership of 10% or more of our outstanding
common stock or (2) 10 business days (or such later date as
may be determined by action of our board of directors prior to
such time as any person or group of affiliated persons becomes
an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange
offer, the consummation of which would result in the beneficial
ownership by a person or group of 10% or more of our outstanding
common stock (the earlier of such dates being called the
Distribution Date), the Rights will be evidenced,
with respect to any of the common stock share certificates
outstanding as of the Record Date, by such common stock share
certificate with a copy of the Summary of Rights attached
thereto. Notwithstanding the foregoing, certain institutional
investors are permitted to acquire and hold no more than 12.5%
of our outstanding common stock without becoming an Acquiring
Person, provided that the common stock is held in the ordinary
course of the investors business and not with the purpose
nor with the effect of changing or influencing the control of
our company.
The Rights Agreement provides that, until the Distribution Date
(or earlier redemption or expiration of the Rights), the Rights
will be transferred with and only with shares of common stock.
Until the Distribution Date (or earlier redemption or expiration
of the Rights), new common stock share certificates issued after
the Record Date upon transfer or new issuance of shares of
common stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for
transfer of any certificates for shares of common stock
outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will
also constitute the transfer of the Rights associated with the
shares of common stock represented by such certificate. As soon
as practicable following the Distribution Date, separate
certificates evidencing the Rights (Right
Certificates) will be mailed to holders of record of the
shares of our common stock as of the close of business on the
Distribution Date, and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on February 28, 2009 (the Final
Expiration Date), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed or exchanged
by us, in each case, as described below.
9
The Purchase Price payable, and the number of Preferred Shares
or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution (1) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred
Shares, (2) upon the grant to holders of the Preferred
Shares of certain rights or warrants to subscribe for or
purchase Preferred Shares at a price, or securities convertible
into Preferred Shares with a conversion price, less than the
then-current market price of the Preferred Shares or
(3) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained
earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to
above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of
each Right are also subject to adjustment in the event of a
stock split of the shares of common stock or a stock dividend on
shares of our common stock payable in shares of common stock or
subdivisions, consolidations or combinations of shares of our
common stock occurring, in any such case, prior to the
Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to a
minimum preferential quarterly dividend payment of $1 per share
but will be entitled to an aggregate dividend of 100 times the
dividend declared per share of our common stock. In the event of
liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100
per share but will be entitled to an aggregate payment of 100
times the payment made per share of our common stock. Each
Preferred Share will have 100 votes, voting together with the
shares of our common stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of our common
stock are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per share of our common
stock. These rights are protected by customary antidilution
provisions.
Because of the nature of the Preferred Shares dividend,
liquidation and voting rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon
exercise of each Right should approximate the value of one share
of our common stock.
In the event that we are acquired in a merger or other business
combination transaction or 50% or more of our consolidated
assets or earning power are sold after a person or group has
become an Acquiring Person, proper provision will be made so
that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise
price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the
Right. In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive
upon exercise that number of shares of our common stock having a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring
Person and prior to the acquisition by such person or group of
50% or more of the outstanding shares of our common stock, our
board of directors may exchange the Rights (other than Rights
owned by such person or group which will have become void), in
whole or in part, at an exchange ratio of one share of our
common stock, or one one-hundredth of a Preferred Share (or of a
share of a class or series of our preferred stock having
equivalent rights, preferences and privileges), per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
Preferred Shares will be issued (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share,
which may, at our election, be evidenced by depositary receipts)
and, in lieu thereof, an adjustment in cash will be made based
on the market price of the Preferred Shares on the last trading
day prior to the date of exercise.
At any time prior to the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 10%
or more of the outstanding shares of our common stock, the board
of directors may redeem
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the Rights in whole, but not in part, at a price of $.01 per
Right (the Redemption Price). The redemption of
the Rights may be made effective at such time on such basis with
such conditions as our board of directors in its sole discretion
may establish. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the
Redemption Price.
The terms of the Rights may be amended by our board of directors
without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not
less than the greater of (1) the sum of .001% and the
largest percentage of the outstanding shares of common stock
then known to us to be beneficially owned by any person or group
of affiliated or associated persons and (2) 10%, except
that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no
such amendment may adversely affect the interests of the holders
of the Rights.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of our company, including,
without limitation, the right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to
acquire our company in a manner or on terms not approved by our
board of directors. The Rights, however, should not deter any
prospective offeror willing to negotiate in good faith with the
board of directors, nor should the Rights interfere with any
merger or business combination approved by our board of
directors prior to an Acquiring Persons acquiring 10% or
more of the shares of our common stock.
Delaware
Business Combination Statute
We have elected to be subject to Section 203 of the
Delaware General Corporation Law, which regulates corporate
acquisitions. Section 203 prevents an interested
stockholder, which is defined generally as a person owning
15% or more of a corporations voting stock, or any
affiliate or associate of that person, from engaging in a broad
range of business combinations with the corporation
for three years after becoming an interested stockholder unless:
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the board of directors of the corporation had previously
approved either the business combination or the transaction that
resulted in the stockholders becoming an interested
stockholder;
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upon completion of the transaction that resulted in the
stockholders becoming an interested stockholder, that
person owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, other than
statutorily excluded shares; or
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following the transaction in which that person became an
interested stockholder, the business combination is approved by
the board of directors of the corporation and holders of at
least two-thirds of the outstanding voting stock not owned by
the interested stockholder.
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Under Section 203, the restrictions described above also do
not apply to specific business combinations proposed by an
interested stockholder following the announcement or
notification of designated extraordinary transactions involving
the corporation and a person who had not been an interested
stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the
corporations directors, if such extraordinary transaction
is approved or not opposed by a majority of the directors who
were directors prior to any person becoming an interested
stockholder during the previous three years or were recommended
for election or elected to succeed such directors by a majority
of such directors.
Section 203 may make it more difficult for a person who
would be an interested stockholder to effect various business
combinations with a corporation for a three-year period.
Section 203 also may have the effect of preventing changes
in our management and could make it more difficult to accomplish
transactions which our stockholders may otherwise deem to be in
their best interests.
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Description
of Warrants
We may issue warrants to purchase debt securities, common stock,
preferred stock, rights or other securities of the Company or
any other entity or any combination of the foregoing. We may
issue warrants independently or together with other securities.
Warrants sold with other securities may be attached to or
separate from the other securities. We will issue warrants under
one or more warrant agreements between us and a warrant agent
that we will name in the prospectus supplement.
The prospectus supplement relating to any warrants we are
offering will include specific terms relating to the offering.
We will file the form of any warrant agreement with the SEC, and
you should read the warrant agreement for provisions that may be
important to you. The prospectus supplement will include some or
all of the following terms:
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the title of the warrants;
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the aggregate number of warrants offered;
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the designation, number and terms of the debt securities, common
stock, preferred stock, rights or other securities purchasable
upon exercise of the warrants, and procedures that will result
in the adjustment of those numbers;
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the exercise price of the warrants;
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the dates or periods during which the warrants are exercisable;
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the designation and terms of any securities with which the
warrants are issued;
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if the warrants are issued as a unit with another security, the
date, if any, on and after which the warrants and the other
security will be separately transferable;
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if the exercise price is not payable in U.S. dollars, the
foreign currency, currency unit or composite currency in which
the exercise price is denominated;
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any minimum or maximum amount of warrants that may be exercised
at any one time;
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any terms, procedures and limitations relating to the
transferability, exchange or exercise of the warrants; and
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any other terms of the warrants.
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Plan of
Distribution
We may sell the securities in and outside the United States
through underwriters or dealers, directly to purchasers or
through agents. The prospectus supplement will include the
following information:
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the terms of the offering;
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the names of any underwriters or agents;
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the purchase price of the securities from us and, if the
purchase price is not payable in U.S. dollars, the currency
or composite currency in which the purchase price is payable;
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the net proceeds to us from the sale of the securities;
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any delayed delivery arrangements;
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any underwriting discounts, commissions and other items
constituting underwriters compensation;
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any initial public offering price;
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any discounts or concessions allowed or reallowed or paid to
dealers; and
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any commissions paid to agents.
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Sale
Through Underwriters or Dealers
If we use underwriters in the sale of securities, the
underwriters will acquire the securities for their own account.
The underwriters may resell the securities from time to time in
one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at
the time of sale. Underwriters may offer securities to the
public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more firms
acting as underwriters. Unless we inform you otherwise in the
prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to conditions, and the
underwriters will be obligated to purchase all the securities if
they purchase any of them. The underwriters may change from time
to time any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers.
During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open
market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers
for the offered securities sold for their account may be
reclaimed by the syndicate if such offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, these activities may be
discontinued at any time.
If we use dealers in the sale of securities, we will sell the
securities to them as principals. They may then resell those
securities to the public at varying prices determined by the
dealers at the time of resale. The dealers participating in any
sale of the securities may be deemed to be underwriters within
the meaning of the Securities Act with respect to any sale of
those securities. We will include in the prospectus supplement
the names of the dealers and the terms of the transaction.
Direct
Sales and Sales Through Agents
We may sell the securities directly. In that event, no
underwriters or agents would be involved. We may also sell the
securities through agents we designate from time to time. In the
prospectus supplement, we will name any agent involved in the
offer or sale of the securities, and we will describe any
commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to
use its reasonable best efforts to solicit purchases for the
period of its appointment.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act with respect to any sale of those
securities. We will describe the terms of any such sales in the
prospectus supplement.
Delayed
Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize
agents, underwriters or dealers to solicit offers from certain
types of institutions to purchase securities from us at the
public offering price under delayed delivery contracts. These
contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those
conditions described in the prospectus supplement. The
prospectus supplement will describe the commission payable for
solicitation of those contracts.
Remarketing
We may offer and sell any of the securities in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment by their terms or otherwise, by one or more
remarketing firms acting as principals for their own accounts or
as our agents. We will identify any remarketing firm, the terms
of any remarketing agreement and the compensation to be paid to
the remarketing firm in the prospectus supplement. Remarketing
firms may be deemed underwriters under the Securities Act.
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Derivative
Transactions
We may enter into derivative transactions with third parties, or
sell securities not covered by this prospectus to third parties
in privately negotiated transactions. If the applicable
prospectus supplement indicates, in connection with those
derivatives, the third parties may sell securities covered by
this prospectus and the applicable prospectus supplement,
including in short sale transactions. If so, the third parties
may use securities pledged by us or borrowed from us or others
to settle those sales or to close out any related open
borrowings of stock, and may use securities received from us in
settlement of those derivatives to close out any related open
borrowings of stock.
We or one of our affiliates may loan or pledge securities to a
financial institution or other third party that in turn may sell
the securities using this prospectus. Such financial institution
or third party may transfer its short position to investors in
our securities or in connection with a simultaneous offering of
other securities offered by this prospectus or otherwise.
The third parties in any of the sale transactions described
above will be underwriters and will be identified in the
applicable prospectus supplement or in a post-effective
amendment to the registration statement of which this prospectus
forms a part.
General
Information
We may have agreements with the agents, dealers and underwriters
to indemnify them against civil liabilities, including
liabilities under the Securities Act, or to contribute with
respect to payments that the agents, dealers or underwriters may
be required to make. Agents, dealers and underwriters may engage
in transactions with us or perform services for us in the
ordinary course of their businesses.
The securities may or may not be listed on a national securities
exchange. We cannot assure you that there will be a market for
the securities.
Legal
Matters
The validity of the offered securities and other matters in
connection with any offering of the securities will be passed
upon for us by Baker Botts L.L.P., Houston, Texas, our outside
counsel. Any underwriters will be advised about legal matters
relating to any offering by their own legal counsel, which will
be named in the related prospectus supplement.
Experts
The consolidated financial statements of Bristow Group Inc. as
of March 31, 2008 and 2007, and for each of the years in
the three-year period ended March 31, 2008, and
managements assessment of the effectiveness of internal
control over financial reporting as of March 31, 2008, have
been incorporated by reference herein, in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The audit report covering the March 31, 2008, consolidated
financial statements refers to a change in the method of
accounting for uncertainty in income taxes as of April 1,
2007, the method of accounting for defined benefit plans as of
March 31, 2007, and the method of accounting for
stock-based compensation plans as of April 1, 2006.
Where You
Can Find More Information
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy this
registration statement and any other document we file at the
Public Reference Room of the SEC, 100 F Street, N.E.,
Washington, D.C. 20549.
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Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. Our SEC
filings are also available to the public on the SECs
website at
http://www.sec.gov
and on our website at
http://www.bristowgroup.com.
However, the information on our website does not constitute a
part of this prospectus. Reports and other information
concerning us can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York
10005. Our common stock is listed and traded on the New York
Stock Exchange under the trading symbol BRS.
This prospectus is part of a registration statement and, as
permitted by SEC rules, does not contain all of the information
included in the registration statement. Whenever a reference is
made in this prospectus or any prospectus supplement to any of
our contracts or other documents, the reference may not be
complete and, for a copy of the contract or document, you should
refer to the exhibits that are part of or incorporated by
reference into the registration statement.
The SEC allows us to incorporate by reference into
this prospectus the information we file with it, which means
that we can disclose important information to you by referring
you to those documents. Information incorporated by reference is
considered to be part of this prospectus. Any statement
contained in this prospectus or a document incorporated by
reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any other
subsequently filed document that is incorporated by reference in
this prospectus modifies or superseded the statement. Any
statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this
prospectus. We incorporate by reference the documents listed
below and future filings we make with the SEC (File
No. 001-31617)
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
(excluding any information furnished but not
filed, unless we specifically provide that such
furnished information is to be incorporated by
reference) after the effectiveness of this registration
statement and until the termination of offerings under this
prospectus:
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our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008, which was filed
with the SEC on May 21, 2008; and
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the description of our common stock contained in our
Registration Statement on
Form 8-A/A,
filed on March 7, 2003, and any subsequent amendment
thereto filed for the purpose of updating such description.
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We will provide, at no charge, to any person, including any
beneficial owner, to whom a prospectus is delivered, a copy of
any and all documents that have been incorporated by reference
into this prospectus. Requests for copies of any such document
should be made by written or oral request to:
Bristow
Group Inc.
2000 W. Sam Houston Pkwy S., Suite 1700
Houston, Texas 77042
Attention: Corporate Secretary
Telephone number is
(713) 267-7600
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