sv1
As filed with the Securities and Exchange Commission on
August 18, 2006
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
BRISTOW GROUP INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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4522
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72-0679819
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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2000 W. Sam Houston Pkwy. S.,
Suite 1700
Houston, Texas 77042
(713) 267-7600
(Address, including zip code,
and telephone number, including area code,
of registrants principal executive offices)
Randall A. Stafford
Vice President and General
Counsel, Corporate Secretary
2000 W. Sam Houston Pkwy. S.,
Suite 1700
Houston, Texas 77042
(713) 267-7600
(Name, address, including zip
code, and telephone number,
including area code, of agent for service)
Copies to:
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John D. Geddes
Baker Botts L.L.P.
910 Louisiana Street
One Shell Plaza
Houston, Texas 77002-4995
(713) 229-1234
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T. Mark Kelly
Douglas E. McWilliams
Vinson & Elkins L.L.P.
1001 Fannin Street
2300 First City Tower
Houston, Texas 77002-6760
(713) 758-2222
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effective date of this Registration Statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the
Securities Act), check the following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Title of Each Class of
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Aggregate Offering
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Amount of
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Securities to be Registered
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Price(1)(2)
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Registration Fee
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% Mandatory Convertible
Preferred Stock, par value $.01 per share
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$230,000,000
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$24,610
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Common Stock, par value
$.01 per share(3)
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(4)(5)
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(5)
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(1)
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Includes shares of mandatory
convertible preferred stock that may be sold to cover the
exercise of an overallotment option granted to the underwriters.
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(2)
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Estimated solely for the purpose of
calculating the registration fee under Rule 457(o) under
the Securities Act.
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(3)
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Each share of our common stock
includes an associated Preferred Share Purchase Right.
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(4)
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There are being registered
hereunder an indeterminate number of shares of common stock
issuable upon conversion of the mandatory convertible preferred
stock. Each share of mandatory convertible preferred stock,
prior to the mandatory conversion date, is convertible into a
number of shares of common stock, subject to adjustments under
certain circumstances. Pursuant to Rule 416 under the
Securities Act, such number of shares of common stock registered
hereby shall include an indeterminate number of shares of common
stock that may be issued in connection with a stock split, stock
dividend, recapitalization, or similar event or adjustment in
the number of shares issuable as provided in certificate of
designations of the mandatory convertible preferred stock.
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(5)
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The shares of common stock issuable
upon conversion of the mandatory convertible preferred stock
will be issued for no additional consideration, and therefore no
registration fee is required pursuant to Rule 457(i).
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The Registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to
Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities, and we are not soliciting an offer to buy these
securities, in any state where the offer or sale is not
permitted.
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SUBJECT
TO COMPLETION, DATED AUGUST 18, 2006
PROSPECTUS
4,000,000
Shares
Bristow
Group Inc.
%
Mandatory Convertible Preferred Stock
We are selling
4,000,000 shares of our % mandatory convertible
preferred stock.
We will pay annual
dividends on each share of our mandatory convertible preferred
stock in the amount of $ .
Dividends will accrue and cumulate from the date of issuance,
and to the extent that we are legally permitted to pay dividends
and our board of directors declares a dividend payable, we will
pay dividends in cash
on , ,
and
of each year prior
to ,
2009, and
on ,
2009. The first dividend payment will be made
on ,
in the amount of $ per share
of our mandatory convertible preferred stock, which reflects the
time period from the date of issuance
to .
Each share of our
mandatory convertible preferred stock has a liquidation
preference of $ , plus accrued,
cumulated and unpaid dividends. Each share of our mandatory
convertible preferred stock will automatically convert
on ,
2009, into
between
and shares
of common stock, subject to anti-dilution adjustments, depending
on the average closing price per share of our common stock over
the 20 trading day period ending on the third trading day prior
to such date. At any time prior
to ,
2009, holders may elect to convert each share of our mandatory
convertible preferred stock
into shares
of common stock, subject to anti-dilution adjustments. If the
closing price per share of our common stock exceeds
$ for at least 20 trading days
within a period of 30 consecutive trading days, we may elect,
subject to certain limitations, to cause the conversion of all,
but not less than all, of the shares of mandatory convertible
preferred stock then outstanding at the conversion rate
of shares
of common stock per share of our mandatory convertible preferred
stock, provided that at the time of such conversion we are then
legally permitted to and do pay an amount equal to any accrued,
cumulated and unpaid dividends (other than dividends payable to
previous record holders) plus the present value of all remaining
future dividend payments to the mandatory conversion date.
Prior to this
offering, there has been no public market for our mandatory
convertible preferred stock. We intend to apply to list our
mandatory convertible preferred stock on the New York Stock
Exchange. Our common stock is listed on the New York Stock
Exchange under the symbol BRS. The last reported
sale price of our common stock on the New York Stock Exchange on
August 17, 2006 was $38.51 per share.
Investing in our
mandatory convertible preferred stock involves risks. See
Risk Factors beginning on page 14.
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Per
Share
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Total
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Public Offering Price
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$
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$
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Underwriting Discounts and
Commissions
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$
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$
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Proceeds to Bristow Group
Inc.
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$
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$
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The underwriters
have an option to purchase a maximum of 600,000 additional
shares to cover over-allotments of shares.
Delivery of the
shares of mandatory convertible preferred stock will be made on
or
about ,
2006.
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.
Credit
Suisse
The date of this
Prospectus
is ,
2006.
TABLE OF
CONTENTS
You should rely only on the information contained in this
document or to which we have referred you. We have not
authorized anyone to provide you with information that is
different. This document may only be used where it is legal to
sell these securities. The information in this document may only
be accurate on the date of this document.
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PROSPECTUS
SUMMARY
This summary highlights certain information contained
elsewhere in this prospectus. This summary does not contain all
of the information you should consider before investing in our
mandatory convertible preferred stock. You should carefully read
the entire prospectus, including Risk Factors and
our consolidated financial statements and related notes included
elsewhere in this prospectus, before you decide whether to
invest in our mandatory convertible preferred stock. We use the
pronouns we, our and us and
the term Bristow Group 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. 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. For example, the fiscal year
ended March 31, 2006 is referred to as fiscal year
2006. We refer to the three months ended June 30,
2006 and June 30, 2005 as first quarter fiscal year
2007 and first quarter fiscal year 2006,
respectively. Notes to Consolidated Financial
Statements refers to the Notes to Consolidated
Financial Statements for the Fiscal Years Ended March 31,
2006, 2005 and 2004 included elsewhere in this prospectus,
and Condensed Notes to Consolidated Financial
Statements refers to the Condensed Notes to
Consolidated Financial Statement for the Three Months Ended
June 30, 2006 and 2005 included elsewhere in this
prospectus.
Our
Company
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 the U.S. Gulf of
Mexico and the North Sea, and operations in most of the other
major offshore oil and gas producing regions of the world,
including Alaska, Australia, Brazil, China, Mexico, Nigeria,
Russia and Trinidad. We have a long history in the helicopter
service industry, with our two principal legacy companies,
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
June 30, 2006, we operated 333 aircraft (including 311
owned aircraft, 22 leased aircraft and five aircraft held for
sale), and our unconsolidated affiliates operated an additional
147 aircraft (excluding those aircraft leased from us). In
fiscal year 2006, our Helicopter Services segment contributed
approximately 91% of our operating revenue.
We are also a leading provider of production management services
for oil and gas production facilities in the U.S. Gulf of
Mexico. Our services include furnishing specialized production
operations personnel, engineering services, production operating
services, paramedic services and providing marine and helicopter
transportation of personnel and supplies between onshore bases
and offshore facilities. In connection with these activities,
our Production Management Services segment uses our helicopter
services. We also handle regulatory and production reporting for
some of our customers. As of June 30, 2006, we managed or
had personnel assigned to 315 production facilities in the
U.S. Gulf of Mexico.
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Recent
Changes
While remaining committed to maintaining profitable growth and a
flexible capital structure, we completed a series of changes in
fiscal years 2005 and 2006 to better integrate our global
operations among previously independently managed businesses and
to improve various other aspects of our operations. We believe
that these changes will allow us to capitalize on our strengths
and the current strong levels of demand for our services, and
position our company as the preferred provider of helicopter
services to the offshore energy industry. These changes have
included:
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New Management and Corporate Functions Nine
of the twelve members of our senior management have joined the
company since July 2004, bringing with them significant business
experience. We also created six corporate functions (business
development, compliance, legal, quality and safety, treasury and
supply chain), some of which had historically been performed on
a local or divisional basis.
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Global Fleet Management We have implemented
procedures to manage our aircraft fleet globally based on return
on capital employed, while considering our customer, community
and employee responsibilities. We believe these procedures
result in higher margins and better asset allocation decisions.
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Common Standards for Quality and Safety We
have instituted specific, company-wide processes to globalize
our industry-leading quality and safety technologies and
practices. These processes provide our customers in all markets
with consistent, high-quality, safe service, which we believe
gives us an advantage over our regional competitors.
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Geographic Business Units We have structured
our new business units based on geographic location. Managers of
these business units have operational control to optimize the
assets deployed within their region.
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Customer Relationships We have implemented
procedures to maintain and enhance relationships with our
customers corporate management, in addition to our
existing relationships with local management. We believe these
relationships help us to better understand and respond to our
customers needs on a global basis.
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Relocated Headquarters We have relocated our
corporate headquarters to Houston, Texas, bringing us nearer to
the headquarters of many global offshore energy customers.
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New Name We have rebranded our business as
Bristow Group Inc. to reflect the significant changes at our
company and to leverage the broad name recognition of the
Bristow brand in international markets. At the same
time, we continue to use our Air Logistics and Grasso Production
Management brands in the U.S. Gulf of Mexico due to the
strength of these brands in that region.
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Aircraft
Fleet Expansion
In response to significant demand for our helicopter services,
we are expanding our fleet of aircraft. As of June 30,
2006, we had 51 aircraft on order and options to acquire an
additional 37 aircraft. The additional aircraft on order are
expected to provide incremental fleet capacity, with only a
small number of our existing aircraft expected to be replaced
with the new aircraft. We expect that these additional aircraft
on order will increase our total number of aircraft by 15%
assuming no aircraft are replaced, but will provide an even
larger increase in our passenger transportation capacity and
corresponding revenue due to the size of the new aircraft. All
of the aircraft under option and 48 of the 51 aircraft on order
are large- or medium-sized aircraft, as compared with our
existing fleet, of which about half are large- or medium-sized
aircraft.
Of the aircraft on order, 25 are expected to be delivered during
the last nine months in fiscal year 2007. All of these 25
aircraft have been dedicated to customers for specific projects,
including 18 under signed contracts. During fiscal year 2006 and
first quarter fiscal year 2007, we spent $141.2 million and
$44.1 million, respectively, on aircraft acquisitions. We
expect to spend an additional $394.5 million to
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acquire the aircraft that were on order as of June 30,
2006, including $211.2 million in the last nine months of
fiscal year 2007.
Our options to acquire additional aircraft consist of options
for 13 large aircraft and 24 medium-sized aircraft. Options
for five large aircraft expire on September 30, 2006. We
anticipate that the total purchase price for all of the aircraft
under option as of June 30, 2006 will be
$448.2 million if we exercise all of these options. Upon
completion of this offering, we plan to exercise options to
acquire additional large aircraft, including the options for
five large aircraft that expire on September 30, 2006.
The chart below presents (1) the number of helicopters in
our fleet (comprised of 311 owned aircraft, 22 leased aircraft
and five aircraft held for sale) and their distribution among
the business units of our Helicopter Services segment as of
June 30, 2006; (2) the number of helicopters which we
had on order or under option as of June 30, 2006; and
(3) the percentage of gross revenues which each of our
segments and business units provided during fiscal year 2006.
For additional information regarding our commitments and options
to acquire aircraft, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Liquidity Future Capital
Requirements Capital Commitments included
elsewhere in this prospectus.
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Aircraft in Fleet
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Percentage of
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Helicopters
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Fiscal Year 2006
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Small
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Medium
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Large
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Fixed Wing
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Total
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Revenues
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Helicopter Services
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North America
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137
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26
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5
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1
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169
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26
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%
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South and Central America
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2
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31
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1
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34
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6
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%
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Europe
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1
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6
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31
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38
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31
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%
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West Africa
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11
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32
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2
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6
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51
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14
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%
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Southeast Asia
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2
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5
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9
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16
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8
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%
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Other International
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8
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9
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3
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20
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4
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%
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EH Centralized Operations
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5
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5
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2
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%
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Production Management
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9
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%
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Total
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153
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108
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62
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10
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333
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100
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%
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Aircraft not currently in fleet
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On order
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3
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41
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7
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51
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Under option
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24
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13
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37
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We expect that the additional aircraft on order and any aircraft
we acquire pursuant to options will generally be deployed evenly
across our global business units, but with a bias towards those
units where we expect higher growth, such as our Other
International and Southeast Asia units.
Our
Industry
Increased Demand for Helicopter Services. We
are currently experiencing significant demand for our helicopter
services and, in certain of our markets (particularly the
U.S. Gulf of Mexico), we are unable to meet the full demand
and have been forced to decline customer orders. 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.
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.
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Limited Aircraft Supply. Currently, helicopter
manufacturers are indicating very limited supply availability
during the next two 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 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.
Aircraft Resale Market. Unlike equipment in
most sectors of the energy services industry, helicopters can be
used in a number of applications in addition to the offshore
energy industry. Aircraft have applications in numerous other
markets, including air medical, tourism, firefighting, corporate
transportation, traffic monitoring, police and military.
Accordingly, we are able to 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.
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 seven passengers), medium
(12 to 13 passengers) and large helicopters (18 to 25
passengers), each of which serves a different transportation
need of the offshore energy industry. Small helicopters are
generally used for daytime flights on shorter routes and to
reach production facilities that cannot accommodate medium and
large helicopters. With more than 4,000 active production
facilities, many of which are unable to accommodate medium or
large helicopters, the U.S. Gulf of Mexico is a significant
market for helicopters of this type. 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.
Our
Strengths
We believe that we possess a number of strengths, including:
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We have a global footprint. We operate in 21
countries and have the largest fleet of helicopters serving the
offshore energy market in the world. We have the largest fleet
in the U.S. Gulf of Mexico and also have a strong market
position in other key markets, including the North Sea and
Nigeria. This global footprint allows us to provide our global
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. As of
June 30, 2006, the average age of the helicopters in our
consolidated fleet was approximately 16 years. The average
age of our fleet has been reduced with the addition of 21 new
aircraft in fiscal year 2006, and will be further reduced with
the expected addition of 27 new aircraft in fiscal year 2007 and
the periodic retirement of older aircraft.
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We have strong, long-term relationships with our major
customers. We have strong, long-term
relationships with our major customers, which include major,
independent, international and national energy companies. We are
the largest provider of helicopter services by revenue for the
Shell Companies and the BP Group companies. In addition, we have
entered into a global agreement with ConocoPhillips, that
provides for information sharing regarding future aircraft
requirements, coordination of our respective operations and
business volume discount arrangements. Our close relationships
with these companies have allowed us to expand our aircraft
fleet to meet customer needs and may present us with additional
opportunities where our customers operate.
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We have a history of revenue and profit
growth. We have a history of consistent revenue
growth, including 10% compounded annual growth over the past
four fiscal years, 14% in the most recent fiscal year, and 22%
in the first quarter fiscal year 2007. Our growth has translated
into increases in net income of 8% compounded annually over the
past four fiscal years. The majority of our revenue is
attributable to production activity. 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.
|
|
|
|
We have the financial flexibility to pursue
growth. Our balance-sheet debt as a percentage of
total capital was 31% at June 30, 2006, and we had
$109.6 million of cash on hand. Under syndicated secured
credit facilities entered into in August 2006 (the Credit
Facilities), we have an un-drawn $100 million
revolving credit facility and $20.9 million available under
a $25 million letter of credit facility as of the date of
this prospectus. We believe that this capital structure provides
us with the financial flexibility to pursue opportunities to
grow our business, including through the aircraft fleet
expansion program described above.
|
|
|
|
We have an experienced management team and a new
culture. 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 twelve executives who have
an average of 30 years of experience.
|
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:
|
|
|
|
|
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
high-quality service. We focus on maintaining relationships with
both our customers local and corporate management. We
believe that this focus helps us to provide our customers with
the right aircraft in the right place at the right time and to
better anticipate customer needs, which in turn allows us to
better manage our fleet. 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 customer service, safety and reliability, and not just
price.
|
|
|
|
Integrate our operations. We have recently
completed a number of changes in our business to integrate our
global organization, and we intend to continue to identify and
implement further integration opportunities. These changes are
discussed under Our Company Recent
Changes,
|
5
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|
|
|
|
and include changes in our senior management team, the
integration of our operations among previously independently
managed businesses, improvements in global asset allocation and
other changes in our corporate operations. We anticipate that
these improvements will result in revenue growth, and may also
generate cost savings.
|
|
|
|
|
|
Grow our business internationally. We plan to
grow our business in most of the markets in which we operate. We
expect this growth to be particularly strong in international
markets outside our three largest markets (U.S. Gulf of
Mexico, North Sea and Nigeria), which represented 71% of our
fiscal 2006 revenues. Although we have a footprint in most major
oil and gas producing regions of the world, we have the
opportunity to expand and deepen our presence in many of these
markets, for example the Middle East and Southeast Asia. We
anticipate this growth to 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. 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.
|
Risk
Factors
You should carefully consider the matters described under
Risk Factors. These risks could materially and
adversely impact our business, financial condition, operating
results and cash flow, which could cause the trading price of
our mandatory convertible preferred stock or common stock to
decline and could result in a partial or total loss of your
investment.
In 2005, we reviewed certain of our prior business practices as
a result of issues that arose in a number of our international
operations. As a result of the findings of this review, our
previously issued quarter ended December 31, 2004 and prior
financial statements were restated. We informed the United
States Securities and Exchange Commission (SEC) of
the review, and they have initiated a formal investigation. We
have responded to the SECs requests for documents and
intend to continue to do so. We have received a document
subpoena from the Antitrust Division of the U.S. Department of
Justice (the DOJ) that relates to a grand jury
investigation of potential antitrust violations among providers
of helicopter transportation services in the U.S. Gulf of
Mexico. We believe we have submitted to the DOJ substantially
all documents responsive to the subpoena. We cannot predict the
ultimate outcome of the investigations, nor can we predict
whether other applicable U.S. and foreign governmental
authorities will initiate separate investigations. For
additional discussion, see Risk Factors Risks
Relating to Our Internal Review, Governmental Investigations and
Internal Control included elsewhere in this prospectus.
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.
6
The
Offering
Unless otherwise indicated, all information in this
prospectus assumes no exercise of the underwriters option
to purchase up to 600,000 additional shares of mandatory
convertible preferred stock.
|
|
|
Issuer |
|
Bristow Group Inc. |
|
Securities Offered |
|
4,000,000 shares of % mandatory convertible
preferred stock, which we refer to in this prospectus as the
mandatory convertible preferred stock.
4,600,000 shares if the underwriters exercise their option
to purchase additional shares in full. |
|
Initial Offering Price |
|
$ for each share of mandatory
convertible preferred stock. |
|
Option to Purchase Additional Shares of Mandatory Convertible
Preferred Stock |
|
To the extent the underwriters sell more than
4,000,000 shares of our mandatory convertible preferred
stock, the underwriters have the option to purchase up to
600,000 additional shares of our mandatory convertible
preferred stock from us at the initial offering price, less
underwriting discounts and commissions, within 30 days from
the date of this prospectus. |
|
Dividends |
|
$ for each share of our mandatory
convertible preferred stock per year. Dividends will accrue and
cumulate from the date of issuance, and to the extent that we
are legally permitted to pay dividends and our board of
directors, or an authorized committee of our board of directors,
declares a dividend payable, we will pay dividends in cash on
each dividend payment date. The dividend payable on the first
dividend payment date is $ per
share and on each subsequent dividend payment date will be
$ per share. See Description
of Mandatory Convertible Preferred Stock
Dividends. |
|
Dividend Payment Dates |
|
, , and of
each year (or the following business day if the 15th is not
a business day) prior to the mandatory conversion date (as
defined below), and on the mandatory conversion date, commencing
on ,
2006. |
|
Redemption |
|
Our mandatory convertible preferred stock is not redeemable. |
|
Mandatory Conversion Date |
|
,
2009. |
|
Mandatory Conversion |
|
On the mandatory conversion date, each share of our mandatory
convertible preferred stock will automatically convert into
shares of our common stock, based on the conversion rate as
described below. |
|
|
|
Holders of our 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 on our mandatory convertible preferred stock as
of the mandatory conversion date), whether or not declared
(other than previously declared dividends on our mandatory
convertible preferred stock payable to holders of record as of a
prior date), to the extent we are legally permitted to pay such
dividends at such time. |
7
|
|
|
Conversion Rate |
|
The conversion rate for each share of our mandatory convertible
preferred stock will be not more
than shares of common stock
and not less than shares of
common stock, depending on the applicable market value of our
common stock, as described below. |
|
|
|
The applicable 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.
It will be calculated as described under Description of
Mandatory Convertible Preferred Stock Mandatory
Conversion. |
|
|
|
The conversion rate is subject to certain adjustments, as
described under Description of Mandatory Convertible
Preferred Stock Anti-dilution Adjustments. |
|
|
|
The following table illustrates the conversion rate per share of
our mandatory convertible preferred stock subject to certain
anti-dilution adjustments described under Description of
Mandatory Convertible Preferred Stock Anti-dilution
Adjustments. |
|
|
|
|
|
|
|
|
|
Applicable Market Value on Conversion Date
|
|
Conversion Rate
|
|
|
|
|
less than or equal to
$
|
|
|
|
|
|
|
between
$ and
$
|
|
|
to
|
|
|
|
equal to or greater than
$
|
|
|
|
|
|
|
|
Optional Conversion |
|
At any time prior
to ,
2009, you may elect to convert each of your shares of our
mandatory convertible preferred stock at the minimum conversion
rate of shares of common
stock for each share of mandatory convertible preferred stock.
This conversion rate is subject to certain adjustments as
described under Description of Mandatory Convertible
Preferred Stock Anti-dilution Adjustments. |
|
Provisional Conversion at Our Option |
|
If, at any time prior
to ,
2009, the closing price per share of common stock exceeds
$ (150% of the threshold
appreciation price of $ ), subject
to anti-dilution adjustments, for at least 20 trading days
within a period of 30 consecutive trading days, we may elect to
cause the conversion of all, but not less than all, of our
mandatory convertible preferred stock then outstanding at the
minimum conversion rate
of shares of common stock for
each share of mandatory convertible preferred stock, subject to
certain adjustments as described under Description of
Mandatory Convertible Preferred Stock Anti-dilution
Adjustments, and only if, in addition to issuing you such
shares of common stock, at the time of such conversion we are
then legally permitted to and do pay you (i) the present
value of all the remaining future dividend payments through and
including ,
2009, on our mandatory convertible preferred stock, computed
using a discount rate equal to the treasury yield, plus
(ii) an amount equal to any accrued, cumulated and unpaid
dividend payments on our mandatory convertible preferred stock,
whether or not declared (other than previously declared
dividends on our mandatory convertible preferred stock payable
to holders of record as of a prior date). See Description
of Mandatory |
8
|
|
|
|
|
Convertible Preferred Stock Provisional Conversion
at Our Option. |
|
Conversion upon Cash Acquisition; Cash Acquisition Make-Whole
Amount |
|
If we are the subject of specified cash acquisitions on or prior
to ,
2009, under certain circumstances we will (i) permit
conversion of our mandatory convertible preferred stock during
the period beginning on the date that is 15 days prior to
the applicable effective date of the anticipated cash
acquisition and ending on the date that is 15 days after
the actual effective date at a specified conversion rate
determined by reference to the price per share of our common
stock paid in such cash acquisition and (ii) pay converting
holders an amount equal to the sum of any cumulated and unpaid
dividends on shares of our mandatory convertible preferred stock
that are converted plus the present value of all remaining
dividend payments on such shares through and
including ,
2009, as described under Description of Mandatory
Convertible Preferred Stock Conversion Upon
Cash Acquisition; Cash Acquisition Dividend Make-Whole
Amount. The applicable conversion rate will be determined
based on the date such transaction becomes effective and the
price paid per share of our common stock in such transaction.
However, if such transaction constitutes a public acquirer
change of control, in lieu of providing for conversion and
paying the dividend amount, we may elect to adjust our
conversion obligation such that upon conversion of the mandatory
convertible preferred stock, we will deliver acquirer common
stock as described under Description of Mandatory
Convertible Preferred Stock Conversion Upon Cash
Acquisition; Cash Acquisition Dividend Make-Whole
Amount Public Acquirer Change of Control. |
|
Anti-dilution Adjustments |
|
The formula for determining the conversion rate and the number
of shares of common stock to be delivered upon conversion may be
adjusted in the event of, among other things, stock dividends or
distributions in shares of common stock or subdivisions, splits
and combinations of our shares of common stock. See
Description of Mandatory Convertible Preferred
Stock Anti-dilution Adjustments. |
|
Liquidation Preference |
|
$50 per share of mandatory convertible preferred stock,
plus an amount equal to the sum of all accrued, cumulated and
unpaid dividends. |
|
Voting Rights |
|
Except as required by Delaware law and our certificate of
incorporation, which will include the certificate of designation
for the mandatory convertible preferred stock, the holders of
mandatory convertible preferred stock will have no voting rights
unless dividends payable on the mandatory convertible preferred
stock or other preferred stock or preference securities having
similar rights as the mandatory convertible preferred stock are
in arrears for six or more quarterly periods. In that event, the
holders of the mandatory convertible preferred stock, voting as
a single class with the shares of any other preferred stock or
preference securities having similar voting rights (including
our existing preferred |
9
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|
|
stock), will be entitled at the next regular or special meeting
of our shareholders to elect two directors and the number of
directors that comprise our board will be increased by the
number of directors so elected. These voting rights and the
terms of the directors so elected will continue until such time
as the dividend arrearage on the mandatory convertible preferred
stock has been paid in full. The affirmative consent of holders
of at least
66 2/3%
of the outstanding mandatory convertible preferred stock and any
class or series of parity stock, voting as a single class, will
be required for the issuance of any class or series of stock (or
security convertible into stock) ranking senior to the mandatory
convertible preferred stock as to dividend rights or rights upon
our liquidation,
winding-up
or dissolution. The affirmative consent of holders of at least
66 2/3%
of the outstanding mandatory convertible preferred stock will be
required for amendments to our certificate of incorporation that
would adversely affect the rights of holders of the mandatory
convertible preferred stock. |
|
Ranking |
|
The mandatory convertible preferred stock will rank with respect
to dividend rights and rights upon our liquidation,
winding-up
or dissolution: |
|
|
|
senior to all of our common stock and to all of our
other capital stock issued in the future unless the terms of
that stock expressly provide that it ranks senior to, or on a
parity with, the mandatory convertible preferred stock;
|
|
|
|
on a parity with any of our capital stock issued in
the future, the terms of which expressly provide that it will
rank on a parity with the mandatory convertible preferred
stock; and |
|
|
|
junior to all of our capital stock issued in the
future, the terms of which expressly provide that such stock
will rank senior to the mandatory convertible preferred stock. |
|
Use of proceeds |
|
We estimate that the net proceeds to us from this offering,
after deducting underwriter discounts and commissions and our
estimated offering expenses, will be approximately
$190.4 million. We intend to use the net proceeds from this
offering for the following purposes: |
|
|
|
to fund the acquisition of aircraft on order and to
repay borrowings, if any, used to fund recent aircraft
acquisitions; and |
|
|
|
to fund future aircraft acquisitions, including
acquisition of the aircraft under option. |
|
|
|
Upon completion of this offering, we plan to exercise options to
acquire additional large aircraft, including the options for
five large aircraft that expire on September 30, 2006. |
|
|
|
Any remaining net proceeds will be used for working capital and
other general corporate purposes. Please read Use of
Proceeds. |
|
Tax Consequences |
|
The U.S. federal income tax consequences of purchasing, owning
and disposing of the mandatory convertible preferred stock and
any common stock received upon its conversion are described in
U.S. Federal Income Tax Considerations. As described
more |
10
|
|
|
|
|
fully therein, and in all cases subject to certain exceptions as
described therein, (i) dividends with respect to our
mandatory convertible preferred stock and our common stock will
generally be taxable to a U.S. holder when paid to the extent of
our current and accumulated earnings and profits as determined
for U.S. federal income tax purposes (and dividends paid to a
non-U.S. holder will generally be subject to a 30% U.S.
withholding tax), (ii) a U.S. holder will generally
recognize capital gain or loss on a sale or exchange of our
mandatory convertible preferred stock or our common stock equal
to the difference between the amount realized upon the sale or
exchange and the holders adjusted tax basis in the shares
sold or exchanged (and a non-U.S. holder generally will not be
subject to U.S. federal income or withholding tax on income or
gain realized on such a sale or exchange), (iii) U.S.
holders and non-U.S. holders will not generally recognize any
gain or loss upon the conversion of our mandatory convertible
preferred stock, and (iv) adjustments to the conversion
rate of the mandatory convertible preferred stock could result
in a constructive dividend taxed to the holder in the same
manner as an actual dividend paid with respect to such stock. |
|
Listing |
|
We intend to apply to list the mandatory convertible preferred
stock on the New York Stock Exchange, or NYSE. |
|
Book-Entry, Delivery and Form |
|
Initially, the mandatory convertible preferred stock will be
represented by one or more permanent global certificates in
definitive, fully registered form deposited with a custodian
for, and registered in the name of, a nominee of DTC. |
|
Common Stock |
|
Our common stock is listed for trading on the NYSE under the
symbol BRS. |
11
Summary
Historical Financial Data
You should read the data set forth below in conjunction with our
consolidated financial statements and related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations and other financial
information included elsewhere in this prospectus. We derived
the summary financial data as of March 31, 2006 and 2005
and for each of the fiscal years ended March 31, 2006, 2005
and 2004 from our audited consolidated financial statements and
the related notes included in this prospectus. We derived the
summary financial data as of March 31, 2004, 2003 and 2002
and for the fiscal years ended March 31, 2003 and 2002 from
our audited consolidated financial statements and the related
notes not included in this prospectus. We derived the summary
financial data as of June 30, 2006 and for each of the
three-month periods ended June 30, 2006 and 2005 from our
interim consolidated financial statements (unaudited) and the
related notes included in this prospectus. The summary financial
data for the three-month period ended June 30, 2006 are not
necessarily indicative of our results for the year ending
March 31, 2007, and our historical results are not
necessarily indicative of our results for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006(1)(2)
|
|
|
2005(1)(2)
|
|
|
2006(1)(2)
|
|
|
2005(1)(2)
|
|
|
2004(2)(3)(4)
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands, except per share and other data)
|
|
|
Statement of Income
Data(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
221,062
|
|
|
$
|
180,937
|
|
|
$
|
768,940
|
|
|
$
|
673,646
|
|
|
$
|
617,001
|
|
|
$
|
601,550
|
|
|
$
|
552,913
|
|
Operating expense
|
|
|
190,002
|
|
|
|
165,892
|
|
|
|
695,145
|
|
|
|
596,038
|
|
|
|
528,276
|
|
|
|
536,184
|
|
|
|
483,152
|
|
Operating income
|
|
|
31,060
|
|
|
|
15,045
|
|
|
|
73,795
|
|
|
|
77,608
|
|
|
|
88,725
|
|
|
|
65,366
|
|
|
|
69,761
|
|
Earnings from unconsolidated
affiliates, net of losses
|
|
|
1,559
|
|
|
|
46
|
|
|
|
6,758
|
|
|
|
9,600
|
|
|
|
11,039
|
|
|
|
12,054
|
|
|
|
6,604
|
|
Net income
|
|
|
17,229
|
|
|
|
11,972
|
|
|
|
57,809
|
|
|
|
51,560
|
|
|
|
49,825
|
|
|
|
40,404
|
|
|
|
42,039
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.74
|
|
|
|
0.51
|
|
|
|
2.48
|
|
|
|
2.24
|
|
|
|
2.21
|
|
|
|
1.80
|
|
|
|
1.91
|
|
Diluted
|
|
|
0.73
|
|
|
|
0.51
|
|
|
|
2.45
|
|
|
|
2.21
|
|
|
|
2.15
|
|
|
|
1.67
|
|
|
|
1.75
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
and preferred dividends(6)
|
|
|
5.49
|
x
|
|
|
3.88
|
x
|
|
|
4.41
|
x
|
|
|
5.07
|
x
|
|
|
4.14
|
x
|
|
|
4.39
|
x
|
|
|
4.56
|
x
|
Flight hours
|
|
|
74,191
|
|
|
|
67,694
|
|
|
|
272,541
|
|
|
|
243,118
|
|
|
|
249,335
|
|
|
|
251,131
|
|
|
|
257,094
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30,
|
|
|
At March 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands, except other data)
|
|
|
Balance Sheet Data(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
457,486
|
|
|
$
|
447,266
|
|
|
$
|
432,444
|
|
|
$
|
352,047
|
|
|
$
|
303,101
|
|
|
$
|
273,202
|
|
Investment in unconsolidated
affiliates
|
|
|
40,668
|
|
|
|
39,912
|
|
|
|
37,176
|
|
|
|
38,929
|
|
|
|
27,928
|
|
|
|
21,103
|
|
Property and equipment
at cost
|
|
|
943,982
|
|
|
|
878,986
|
|
|
|
859,574
|
|
|
|
824,377
|
|
|
|
719,782
|
|
|
|
666,911
|
|
Total assets
|
|
|
1,239,794
|
|
|
|
1,176,413
|
|
|
|
1,149,576
|
|
|
|
1,046,828
|
|
|
|
906,031
|
|
|
|
807,301
|
|
Long-term debt, including current
maturities
|
|
|
261,518
|
|
|
|
265,296
|
|
|
|
262,080
|
|
|
|
255,534
|
|
|
|
232,818
|
|
|
|
208,014
|
|
Stockholders investment
|
|
|
575,722
|
|
|
|
537,697
|
|
|
|
492,993
|
|
|
|
429,952
|
|
|
|
350,206
|
|
|
|
331,940
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft in fleet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operated by consolidated affiliates
|
|
|
333
|
|
|
|
331
|
|
|
|
320
|
|
|
|
332
|
|
|
|
335
|
|
|
|
345
|
|
Operated by unconsolidated
affiliates
|
|
|
147
|
|
|
|
146
|
|
|
|
110
|
|
|
|
96
|
|
|
|
91
|
|
|
|
83
|
|
|
|
|
(1) |
|
During the first quarter fiscal year 2007, the first quarter
fiscal year 2006 and fiscal years 2006 and 2005, we incurred
approximately $0.7 million, $3.2 million,
$13.1 million and $2.6 million, respectively, in legal
and other professional costs in connection with the Internal
Review and DOJ investigation (each defined below). |
|
(2) |
|
Effective July 1, 2003, we changed the useful lives of
certain of our aircraft to 15 years from a range of seven
to ten years. The effect of this change for the first quarter
fiscal year 2007, the first quarter fiscal year 2006 and fiscal
years 2006, 2005 and 2004 was a reduction in depreciation
expense (after tax) of $0.6 million, $0.7 million,
$2.9 million, $2.9 million and $2.3 million,
respectively. |
|
(3) |
|
Results for fiscal year 2004 include $21.7 million
($15.7 million, net of tax) of curtailment gain relating to
the pension plan discussed in Note 9 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus. |
|
(4) |
|
Results for fiscal year 2004 include $6.2 million in loss
on extinguishment of debt related to notes redeemed in that
fiscal year. See discussion in Note 5 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus. |
|
(5) |
|
Results of operations and financial position of companies that
we have acquired have been included beginning on the respective
dates of acquisition and include Aviashelf (July 2004), Pan
African Airlines (Nigeria) Ltd. (July 2002) and Turbo
Engines Inc. (formerly Pueblo Automotive) (December 2001). |
|
(6) |
|
For purposes of determining the ratios of earnings to fixed
charges and preferred dividends, earnings are defined as net
income 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. |
13
RISK
FACTORS
You should carefully consider each of the following risks and
all of the information set forth in this prospectus and in the
documents we incorporate by reference before deciding to invest
in our mandatory convertible preferred stock. If any of the
following risks and uncertainties develop into actual events,
our business, financial condition, results of operations or cash
flows could be materially adversely affected. In that case, the
trading price of our mandatory convertible preferred stock or
common stock could decline and you may lose all or part of your
investment.
This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of the risks faced by us described below.
See Forward-Looking Statements.
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:
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the supply of and demand for oil and gas and market expectations
for such supply and demand;
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actions of the Organization of Petroleum Exporting Countries
(OPEC) and other oil producing countries to control
prices or change production levels;
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general economic conditions, both worldwide and in particular
regions;
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governmental regulation;
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the price and availability of alternative fuels;
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weather conditions, including the impact of hurricanes and other
weather-related phenomena;
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advances in exploration, development and production technology;
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the policies of various governments regarding exploration and
development of their oil and gas reserves; and
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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 United States or elsewhere.
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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.
14
We are
highly dependent upon the level of activity in North America and
the North Sea.
In fiscal year 2006 and first quarter fiscal year 2007,
approximately 57% and 58%, respectively, of our gross revenue
was derived from helicopter services provided to customers
operating in North America 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. Hurricanes
Katrina and Rita have resulted in, or may result in, the
plugging and abandonment of many wells in the U.S. Gulf of
Mexico. 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 North
America 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
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. 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
revenues.
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 Helicopter
Services Customers and Contracts included
elsewhere in this prospectus. The results of the Internal Review
may impact our ability to retain some or all of the business we
have with certain of these customers. See The
disclosure and remediation of activities identified in the
Internal Review could result in the loss of business
relationships and adversely affect our business.
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 are substantially expanding our fleet of 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
15
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, Governmental Investigations and
Internal Control
The
SEC investigation, any related 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
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 such special outside counsel to cover operations in
other countries and other issues (the Internal
Review). In connection with this review, special outside
counsel to the Audit Committee retained forensic accountants. As
a result of the findings of the Internal Review, our quarter
ended December 31, 2004 and prior financial statements were
restated. For further information on the restatements, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Internal Review,
Restatement, Governmental Investigations and Internal
Control Restatement of Previously Reported
Amounts.
The SEC then notified us that it had initiated an informal
inquiry and requested that we provide certain documents on a
voluntary basis. The SEC thereafter advised us that the inquiry
has become a formal investigation. We have responded to the
SECs requests for documents and intend to continue to do
so.
The Internal Review is complete. All known required restatements
were reflected in the financial statements included in our
Annual Report on
Form 10-K
for fiscal year 2005, and no further restatements were required
in our Annual Report on
Form 10-K
for fiscal year 2006 or our financial statements for the first
quarter fiscal year 2007 presented in our
Form 10-Q
for the first quarter fiscal year 2007. As a
follow-up to
matters identified during the course of the Internal Review,
special counsel to the Audit Committee may be called upon to
undertake additional work in the future to assist in responding
to inquiries from the SEC, from other governmental authorities
or customers, or as
follow-up to
the previous work performed by such special counsel.
In October 2005, the Audit Committee reached certain
conclusions with respect to findings to date from the Internal
Review. The Audit Committee concluded that, over a considerable
period of time, (1) improper payments were made by, and on
behalf of, certain foreign affiliated entities directly or
indirectly to employees of the Nigerian government,
(2) improper payments were made by certain foreign
affiliated entities to Nigerian employees of certain customers
with whom we have contracts, (3) inadequate employee
payroll declarations and, in certain instances, tax payments
were made by us or our affiliated entities in certain
jurisdictions, (4) inadequate valuations for customs
purposes may have been declared in certain jurisdictions
resulting in the underpayment of import duties and (5) an
affiliated entity in a South American country, with the
assistance of our personnel and two of our other affiliated
entities, engaged in transactions which appear to have assisted
the South American entity in the circumvention of currency
transfer restrictions and other regulations. In addition, as a
result of the Internal Review, the Audit Committee and
management determined that there were deficiencies in our books
and records and internal controls with respect to the foregoing
and certain other activities.
Based on the Audit Committees findings and
recommendations, the board of directors has taken disciplinary
action with respect to our personnel who it determined bore
responsibility for these matters. The disciplinary actions
included termination or resignation of employment (including
certain members of senior management), changes of job
responsibility, reductions in incentive compensation payments
and reprimands. One of our affiliates has also obtained the
resignation of certain of its personnel.
We have initiated remedial action, including initiating action
to correct underreporting of payroll tax, disclosing to certain
customers inappropriate payments made to customer personnel and
terminating certain
16
agency, business and joint venture relationships. We also have
taken steps to reinforce our commitment to conduct our business
with integrity by creating an internal corporate compliance
function, instituting a new code of business conduct, and
developing and implementing a training program for all
employees. In addition to the disciplinary actions referred to
above, we have also taken steps to strengthen our control
environment by hiring new key members of senior and financial
management, including persons with appropriate technical
accounting expertise, expanding our corporate finance group and
internal audit staff, realigning reporting lines within the
accounting function so that field accounting reports directly to
the corporate accounting function instead of operations
management, and improving the management of our tax structure to
comply with its intended design. Our compliance program has also
begun full operation, and clear corporate policies have been
established and communicated to our relevant personnel related
to employee expenses, delegation of authority, revenue
recognition and customer billings.
We have communicated the Audit Committees conclusions with
respect to the findings of the Internal Review to regulatory
authorities in some, but not all, of the jurisdictions in which
the relevant activities took place. We are in the process of
gathering and analyzing additional information related to these
matters, and expect to disclose the Audit Committees
conclusions to regulatory authorities in other jurisdictions
once this process has been completed. Such disclosure may result
in 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. To the extent that
violations of the law may have occurred in several countries in
which we operate, we do not yet know whether such violations can
be cured merely by the payment of fines or whether other actions
may be taken against us, including requiring us to curtail our
business operations in one or more such countries for a period
of time. In the event that we curtail our business operations in
any such country, we then may face difficulties exporting our
aircraft from such country. As of June 30, 2006, the book
values of our aircraft in Nigeria and the South American country
where certain improper activities took place were approximately
$118.3 million and $8.1 million, respectively.
We cannot predict the ultimate outcome of the SEC investigation,
nor can we predict whether other applicable U.S. and foreign
governmental authorities will initiate separate investigations.
The outcome of the SEC investigation and any related legal and
administrative proceedings could include the institution of
administrative, civil injunctive or criminal proceedings
involving us
and/or
current or former employees, officers
and/or
directors, the imposition of fines and other penalties, remedies
and/or
sanctions, modifications to business practices and compliance
programs
and/or
referral to other governmental agencies for other appropriate
actions. It is not possible to accurately predict at this time
when matters relating to the SEC investigation will be
completed, the final outcome of the SEC investigation, what if
any actions may be taken by the SEC or by other governmental
agencies in the U.S. or in foreign jurisdictions, or the
effect that such actions may have on our consolidated financial
statements.
In addition, in view of the findings of the Internal Review, we
may encounter difficulties in the future conducting business in
Nigeria and a South American country, and with certain
customers. It is also possible that certain of our existing
contracts may be cancelled (although none have been cancelled as
of the date of this prospectus) and 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 connection with its conclusions regarding payroll
declarations and tax payments, the Audit Committee determined on
November 23, 2005, following the recommendation of our
senior management, that there was a need to restate our quarter
ended December 31, 2004 and prior financial statements.
Such restatement was reflected in our Annual Report on
Form 10-K
for fiscal year 2005. As of June 30, 2006, we have accrued
an aggregate of $21.6 million for the taxes, penalties and
interest attributable to underreported employee payroll.
Operating income for fiscal years 2006, 2005 and 2004 included
$4.3 million, $3.8 million and $4.2 million,
respectively, attributable to this accrual. Operating income for
first quarter fiscal year 2006 included $0.9 million
attributable to this accrual. No additional amounts were
incurred during the first
17
quarter fiscal year 2007. At this time, we cannot estimate what
additional payments, fines, penalties and/or litigation and
related expenses may be required in connection with the matters
identified as a result of the Internal Review, the SEC
investigation, and/or any other related regulatory investigation
that may be instituted or third-party litigation; however, such
payments, fines, penalties and/or expenses could have a material
adverse effect on our business, financial condition and results
of operations.
As we continue to respond to the SEC investigation and other
governmental authorities and take other actions relating to
improper activities that have been identified in connection with
the Internal Review, there can be no assurance that
restatements, in addition to those reflected in our Annual
Report on
Form 10-K
for fiscal year 2005, will not be required or that our
historical financial statements included in this prospectus will
not change or require further amendment. In addition, new issues
may be identified that may impact our financial statements and
the scope of the restatements described in this prospectus and
lead us to take other remedial actions or otherwise adversely
impact us.
For additional discussion of the SEC investigation, the Internal
Review, and related proceedings, see Business
Legal Proceedings included elsewhere in this prospectus.
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.
We have disclosed the activities in Nigeria identified in the
Internal Review to affected customers, and one or more of these
customers may seek to cancel their contracts with us. One such
customer has conducted its own investigation and contract audit.
We have agreed with that customer on certain actions we will
take to address the findings of their audit, which in large part
are steps we have taken or had already planned to take. Since
our customers in Nigeria are affiliates of major international
petroleum companies with whom we do business throughout the
world, any actions which are taken by certain customers could
have a material adverse effect on our business, financial
position and results of operations, and these customers may
preclude us from bidding on future business with them either
locally or on a worldwide basis. In addition, applicable
governmental authorities may preclude us from bidding on
contracts to provide services in the countries where improper
activities took place.
In connection with the Internal Review, we also have terminated
our business relationship with certain agents and have taken
actions to terminate business relationships with other agents.
In November 2005, one of the terminated agents and his
affiliated entity have commenced litigation against two of our
foreign affiliated entities claiming damages of
$16.3 million for breach of contract.
We may be required to indemnify certain of our agents to the
extent that regulatory authorities seek to hold them responsible
in connection with activities identified in the Internal Review.
In a South American country where certain improper activities
took place, we are negotiating to terminate our ownership
interest in the joint venture that provides us with the local
ownership content necessary to meet local regulatory
requirements for operating in that country. We may not be
successful in our negotiations to terminate our ownership
interest in the joint venture, and the outcome of such
negotiations may negatively affect our ability to continue
leasing our aircraft to the joint venture or other unrelated
operating companies, to conduct other business in that country,
or to export our aircraft and inventory from that country. We
recorded an impairment charge of $1.0 million during fiscal
year 2006 to reduce the recorded value of our investment in the
joint venture. During fiscal years 2006 and 2005, the first
quarter fiscal year 2007 and the first quarter fiscal year 2006,
we derived approximately $8.0 million, $10.2 million,
$2.0 million and $2.0 million, respectively, of
leasing and other revenues from this joint venture, of which
$4.0 million, $3.2 million, $0.9 million and
$1.3 million, respectively, was paid by us to a
18
third party for the use of the aircraft. In addition, during
fiscal year 2005, approximately $0.3 million of dividend
income was derived from this joint venture. No dividend income
was derived from this joint venture during the first quarter
fiscal year 2007.
Without a joint venture partner, we will be unable to maintain
an operating license and our future activities in that country
may be limited to leasing our aircraft to unrelated operating
companies. Our joint venture partners and agents are typically
influential members of the local business community and
instrumental in aiding us in obtaining contracts and managing
our affairs in the local country. As a result of terminating
these relationships, our ability to continue conducting business
in these countries where the improper activities took place may
be negatively affected.
We
expect to incur higher costs and lower profit margins as a
result of the remediation of activities identified in the
Internal Review.
Many of the improper actions identified in the Internal Review
resulted in decreasing the costs incurred by us in performing
our services. The remedial actions we are taking have resulted
in an increase in these costs and, if we cannot raise our prices
simultaneously and to the same extent as our increased costs,
our operating income will decrease.
The
DOJ 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 civil litigation,
the incurrence of expenses, the loss of business and other
adverse effects on our company.
On June 15, 2005, we issued a press release disclosing that
one of our subsidiaries had received a document subpoena from
the DOJ. The subpoena relates 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;
however, our ability to review this matter internally has been
somewhat impacted by the fact that certain of our former
officers covered by the DOJ investigation are no longer with our
company. We have had discussions with the DOJ and provided
documents related to our operations in the United States 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
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 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 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
and $0.6 million in legal and other professional fees in
fiscal year 2006 and the first quarter fiscal year 2007,
respectively, and significant expenditures may continue to be
incurred in the future. For additional information, see
Business Legal Proceedings
Document Subpoena from U.S. Department of Justice
included elsewhere in this prospectus.
19
We
have identified certain material weaknesses related to our
disclosure controls and procedures and internal control over
financial reporting. As a result of these material weaknesses,
we have concluded that as of March 31, 2006, we did not
maintain effective internal control over financial reporting.
These material weaknesses remain unremediated, which could
affect our ability to report accurately and in a timely manner
our results of operations and financial condition and could
lessen investor confidence in our financial
reports.
Our management assessed the effectiveness of our disclosure
controls and procedures and internal control over financial
reporting as of March 31, 2006 and concluded that these
controls and procedures were not effective as of this date.
Management reached this conclusion because it found that certain
material weaknesses related to these controls and procedures
existed as of this date. Although we have taken steps to address
them, these material weaknesses remain unremediated as of the
date of this prospectus. As long as these material weaknesses
continue to exist, they could result in accounting errors such
as those which led to the restatement of our quarter ended
December 31, 2004 and prior financial statements. For
further information on this restatement, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Internal Review,
Restatement, Governmental Investigations and Internal
Control Restatement of Previously Reported
Amounts. We may in the future identify similar errors in
prior period financial information, requiring further
restatement of our financial statements. These material
weaknesses may likewise negatively impact our ability to report
accurately and in a timely manner our financial condition and
results of operations for future periods, which could cause us
to fail to comply with reporting obligations contained in the
rules of the SEC and the NYSE and our debt agreements. In
addition, these material weaknesses could cause investors to
lose confidence in the reliability of our financial statements,
which could negatively impact market prices for our securities.
Any of these results could have a material adverse effect on our
business, financial condition and results of operations.
For additional discussion of these material weaknesses and the
steps we have taken to remedy them, see Managements
Discussion and Analysis of Financial Condition and Results of
Operations Material Weaknesses Reported for Fiscal
Years 2006 and 2005 included elsewhere in this prospectus.
Risks
Relating to Our Business
Our
future growth depends on our ability to operate outside of North
America and the North Sea.
Our future growth will depend significantly on our ability to
expand into international markets outside of North America and
the North Sea. Expansion of our business depends on our ability
to operate in these regions.
Expansion of our business outside of North America 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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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 operations outside
of North America and the North Sea, our future business,
financial condition and results of operations may be adversely
affected, and our operations outside of North America and the
North Sea may not grow. Our operations in Nigeria and South
America are likely to be negatively affected by actions that we
are taking as a result of the activities identified in the
Internal Review, as discussed above under The
disclosure and remediation of activities identified in the
Internal Review could result in the loss of business
relationships and adversely affect our business.
20
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. In addition, the SEC
investigation, any related proceedings in other countries and
the consequences of the activities identified in the Internal
Review could adversely affect our ability to raise additional
funds. If we raise additional funds by issuing equity
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
Capital Commitments elsewhere in this prospectus.
Our
operations outside of North America and the North Sea are
subject to additional risks.
During fiscal year 2006 and first quarter fiscal year 2007,
approximately 34% of our gross revenue was attributable to
helicopter services provided to oil and gas customers operating
outside of North America 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 14% of our gross revenue in fiscal year 2006 and
first quarter fiscal year 2007. While this unrest has not
adversely affected our results of operations, any future unrest
in Nigeria or our other operating regions could adversely affect
our business, financial condition and results of operations. We
cannot predict whether any of these events will occur in the
future in Nigeria or 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 pounds 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 pounds 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.
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
21
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
$14.8 million and increased by as much as
$27.6 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
$7.9 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 and Russia. 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 Managements Discussion and Analysis of
Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
included elsewhere in this prospectus.
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, and the U.K. Additionally, as indicated above,
we have an interest in a joint venture in a South American
country that we are currently in the process of terminating. We
provide engineering and administrative support to these
entities. We derive significant amounts of lease revenue,
service revenue and dividend income from these entities. In
fiscal year 2006 and first quarter fiscal year 2007, we derived
approximately $2.7 million and $0, respectively, of
dividend income from our unconsolidated affiliates, none of
which was derived from the joint venture in such South American
country. More significantly, in fiscal year 2006 and first
quarter fiscal year 2007, we received approximately
$56.2 million and $13.2 million, respectively, of
revenues from the provision of aircraft and other services to
unconsolidated affiliates, of which approximately
$8.0 million and $2.0 million, respectively, was
derived from the joint venture in such South American country.
Because we do not own a majority or maintain voting control of
these entities, 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 and results of operations.
Labor
problems could adversely affect us.
Approximately 300 pilots in our North America business unit and
substantially all of our employees in the United Kingdom,
Nigeria and Australia 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. We are
currently involved in negotiations with the unions in Nigeria
and anticipate that we will increase certain benefits for union
personnel as a result of these negotiations. If our unionized
workers engage in a strike, work stoppage or other slowdown, or
other employees elect to become unionized or existing labor
agreements are renegotiated on, 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.
22
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. In
addition, our Production Management Services are subject to the
normal risks associated with working on offshore oil and gas
production facilities. These risks include injury to or death of
personnel and damage to or loss of property.
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,
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. In the United States, our
aircraft may be subject to deregistration under the Federal
Aviation Act of 1958, as amended from time to time (the
Federal Aviation Act), 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, if the president of our company
is not a U.S. citizen, if two-thirds or more of our
directors are not U.S. citizens or if our company is not
under the actual control of U.S. citizens. 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. In the United Kingdom, we are subject to
regulation under English and European statutes and regulations
and are required to hold an operating license issued by the
Civil Aviation Authority (the CAA) in order to
operate in the United Kingdom. To operate under this license,
the company through which we conduct operations in the United
Kingdom, 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% of, and hold certain put/call rights over
additional, shares of common stock of Bristow Aviation. Please
read Certain Relationships and Related-Party
Transactions. If we were considered to have majority
ownership of or control over Bristow Helicopters Ltd., either
presently or in the future (including following the exercise of
the put/call option), Bristow Helicopters Ltd. could lose its
operating license, which would have a material adverse effect on
our ability to operate in the United Kingdom.
Changes in these 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. Additionally, changes in
local laws, regulations or administrative requirements or their
interpretation in other international locations where we operate
may have a material adverse effect on our business or financial
condition or on our ability to continue operations in these
areas.
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 under the heading
Business Government Regulation included
elsewhere in this prospectus.
23
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 regulations in these jurisdictions regulate
the offshore operations of our customers. The agencies empowered
to enforce these statutes and regulations may suspend, curtail
or 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 under
Business Government Regulation included
elsewhere in this prospectus.
Our
failure to attract and retain qualified personnel could have an
adverse affect 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 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.
We
face substantial competition in both of our business
segments.
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 addition, certain of our customers have the
capability to perform their own helicopter operations should
they elect to do so, which may limit our ability to increase
charter rates under certain circumstances.
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. In
our other international operations, we also face significant
competition. In addition, foreign regulations may require the
awarding of contracts to local operators.
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 materially adversely affect our business,
financial condition and results of operations.
The production management services business is also highly
competitive. There are a number of competitors that maintain a
presence throughout the U.S. Gulf of Mexico. In addition,
there are many smaller operators that compete with us on a local
basis or for single projects or jobs. Contracts for our
Production Management Services are generally for terms of a year
or less and could be awarded to our competitors upon expiration.
Many of our customers are also able to perform their own
production management services should they choose to do so.
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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.
Our
operations are subject to weather-related and seasonal
fluctuations.
Generally, our operations can be impaired by harsh weather
conditions. Poor visibility, high wind and heavy precipitation
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. For example, during the summer
and fall of 2005, hurricanes Katrina and Rita caused substantial
damage to several of our Louisiana facilities. See
Business Helicopter Services North
America included elsewhere in this prospectus.
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. 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 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.
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. Our Production Management Services are
also affected by the environmental laws and regulations that
restrict the activities of our customers in the offshore oil and
gas production industry. 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
BusinessEnvironmental and
BusinessLegal Proceedings included elsewhere
in this prospectus.
Our
dependence on a small number of helicopter manufacturers poses a
significant risk to our business and prospects.
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 or labor strikes, we may experience a
significant delay in the delivery of previously ordered
aircraft, which would adversely affect our revenues and
profitability and could jeopardize our ability to meet the
demands of our customers. We have limited alternatives to find
alternate sources of new aircraft.
Risks
Relating to this Offering
We may
not be able to pay cash dividends on the mandatory convertible
preferred stock.
Our $230 million
61/8% Senior
Notes due 2013 (Senior Notes) and Credit Facilities
limit, and any indentures and other financing agreements that we
enter into in the future will likely limit, our ability to pay
cash dividends on our capital stock. Specifically, under our
existing Senior Notes indenture and the Credit Facilities, we
may pay cash dividends and make other distributions on or in
respect of our capital stock, including the mandatory
convertible preferred stock, only if certain covenants are met.
For example our Credit Facilities currently limit our ability to
pay cash dividends on our preferred stock to $15 million
annually. In the event that any of our indentures or other
financing agreements in the future restrict our ability to pay
cash dividends on the mandatory convertible preferred stock, we
will be unable to pay cash dividends on the mandatory
convertible preferred stock unless we can refinance amounts
outstanding under those agreements. See Description of
Mandatory Convertible Preferred Stock Method of
Payment of Dividends and Conversion Upon
Cash Acquisition; Cash Acquisition Dividend Make-Whole
Amount.
Under Delaware law, cash dividends on capital stock may only be
paid from surplus or, if there is no
surplus, from the corporations net profits for
the then current or the preceding fiscal year. Unless we
continue to operate profitably, our ability to pay cash
dividends on the mandatory convertible preferred stock would
require the availability of adequate surplus, which
is defined as the excess, if any, of our net assets (total
assets less total liabilities) over our capital. Further, even
if adequate surplus is available to pay cash dividends on the
mandatory convertible preferred stock, we may not have
sufficient cash to pay dividends on the mandatory convertible
preferred stock.
A
holder of our mandatory convertible preferred stock may realize
some or all of a decline in the market value of our shares of
our common stock.
The market value of shares of our common stock on the mandatory
conversion date may be less than the market price corresponding
to the maximum conversion rate, which we call the initial price,
in which case holders of our mandatory convertible preferred
stock will receive shares of our common stock on the mandatory
conversion date with a market value per share that is less than
the initial price. Accordingly, a holder of mandatory
convertible preferred stock assumes the entire risk that the
market value of our common stock may decline.
Our
issuance of additional series of shares of our preferred stock
could adversely affect holders of shares of our common stock
and, as a result, holders of the mandatory convertible preferred
stock.
After giving effect to this offering, our board of directors is
authorized to issue additional classes or series of shares of
our preferred stock without any action on the part of our
stockholders, subject to the limitations of the mandatory
convertible preferred stock. Our board of directors also has the
power, without stockholder approval, to set the terms of any
such classes or series of shares of our preferred stock that may
be issued, including voting rights, dividend rights, conversion
features, preferences over shares of our
26
common stock with respect to dividends or if we liquidate,
dissolve or wind up our business and other terms. If we issue
shares of our preferred stock in the future that have preference
over shares of our common stock with respect to the payment of
dividends or upon our liquidation, dissolution or winding up, or
if we issue shares of our preferred stock with voting rights
that dilute the voting power of shares of our common stock, the
rights of holders of shares of our common stock or the market
price of shares of our common stock, and as a result of our
mandatory convertible preferred stock, could be adversely
affected.
Holders
of our mandatory convertible preferred stock will have no rights
as holders of shares of our common stock until they acquire
shares of our common stock.
Until you acquire shares of our common stock upon conversion,
you will have no rights with respect to shares of our common
stock, including voting rights (except as described under
Description of Mandatory Convertible Preferred
Stock Voting Rights and as required by
applicable state law), rights to respond to tender offers and
rights to receive any dividends or other distributions on shares
of our common stock. Upon conversion, you will be entitled to
exercise the rights of a holder of shares of our common stock
only as to matters for which the record date occurs on or after
the conversion date.
The
opportunity for equity appreciation provided by an investment in
the shares of our mandatory convertible preferred stock is less
than that provided by a direct investment in shares of our
common stock.
The number of shares of our common stock that are issuable upon
mandatory conversion on the conversion date of our mandatory
convertible preferred stock will decrease if the applicable
market value increases to above $ .
Therefore, the opportunity for equity appreciation provided by
an investment in our mandatory convertible preferred stock is
less than that provided by a direct investment in shares of our
common stock. Assuming the initial price accurately reflects
fair market value, the market value of shares of our common
stock
on ,
2009 must exceed the threshold appreciation price of
$ before a holder of our mandatory
convertible preferred stock will realize any equity appreciation.
Our
mandatory convertible preferred stock will rank junior to all of
our and our subsidiaries liabilities in the event of a
bankruptcy, liquidation or winding up of our
assets.
In the event of bankruptcy, liquidation or winding up, our
assets will be available to pay obligations on our mandatory
convertible preferred stock only after all of our liabilities
have been paid. In addition, our mandatory convertible preferred
stock will effectively rank junior to all existing and future
liabilities of our subsidiaries and the capital stock of our
subsidiaries held by third parties. The rights of holders of our
mandatory convertible preferred stock to participate in the
assets of our subsidiaries upon any liquidation or
reorganization of any subsidiary will rank junior to the prior
claims of that subsidiarys creditors and equity holders.
In the event of bankruptcy, liquidation or winding up, there may
not be sufficient assets remaining, after paying our and our
subsidiaries liabilities, to pay amounts due on any or all
of our mandatory convertible preferred stock then outstanding.
You
may have to pay taxes with respect to distributions on our
common stock that you do not receive.
The number of shares of common stock that you are entitled to
receive on the mandatory conversion date, or as a result of
early conversion of the mandatory convertible preferred stock,
is subject to adjustment for certain events arising from stock
splits and combinations, stock dividends, certain cash dividends
and certain other actions by us or a third party that modify our
capital structure. See Description of Mandatory
Convertible Preferred Stock Anti-dilution
Adjustments. If the conversion rate is adjusted as a
result of a distribution that is taxable to the holders of our
common stock, you generally would be required to include an
amount in income on a current basis for U.S. federal income
tax purposes, notwithstanding the fact that you have not
actually received such distribution. The amount that you will
generally have to include in income would be the fair market
value of the additional shares of common stock to which you
would be entitled by reason of the increase in your
proportionate equity interest in us to the extent of our current
and accumulated earnings and profits. In addition,
non-U.S. holders
of the mandatory convertible preferred
27
stock may, in certain circumstances, be deemed to have received
a distribution subject to U.S. federal withholding tax
requirements.
There
is no public market for the mandatory convertible preferred
stock.
The mandatory convertible preferred stock will be a new issue of
securities for which there is currently no public market.
Although the underwriters currently intend to make a market in
the mandatory convertible preferred stock, they are not
obligated to do so, and any market-making activities may be
discontinued at any time without notice. Accordingly, there may
not be development of or liquidity in any market for the
mandatory convertible preferred stock. If a market for the
mandatory convertible preferred stock were to develop, the
mandatory convertible preferred stock could trade at prices that
may be higher or lower than the initial offering price depending
upon many factors, including the price of our common stock,
prevailing interest rates, our operating results and the markets
for similar securities.
The
conversion rate and payment you may receive in respect of shares
of mandatory convertible preferred stock converted in connection
with certain cash acquisitions of us may not adequately
compensate you for the lost option time value of your mandatory
convertible preferred stock as a result of such
change.
If certain cash acquisitions of us occur on or prior
to ,
2009, under certain circumstances, we will (1) permit
conversion of our mandatory convertible preferred stock during
the period beginning on the date that is 15 days prior to
the anticipated effective date of the applicable cash
acquisition and ending on the date that is 15 days after
the actual effective date and (2) pay converting holders an
amount equal to the sum of any accumulated and unpaid dividends
on shares of our mandatory convertible preferred stock that are
converted plus the present value of all remaining dividend
payments on such shares through and
including ,
2009, as described under Description of Mandatory
Convertible Preferred Stock Conversion Upon Cash
Acquisition; Cash Acquisition Dividend Make-Whole Amount.
The applicable conversion rate will be determined based on the
date on which the transaction becomes effective and the price
paid per share of our common stock in such transaction as
described under Description of Mandatory Convertible
Preferred Stock Conversion Upon Cash Acquisition;
Cash Acquisition Dividend Make-Whole Amount. While the
conversion rate adjustment and the additional payment amount are
designed to compensate you for the lost option time value of
your mandatory convertible preferred stock and lost dividends
resulting from your decision to convert early as a result of
such transaction, the amount of the make-whole premium is only
an approximation of such lost value and may not adequately
compensate you for such loss.
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 mandatory
convertible preferred stock 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.
The
price of our common stock, and therefore the price of our
mandatory convertible preferred stock, may be volatile, which
may make it difficult for you to resell the mandatory
convertible preferred stock, or common stock issuable upon
conversion of the mandatory convertible preferred stock, when
you want or at prices you find attractive.
The market price of our common stock, and therefore the price of
our mandatory convertible preferred stock, could be subject to
significant fluctuations. This may make it difficult for you to
resell the mandatory
28
convertible preferred stock, or common stock issuable upon
conversion of the mandatory convertible preferred stock, when
you want or at prices you find attractive. Among the factors
that could affect the price of our common stock are:
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our operating and financial performance and prospects;
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quarterly variations in the rate of growth of our financial
indicators, such as earnings per share, net income and revenues;
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changes in revenue or earnings estimates;
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developments in the Internal Review or DOJ investigation;
|
|
|
|
publication of research reports by analysts;
|
|
|
|
speculation in the press or investment community;
|
|
|
|
strategic actions by us or our competitors, such as acquisitions
or restructurings;
|
|
|
|
sales of our common stock by stockholders;
|
|
|
|
actions by institutional investors;
|
|
|
|
fluctuations in oil and natural gas prices;
|
|
|
|
general market conditions; and
|
|
|
|
U.S. and international economic, legal and regulatory factors
unrelated to our performance.
|
The stock markets in general have experienced extreme volatility
that has at times been unrelated to the operating performance of
particular companies. These broad market fluctuations may
adversely affect the trading price of our common stock.
Future
sales of shares of our common stock may affect their market
price and the future exercise of options may depress our stock
price and result in immediate and substantial
dilution.
We cannot predict what effect, if any, future sales of shares of
our common stock, or the availability of shares for future sale,
will have on the market price of our common stock. As of
August 1, 2006, 900,064 shares of our common stock, or
3.8% of our outstanding common stock, may be issued in
connection with the exercise of outstanding options.
We and our directors and executive officers are subject to the
lockup agreements described in Underwriting for a
period of 90 days after the date of this prospectus. Shares
beneficially held for at least one year will be eligible for
sale in the public market pursuant to Rule 144 under the
Securities Act of 1933, as amended (the Securities
Act), subject to the lockup agreements. Sales of
substantial amounts of our common stock in the public market
following this offering, or the perception that such sales could
occur, could adversely affect the market price of our common
stock and may make it more difficult for you to sell your shares
at a time and price that you deem appropriate. Please read
Shares Eligible for Future Sale.
We have filed registration statements with the SEC on
Form S-8
providing for the registration of 1,250,000 shares of our
common stock issued or reserved for issuance under our stock
incentive plans. As of August 1, 2006, options to acquire
900,064 shares of our common stock were outstanding.
Subject to the expiration of lockups that we and our directors
and executive officers have entered into and any applicable
restrictions or conditions contained in our stock incentive
plans and under federal securities laws, the shares that may be
acquired pursuant to these options will be available for resale
immediately in the public market without restriction.
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 certificate of incorporation,
as amended, 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 change of control or change in
29
management is delayed or prevented, the market price of our
common stock could decline. Please read Description of
Capital Stock included elsewhere in this prospectus for a
description of these provisions.
We
limit foreign ownership of our company, which could reduce the
price of our common stock and cause owners of our common stock
who are not U.S. persons to lose their voting
rights.
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 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 the shares of
common 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. 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 common stock because holders may be unable to transfer our
common stock to persons who are not citizens of the United
States.
FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934 (the
Exchange Act). Forward-looking statements are
statements about our future business, strategy, operations,
capabilities and results; 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 of 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 included elsewhere in this prospectus;
|
|
|
|
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 not able to re-deploy our aircraft to regions with the
greater demand;
|
|
|
|
we do not achieve the anticipated benefit of our fleet expansion
program;
|
30
|
|
|
|
|
the outcome of the SEC investigation relating to the Foreign
Corrupt Practices Act and other matters, or the Internal Review,
has a greater than anticipated financial or business impact;
|
|
|
|
the outcome of the DOJ antitrust investigation, which is
ongoing, has a greater than anticipated financial or business
impact; and
|
|
|
|
the implementation of our plan to improve our internal control
over financial reporting, as discussed under
Managements Discussion and Analysis of Financial
Condition and Results of Operations Internal Review,
Restatement, Governmental Investigations and Internal
Control Internal Control Matters
Managements Response to Material Weaknesses.
|
All forward-looking statements in this prospectus are qualified
by these cautionary statements and speak only as of the date of
the particular statement. 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.
31
USE OF
PROCEEDS
We estimate that our net proceeds from the sale of 4,000,000 of
our % mandatory convertible
preferred stock in this offering will be approximately
$190.4 million, after deducting underwriting discounts and
commissions and our estimated offering expenses.
We intend to use the net proceeds from this offering for the
following purposes:
|
|
|
|
|
to fund the acquisition of aircraft on order and to repay
borrowings, if any, used to fund recent aircraft acquisitions;
and
|
|
|
|
to fund future aircraft acquisitions, including acquisition of
the aircraft under option.
|
Upon completion of this offering, we plan to exercise options to
acquire additional large aircraft including the options for five
large aircraft that expire on September 30, 2006. Any
remaining net proceeds will be used for working capital and
other general corporate purposes. Pending such uses, we plan to
invest the net proceeds of this offering in highly liquid,
investment-grade securities.
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 Future Cash Requirements
Capital Commitments and Business Changes
at Our Company Aircraft Fleet Expansion. For a
discussion of our Credit Facilities, please read
Managements Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity Future Cash Requirements Debt
Obligations Credit Facilities. As of
August 15, 2006, our Credit Facilities bore interest at
LIBOR plus 1.25%, or 6.58% per year, as of such date. Our
Credit Facilities mature in August 2011.
32
PRICE
RANGE OF 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,
the first quarter fiscal year 2007 and the second quarter fiscal
year 2007 through August 17, 2006.
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal Year Ended
March 31, 2005
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
28.16
|
|
|
$
|
21.85
|
|
Second Quarter
|
|
|
34.42
|
|
|
|
27.08
|
|
Third Quarter
|
|
|
38.05
|
|
|
|
32.47
|
|
Fourth Quarter
|
|
|
35.12
|
|
|
|
29.10
|
|
Fiscal Year Ended
March 31, 2006
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
34.93
|
|
|
|
27.78
|
|
Second Quarter
|
|
|
37.00
|
|
|
|
32.10
|
|
Third Quarter
|
|
|
36.86
|
|
|
|
29.17
|
|
Fourth Quarter
|
|
|
36.50
|
|
|
|
27.67
|
|
Fiscal Year Ended
March 31, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
38.37
|
|
|
|
33.62
|
|
Second Quarter (through
August 17, 2006)
|
|
|
38.52
|
|
|
|
32.21
|
|
On August 17, 2006, the last reported sale price of our
common stock on the NYSE was $38.51 per share. As of
August 1, 2006, there were 709 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:
|
|
|
|
|
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.
|
In addition, the terms of our Senior Notes and Credit Facilities
restrict our payment of cash dividends and other distributions
to stockholders. For descriptions of our Senior Notes and Credit
Facilities, see Managements Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources Future Cash
Requirements Debt Obligations, Note 5 in
the Notes to Consolidated Financial Statements and
Note 3 in the Condensed Notes to Consolidated
Financial Statements included elsewhere in this prospectus.
33
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of June 30, 2006 (1) on an actual
basis and (2) on an as adjusted basis after giving effect
to this offering and the use of the net proceeds as described
under Use of Proceeds as if these transactions had
occurred as of June 30, 2006.
You should read the information in this table in conjunction
with our Selected Historical Financial Data,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements and related notes included elsewhere in
this prospectus.
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2006
|
|
|
|
Actual
|
|
|
As Adjusted(1)
|
|
|
|
(In thousands)
|
|
|
Cash and cash
equivalents
|
|
$
|
109,634
|
|
|
$
|
300,034
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
61/8% Senior
Notes due 2013
|
|
$
|
230,000
|
|
|
$
|
230,000
|
|
Limited recourse term loans
|
|
|
19,736
|
|
|
|
19,736
|
|
Hemisco Helicopters International,
Inc. Note
|
|
|
4,380
|
|
|
|
4,380
|
|
Short-term advance from customer
|
|
|
1,400
|
|
|
|
1,400
|
|
Note to Sakhalin Aviation Services
Ltd.
|
|
|
664
|
|
|
|
664
|
|
Sakhalin debt
|
|
|
5,338
|
|
|
|
5,338
|
|
Revolving credit facility(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt (including current
maturities)
|
|
|
261,518
|
|
|
|
261,518
|
|
|
|
|
|
|
|
|
|
|
Stockholders
investment:
|
|
|
|
|
|
|
|
|
% mandatory
convertible preferred stock, $.01 par value, authorized
4,600,000 shares: outstanding 4,000,000 shares,
entitled on liquidation to $200 million
|
|
|
|
|
|
|
190,400
|
|
Common stock, $.01 par value,
authorized 35,000,000 shares: outstanding
23,430,097 shares exclusive of 1,281,050 treasury shares)
|
|
|
234
|
|
|
|
234
|
|
Additional paid-in capital
|
|
|
161,191
|
|
|
|
161,191
|
|
Retained earnings
|
|
|
464,753
|
|
|
|
464,753
|
|
Accumulated other comprehensive
loss
|
|
|
(50,456
|
)
|
|
|
(50,456
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders investment
|
|
|
575,722
|
|
|
|
766,122
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
837,240
|
|
|
$
|
1,027,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We intend to use the net proceeds of this offering to fund the
acquisition of aircraft on order and to repay borrowings,
if any, used to fund recent aircraft acquisitions and to fund
future aircraft acquisitions, including acquisitions of aircraft
under option. Upon completion of this offering, we plan to
exercise options to acquire additional large aircraft, including
the options for five large aircraft that expire on
September 30, 2006. Any remaining net proceeds will be used
for working capital and other general corporate purposes.
Pending such uses, we plan to invest the net proceeds of this
offering in highly liquid, investment-grade securities.
Consequently, the net proceeds of this offering are recorded
under Cash and cash equivalents in the table above.
For additional information about these transactions, please read
Managements Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity Future Cash Requirements
Capital Commitments, Business Changes at
Our Company Aircraft Fleet Expansion and
Managements Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity Future Cash Requirements Debt
Obligations Credit Facilities. |
|
(2) |
|
As of June 30, 2006, we had no borrowings outstanding and
$3.2 million in letters of credit issued under this
$30 million facility. In August 2006, we terminated this
revolving credit facility and entered into the Credit
Facilities, which consist of a $100 million revolving
credit facility and a $25 million letter of credit
facility. As of August 15, 2006, we had no borrowings
outstanding and $4.1 million in letters of credit issued
under the Credit Facilities. |
34
SELECTED
HISTORICAL FINANCIAL DATA
You should read the data set forth below in conjunction with our
consolidated financial statements and related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations and other financial
information included elsewhere in this prospectus. We derived
the selected financial data as of March 31, 2006 and 2005
and for each of the fiscal years ended March 31, 2006, 2005
and 2004 from our audited consolidated financial statements and
the related notes included in this prospectus. We derived the
selected financial data as of March 31, 2004, 2003 and 2002
and for the fiscal years ended March 31, 2003 and 2002 from
our audited consolidated financial statements and the related
notes not included in this prospectus. We derived the selected
financial data as of June 30, 2006 and for each of the
three-month periods ended June 30, 2006 and 2005 from our
interim consolidated financial statements (unaudited) and the
related notes included in this prospectus. The selected
financial data for the three-month period ended June 30,
2006 are not necessarily indicative of our results for the year
ending March 31, 2007, and our historical results are not
necessarily indicative of our results for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended June 30,
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006(1)(2)
|
|
|
2005(1)(2)
|
|
|
2006(1)(2)
|
|
|
2005(1)(2)
|
|
|
2004(2)(3)(4)
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands, except per share and other data)
|
|
|
|
|
|
Statement of Income
Data(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
221,062
|
|
|
$
|
180,937
|
|
|
$
|
768,940
|
|
|
$
|
673,646
|
|
|
$
|
617,001
|
|
|
$
|
601,550
|
|
|
$
|
552,913
|
|
Operating expense
|
|
|
190,002
|
|
|
|
165,892
|
|
|
|
695,145
|
|
|
|
596,038
|
|
|
|
528,276
|
|
|
|
536,184
|
|
|
|
483,152
|
|
Operating income
|
|
|
31,060
|
|
|
|
15,045
|
|
|
|
73,795
|
|
|
|
77,608
|
|
|
|
88,725
|
|
|
|
65,366
|
|
|
|
69,761
|
|
Earnings from unconsolidated
affiliates, net
of losses
|
|
|
1,559
|
|
|
|
46
|
|
|
|
6,758
|
|
|
|
9,600
|
|
|
|
11,039
|
|
|
|
12,054
|
|
|
|
6,604
|
|
Net income
|
|
|
17,229
|
|
|
|
11,972
|
|
|
|
57,809
|
|
|
|
51,560
|
|
|
|
49,825
|
|
|
|
40,404
|
|
|
|
42,039
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.74
|
|
|
|
0.51
|
|
|
|
2.48
|
|
|
|
2.24
|
|
|
|
2.21
|
|
|
|
1.80
|
|
|
|
1.91
|
|
Diluted
|
|
|
0.73
|
|
|
|
0.51
|
|
|
|
2.45
|
|
|
|
2.21
|
|
|
|
2.15
|
|
|
|
1.67
|
|
|
|
1.75
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
and preferred dividends(6)
|
|
|
5.49
|
x
|
|
|
3.88
|
x
|
|
|
4.41
|
x
|
|
|
5.07
|
x
|
|
|
4.14
|
x
|
|
|
4.39
|
x
|
|
|
4.56
|
x
|
Flight hours
|
|
|
74,191
|
|
|
|
67,694
|
|
|
|
272,541
|
|
|
|
243,118
|
|
|
|
249,335
|
|
|
|
251,131
|
|
|
|
257,094
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30,
|
|
|
At March 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands, except other data)
|
|
|
Balance Sheet Data(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
457,486
|
|
|
$
|
447,266
|
|
|
$
|
432,444
|
|
|
$
|
352,047
|
|
|
$
|
303,101
|
|
|
$
|
273,202
|
|
Investment in unconsolidated
affiliates
|
|
|
40,668
|
|
|
|
39,912
|
|
|
|
37,176
|
|
|
|
38,929
|
|
|
|
27,928
|
|
|
|
21,103
|
|
Property and equipment
at cost
|
|
|
943,982
|
|
|
|
878,986
|
|
|
|
859,574
|
|
|
|
824,377
|
|
|
|
719,782
|
|
|
|
666,911
|
|
Total assets
|
|
|
1,239,794
|
|
|
|
1,176,413
|
|
|
|
1,149,576
|
|
|
|
1,046,828
|
|
|
|
906,031
|
|
|
|
807,301
|
|
Long-term debt, including current
maturities
|
|
|
261,518
|
|
|
|
265,296
|
|
|
|
262,080
|
|
|
|
255,534
|
|
|
|
232,818
|
|
|
|
208,014
|
|
Stockholders investment
|
|
|
575,722
|
|
|
|
537,697
|
|
|
|
492,993
|
|
|
|
429,952
|
|
|
|
350,206
|
|
|
|
331,940
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft in fleet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operated by consolidated affiliates
|
|
|
333
|
|
|
|
331
|
|
|
|
320
|
|
|
|
332
|
|
|
|
335
|
|
|
|
345
|
|
Operated by unconsolidated
affiliates
|
|
|
147
|
|
|
|
146
|
|
|
|
110
|
|
|
|
96
|
|
|
|
91
|
|
|
|
83
|
|
|
|
|
(1) |
|
During the first quarter fiscal year 2007, the first quarter
fiscal year 2006 and fiscal years 2006 and 2005, we incurred
approximately $0.7 million, $3.2 million,
$13.1 million and $2.6 million, respectively, in legal
and other professional costs in connection with the Internal
Review and DOJ investigation. |
|
(2) |
|
Effective July 1, 2003, we changed the useful lives of
certain of our aircraft to 15 years from a range of seven
to ten years. The effect of this change for the first quarter
fiscal year 2007, the first quarter fiscal year 2006 and fiscal
years 2006, 2005 and 2004 was a reduction in depreciation
expense (after tax) of $0.6 million, $0.7 million,
$2.9 million, $2.9 million and $2.3 million,
respectively. |
|
(3) |
|
Results for fiscal year 2004 include $21.7 million
($15.7 million, net of tax) of curtailment gain relating to
the pension plan discussed in Note 9 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus. |
|
(4) |
|
Results for fiscal year 2004 include $6.2 million in loss
on extinguishment of debt related to notes redeemed in that
fiscal year. See discussion in Note 5 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus. |
|
(5) |
|
Results of operations and financial position of companies that
we have acquired have been included beginning on the respective
dates of acquisition and include Aviashelf (July 2004), Pan
African Airlines (Nigeria) Ltd. (July 2002) and Turbo
Engines Inc. (formerly Pueblo Automotive) (December 2001). |
|
(6) |
|
For purposes of determining the ratios of earnings to fixed
charges and preferred dividends, earnings are defined as net
income 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. |
36
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 Forward-Looking Statements,
Risk Factors and our consolidated financial
statements and the notes thereto, all of which are included
elsewhere in this prospectus.
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 follows and does not disclose every item
bearing on our financial condition and operating performance.
General
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 the U.S. Gulf of
Mexico and the North Sea, and operations in most of the other
major offshore oil and gas producing regions of the world,
including Alaska, Australia, Brazil, China, Mexico, Nigeria,
Russia and Trinidad. We have a long history in the helicopter
service industry, with our two principal legacy companies,
Bristow Helicopters Ltd. and Offshore Logistics, Inc.
(Offshore Logistics), having been founded in 1955
and 1969, respectively.
We conduct our business in two segments: Helicopter Services and
Production Management Services. The Helicopter Services segment
conducts its operations through seven business units:
|
|
|
|
|
North America;
|
|
|
|
South and Central America;
|
|
|
|
Europe;
|
|
|
|
West Africa;
|
|
|
|
Southeast Asia;
|
|
|
|
Other International; and
|
|
|
|
Eastern Hemisphere (EH) Centralized Operations.
|
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
June 30, 2006, we operated 333 aircraft (including 311
owned aircraft, 22 leased aircraft and five aircraft held for
sale), and our unconsolidated affiliates operated an additional
147 aircraft (excluding those aircraft leased from us).
We are also a leading provider of production management services
for oil and gas production facilities in the U.S. Gulf of
Mexico. Our services include furnishing specialized production
operations personnel, engineering services, production operating
services, paramedic services and providing marine and helicopter
transportation of personnel and supplies between onshore bases
and offshore facilities. In connection with these activities,
our Production Management Services segment uses our helicopter
services. We also handle regulatory and production reporting for
some of our customers. As of June 30, 2006, we managed or
had personnel assigned to 315 production facilities in the
U.S. Gulf of Mexico.
During fiscal year 2006, our North America, South and Central
America, Europe, West Africa, Southeast Asia, Other
International and EH Centralized Operations business units
contributed 26%, 6%,
37
31%, 14%, 8%, 4% and 2%, respectively, of our gross revenue. Our
Production Management Services segment contributed the remaining
9% of our gross revenue in fiscal year 2006.
The following table sets forth the number of our aircraft owned
or leased as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
North America
|
|
|
169
|
|
|
|
170
|
|
South and Central America
|
|
|
34
|
|
|
|
32
|
|
Europe
|
|
|
38
|
|
|
|
40
|
|
West Africa
|
|
|
51
|
|
|
|
48
|
|
Southeast Asia
|
|
|
16
|
|
|
|
15
|
|
Other International
|
|
|
20
|
|
|
|
21
|
|
EH Centralized Operations
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Total consolidated affiliates
|
|
|
333
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
Additional aircraft operated by
unconsolidated affiliates
|
|
|
147
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
Our operating revenue depends on the demand for our services and
the pricing terms of our contracts. We measure the demand for
our helicopter services in flight hours. Demand for our services
depends on the level of worldwide offshore oil and gas
exploration, development and production activities. We believe
that our customers exploration and development activities
are influenced by actual and expected trends in commodity prices
for oil and gas. Exploration and development activities
generally use medium-size and larger aircraft on which we
typically earn higher margins. We believe that
production-related activities are less sensitive to variances in
commodity prices, and accordingly, provide more stable activity
levels and revenue stream. We estimate that a majority of our
operating revenue from Helicopter Services is related to the
production activities of the oil and gas companies.
Helicopter Services are seasonal in nature, as our flight
activities are influenced by the length of daylight hours and
weather conditions. The worst of these conditions typically
occurs during the winter months when our ability to safely fly
and our customers ability to safely conduct their
operations, is inhibited. Accordingly, our flight activity is
generally lower in the fourth fiscal quarter.
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
costs such as certain landing and navigation 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,
38
quality of service, equipment and record of safety. An incumbent
operator has a competitive advantage in the bidding process
based on its relationship with the customer, its knowledge of
the site characteristics and its understanding of the cost
structure for the operations.
Maintenance and repair expenses, training costs, employee wages
and insurance premiums represent a significant portion of our
overall expenses. Our production management costs also include
contracted transportation services. We expense maintenance and
repair costs, including major aircraft component overhaul costs,
as the costs are incurred. As a result, our earnings in any
given period are directly impacted by the amount of our
maintenance and repair expenses for that period. In certain
instances, 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.
As a result of local laws limiting foreign ownership of aviation
companies, we conduct helicopter services in many foreign
countries through interests in affiliates, some of which are
unconsolidated. Generally, we realize revenue from these foreign
operations by leasing aircraft and providing services and
technical support to those entities. We also receive dividend
income from the earnings of some of these entities. For
additional information about these unconsolidated affiliates,
see Note 3 in the Notes to Consolidated Financial
Statements and Note 2 in the Condensed Notes to
Consolidated Financial Statements included elsewhere in
this prospectus.
Market
Outlook
We are currently experiencing significant demand for our
helicopter services and, in certain of our markets (particularly
the U.S. Gulf of Mexico), we are unable to meet the full
demand and have been forced to decline customer orders. 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
aircraft 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 transportation capacity of the 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.
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 Southeast Asia and Other International business units
will continue to increase as the major oil and gas companies
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 from weaker markets into markets that will sustain
higher rates for our services. Currently, helicopter
manufacturers are indicating very limited supply availability
during the next 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. At the
same time, we believe that our recent aircraft acquisitions and
commitments position us to capture a portion of the upside
created by the current market conditions.
Current activity levels in the Gulf of Mexico are at or near
all-time highs. There has also been a trend of major oil and gas
companies transferring reserves located in the U.S. Gulf of
Mexico to smaller, independent oil and gas producers. This trend
has generated, and is expected to continue to generate,
additional demand for our production management services, as
smaller producers are more likely to require the operational and
manpower support that our Production Management Services segment
provides.
While contracts in the North Sea are generally long term, we
have experienced a trend of increased spot market contracting of
helicopters as exploration activity has increased in the North
Sea. Our Other International operations have experienced high
customer demand for aircraft to support new and ongoing
operations, and we expect this trend to continue. Due to the
current high levels of fleet utilization, we have experienced,
along with other helicopter operators, some difficulty in
meeting our customers needs for short-notice exploration
drilling support, particularly in remote international locations.
39
In 2005, we conducted the Internal Review, which consisted of a
review of certain of our prior business practices, focused on
Foreign Corrupt Practices Act matters and other issues in a
number of our international operations. As a result of the
findings of the Internal Review, our quarter ended
December 31, 2004 and prior financial statements were
restated. We informed the SEC of the Internal Review, and they
have initiated a formal investigation. We have responded to the
SECs requests for documents and intend to continue to do
so. We have received a document subpoena from the DOJ that
relates to a grand jury investigation of potential antitrust
violations among providers of helicopter transportation services
in the U.S. Gulf of Mexico. We believe we have submitted to the
DOJ substantially all documents responsive to the subpoena. For
further information, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Internal Review, Restatement,
Governmental Investigations and Internal Control.
Overview
of Operating Results
The following table presents our operating results and other
income statement information for the applicable periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
$
|
193,865
|
|
|
$
|
162,234
|
|
|
$
|
688,719
|
|
|
$
|
608,922
|
|
|
$
|
558,137
|
|
Reimbursable revenue
|
|
|
27,197
|
|
|
|
18,703
|
|
|
|
80,221
|
|
|
|
64,724
|
|
|
|
58,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross revenue
|
|
|
221,062
|
|
|
|
180,937
|
|
|
|
768,940
|
|
|
|
673,646
|
|
|
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
138,470
|
|
|
|
122,552
|
|
|
|
512,518
|
|
|
|
454,836
|
|
|
|
417,359
|
|
Reimbursable expense
|
|
|
26,898
|
|
|
|
18,662
|
|
|
|
78,525
|
|
|
|
63,303
|
|
|
|
58,090
|
|
Depreciation and amortization
|
|
|
10,283
|
|
|
|
10,307
|
|
|
|
42,256
|
|
|
|
40,693
|
|
|
|
39,543
|
|
General and administrative
|
|
|
15,349
|
|
|
|
14,963
|
|
|
|
61,948
|
|
|
|
45,245
|
|
|
|
38,892
|
|
Gain on disposal of assets
|
|
|
(998
|
)
|
|
|
(592
|
)
|
|
|
(102
|
)
|
|
|
(8,039
|
)
|
|
|
(3,943
|
)
|
Curtailment gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,665
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
|
|
190,002
|
|
|
|
165,892
|
|
|
|
695,145
|
|
|
|
596,038
|
|
|
|
528,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
31,060
|
|
|
|
15,045
|
|
|
|
73,795
|
|
|
|
77,608
|
|
|
|
88,725
|
|
Earnings from unconsolidated
affiliates, net of losses
|
|
|
1,559
|
|
|
|
46
|
|
|
|
6,758
|
|
|
|
9,600
|
|
|
|
11,039
|
|
Interest expense, net
|
|
|
(1,946
|
)
|
|
|
(2,676
|
)
|
|
|
(10,530
|
)
|
|
|
(12,477
|
)
|
|
|
(15,140
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,205
|
)
|
Other income (expense), net
|
|
|
(4,785
|
)
|
|
|
2,783
|
|
|
|
4,612
|
|
|
|
(1,126
|
)
|
|
|
(7,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
25,888
|
|
|
|
15,198
|
|
|
|
74,635
|
|
|
|
73,605
|
|
|
|
70,609
|
|
Provision for income taxes
|
|
|
(8,543
|
)
|
|
|
(3,176
|
)
|
|
|
(16,607
|
)
|
|
|
(21,835
|
)
|
|
|
(19,402
|
)
|
Minority interest
|
|
|
(116
|
)
|
|
|
(50
|
)
|
|
|
(219
|
)
|
|
|
(210
|
)
|
|
|
(1,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,229
|
|
|
$
|
11,972
|
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
First
Quarter Fiscal Year 2007 Compared to First Quarter Fiscal Year
2006
Our gross revenue increased to $221.1 million for the first
quarter fiscal year 2007 from $180.9 million for the first
quarter fiscal year 2006, an increase of 22.2%. The increase in
gross revenue occurred in both our Helicopter Services segment
and our Production Management Services segment. Helicopter
Services primarily contributed to the increase in gross revenue
with improvements for North America, resulting from an increase
in flight hours and rates, and improvements in Europe, resulting
from higher rates and new contracts. Our operating expense
increased to $190.0 million for the first quarter fiscal
year 2007 from $165.9 million for the first quarter fiscal
year 2006, an increase of 14.5%. The increase was primarily a
result of higher costs associated with higher activity levels,
higher labor costs, higher fuel rates (which are generally
recovered from our customers), and higher salaries and benefits
associated with the addition of personnel, salary increases and
the impact of the adoption of the new equity compensation
accounting standard in the first quarter fiscal year 2007 (see
discussion below). Primarily as a result of lower maintenance
costs within our EH Centralized Operations business unit and the
improvement in rates in North America and Europe, our operating
income and operating margin for the first quarter fiscal year
2007 increased to $31.1 million and 14.1%, respectively,
compared to $15.0 million and 8.3%, respectively, for the
first quarter fiscal year 2006.
Net income for the first quarter fiscal year 2007 of
$17.2 million represents a $5.2 million increase from
the first quarter fiscal year 2006. This increase in net income
was driven by the increase in operating income discussed above,
which was partially offset by foreign exchange losses of
$4.8 million in the first quarter fiscal year 2007 compared
to foreign exchange gains of $2.8 million in the first
quarter fiscal year 2006, and an increase in the provision for
income taxes to $8.5 million in the first quarter fiscal
year 2007 from $3.2 in the first quarter fiscal year 2006. The
provision for income taxes increased as a result of the increase
in income during the first quarter fiscal year 2007 and from an
increase in the overall effective tax rate to 33.0% in the first
quarter fiscal year 2007 from 20.9% in the first quarter fiscal
year 2006.
Fiscal
Year 2006 Compared to Fiscal Year 2005
Our gross revenue increased to $768.9 million, an increase
of 14.1%, for fiscal year 2006 from $673.6 million for
fiscal year 2005. The increase in gross revenue was noted in
both our Helicopter Services segment and our Production
Management Services segment. Helicopter Services contributed to
most of the increase with improvements for North America,
resulting from an increase in flight hours and rates, and
improvements in Europe, resulting from higher rates and new
contracts. Our operating expenses for fiscal year 2006 increased
to $695.1 million, an increase of 16.6%, from
$596.0 million for fiscal year 2005. The increase was
primarily a result of higher costs associated with higher
activity levels, higher labor costs, higher fuel rates (which
are generally recovered from our customers) and higher
professional fees related to the Internal Review and DOJ
investigations. In addition, we had a gain on disposal of assets
of $0.1 million for fiscal year 2006 compared to a gain on
disposal of assets of $8.0 million for fiscal year 2005. As
a result of the higher professional fees and lower gains on
disposals of assets, our operating income and operating margin
for fiscal year 2006 decreased to $73.8 million and 9.6%,
respectively, compared to $77.6 million and 11.5%,
respectively, for fiscal year 2005.
Net income for fiscal year 2006 of $57.8 million represents
a $6.2 million increase from fiscal year 2005. This
increase primarily resulted from the decrease in the overall
effective tax rate from 29.7% to 22.3% primarily due to the
reversal of reserves for tax contingencies in fiscal year 2006
and foreign exchange gains of $5.4 million in fiscal year
2006 compared to foreign exchange losses of $1.3 million in
fiscal year 2005.
Fiscal
Year 2005 Compared to Fiscal Year 2004
Our gross revenue increased to $673.6 million, an increase
of 9.2%, for fiscal year 2005 from $617.0 million for
fiscal year 2004. The increase in gross revenue for our
Helicopter Services segment was primarily due to higher
third-party revenue from rate increases in our North America
business unit and a favorable change in the mix of aircraft in
our other Helicopter Services business units as compared to
fiscal
41
year 2004. Gross revenue from our Production Management Services
segment increased due to additional activity from a major
customer. Our operating expense for fiscal year 2005 increased
to $596.0 million, an increase of 12.8%, from
$528.3 million in fiscal year 2004. The increase was
primarily a result of higher labor and maintenance costs in
fiscal year 2005 and a $21.7 million curtailment gain
reflected in operating expense for fiscal year 2004. Our
operating income and operating margin for fiscal year 2005
decreased to $77.6 million and 11.5%, respectively,
compared to $88.7 million and 14.4%, respectively, in
fiscal year 2004. However, excluding the curtailment gain of
$21.7 million in fiscal year 2004, our operating income and
operating margin for fiscal year 2005 increased compared to
fiscal year 2004 primarily as a result of higher revenue.
Net income for fiscal year 2005 was $51.6 million, compared
to net income of $49.8 million in fiscal year 2004.
Excluding the curtailment gain discussed above, our net income
for fiscal year 2005 increased by $17.5 million compared to
fiscal year 2004, primarily as a result of higher revenue and a
decrease in other expense. Other expenses decreased due to lower
foreign exchange losses in fiscal year 2005 as compared to
fiscal year 2004 and the $6.2 million loss on
extinguishment of debt charged to expense during fiscal year
2004.
Results
of Operations
The following tables set forth certain operating information,
which forms the basis for discussion of our Helicopter Services
and Production Management Services segments, and for the seven
business units comprising our Helicopter Services segment. See
Note 11 in the Notes to Consolidated Financial
Statements and Note 8 in the Condensed Notes to
Consolidated Financial Statements included elsewhere in
this prospectus for further information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Flight hours (excludes
unconsolidated affiliates):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
40,595
|
|
|
|
35,778
|
|
|
|
142,409
|
|
|
|
118,371
|
|
|
|
123,488
|
|
South and Central America
|
|
|
9,285
|
|
|
|
9,516
|
|
|
|
38,469
|
|
|
|
42,351
|
|
|
|
44,657
|
|
Europe
|
|
|
10,170
|
|
|
|
9,731
|
|
|
|
38,648
|
|
|
|
35,542
|
|
|
|
37,569
|
|
West Africa
|
|
|
8,883
|
|
|
|
8,344
|
|
|
|
34,185
|
|
|
|
31,918
|
|
|
|
30,059
|
|
Southeast Asia
|
|
|
3,206
|
|
|
|
2,722
|
|
|
|
12,119
|
|
|
|
11,547
|
|
|
|
10,643
|
|
Other International
|
|
|
2,052
|
|
|
|
1,603
|
|
|
|
6,711
|
|
|
|
3,389
|
|
|
|
2,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
|
74,191
|
|
|
|
67,694
|
|
|
|
272,541
|
|
|
|
243,118
|
|
|
|
249,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
66,800
|
|
|
$
|
52,449
|
|
|
$
|
228,584
|
|
|
$
|
179,019
|
|
|
$
|
172,138
|
|
South and Central America
|
|
|
13,237
|
|
|
|
10,037
|
|
|
|
44,554
|
|
|
|
53,699
|
|
|
|
52,580
|
|
Europe
|
|
|
71,393
|
|
|
|
59,179
|
|
|
|
242,941
|
|
|
|
223,698
|
|
|
|
211,499
|
|
West Africa
|
|
|
31,736
|
|
|
|
25,909
|
|
|
|
107,411
|
|
|
|
94,432
|
|
|
|
77,205
|
|
Southeast Asia
|
|
|
17,041
|
|
|
|
13,808
|
|
|
|
61,168
|
|
|
|
53,024
|
|
|
|
43,329
|
|
Other International
|
|
|
8,954
|
|
|
|
7,588
|
|
|
|
35,339
|
|
|
|
21,344
|
|
|
|
10,821
|
|
EH Centralized Operations
|
|
|
14,405
|
|
|
|
12,407
|
|
|
|
54,933
|
|
|
|
56,169
|
|
|
|
72,177
|
|
Intrasegment eliminations
|
|
|
(17,298
|
)
|
|
|
(15,462
|
)
|
|
|
(65,876
|
)
|
|
|
(60,567
|
)
|
|
|
(67,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services(1)
|
|
|
206,268
|
|
|
|
165,915
|
|
|
|
709,054
|
|
|
|
620,818
|
|
|
|
572,465
|
|
Production Management Services(2)
|
|
|
17,684
|
|
|
|
16,969
|
|
|
|
68,170
|
|
|
|
58,982
|
|
|
|
49,815
|
|
Corporate
|
|
|
(25
|
)
|
|
|
16
|
|
|
|
693
|
|
|
|
1,684
|
|
|
|
1,529
|
|
Intersegment eliminations
|
|
|
(2,865
|
)
|
|
|
(1,963
|
)
|
|
|
(8,977
|
)
|
|
|
(7,838
|
)
|
|
|
(6,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
221,062
|
|
|
$
|
180,937
|
|
|
$
|
768,940
|
|
|
$
|
673,646
|
|
|
$
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
55,705
|
|
|
$
|
42,666
|
|
|
$
|
190,721
|
|
|
$
|
153,042
|
|
|
$
|
143,715
|
|
South and Central America
|
|
|
9,615
|
|
|
|
9,625
|
|
|
|
39,512
|
|
|
|
41,616
|
|
|
|
39,605
|
|
Europe
|
|
|
62,357
|
|
|
|
52,259
|
|
|
|
212,311
|
|
|
|
194,324
|
|
|
|
194,190
|
|
West Africa
|
|
|
29,328
|
|
|
|
23,838
|
|
|
|
101,779
|
|
|
|
88,541
|
|
|
|
76,104
|
|
Southeast Asia
|
|
|
15,952
|
|
|
|
13,101
|
|
|
|
56,368
|
|
|
|
49,022
|
|
|
|
40,943
|
|
Other International
|
|
|
7,848
|
|
|
|
6,361
|
|
|
|
27,790
|
|
|
|
18,465
|
|
|
|
9,097
|
|
EH Centralized Operations
|
|
|
8,945
|
|
|
|
13,693
|
|
|
|
54,496
|
|
|
|
60,610
|
|
|
|
69,853
|
|
Curtailment gain allocated to
Helicopter Services(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,365
|
)
|
Intrasegment eliminations
|
|
|
(17,298
|
)
|
|
|
(15,462
|
)
|
|
|
(65,876
|
)
|
|
|
(60,567
|
)
|
|
|
(67,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
172,452
|
|
|
|
146,081
|
|
|
|
617,101
|
|
|
|
545,053
|
|
|
|
485,858
|
|
Production Management Services
|
|
|
16,271
|
|
|
|
15,649
|
|
|
|
62,843
|
|
|
|
55,075
|
|
|
|
47,301
|
|
Gain on disposal of assets
|
|
|
(998
|
)
|
|
|
(592
|
)
|
|
|
(102
|
)
|
|
|
(8,039
|
)
|
|
|
(3,943
|
)
|
Corporate
|
|
|
5,142
|
|
|
|
6,717
|
|
|
|
24,280
|
|
|
|
11,787
|
|
|
|
7,168
|
|
Curtailment gain allocated to
Corporate(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,300
|
)
|
Intersegment eliminations
|
|
|
(2,865
|
)
|
|
|
(1,963
|
)
|
|
|
(8,977
|
)
|
|
|
(7,838
|
)
|
|
|
(6,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
190,002
|
|
|
$
|
165,892
|
|
|
$
|
695,145
|
|
|
$
|
596,038
|
|
|
$
|
528,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
11,095
|
|
|
$
|
9,783
|
|
|
$
|
37,863
|
|
|
$
|
25,977
|
|
|
$
|
28,423
|
|
South and Central America
|
|
|
3,622
|
|
|
|
412
|
|
|
|
5,042
|
|
|
|
12,083
|
|
|
|
12,975
|
|
Europe
|
|
|
9,036
|
|
|
|
6,920
|
|
|
|
30,630
|
|
|
|
29,374
|
|
|
|
17,309
|
|
West Africa
|
|
|
2,408
|
|
|
|
2,071
|
|
|
|
5,632
|
|
|
|
5,891
|
|
|
|
1,101
|
|
Southeast Asia
|
|
|
1,089
|
|
|
|
707
|
|
|
|
4,800
|
|
|
|
4,002
|
|
|
|
2,386
|
|
Other International
|
|
|
1,106
|
|
|
|
1,227
|
|
|
|
7,549
|
|
|
|
2,879
|
|
|
|
1,724
|
|
EH Centralized Operations
|
|
|
5,460
|
|
|
|
(1,286
|
)
|
|
|
437
|
|
|
|
(4,441
|
)
|
|
|
2,324
|
|
Curtailment gain allocated to
Helicopter Services(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
33,816
|
|
|
|
19,834
|
|
|
|
91,953
|
|
|
|
75,765
|
|
|
|
86,607
|
|
Production Management Services
|
|
|
1,413
|
|
|
|
1,320
|
|
|
|
5,327
|
|
|
|
3,907
|
|
|
|
2,514
|
|
Gain on disposal of assets
|
|
|
998
|
|
|
|
592
|
|
|
|
102
|
|
|
|
8,039
|
|
|
|
3,943
|
|
Corporate
|
|
|
(5,167
|
)
|
|
|
(6,701
|
)
|
|
|
(23,587
|
)
|
|
|
(10,103
|
)
|
|
|
(5,639
|
)
|
Curtailment gain allocated to
Corporate(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
31,060
|
|
|
|
15,045
|
|
|
|
73,795
|
|
|
|
77,608
|
|
|
|
88,725
|
|
Earnings from unconsolidated
affiliates
|
|
|
1,559
|
|
|
|
46
|
|
|
|
6,758
|
|
|
|
9,600
|
|
|
|
11,039
|
|
Interest income
|
|
|
1,290
|
|
|
|
1,032
|
|
|
|
4,159
|
|
|
|
3,188
|
|
|
|
1,689
|
|
Interest expense
|
|
|
(3,236
|
)
|
|
|
(3,708
|
)
|
|
|
(14,689
|
)
|
|
|
(15,665
|
)
|
|
|
(16,829
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,205
|
)
|
Other income (expense), net
|
|
|
(4,785
|
)
|
|
|
2,783
|
|
|
|
4,612
|
|
|
|
(1,126
|
)
|
|
|
(7,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
25,888
|
|
|
|
15,198
|
|
|
|
74,635
|
|
|
|
73,605
|
|
|
|
70,609
|
|
Provision for income taxes
|
|
|
(8,543
|
)
|
|
|
(3,176
|
)
|
|
|
(16,607
|
)
|
|
|
(21,835
|
)
|
|
|
(19,402
|
)
|
Minority interest
|
|
|
(116
|
)
|
|
|
(50
|
)
|
|
|
(219
|
)
|
|
|
(210
|
)
|
|
|
(1,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,229
|
|
|
$
|
11,972
|
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin:(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
16.6
|
%
|
|
|
18.7
|
%
|
|
|
16.6
|
%
|
|
|
14.5
|
%
|
|
|
16.5
|
%
|
South and Central America
|
|
|
27.4
|
%
|
|
|
4.1
|
%
|
|
|
11.3
|
%
|
|
|
22.5
|
%
|
|
|
24.7
|
%
|
Europe
|
|
|
12.7
|
%
|
|
|
11.7
|
%
|
|
|
12.6
|
%
|
|
|
13.1
|
%
|
|
|
8.2
|
%
|
West Africa
|
|
|
7.6
|
%
|
|
|
8.0
|
%
|
|
|
5.2
|
%
|
|
|
6.2
|
%
|
|
|
1.4
|
%
|
Southeast Asia
|
|
|
6.4
|
%
|
|
|
5.1
|
%
|
|
|
7.8
|
%
|
|
|
7.5
|
%
|
|
|
5.5
|
%
|
Other International
|
|
|
12.4
|
%
|
|
|
16.2
|
%
|
|
|
21.4
|
%
|
|
|
13.5
|
%
|
|
|
15.9
|
%
|
EH Centralized Operations
|
|
|
37.9
|
%
|
|
|
(10.4
|
)%
|
|
|
0.8
|
%
|
|
|
(7.9
|
)%
|
|
|
3.2
|
%
|
Total Helicopter Services
|
|
|
16.4
|
%
|
|
|
12.0
|
%
|
|
|
13.0
|
%
|
|
|
12.2
|
%
|
|
|
15.1
|
%
|
Production Management Services
|
|
|
8.0
|
%
|
|
|
7.8
|
%
|
|
|
7.8
|
%
|
|
|
6.6
|
%
|
|
|
5.0
|
%
|
Consolidated total
|
|
|
14.1
|
%
|
|
|
8.3
|
%
|
|
|
9.6
|
%
|
|
|
11.5
|
%
|
|
|
14.4
|
%
|
44
|
|
|
(1) |
|
Includes reimbursable revenue of $62.9 million,
$53.6 million and $52.2 million for the fiscal years
ended March 31, 2006, 2005 and 2004, and $23.3 million
and $14.1 million for the first quarter fiscal year 2007
and the first quarter fiscal year 2006, respectively. |
|
(2) |
|
Includes reimbursable revenue of $17.3 million,
$11.1 million and $6.7 million for the fiscal years
ended March 31, 2006, 2005 and 2004, and $3.9 million
and $4.6 million for the first quarter fiscal year 2007 and
the first quarter fiscal year 2006, respectively. |
|
(3) |
|
Operating expenses include depreciation and amortization in the
following amounts for the periods presented: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
4,182
|
|
|
$
|
4,099
|
|
|
$
|
16,899
|
|
|
$
|
14,953
|
|
|
$
|
12,693
|
|
South and Central America
|
|
|
455
|
|
|
|
538
|
|
|
|
2,064
|
|
|
|
2,110
|
|
|
|
2,516
|
|
Europe
|
|
|
128
|
|
|
|
135
|
|
|
|
497
|
|
|
|
507
|
|
|
|
505
|
|
West Africa
|
|
|
301
|
|
|
|
291
|
|
|
|
1,707
|
|
|
|
1,132
|
|
|
|
1,114
|
|
Southeast Asia
|
|
|
85
|
|
|
|
(49
|
)
|
|
|
341
|
|
|
|
294
|
|
|
|
231
|
|
Other International
|
|
|
504
|
|
|
|
469
|
|
|
|
1,936
|
|
|
|
1,478
|
|
|
|
666
|
|
EH Centralized Operations
|
|
|
4,555
|
|
|
|
4,757
|
|
|
|
18,521
|
|
|
|
19,917
|
|
|
|
21,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
10,210
|
|
|
|
10,240
|
|
|
|
41,965
|
|
|
|
40,391
|
|
|
|
39,178
|
|
Production Management Services
|
|
|
47
|
|
|
|
50
|
|
|
|
196
|
|
|
|
194
|
|
|
|
166
|
|
Corporate
|
|
|
26
|
|
|
|
17
|
|
|
|
95
|
|
|
|
108
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
10,283
|
|
|
$
|
10,307
|
|
|
$
|
42,256
|
|
|
$
|
40,693
|
|
|
$
|
39,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
See discussion of the curtailment gain under
Fiscal Year 2005 Compared to Fiscal Year
2004 Curtailment Gain. |
|
(5) |
|
Operating margin is calculated as gross revenues less operating
expenses divided by gross revenues. |
First
Quarter Fiscal Year 2007 Compared to First Quarter Fiscal Year
2006
Set forth below is a discussion of operations of our segments
and business units. Our consolidated results are discussed under
Executive Overview Overview of Operating
Results above.
Helicopter
Services
Gross revenue for Helicopter Services increased to
$206.3 million, an increase of 24.4%, for the first quarter
fiscal year 2007 from $165.9 million for the first quarter
fiscal year 2006, and operating expense increased to
$172.5 million, an increase of 18.1%, from
$146.1 million for the first quarter fiscal year 2006. This
resulted in an operating margin of 16.4% for the first quarter
fiscal year 2007 compared to 12.0% for the first quarter fiscal
year 2006. Helicopter Services results are further explained
below by business unit.
North
America
Gross revenue for North America increased to $66.8 million
for the first quarter fiscal year 2007 from $52.4 million
for the first quarter fiscal year 2006, and flight activity
increased by 13.5%. The increase in gross revenue is due to an
increase in the number of aircraft on
month-to-month
contracts for the first quarter fiscal year 2007 (as is
reflected in the increase in flight activity), 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 is
being phased in beginning in March 2006), and an increase in
fuel surcharges we billed to our customers as a result of fuel
price increases.
45
Operating expense for North America increased to
$55.7 million for the first quarter fiscal year 2007 from
$42.7 million for the first quarter fiscal year 2006. The
increase was primarily due to higher labor costs associated with
the increase in flight activity and from the adoption of the new
equity compensation accounting standard in the first quarter
fiscal year 2007, costs incurred in the first quarter fiscal
year 2007 related to the DOJ investigation (see Internal
Review, Restatement, Governmental Investigations and Internal
Control Document Subpoena from U.S. Department
of Justice below for further discussion), and higher fuel
costs associated with both the increase in flight activity and a
higher average cost per gallon. We are generally able to recover
fuel costs increases from our customers. Our operating margin
for North America decreased to 16.6% for the first quarter
fiscal year 2007 from 18.7% for the first quarter fiscal year
2006 primarily due to the increase in labor costs and costs
related to the DOJ investigation.
South and
Central America
Gross revenue for South and Central America increased to
$13.2 million for the first quarter fiscal year 2007 from
$10.0 million for the first quarter fiscal year 2006
primarily due to a 15.5% increase in flight activity in Trinidad
and revenue recognized in the first quarter fiscal year 2007
upon receipt of cash from our joint venture in Mexico. Flight
activity increased in Trinidad as a result of the addition of an
aircraft in this market and the addition of a new contract in
this market in November 2005. In Mexico, the contract with
Petróleos Mexicanos (PEMEX) concluded in
February 2005. As a result, our 49% owned unconsolidated
affiliates, Hemisco Helicopters International, Inc. and
Heliservicio Campeche S.A. de C.V. (Heliservicio,
and collectively, HC), experienced difficulties
during fiscal year 2006 in meeting their obligations to make
lease rental payments to us and to another one of our
unconsolidated affiliates, Rotorwing Leasing Resources, L.L.C.
(RLR). During fiscal year 2006, RLR and we made a
determination that because of the uncertainties as to
collectibility, lease revenues from HC would be recognized as
they were collected. As of June 30, 2006, $1.0 million
of revenues 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 $2.6 million for
revenues billed but not collected from HC. During the first
quarter fiscal year 2007, we recognized revenue of
$0.8 million upon receipt of payment from HC for amounts
billed in fiscal year 2006.
Operating expense for South and Central America totaled
$9.6 million for both the first quarter fiscal year 2007
and the first quarter fiscal year 2006. Operating expense
increased in Trinidad as a result of the increase in flight
activity in that market, which was fully offset by lower
operating expense in other markets. The largest of these
decreases was noted in Mexico, where overall flight activity has
declined due to the conclusion of the PEMEX contract. As a
result of the increase in gross revenue while operating expense
was unchanged, the operating margin for this business unit
increased significantly to 27.4% for the first quarter fiscal
year 2007 from 4.1% for the first quarter fiscal year 2006.
Since the conclusion of the PEMEX contract in February 2005, we
have taken several actions to improve the financial condition
and profitability of HC, including relocating several aircraft
to other markets, restructuring our profit sharing arrangement
with our partner, and completing a recapitalization of
Heliservicio on August 19, 2005. We also are exploring
markets in which to redeploy aircraft that are currently
operating on an ad hoc basis in Mexico. In first quarter fiscal
year 2007, Heliservicio was awarded a two-year contract by
PEMEX. Under this contract, Heliservicio will provide and
operate three medium helicopters in support of PEMEXs oil
and gas operations. 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.
We are negotiating the termination of our ownership interest in
the joint venture that operates in Brazil. Nevertheless, upon
such termination, we anticipate that we will lease additional
aircraft to helicopter service operations in Brazil. To the
extent that we are not able to continue such leases, we expect
to experience a substantial reduction in business activity in
Brazil in future periods.
46
Europe
Gross revenue for Europe increased to $71.4 million for the
first quarter fiscal year 2007 from $59.2 million for the
first quarter fiscal year 2006, primarily as a result of a 4.5%
increase in flight activity. The majority of the increase in
flight hours related to the start of a new contract within the
North Sea that commenced in July 2005.
Operating expense for Europe increased to $62.4 million for
the first quarter fiscal year 2007 from $52.3 million for
the first quarter fiscal year 2006 primarily due to an increase
in activity in the North Sea, higher fuel rates and the impact
of additions in personnel and salary increases in the first
quarter fiscal year 2007 compared to the first quarter fiscal
year 2006. We are generally able to recover fuel cost increases
from our customers. As a result of the increase in gross
revenue, operating margin for Europe increased to 12.7% for the
first quarter fiscal year 2007 from 11.7% for the first quarter
fiscal year 2006.
In January 2005, we were awarded two contracts to provide
helicopter services in the North Sea. The first is a seven-year
contract that began on July 1, 2005 and is for a total of
two large and four medium aircraft. The second contract is a
five-year contract that began on April 1, 2005 and utilizes
two large aircraft.
In December 2005, we were informed that we were not awarded the
contract extension commencing in mid-2007 to provide search and
rescue services using seven
S-61
aircraft and operate four helicopter bases for the U.K. Maritime
and Coastguard Agency (MCA). The MCA has the option
to extend our agreement through July 2009, and we expect that
the transition of work will take place, one base at a time, over
a period of at least one year. At the end of the agreement and
any transition period, we expect that we will either be able to
employ these aircraft for other customers or trade the aircraft
in as partial consideration towards the purchase of new
aircraft. We are currently evaluating our options related to
these aircraft. In the first quarter fiscal year 2007 and first
quarter fiscal year 2006, we had $4.1 million and
$2.2 million, respectively, in operating revenues
associated with this contract. In July 2006, we announced a
partnership with an unconsolidated affiliate of ours, FB
Heliservices Limited (FBH), and a third party,
Serco, through which we will form a team to seek to obtain the
future U.K.-wide search and rescue contract.
West
Africa
Gross revenue for West Africa increased to $31.7 million
for the first quarter fiscal year 2007 from $25.9 million
for the first quarter fiscal year 2006, primarily as a result of
a 6.5% increase in flight activity in Nigeria from the first
quarter fiscal year 2006, including additional ad hoc flying,
which generally earns higher rates.
Operating expense for West Africa increased to
$29.3 million for the first quarter fiscal year 2007 from
$23.8 million in the first quarter fiscal year 2006. The
increase was primarily as a result of higher salary expense due
to the increase in activity. We are currently involved in
negotiations with the unions in Nigeria and anticipate that we
will increase certain benefits for union personnel as a result
of these negotiations. We do not expect these benefit increases
to have a material impact on our results of operations.
Operating margin for West Africa decreased slightly to 7.6% in
the first quarter fiscal year 2007 from 8.0% in the first
quarter fiscal year 2006.
Additionally, we were awarded the renewal of a contract in
Nigeria with an international oil company in January 2005 for a
minimum of five medium aircraft. The contract term is for five
years beginning on April 1, 2005.
Approximately 14% of our gross revenue for the first quarter
fiscal year 2007 was derived from Nigeria. As a result of the
potential cancellation by customers of their contracts with us
resulting from the findings of the Internal Review (although
none have been cancelled as of the date of this prospectus), we
may experience a substantial reduction in business activity in
Nigeria in future periods. In May 2006, we extended our contract
with a major customer to March 31, 2008, under which we
will provide and operate two large and two medium helicopters.
The contract is not cancelable by the customer during the first
47
12 months and 180 days cancellation notice is required
in the second 12 months. We have commenced a reorganization
of our Nigerian operations, including consolidation of two
former 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. We expect this process to continue
for at least the remainder of fiscal year 2007, which may cause
our financial results to vary in future periods.
Southeast
Asia
Gross revenue for Southeast Asia increased to $17.0 million
in the first quarter fiscal year 2007 from $13.8 million
for the first quarter fiscal year 2006 primarily due to higher
revenue in Australia. Australias flight activity and
revenue increased 23.8% and 23.2%, respectively, from the first
quarter fiscal year 2006, primarily due to the utilization of an
additional large aircraft and more ad hoc flying.
Operating expense increased to $16.0 million for the first
quarter fiscal year 2007 from $13.1 million for the first
quarter fiscal year 2006 as a result of costs associated with
the mobilization of new aircraft to Australia and other costs
related to the increase of activity compared to the first
quarter fiscal year 2006. As a result of higher gross revenue
during the first quarter fiscal year 2007, operating margin
increased to 6.4% for the first quarter fiscal year 2007 from
5.1% for the first quarter fiscal year 2006.
Other
International
Gross revenue for Other International increased to
$9.0 million for the first quarter fiscal year 2007 from
$7.6 million for the first quarter fiscal year 2006
primarily due to increases in flight activity in Russia and
Turkmenistan, and improvement 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 $7.8 million for the first
quarter fiscal year 2007 from $6.4 million for the first
quarter 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
associated with the increased operating activity in this
business unit. As a result of the increase in general and
administrative costs discussed above, our operating margin for
Other International decreased to 12.4% for the first quarter
fiscal year 2007 from 16.2% for the first quarter fiscal year
2006.
EH
Centralized Operations
Gross revenue for EH Centralized Operations increased to
$14.4 million for the first quarter fiscal year 2007 from
$12.4 million for the first quarter fiscal year 2006 as a
result of increased parts sales and
out-of-pocket
costs rebilled to our customers in the first quarter fiscal year
2007 compared to the first quarter fiscal year 2006.
Operating expense decreased to $8.9 million for the first
quarter fiscal year 2007 from $13.7 million for the first
quarter fiscal year 2006 primarily due to lower maintenance
costs, which primarily relate to a high level of maintenance in
the first quarter fiscal year 2006 for a large aircraft that was
then in the process of being prepared for deployment to
Malaysia. As a result of higher gross revenue and the decrease
in operating expense, our operating margin for EH Centralized
Operations increased to 37.9% for the first quarter fiscal year
2007 from a negative 10.4% for the first quarter fiscal year
2006.
Production
Management Services
Gross revenue for our Production Management Services segment
increased to $17.7 million for the first quarter fiscal
year 2007, an increase of 4.1%, from $17.0 million for the
first quarter fiscal year 2006 primarily due to an increase in
labor revenue with the addition of several new contracts. We
also had additional billings to an existing customer beginning
in June 2006 for an additional helicopter provided to them under
contract. Operating expense increased to $16.3 million for
the first quarter fiscal year 2007 from
48
$15.6 million for the first quarter fiscal year 2006,
primarily due to an increase in costs associated with the
increase in activity. As a result of the increase in gross
revenue, our operating margin increased to 8.0% for the first
quarter fiscal year 2007 from 7.8% in the first quarter fiscal
year 2006.
General
and Administrative Costs
Consolidated general and administrative costs increased by
$0.4 million during the first quarter fiscal year 2007
compared to the first quarter fiscal year 2006. The increase is
primarily due to (1) the adoption of the new equity
compensation accounting rules during the first quarter fiscal
year 2007, (2) the addition of corporate personnel,
(3) cost increase in the first quarter fiscal year 2007
associated with the DOJ investigation and (4) an overall
increase in corporate general and administrative costs,
including additional legal fees. The increase in cost in the
first quarter fiscal year 2007 was partially offset by lower
costs incurred related to the Internal Review. As discussed in
Note 6 in the Condensed Notes to Consolidated
Financial Statements included elsewhere in this
prospectus, the adoption of the new equity compensation
accounting rules resulted in additional expense totaling
$0.4 million for the first quarter fiscal year 2007.
Professional fees in the first quarter fiscal year 2007 included
approximately $0.1 million and $0.6 million in
connection with the Internal Review and DOJ investigations,
respectively. Professional fees in the first quarter fiscal year
2006 included approximately $3.1 million and less than
$0.1 million in connection with the Internal Review and DOJ
investigations, respectively. Corporate general and
administrative costs are expected to increase over the remainder
of the current fiscal year related to additional corporate
personnel.
Earnings
from Unconsolidated Affiliates
Earnings from unconsolidated affiliates increased to
$1.5 million during the first quarter fiscal year 2007
compared to a negligible amount in the first quarter fiscal year
2006, primarily due to higher equity earnings from FBS Limited
(primarily resulting from an increase in activity and rates for
a manpower services contract, and a decrease in overhead costs
compared to the first quarter fiscal year 2006), and Norsk
(resulting from the acquisition of Lufttransport AS and
Lufttransport AB in June 2005 and from the addition of one new
large aircraft in the third quarter of fiscal year 2006), and
RLR (resulting from an increase in the amount of cash received
from HC during the first quarter fiscal year 2007 compared to
the first quarter fiscal year 2006, as HCs results have
improved as work lost upon completion of the PEMEX contract in
February 2005 has gradually been replaced).
Interest
Expense, Net
Interest expense, net of interest income, totaled
$1.9 million during the first quarter fiscal year 2007
compared to $2.7 million during the first quarter fiscal
year 2006. Interest expense for the first quarter fiscal year
2007 and first quarter fiscal year 2006 was reduced by
approximately $1.0 million and $0.5 million,
respectively, of capitalized interest. More interest was
capitalized in the first quarter fiscal year 2007 as a result of
the increase in capital expenditures discussed under
Liquidity and Capital Resources Cash
Flows Investing Activities below.
Other
Income (Expense), Net
Other income (expense), net, for the first quarter fiscal year
2007 was expense of $4.8 million compared to income of
$2.8 million for the first quarter fiscal year 2006, and
primarily represents foreign currency transaction gains and
losses. These gains and losses primarily arise from operations
performed by our U.K. consolidated affiliates, whose functional
currency is the British pound sterling, and from operations
which are outside the North Sea. These foreign currency
transaction gains and losses are attributable primarily to the
impact of changes in exchange rates on cash balances dominated
in U.S. dollars and intercompany loan balances that are not
permanently invested. Beginning in July 2006, we reduced a
portion of Bristow Helicopters
U.S. dollardenominated balances, and we have taken
other actions recently to further mitigate this foreign exchange
exposure. See Quantitative and Qualitative Disclosures
about Market Risk Foreign Currency Risk.
49
Taxes
Our effective income tax rates from continuing operations were
33.0% and 20.9% for the first quarter fiscal year 2007 and first
quarter fiscal year 2006, respectively. The significant variance
between the U.S. federal statutory rate and the effective
rate for the first quarter fiscal year 2006 was due primarily to
the impact of the reversals of reserves for tax contingencies of
$2.9 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. During the
first quarter fiscal year 2007, we had net reversals of reserves
for estimated tax exposures of $0.8 million. Reversals of
reserves at a level similar to that for the first quarter fiscal
year 2007 are expected to occur in each of the remaining
quarterly periods of fiscal year 2007. 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.
Fiscal
Year 2006 Compared to Fiscal Year 2005
Set forth below is a discussion of the results of operations of
our segments and business units. Our consolidated results are
discussed under Executive Overview
Overview of Operating Results above.
Helicopter
Services
Gross revenue for Helicopter Services increased to
$709.1 million, an increase of 14.2%, for fiscal year 2006
from $620.8 million for fiscal year 2005, and operating
expense increased to $617.1 million, an increase of 13.2%,
from $545.1 million for fiscal year 2005. This resulted in
an operating margin of 13.0% for fiscal year 2006 compared to
12.2% for fiscal year 2005. Helicopter Services results are
further explained below by business unit.
North
America
Gross revenue for North America increased to $228.6 million
for fiscal year 2006 from $179.0 million for fiscal year
2005 and flight activity increased by 20.3%. This increase in
gross revenue was due to: an increase in the number of aircraft
on
month-to-month
contracts for fiscal year 2006, as is reflected in the increase
in flight activity; the effect in fiscal year 2006 of an 8% rate
increase for the U.S. Gulf of Mexico that was phased in
beginning in May 2005 and, to a lesser extent, an additional 10%
rate increase for certain contracts that was effective on
March 1, 2006; and an increase in fuel surcharges as fuel
prices have increased.
Operating expense for North America increased to
$190.7 million for fiscal year 2006 from
$153.0 million for fiscal year 2005. The increase was
primarily due to an increase in maintenance and salary costs due
to increased flight activity and higher fuel costs associated
with both the increase in flight activity and a higher average
cost per gallon. In addition, direct costs for fiscal year 2006
include a $2.7 million charge related to obsolete inventory.
Operating margin for North America increased to 16.6% for fiscal
year 2006 from 14.5% for fiscal year 2005 primarily due to the
increase in rates discussed above.
South and
Central America
Gross revenue for South and Central America decreased to
$44.6 million for fiscal year 2006 from $53.7 million
for fiscal year 2005 due to a 13.5% reduction in flight activity
in Mexico and Brazil, offset in part by increased activity in
Trinidad. In Mexico, flight activity decreased 13.8% and revenue
decreased 55.5% during fiscal year 2006 compared to fiscal year
2005. The reduction in flight activity and revenue was due to
the conclusion of the contract with PEMEX in February 2005. For
fiscal year 2006, $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 $2.3 million for amounts billed but not collected from
HC. During the fourth fiscal quarter of 2006, we recognized
revenue of $3.9 million upon receipt of lease rental
payments from HC.
50
Brazils flight activity and revenue decreased 13.1% and
21.2%, respectively, due to the conclusion of contracts for two
aircraft, one in August 2004 and the other in October 2004.
Operating expense for South and Central America decreased in
fiscal year 2006 to $39.5 million from $41.6 million
for fiscal year 2005 primarily due to decreased maintenance
expense resulting from the decrease in flight activity from
fiscal year 2005. As a result of the decrease in gross revenue,
the operating margin for this business unit decreased to 11.3%
for fiscal year 2006 from 22.5% for fiscal year 2005.
Europe
Gross revenue for Europe increased to $242.9 million for
fiscal year 2006 from $223.7 million for fiscal year 2005.
The $19.2 million increase in gross revenue for Europe is
net of a $7.2 million decrease relating to foreign exchange
effects for fiscal year 2006. Excluding this effect, the
increase in gross revenue primarily relates to an 8.7% increase
in flight activity related to the start of one new contract in
the North Sea, which commenced in April 2005.
Operating expense for Europe were $212.3 million for fiscal
year 2006 compared to $194.3 million for fiscal year 2005.
The $18.0 million increase in operating expense for Europe
is net of a $6.3 million decrease relating to foreign
exchange effects for fiscal year 2006. Excluding this effect,
the increase in operating expense primarily relates to an
increase in maintenance costs and salaries resulting from the
increase in flight activity in our North Sea operations, and
higher fuel rates. Salaries also increased during fiscal year
2006. The operating margin in Europe decreased slightly to 12.6%
for fiscal year 2006 from 13.1% for fiscal year 2005.
West
Africa
Gross revenue for West Africa increased to $107.4 million
for fiscal year 2006 from $94.4 million for fiscal year
2005 primarily as a result of a 7.1% increase in flight
activity. This increase in flight activity primarily related to
an increase in drilling activity by two customers in Nigeria,
which resulted in higher demand for our services.
Operating expense for West Africa increased in fiscal year 2006
to $101.8 million from $88.5 million in fiscal year
2005. The increase was primarily attributable to increased
salary costs, increased aircraft hire costs due to increased
activity, and a general increase in local operating costs and
overhead. The operating margin for West Africa decreased to 5.2%
for fiscal year 2006 from 6.2% for fiscal year 2005 as a result
of the increase in costs.
Approximately 14% of our total gross revenue for fiscal year
2006 were derived from Nigeria.
Southeast
Asia
Gross revenue for Southeast Asia increased to $61.2 million
for fiscal year 2006 from $53.0 million for fiscal year
2005. The higher revenue resulted from increased flight activity
primarily in Australia. Australias flight activity and
revenue increased 9.9% and 21.4%, respectively, from fiscal year
2005 primarily due to the utilization of an additional large
aircraft and more ad hoc flying. Chinas flight activity
and revenue for fiscal year 2006 decreased 14.2% and 19.4%,
respectively, from fiscal year 2005 primarily due to having one
less aircraft on contract, which was relocated to Malaysia
during the year.
Operating expense increased to $56.4 million for fiscal
year 2006 from $49.0 million for fiscal year 2005 as a
result of higher salaries, maintenance costs and fuel costs
associated with the increase in flight activity in Australia. As
a result of higher gross revenue during fiscal year 2006,
operating margin increased to 7.8% for fiscal year 2006 from
7.5% for fiscal year 2005. Operating expenses for Southeast Asia
increased at a higher rate than revenues primarily due to costs
associated with the addition of new bases in Australia during
fiscal year 2006.
51
Other
International
Gross revenue for Other International increased to
$35.3 million for fiscal year 2006 from $21.3 million
for fiscal year 2005. The increase in revenue was primarily due
to increased flight activity, which nearly doubled. The
increased flight activity was noted primarily in Russia, where
we had our first full year of operations since the July 2004
acquisition of Bristow Aviations interest in Aviashelf.
Revenue also increased in Turkmenistan and Mauritania during
fiscal year 2006. The increase in Turkmenistan resulted from the
addition of one aircraft on an eight-month contract during
fiscal year 2006. The increase in Mauritania resulted from a new
contract for two medium aircraft that commenced in September
2004.
Operating expense for Other International increased to
$27.8 million for fiscal year 2006 from $18.5 million
for fiscal year 2005. The increase in operating expense is
primarily due to higher salary and maintenance costs and
increased activity throughout our Other International locations.
However, as a result of the higher revenue, our operating margin
for Other International improved to 21.4% for fiscal year 2006
from 13.5% for fiscal year 2005.
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 companies, Bristow Aviation purchased
two large twin-engine helicopters and two fixed-wing aircraft,
for an aggregate purchase price of $10.7 million. The
acquisition was accounted for under the purchase method, and we
have consolidated the results of Aviashelf from the date of
acquisition. The acquisition was financed with $2.0 million
of existing cash and the assumption of $8.7 million in
debt. The purchase price was allocated to the assets and
liabilities acquired based upon estimated fair values. No
goodwill was recorded. The pro forma effect on operations of the
acquisition as of the beginning of the periods presented was not
material to our consolidated statements of income.
EH
Centralized Operations
Gross revenue for EH Centralized Operations decreased slightly
to $54.9 million for fiscal year 2006 from
$56.2 million for fiscal year 2005. Gross revenue for
technical services in the U.K. provided to third parties
decreased to $6.2 million for fiscal year 2006 from
$14.4 million for fiscal year 2005 due to the downsizing of
our technical services operations in the U.K. in fiscal year
2005. The decrease was partially offset by an increase in lease
revenue for aircraft leased to unconsolidated affiliates and an
increase in reimbursable revenue primarily related to billing
for staff and other associated costs to FBH during fiscal year
2006 after the transfer of technical services contracts to that
entity.
Operating expense for EH Centralized Operations decreased to
$54.5 million for fiscal year 2006 from $60.6 million
for fiscal year 2005 as a result of a decrease in salary expense
resulting from the downsizing of our technical services
operations in the U.K. The operating margin for EH Centralized
Operations improved to 0.8% for fiscal year 2006 from a negative
7.9% for fiscal year 2005 due to the decrease in operating
expense as a result of the reduction in costs associated with
the downsizing of our technical services operations.
In November 2004, we sold certain contracts held by one of our
technical services subsidiaries to an existing joint venture.
The remaining operations of the subsidiary were downsized by
ceasing to perform certain services for third parties that had
generated poor financial results during the prior two years. As
a result of the downsizing, we reduced staffing levels by 80
positions in our Europe business unit over a nine-month period
ended on December 31, 2004. Approximately $3.1 million
in severance costs and approximately $76,000 in other related
costs have been incurred as of March 31, 2006.
Production
Management Services
Gross revenue from our Production Management Services segment
increased to $68.2 million, an increase of 15.6%, for
fiscal year 2006 from $59.0 million for fiscal year 2005,
primarily due to higher costs
52
for marine vessels resulting from the hurricanes in fiscal year
2006 (which were passed on to our customers), and an overall
increase in transportation activity resulting from an increase
in the number of properties under management. Operating expenses
increased to $62.8 million for fiscal year 2006 from
$55.1 million for fiscal year 2005, primarily due to the
higher cost for marine vessels and an overall increase in
transportation and labor costs associated with the increase in
activity. As a result of the higher revenue, our operating
margin increased to 7.8% for fiscal year 2006 from 6.6% for
fiscal year 2005.
General
and Administrative Costs
Consolidated general and administrative costs increased by
$16.7 million during fiscal year 2006. The increase was
primarily due to higher professional fees, offset in part by
$1.1 million of restructuring charges for our U.K.
operations that are included within fiscal year 2005.
Professional fees in fiscal year 2006 included approximately
$10.5 million and $2.6 million in connection with the
Internal Review and DOJ investigations, respectively.
Professional fees in fiscal year 2005 included approximately
$2.2 million in connection with the Internal Review.
Professional fees also increased during fiscal year 2006 as a
result of costs associated with the relocation of our offices to
Houston and the bond holder consent process (see discussion in
Note 5 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus). Legal
costs related to the investigations are expected to continue in
the next fiscal year, but to a lesser extent. Also, corporate
general and administrative costs are expected to increase over
the next fiscal year related to additional corporate personnel
and adoption of the new equity compensation accounting rules.
Earnings
from Unconsolidated Affiliates
Earnings from unconsolidated affiliates decreased by
$2.8 million during fiscal year 2006, primarily due a
decrease in operating results for our unconsolidated affiliates
in Mexico resulting from a decline in activity as a result of
the completion of the PEMEX contract previously discussed. The
decrease was partially offset by higher equity earnings from
Norsk resulting from the acquisition of Lufttransport AS and
Lufttransport AB in the first quarter of fiscal year 2006 and
from the addition of one new large aircraft in the third quarter
of fiscal year 2006.
Interest
Expense, Net
Interest expense, net, decreased by $1.9 million during
fiscal year 2006. Approximately $1.0 million of this
decrease resulted from an increase in interest income resulting
from higher cash balances and investment returns during fiscal
year 2006. Interest expense for fiscal years 2006 and 2005 was
reduced by approximately $2.4 million and
$1.3 million, respectively, of capitalized interest.
Other
Income (Expense), Net
Other income (expense), net, for fiscal year 2006 was income of
$4.6 million compared to expense of $1.1 million for
fiscal year 2005, and primarily reflects foreign currency
transaction gains and losses. These gains and losses primarily
arise from operations performed by our U.K. subsidiaries, whose
functional currency is the British pound sterling, and which are
outside of the North Sea. The income for fiscal year 2006 was
partially offset by an impairment charge of $1.0 million
recorded in the third quarter of fiscal year 2006 related to our
investment in Aeroleo in Brazil (see further discussion in
Note 3 in the Notes to Consolidated Financial
Statements included elsewhere in this prospectus).
Taxes
Our effective income tax rates from continuing operations were
22.3% and 29.7% for fiscal years 2006 and 2005, respectively.
The variance between the U.S. federal statutory rate and
the effective rate for these periods was due primarily to the
impact of the reversals of reserves for tax contingencies of
$11.4 million and $3.7 million in fiscal years 2006
and 2005, respectively, as a result of our evaluation of the
need for such reserves in light of the expiration of the related
statutes of limitations in these years. Similar reversals
53
of reserves are expected to occur in the next year, but to a
more limited extent. Our effective tax rate was also impacted 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.
Fiscal
Year 2005 Compared to Fiscal Year 2004
Set forth below is a discussion of the results of operations of
our segments and business units. Our consolidated results are
discussed under Executive Overview
Overview of Operating Results above.
Helicopter
Services
Gross revenue from Helicopter Services increased to
$620.8 million, an increase of 8.4%, during fiscal year
2005 and operating expense increased 12.2% to
$545.1 million from $485.9 million. This resulted in
an operating margin of 12.2% for fiscal year 2005 as compared to
15.1% for fiscal year 2004. Operating income in fiscal year 2004
included a $21.7 million curtailment gain. Helicopter
Services results are further explained below by business unit.
North
America
Gross revenue for North America increased by 4.0% in fiscal year
2005 as compared to the prior fiscal year while flight activity
decreased by 4.1%. Revenue increased despite a decrease in
flight hours as a result of the full impact in fiscal year 2005
of a 7% rate increase for the U.S. Gulf of Mexico that was
phased in throughout fiscal year 2004, and an increase in ad hoc
flights for hurricane evacuations during the quarter ended
September 30, 2005.
Operating expense from North America increased to
$153.0 million for fiscal year 2005 from
$143.7 million for fiscal year 2004. The increase in
operating expense was primarily in salary costs and additional
depreciation expense. Depreciation expense for fiscal year 2005
was $15.0 million, or 18.1% higher than for fiscal year
2004, primarily due to additional aircraft added to the fleet.
The increase in depreciation expense was offset in part by a
$3.2 million decrease resulting from a change in salvage
value and useful lives on certain aircraft types. As a result of
higher operating expense, our operating margin for North America
decreased to 14.5% for fiscal year 2005 from 16.5% for fiscal
year 2004.
South and
Central America
Gross revenue for South and Central America increased slightly
to $53.7 million for fiscal year 2005 from
$52.6 million for fiscal year 2004, primarily due to rate
increases in both November 2003 and November 2004 on a contract
with our largest customer in Trinidad, which was partially
offset by lower revenue for our Mexico operations primarily
resulting from the loss of the PEMEX contract in February 2005
and an overall reduction in the number of aircraft that we owned
and operated in fiscal year 2005 compared to fiscal year 2004.
Operating expense for South and Central America increased in
fiscal year 2005 to $41.6 million from $39.6 million
for fiscal year 2004. The increase was primarily related to
costs associated with the addition of staff in Trinidad and the
related costs of training and housing these employees. The
operating margin in South and Central America decreased to 22.5%
for fiscal year 2005 from 24.7% for fiscal year 2004 as a result
of the increase in operating expense.
Europe
Gross revenue for Europe increased in fiscal year 2005 to
$223.7 million from $211.5 million for fiscal year
2004. The $12.2 million increase in gross revenue was due
to an $18.8 million increase attributable to foreign
exchange effects. Excluding the foreign exchange effects, gross
revenue for Europe decreased 3.1% in fiscal year 2005 primarily
due to lower flight activity compared to fiscal year 2004.
54
Operating expense for Europe increased by $0.1 million in
fiscal year 2005. Included in operating expense for Europe is
$17.2 million attributable to foreign exchange effects.
Excluding the foreign exchange effects, operating expense
decreased 8.8% in fiscal year 2005. This decrease was primarily
in salary costs due to the restructuring of operations in the
North Sea and the amendment of the pension plan in February
2004. The operating margin in Europe increased to 13.1% for
fiscal year 2005 from 8.2% for fiscal year 2004.
West
Africa
Gross revenue from West Africa increased in fiscal year 2005 to
$94.4 million from $77.2 million in fiscal year 2004.
Nigerias flight activity and gross revenue increased 6.1%
and 22.1%, respectively, during fiscal year 2005 primarily due
to the addition of two medium aircraft in November 2003 and two
large and one medium aircraft in April 2004. The increase in
revenue significantly exceeded the increase in flight activity
as a result of a favorable change in the mix of aircraft.
Nigeria accounted for approximately 14.3% of our gross revenue
for fiscal year 2005.
Operating expense for West Africa increased in fiscal year 2005
to $88.5 million from $76.1 million for fiscal year
2004. The increase was primarily due to higher salary and
maintenance expense due to the increase in activity. The
operating margin in West Africa increased to 6.2% for fiscal
year 2005 from 1.4% for fiscal year 2004 as a result of the
increase in gross revenue.
Southeast
Asia
Gross revenue for Southeast Asia increased in fiscal year 2005
to $53.0 million from $43.3 million for fiscal year
2004, primarily as a result of increased flight activity and
gross revenue in Australia. Australias flight activity and
gross revenue increased 15.8% and 34.5%, respectively, primarily
due to a
15-month
contract that began in July 2004 and higher ad hoc flying for
fiscal year 2005. Australia accounted for approximately 81.4% of
gross revenue for Southeast Asia during fiscal year 2005.
Operating expense for Southeast Asia increased to
$49.0 million in fiscal year 2005 from $40.9 million
for fiscal year 2004. As a result of higher gross revenue in
fiscal year 2005, the operating margin increased to 7.5% for
fiscal year 2005 from 5.5% for fiscal year 2004.
Other
International
Gross revenue for Other International increased to
$21.3 million in fiscal year 2005 from $10.8 million
for fiscal year 2004, primarily resulting from the acquisition
of our operation in Russia in July 2004, which contributed
$7.3 million in revenue during fiscal year 2005.
Operating expense for Other International increased to
$18.5 million in fiscal year 2005 from $9.1 million
for fiscal year 2004 as a result of the increased activity in
Mauritania, Russia and Turkmenistan. As a result of this
increase in costs, our operating margin for Other International
declined to 13.5% for fiscal year 2005 from 15.9% for fiscal
year 2004.
EH
Centralized Operations
Gross revenue for EH Centralized Operations decreased to
$56.2 million in fiscal year 2005 from $72.2 million
for fiscal year 2004 primarily due to a restructuring of our
technical service business in the U.K. and the sale of certain
contracts to FBH in November 2004.
Operating expense for EH Centralized Operations decreased to
$60.6 million in fiscal year 2005 from $69.9 million
for fiscal year 2004 primarily due to the reduction in activity
associated with the restructuring and contract sale offset in
part by severance costs of $2.8 million recorded in fiscal
year 2005 related to downsizing of our U.K. technical services
business. For these reasons, the operating margin for EH
Centralized Operations decreased to 7.9% loss for fiscal year
2005 from a 3.2% profit for fiscal year 2004.
55
Production
Management Services
Gross revenue from the Production Management Services business
increased to $59.0 million, an increase of 18.5%, in fiscal
year 2005 from $49.8 million in fiscal year 2004 primarily
due to increased activity with a major customer that needed
additional production management services. Operating expense
increased to $55.1 million, or 16.5%, in fiscal year 2005
from $47.3 million in fiscal year 2004 primarily due to
higher labor and helicopter transportation costs. As a result of
the higher revenue, our operating margin increased to 6.6% from
5.0% in fiscal year 2004.
General
and Administrative Costs
Consolidated general and administrative costs increased by
$6.4 million for fiscal year 2005 primarily due to an
increase in compensation costs and higher professional fees,
partially offset by a decrease in restructuring charges for our
North Sea operations. Restructuring charges for our operations
in the North Sea in fiscal years 2005 and 2004 were
approximately $1.1 million and $3.1 million,
respectively. Professional fees in the fiscal year 2005 included
fees of $2.2 million incurred in connection with the
investigation by outside counsel of activities related to the
Internal Review. Additionally, professional fees in fiscal year
2005 included costs associated with an executive search,
Sarbanes Oxley compliance initiatives and other projects
requiring consulting services.
Curtailment
Gain
In January 2004, we amended our defined benefit pension plan
covering certain United Kingdom and other overseas employees.
The amendment, which was effective February 1, 2004,
essentially removed the defined benefit feature for a
participants future services and replaced it with a
defined contribution arrangement. Under the new defined
contribution feature, we contribute a maximum of 7.35% of a
participants non-variable salary to a defined contribution
section of the plans. The participant is required to contribute
a minimum of 5% of non-variable salary for us to match the
contribution. Participants were also given the option to
transfer out of the plan. The net impact on our statement of
income as a result of these changes was a reduction in pension
expense of approximately £1.4 million
($2.6 million) for our fourth quarter of fiscal year 2004.
The above change to the plans constitutes a
curtailment of benefits and, accordingly, all
previously deferred service gains or losses are immediately
recognized in the statement of income. At the date of the 2004
amendment, we had a deferred prior service gain of
£11.9 million ($21.7 million), or $0.65 per
diluted share, related to prior plan amendments, which was
recognized as a curtailment gain in fiscal year 2004.
Earnings
from Unconsolidated Affiliates
Earnings from unconsolidated affiliates decreased in fiscal year
2005 by $1.4 million primarily due to a decrease in
dividends received from investments accounted for under the cost
method of accounting. The decrease in dividends received was
primarily related to a reduction in dividends from our Mexico
joint venture, which experienced a decline in activity as a
result of the completion of the PEMEX contract previously
discussed.
Interest
Expense, Net
Interest expense, net, decreased in fiscal year 2005 by
$2.7 million from fiscal year 2004. Approximately
$1.2 million of this decrease resulted from lower interest
expense during fiscal year 2005 caused by the refinancing of our
6% Convertible Subordinated Notes and
77/8% Senior
Notes with the issuance
61/8% Senior
Notes during fiscal year 2004 and an increase in interest income
of $1.5 million resulting from higher cash balances and
investment returns in fiscal year 2005. Interest expense in
fiscal years 2005 and 2004 was offset by approximately
$1.3 million and $1.2 million, respectively, of
capitalized interest.
56
Loss
on extinguishment of debt
In fiscal year 2005, no loss on extinguishment of debt was
recognized, compared to a recognized loss on extinguishment of
debt of $6.2 million in fiscal year 2004. The loss in
fiscal year 2004 related to the redemption on July 29, 2003
of our 6% Convertible Subordinated Notes and our
77/8% Senior
Notes. Approximately $4.7 million of the loss in fiscal
year 2004 pertained to the payment of redemption premiums and
$1.5 million pertained to the write-off of unamortized debt
issuance costs related to the 6% Convertible Subordinated
Notes and
77/8% Senior
Notes.
Other
Income (Expense), Net
Other expense in fiscal year 2005 was $1.1 million compared
to other expense of $7.8 million in fiscal year 2004 and
primarily represents foreign currency transaction gains and
losses. The weakening of the U.S. dollar against the
British pound is the primary reason for the losses.
Taxes
Our effective income tax rates from continuing operations were
29.7% and 27.5% for fiscal years 2005 and 2004, respectively.
The variance between the U.S. federal statutory rate and
the effective rate reflects the impact of the reversal of
reserves for tax contingencies of $3.7 million and
$3.5 million in fiscal years 2005 and 2004, respectively,
in connection with the expiration of the related statutes of
limitations. The effective tax rate for both fiscal year 2005
and 2004 was also impacted by the permanent reinvestment outside
the U.S. of foreign earnings, upon which no U.S. tax
has been provided, and the amount of our foreign source income
and our ability to realize foreign tax credits.
Liquidity
and Capital Resources
Cash
Flows
Operating
Activities
Net cash flows provided by operating activities were
$39.3 million, $104.5 million and $83.3 million
for fiscal years 2006, 2005 and 2004, respectively. Net cash
flows provided by operating activities totaled
$32.2 million during the first quarter fiscal year 2007
compared to net cash used in operating activities of
$9.8 million during the first quarter fiscal year 2006.
During the first quarter fiscal year 2007, changes in non-cash
working capital provided $3.4 million in cash flows from
operating activities compared to $30.9 million in cash
flows used in operating activities for the first quarter fiscal
year 2006. In addition, cash flows from operating activities
improved due to the improvement in net income during first
quarter fiscal year 2007.
The decrease in net cash provided by operations between fiscal
years 2006 and 2005 was primarily due to cash used to fund
working capital requirements in fiscal year 2006 resulting from
the expansion of our business through purchases of additional
aircraft and increases in flight hours from our existing
aircraft fleet. These requirements are likely to continue in the
future as we expand our fleet further. In addition, operating
cash flow declined due to a decrease of $10.1 million in
dividends in excess of earnings from unconsolidated affiliates.
Net cash provided by operations increased in fiscal year 2005
over fiscal year 2004 due to an increase in dividends in excess
of earnings from unconsolidated affiliates of $14.9 million
and due to the increase in net income for fiscal year 2005 after
excluding the $21.7 million non-cash curtailment gain from
fiscal year 2004 net income.
Investing
Activities
Cash flows used in investing activities were $54.2 million,
$46.5 million and $62.6 million for fiscal years 2006,
2005 and 2004, respectively. Cash flows used in investing
activities were $44.3 million and
57
$27.7 million for the first quarter fiscal year 2007 and
the first quarter fiscal year 2006, respectively, primarily for
capital expenditures.
During the first quarter fiscal year 2007, the first quarter
fiscal year 2006 and fiscal years 2006, 2005 and 2004, cash was
used for capital expenditures and a portion was provided by
proceeds from asset dispositions. The following table presents
aircraft delivered and overall capital expenditures during these
periods:
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Three Months Ended
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Fiscal Year Ended
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June 30,
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March 31,
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2006
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2005
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2006
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2005
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2004
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Number of aircraft delivered:
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New:
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Small
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10
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|
|
|
8
|
|
|
|
2
|
|
Medium
|
|
|
2
|
|
|
|
1
|
|
|
|
9
|
|
|
|
10
|
|
|
|
7
|
|
Large
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total new aircraft
|
|
|
2
|
|
|
|
2
|
|
|
|
21
|
|
|
|
18
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
|
|
|
|
4
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Medium
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total used aircraft
|
|
|
|
|
|
|
4
|
|
|
|
5
|
|
|
|
1
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total aircraft
|
|
|
2
|
|
|
|
6
|
|
|
|
26
|
|
|
|
19
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures (in
thousands)
Aircraft and related equipment(1)
|
|
$
|
44,085
|
|
|
$
|
27,456
|
|
|
$
|
141,166
|
|
|
$
|
86,145
|
|
|
$
|
66,792
|
|
Other
|
|
|
2,797
|
|
|
|
2,674
|
|
|
|
13,096
|
|
|
|
3,878
|
|
|
|
1,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
46,882
|
|
|
$
|
30,130
|
|
|
$
|
154,262
|
|
|
$
|
90,023
|
|
|
$
|
67,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes expenditures financed with $3.2 million of
short-term notes during fiscal year 2006. |
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.
First Quarter Fiscal Year 2007 and First Quarter Fiscal Year
2006 During the first quarter fiscal year 2007,
we made final payments in connection with the delivery of two
medium aircraft and progress payments on the construction of new
aircraft to be delivered in future periods in conjunction with
our aircraft commitments (discussed below) totaling
$37.4 million. Also during the first quarter fiscal year
2007, we spent an additional $6.7 million to upgrade
aircraft within our existing aircraft fleet and to customize new
aircraft delivered for our operations. During the first quarter
fiscal year 2006, apart from payments made for new aircraft in
conjunction with our aircraft commitments, we purchased four
small aircraft for $5.1 million and paid deposits of
$7.3 million for three large aircraft.
During the first quarter fiscal year 2007, we received proceeds
of $2.6 million primarily from the disposal of five
aircraft, two airframes and certain other equipment, which
together resulted in a net gain of $1.0 million. During the
first quarter fiscal year 2006, we received proceeds of
$2.4 million primarily from the disposal of two aircraft
and certain equipment, which resulted in a net gain of
$0.6 million.
Due to the significant investment in aircraft made in both the
first quarter fiscal year 2007 and the first quarter fiscal year
2006, net capital expenditures exceeded cash flow from
operations, and we expect this will continue to be the case
through at least the end of fiscal year 2007.
58
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 other
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 under Financing
Activities below.
Due to the significant investment in aircraft made in fiscal
year 2006, cash flow from operations was not enough to fund net
capital expenditures.
Fiscal Year 2005 During fiscal year 2005, we
received proceeds of $26.6 million primarily from the
disposal of ten aircraft and certain equipment, which resulted
in a net gain of $5.9 million. We also received proceeds of
$15.1 million from the sale of seven aircraft and certain
contracts in one of our technical services subsidiaries to FBH,
a 50% owned unconsolidated affiliate, which resulted in a gain
of $2.1 million.
Fiscal Year 2004 During fiscal year 2004, we
received proceeds of $6.9 million primarily from the
disposal of aircraft and equipment, which resulted in a net gain
of $3.9 million.
On July 11, 2003, we sold six aircraft, at our cost, to a
newly formed limited liability company, RLR. The capital of RLR
is owned 49% by us and 51% by the same principal with whom we
have other jointly owned businesses operating in Mexico. See a
discussion of the mechanism of financing this purchase by RLR
discussed under Future Cash Requirements below.
Financing
Activities
Cash flows used in financing activities were $5.4 million
for fiscal year 2006, and cash flows provided by financing
activities were $2.8 million and $3.5 million for
fiscal years 2005 and 2004, respectively. Cash flows used in
financing activities were $2.9 million and
$0.3 million for first quarter fiscal year 2007 and 2006,
respectively.
During the first quarter fiscal year 2007, cash was used for the
repayment of debt totaling $4.0 million and was provided by
our receipt of proceeds of $0.8 million from the exercise
of options to acquire shares of our common stock by our
employees.
During the first quarter fiscal year 2006, cash was used for the
repayment of debt totaling $0.8 million and was provided by
our receipt of proceeds of $0.5 million from the exercise
of options to acquire shares of our common stock by our
employees.
During fiscal year 2006, cash was used for the repayment of debt
totaling $4.1 million and a portion was 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.
During fiscal year 2005, cash was provided by our receipt of
proceeds of $12.7 million from the exercise of options to
acquire our common stock by our employees, and $7.4 million
of cash was used for the repurchase of shares from a minority
interest owner. During fiscal year 2004, cash was provided by
the issuance the Senior Notes in aggregate principal amount of
$230.0 million. A portion of the proceeds from this
issuance was used to redeem all of our outstanding
77/8% Senior
Notes due 2008 for $100.0 million and all of our
outstanding 6% Convertible Subordinated Notes due 2003 for
$90.9 million on July 29, 2003.
See further discussion of outstanding debt as of June 30,
2006 under Future Cash Requirements below and our
debt issuances and redemptions in Note 5 in the Notes
to Consolidated Financial Statements and Note 3 in
the Condensed Notes to Consolidated Financial
Statements included elsewhere in this prospectus.
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 aircraft under separate operating leases with terms of ten
years expiring in January 2016. Each net lease
59
agreement requires us to be responsible for all operating costs
and has an effective interest rate of approximately 5%. 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, an early purchase option at
60 months (December 2010), and an early termination option
at 24 months (December 2007). The early purchase option
price for the nine aircraft at 60 months is approximately
$52 million in aggregate. Additional collateral in the
amount of $11.8 million, which consists of five aircraft
and a $2.5 million letter of credit, was provided until the
conclusion of the SEC investigation related to the Internal
Review. 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.
Minority Interest In March 2004, we prepaid
$11.4 million, representing a portion of the put/call
option price over the 51% of the ordinary share capital of
Bristow Aviation that we do not own. This payment was made from
existing cash balances. 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). Bristow
Aviation used the proceeds to redeem £8 million of its
ordinary share capital at par value from all of its outstanding
shareholders, including ourselves. The result of these changes
was to reduce the cost of the guaranteed return to the other
shareholders, which we record as minority interest expense, by
$2.3 million on an annual basis.
Future
Cash Requirements
Debt
Obligations
As of June 30, 2006, total debt was $261.5 million, of
which $14.5 million was classified as current. Aggregate
annual maturities for all long-term debt for the next five
fiscal years and thereafter are as follows (in thousands):
|
|
|
|
|
Nine months ended March 31,
2007
|
|
$
|
14,489
|
(1)
|
Fiscal year ended March 31,
2008
|
|
|
12,017
|
|
2009
|
|
|
432
|
|
2010
|
|
|
200
|
|
2011
|
|
|
|
|
Thereafter
|
|
|
234,380
|
|
|
|
|
|
|
Total
|
|
$
|
261,518
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes current portion of long-term debt of $14.5 million. |
Revolving Credit Facility As of June 30,
2006, we had a $30 million revolving credit facility with a
U.S. bank. Borrowings bear interest at a rate equal to
one-month LIBOR plus a spread ranging from 1.25% to 2.0%. We had
$3.2 million of outstanding letters of credit and no
borrowings under this facility as of June 30, 2006. This
facility was terminated in August 2006.
Senior Secured Credit Facilities In August
2006, we entered into the syndicated senior secured Credit
Facilities which consists 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 aggregate commitments under the revolving credit
facility may be increased to $200 million at our option
following our
61/8% Senior
Notes due 2013 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). The revolving credit facility
may be used for general corporate purposes, including working
capital and acquisitions. The letter of credit facility will be
used to issue letters of credit supporting or securing
performance of statutory obligations, surety or appeal bonds,
bid or performance bonds and similar obligations.
60
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 are 0.0% and 1.25%, respectively. Interest will be
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 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 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.
Senior Notes On June 20, 2003, we
completed a private placement of $230.0 million aggregate
principal amount outstanding of
61/8% Senior
Notes due 2013. On September 4, 2003 we completed an offer
to exchange these notes for a new issue of equivalent notes
registered under the Securities Act of 1933, and we refer to
these registered notes as the Senior Notes.
The Senior Notes are unsecured and are guaranteed by certain of
our U.S. subsidiaries. The Senior Notes are redeemable at
our option, subject to a redemption premium if we redeem the
notes prior to June 15, 2008. In addition, holders of the
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. The terms of the Senior Notes
restrict our ability to, among other things, incur additional
indebtedness or issue disqualified stock (as defined
in the indenture); pay dividends or repurchase our capital stock
or subordinated indebtedness; make loans, guarantees or
investments; create liens or security interests; sell assets;
merge or consolidate with another company, or sell all or
substantially all of our assets; and enter into transactions
with affiliates. Certain of these restrictions will cease to
apply following the Senior Notes receiving an investment grade
rating from Moodys and Standard & Poors,
and so long as no event of default has occurred and is
continuing. In accordance with the indenture to the Senior
Notes, any payment or re-financing of these notes prior to June
2011 is subject to a prepayment premium.
On June 16, 2005, we received notice from the trustee that
we were in default of various financial reporting covenants of
the Senior Notes because we did not provide the required
financial reporting information within the required time period.
On August 16, 2005, we completed a consent solicitation
with the holders of the Senior Notes to waive defaults under and
make amendments to the indenture in consideration for which we
paid an aggregate consent fee of $2.6 million. In January
2006, the default was cured. See Note 5 in the Notes
to Consolidated Financial Statements and Note 3 in
the Condensed Notes to Consolidated Financial
Statements included elsewhere in this prospectus for
further discussion of the Senior Notes.
Limited Recourse Term Loans Our debt includes
two limited recourse term loans with a U.K. bank created in
connection with sale and lease transactions for two aircraft
entered into with Heliair Leasing Limited in fiscal year 1999.
The term loans are secured by both aircraft and our guarantee of
the underlying lease obligations. In addition, we have provided
asset value guarantees totaling up to $3.8 million, payable
at the expiration of the leases depending on the value received
for the aircraft at the time of disposition. As a result of
these guarantees and the terms of the underlying leases, for
financial statement purposes, the aircraft and associated term
loans are reflected on our consolidated balance sheet. As of
June 30, 2006, the aggregate balance of the term loans was
$19.7 million. The term loans provide for rates of interest
payable to the bank of 7.1% and 7.2%, quarterly amortization
payments totaling $0.7 million and balloon payments
61
of $9.8 million and $9.2 million in March 2007 and
July 2007, respectively. See a discussion of our relationship
with Heliair in Note 3 in the Notes to Consolidated
Financial Statements included elsewhere in this prospectus.
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. See Note 2 in the
Notes to Consolidated Financial Statements included
elsewhere in this prospectus for further discussion of our
acquisition. Two promissory notes totaling $1.2 million as
of June 30, 2006 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 included a finance lease
on an aircraft totaling $0.6 million as of June 30,
2006, with an interest rate of 6.5% and expiring in fiscal year
2008; a finance lease on an aircraft totaling $2.9 million
as of June 30, 2006, with an interest rate of 8.5% and
expiring in fiscal year 2008 with a final termination payment of
$2.4 million; and two loan notes on packages of spare parts
totaling $0.5 million as of June 30, 2006, with
interest rates of 10% to 18% expiring in fiscal year 2007.
U.K. Facilities As of June 30, 2006,
Bristow Aviation had a £6.0 million
($11.1 million) facility for letters of credit, of which
£0.4 million ($0.7 million) was outstanding, and
a £1.0 million ($1.8 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 a rate of 0.7% per annum. Borrowings under the
net overdraft facility are payable on 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 is scheduled to expire on August 31,
2006. The facilities are guaranteed by certain of Bristow
Aviations subsidiaries and secured by several helicopter
mortgages and a negative pledge of Bristow Aviations
assets.
Capital
Commitments
Aircraft Purchase Commitments As shown in the
table below, we expect to make additional capital expenditures
over the next seven fiscal years to increase the size of our
aircraft fleet. As of June 30, 2006, we had 51 aircraft on
order and options to acquire an additional 37 aircraft. The
additional aircraft on order are expected to provide incremental
fleet capacity, with only a small number of our existing
aircraft expected to be replaced with the new aircraft.
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011-2013
|
|
|
Total
|
|
|
Commitments as of June 30,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Medium
|
|
|
15
|
|
|
|
11
|
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
41
|
|
Large
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
11
|
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures (in thousands)
|
|
$
|
211,248
|
|
|
$
|
71,519
|
|
|
$
|
23,245
|
|
|
$
|
24,491
|
|
|
$
|
64,022
|
|
|
$
|
394,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options as of June 30,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium(1)
|
|
|
|
|
|
|
1
|
|
|
|
6
|
|
|
|
6
|
|
|
|
11
|
|
|
|
24
|
|
Large(2)
|
|
|
|
|
|
|
7
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
12
|
|
|
|
6
|
|
|
|
11
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures (in thousands)
|
|
$
|
37,861
|
|
|
$
|
178,275
|
|
|
$
|
102,600
|
|
|
$
|
48,292
|
|
|
$
|
81,191
|
|
|
$
|
448,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of June 30, 2006, options with respect to six of these
aircraft were subject to availability, which means
that the delivery time for the aircraft subject to these options
will depend upon the number of manufacturing slots available at
the time the options are exercised. As a result, the delivery
time for these aircraft may be extended beyond those specified
in the purchase agreement with the manufacturer, and the medium
aircraft were included in the
2011-2013
period in the table above. However, we can accelerate the
delivery of these aircraft at our option to as early as
January 1, 2008, subject to the manufacturers
availability to fill customer orders at the time an option is
exercised. |
|
(2) |
|
Options for five large aircraft expire on September 30,
2006, which we plan to exercise upon completion of this offering. |
In connection with an agreement to purchase three large aircraft
to be utilized and owned by Norsk Helikopter AS
(Norsk), our unconsolidated affiliate in Norway, the
company, Norsk and the other equity owner in Norsk each agreed
to fund the purchase of one of these three aircraft. One was
delivered during fiscal year 2006, and the remaining two were
delivered in fiscal year 2007. The one aircraft that we are
purchasing is reflected in the table above.
Other
Obligations
Pension Plan As of June 30, 2006, we had
recorded on our balance sheet a pension liability of
$145.1 million and a prepaid pension asset of
$40.6 million, related to the Bristow Helicopter 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 asset represents the
cumulative contributions made by Bristow Helicopters in excess
of accrued net periodic pension cost. 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 ten years. In recognition of participants concerns
regarding the under-funded position of the plan as well as other
changes we made to the plan (as more fully described under
Fiscal Year 2005 Compared to Fiscal Year 2004
Curtailment Gain), on February 1, 2004, we
contributed £5.2 million ($9.6 million) to the
plan to reach the 90% funded level, and
63
agreed to monthly contributions of £0.2 million
($0.4 million) for the next ten years to comply with the
100% funding requirement. The £5.2 million
($9.6 million) contribution was made from existing cash
balances and did not materially impact our working capital
position. In order to meet these funding requirements, we
agreed, subject to our review every three years, to make
contributions totaling £5.7 million
($9.9 million) per year for the next 10 years
beginning May 2005 and £5.5 million
($9.6 million) per year for the following 10 years.
Nevertheless, regulatory agencies in the U.K. may require us to
further increase the monthly contributions.
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. Based on this statement, it is possible
that we will see an increase in the required level of our
contributions in future periods. We are not currently able to
estimate what this increased level of funding will be and what
impact it will have on our financial position in future periods.
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 June 30, 2006 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 outstanding borrowings. Additional details
regarding these obligations are provided in the Notes to
64
Consolidated Financial Statements and Condensed
Notes to Consolidated Financial Statements included
elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
2012 and
|
|
|
|
Total
|
|
|
2007
|
|
|
2008-2009
|
|
|
2010-2011
|
|
|
beyond
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and short-term
borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
$
|
261,518
|
|
|
$
|
14,489
|
|
|
$
|
12,449
|
|
|
$
|
200
|
|
|
$
|
234,380
|
|
Interest
|
|
|
86,702
|
|
|
|
10,625
|
|
|
|
29,219
|
|
|
|
28,679
|
|
|
|
18,179
|
|
Aircraft operating leases(1)(2)
|
|
|
67,590
|
|
|
|
5,441
|
|
|
|
12,600
|
|
|
|
13,387
|
|
|
|
36,162
|
|
Other operating leases(1)
|
|
|
17,229
|
|
|
|
2,874
|
|
|
|
4,844
|
|
|
|
3,523
|
|
|
|
5,988
|
|
Pension obligations(3)
|
|
|
174,778
|
|
|
|
7,932
|
|
|
|
20,614
|
|
|
|
18,630
|
|
|
|
127,602
|
|
Aircraft purchase obligations
|
|
|
394,525
|
|
|
|
211,248
|
|
|
|
94,764
|
|
|
|
49,839
|
|
|
|
38,674
|
|
Other purchase obligations(4)
|
|
|
30,265
|
|
|
|
30,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
1,032,607
|
|
|
$
|
282,874
|
|
|
$
|
174,490
|
|
|
$
|
114,258
|
|
|
$
|
460,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt guarantees(5)
|
|
$
|
31,567
|
|
|
$
|
|
|
|
$
|
13,079
|
|
|
$
|
|
|
|
$
|
18,488
|
|
Other guarantees(6)
|
|
|
3,496
|
|
|
|
3,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letter of credit(7)
|
|
|
4,767
|
|
|
|
4,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments
|
|
$
|
39,830
|
|
|
$
|
8,263
|
|
|
$
|
13,079
|
|
|
$
|
|
|
|
$
|
18,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents minimum rental payments required under operating
leases that have initial or remaining non-cancelable lease terms
in excess of one year. |
|
(2) |
|
Represents nine aircraft that we sold on December 30, 2005
for $68.6 million in aggregate to a subsidiary of General
Electric Capital Corporation and then leased back under separate
operating leases with terms of ten years expiring in January
2016. A deferred gain on the sale of the aircraft was recorded
in the amount of approximately $10.8 million in aggregate,
which is being amortized over the lease term. |
|
(3) |
|
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 20 years. As of June 30, 2006, we had
recorded on our balance sheet a $145.1 million pension
liability and a $40.6 million prepaid pension asset
associated with this obligation. |
|
(4) |
|
Other purchase obligations primarily represent unfilled purchase
orders for aircraft parts and commitments associated with
upgrading our strategic base facilities. |
|
(5) |
|
We have guaranteed the repayment of up to £10 million
($18.5 million) of the debt of FBS and $13.1 million
of the debt of RLR, both unconsolidated affiliates. |
|
(6) |
|
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 June 30, 2006, surety bonds
with an aggregate value of 39.9 million Mexican pesos
($3.5 million) were outstanding. |
65
|
|
|
(7) |
|
In January 2006, a letter of credit was issued against the
revolving credit facility for $2.5 million in conjunction
with the additional collateral for the sale and leaseback
financing discussed in Note 5 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus. The letter of credit expires January 27,
2007. |
We do not expect the guarantees shown in the table above to
become obligations that we will have to fund.
FBS Performance Guarantees In 1996, FBS
Limited (FBS), a 50% owned unconsolidated affiliate,
purchased and specially modified 47 aircraft dedicated to
conducting certain training activities under a fifteen year
contract with the British Military. Bristow Aviation and its
partner have given joint and several guarantees of up to
£15.0 million ($27.8 million) related to the
performance of this contract. Bristow Aviation has also
guaranteed repayment of up to £10 million
($18.5 million) of FBSs outstanding debt obligation,
which is primarily collateralized by the 47 aircraft discussed
above.
RLR Note RLR financed 90% of the purchase
price of the six aircraft discussed under Investing
Activities above through a five-year term loan of
$31.8 million with a bank requiring monthly principal and
interest payments of $0.3 million and a balloon payment of
$18.3 million due July 11, 2008 (the RLR
Note). The RLR Note is secured by the six aircraft. We
guaranteed 49% of the RLR Note ($15.6 million) and the
other shareholder guaranteed the remaining 51% of the RLR Note
($16.2 million). In addition, we have given the bank a put
option which the bank 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 the
RLR Note from the bank. We simultaneously entered into a similar
agreement with the other RLR shareholder which requires that, in
event of exercise by the bank of its put option to us, the other
shareholder will be required to purchase 51% of the RLR Note
from us. As of June 30, 2006, a liability of
$0.8 million representing the fair value of this guarantee
was reflected in our balance sheet in other liabilities and
deferred credits. We used the proceeds received from the sale of
the aircraft to RLR to repay the $17.9 million short-term
note to the aircraft manufacturer in July 2003. No gain or loss
was recognized on the sale.
As of June 30, 2005, we were in default of various
financial information reporting covenants under the RLR Note for
not providing financial information for fiscal year 2005 when
due, and also for not providing similar information to other
creditors. This situation resulted from the activities
identified in the Internal Review discussed earlier which
prevented us from filing our financial report for fiscal year
2005 on time. The bank provided waivers through January 16,
2006 in exchange for payments totaling $78,000. In January 2006,
the defaults were cured.
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 Credit Facilities 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 the resulting increase in
working capital requirements. In addition, should we exercise
our options to acquire aircraft in addition to those for which
we have existing purchase commitments or should we elect to
expand our business through acquisition, including acquisitions
under consideration or negotiation, we would need to raise
additional funds through public or private debt or equity
financings. Upon completion of this offering, we plan to
exercise options to acquire additional large aircraft, including
the options for five large aircraft that expire on
September 30, 2006. See Risk Factors 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.
Cash and cash equivalents were $122.5 million,
$146.4 million and $85.7 million as of March 31,
2006, 2005 and 2004, respectively, and $109.6 million as of
June 30, 2006. Working capital as of March 31, 2006,
66
2005 and 2004 was $283.3 million, $270.7 million and
$235.7 million, respectively, and $276.7 million as of
June 30, 2006. The decrease in working capital during first
quarter fiscal year 2007 was primarily a result of the
$12.8 million decrease in cash and cash equivalents. The
increase in working capital in fiscal year 2006 was primarily a
result of an increase in accounts receivable and inventory and a
decrease in current deferred taxes, which was offset in part by
an increase in accounts payable and short-term borrowings and
current maturities of long-term debt and the decrease in cash
and cash equivalents. The increase in working capital in fiscal
year 2005 was primarily a result of an increase in cash and cash
equivalents, accounts receivable and inventory offset in part by
an increase in accounts payable, accrued liabilities and current
deferred taxes.
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 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 and various
other factors 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 the
Notes to Consolidated Financial Statements and
Condensed Notes to Consolidated Financial Statements
the following involve a higher degree of judgment and complexity.
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 condition 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. Our annual tax provision
includes 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,
67
actual results may differ materially from these estimates. We
review these liabilities quarterly. During fiscal years 2006,
2005 and 2004, we had net reversals of reserves for estimated
tax exposures of $11.4 million, $3.7 million and
$3.5 million, respectively. During first quarter fiscal
year 2007 and 2006, we had net reversals of reserves for
estimated tax exposures of $0.8 million and
$2.9 million, respectively. These reversals were made in
the fiscal years 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.
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, 2005, our valuation allowance against certain
deferred tax assets, primarily U.S. foreign tax credit
carry forwards was $14.3 million. We decreased the
valuation allowance as of March 31, 2006 to
$13.4 million, and the balance remained at
$13.4 million as of June 30, 2006. 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 and June 30, 2006 that are permanently
reinvested of $35.1 million and $38.9 million,
respectively. 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.
The American Jobs Creation Act of 2004 (the Jobs
Act), signed into law October 22, 2004, provided for
a special one-time tax deduction equal to 85% of dividends
received out of qualifying earnings that are paid in either a
companys last tax year that began before the enactment
date, or the first tax year that begins during the one-year
period beginning on the enactment date. The special deduction is
subject to a number of limitations and requirements, one of
which is to adopt a Domestic Reinvestment Plan
(DRIP) to document planned reinvestments of amounts
equal to the foreign earnings repatriated under the Jobs Act. In
accordance with a DRIP approved by our board of directors,
during fiscal year 2006, we distributed $46.1 million of
earnings from foreign subsidiaries that were previously
considered permanently invested. See Note 8 in the
Notes to Consolidated Financial Statements included
elsewhere in this prospectus.
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.
68
Property
and Equipment
Our net property and equipment represents 52% and 54% of our
total assets as of March 31 and June 30, 2006,
respectively. 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 energy 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.
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.
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 revenues and
costs 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.
69
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.
Revenue from Production Management is recognized based on
contractual rates as the related services are performed.
Contracts are generally evergreen with a yearly review. Each
party has a thirty-day cancellation clause. The rates charged to
the customer are either monthly, based on services specified in
the contract, or hourly if outside the scope of the contract.
Typically hourly rates are charged for services provided beyond
the basic level contemplated in the contract. Services provided
include personnel and transportation. Any escalation in rates is
agreed to in writing by the customer. With respect to both our
Helicopter Services and Production Management Services segments,
cost reimbursements from customers are recorded as revenue.
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.
Two of the most critical assumptions are the expected long-term
rate of return on plan assets and the assumed discount 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 Sterling denominated AA corporate bond index as a
basis for determining the discount rate for our U.K. plans.
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
70
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. During fiscal years 2006, 2005 and 2004, we
increased the allowance account through charges to expense of
$1.6 million, $0.3 million and $0.4 million,
respectively, and decreased the allowance for write-offs and
recoveries of specifically identified uncollectible accounts by
$2.9 million, $0.8 million and $1.4 million,
respectively. Additionally, during fiscal year 2006, we reduced
revenue for a reserve of $1.8 million against invoices
billed to our unconsolidated affiliate in Mexico, which have not
been recognized in our results. See discussion in Note 3 in
the Notes to Consolidated Financial Statements and
Note 2 in the Condensed Notes to Consolidated
Financial Statements included elsewhere in this
prospectus. During the first quarter fiscal year 2007 and the
first quarter fiscal year 2006, we increased the allowance
account through charges to expense of $0.3 million and
$2.6 million, respectively, and decreased the allowance for
write-offs and recoveries of specifically identified
uncollectible accounts by $1.0 million and
$0.2 million, respectively.
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.
If our valuation of these parts is significantly lower than the
book value of the parts, an additional provision may be
required. During fiscal years 2006 and 2004, we increased the
valuation reserve through charges to expense of
$3.2 million and $0.5 million, respectively, for
excess and obsolete inventory. During fiscal years 2006 and
2005, we decreased the valuation reserve for write-offs of
identified obsolete and excess inventory by $0.5 million
and $2.4 million, respectively. During the first quarter
fiscal year 2007, we increased the valuation reserve through
charges to expense of $0.8 million. No amounts were charged
to expense during the first quarter fiscal year 2006. During the
first quarter fiscal year 2007 and the first quarter fiscal year
2006, we decreased the valuation reserve for write-offs of
obsolete and excess inventory by $5.0 million and
$0.8 million, respectively.
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. Revisions to
contingent liability reserves are reflected in income in the
period in which different facts or information become known or
circumstances change that affect our previous assumptions with
respect to the likelihood or amount of loss. 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 and would be recognized in the
period the new information becomes known.
71
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 executives and employees
through the awarding of stock-based compensation, including
stock options and restricted stock units. Based on the
requirements of Statement of Financial Accounting Standards
(SFAS) No. 123(R), Share-Based
Payment, which we adopted on April 1, 2006, we have
begun to account for stock-based compensation awards in the
first quarter fiscal year 2007 using a fair-value based method,
resulting in compensation expense for stock option awards being
recorded in our condensed consolidated statements of income. We
use a Black-Scholes option pricing model to estimate the fair
value of share-based awards under SFAS No. 123(R),
which is the same valuation technique we previously used for pro
forma disclosures under SFAS No. 123, Accounting
for Stock-Based Compensation. 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. In addition, 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 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 condensed 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 the first
quarter fiscal year 2007, see Note 6 in the Condensed
Notes to Consolidated Financial Statements included
elsewhere in this prospectus.
Recent
Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation (FIN)
No. 48, Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement
No. 109, which clarifies the accounting for
uncertainty in income taxes recognized in an enterprises
financial statements in accordance with SFAS No. 109,
Accounting for Income Taxes. FIN No. 48
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.
72
FIN No. 48 requires enterprises to evaluate tax
positions using a two-step process consisting of recognition and
measurement. The effects of a tax position will be recognized in
the period in which the enterprise determines that it is more
likely than not (defined as a more than 50% likelihood) that a
tax position will be sustained upon examination, including
resolution of any related appeals or litigation processes, based
on the technical merits of the position. A tax position that
meets the more-likely-than-not recognition threshold is measured
as the largest amount of tax benefit that is greater than 50%
likely of being recognized upon ultimate settlement.
FIN No. 48 is effective for our fiscal year beginning
on April 1, 2007. We do not believe that the adoption of
this interpretation will have a material impact on our
consolidated results of operations, cash flows or financial
position upon adoption; however, we have not yet completed our
evaluation of the impact of FIN No. 48.
Internal
Review, Restatement, Governmental Investigations and Internal
Control
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 such special outside counsel to cover operations in
other countries and other issues. In connection with this
review, special outside counsel to the Audit Committee retained
forensic accountants. As a result of the findings of the
Internal Review, our quarter ended December 31, 2004 and
prior financial statements were restated. For further
information on the restatements, see
Restatement of Previously Reported
Amounts.
The SEC then notified us that it had initiated an informal
inquiry and requested that we provide certain documents on a
voluntary basis. The SEC thereafter advised us that the inquiry
has become a formal investigation. We have responded to the
SECs requests for documents and intend to continue to
do so.
The Internal Review is complete. All known required restatements
were reflected in the financial statements included in our
Annual Report on
Form 10-K
for fiscal year 2005, and no further restatements were required
in our Annual Report on
Form 10-K
for fiscal year 2006 or our financial statements presented in
our
Form 10-Q
for the first quarter fiscal year 2007. As a
follow-up to
matters identified during the course of the Internal Review,
special counsel to the Audit Committee may be called upon to
undertake additional work in the future to assist in responding
to inquiries from the SEC, from other governmental authorities
or customers, or as
follow-up to
the previous work performed by such special counsel.
For additional discussion of the SEC investigation, the Internal
Review, and related proceedings, see Business
Legal Proceedings Internal Review included
elsewhere in this prospectus.
We have communicated the Audit Committees conclusions with
respect to the findings of the Internal Review to regulatory
authorities in some, but not all, of the jurisdictions in which
the relevant activities took place. We are in the process of
gathering and analyzing additional information related to these
matters, and expect to disclose the Audit Committees
conclusions to regulatory authorities in other jurisdictions
once this process has been completed. Such disclosure may result
in 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. To the extent that
violations of the law may have occurred in several countries in
which we operate, we do not yet know whether such violations can
be cured merely by the payment of fines or whether other actions
may be taken against us, including requiring us to curtail our
business operations in one or more such countries for a period
of time. In the event that we curtail our business operations in
any such country, we then may face difficulties exporting our
aircraft from such country. As of June 30, 2006, the book
values of our aircraft in Nigeria and the South American country
73
where certain improper activities took place were approximately
$118.3 million and $8.1 million, respectively.
We cannot predict the ultimate outcome of the SEC investigation,
nor can we predict whether other applicable U.S. and foreign
governmental authorities will initiate separate investigations.
The outcome of the SEC investigation and any related legal and
administrative proceedings could include the institution of
administrative, civil injunctive or criminal proceedings
involving us
and/or
current or former employees, officers
and/or
directors, the imposition of fines and other penalties, remedies
and/or
sanctions, modifications to business practices and compliance
programs
and/or
referral to other governmental agencies for other appropriate
actions. It is not possible to accurately predict at this time
when matters relating to the SEC investigation will be
completed, the final outcome of the SEC investigation, what if
any actions may be taken by the SEC or by other governmental
agencies in the U.S. or in foreign jurisdictions, or the
effect that such actions may have on our consolidated financial
statements. In addition, in view of the findings of the Internal
Review, we may encounter difficulties in the future conducting
business in Nigeria and a South American country, and with
certain customers. It is also possible that certain of our
existing contracts may be cancelled (although none have been
cancelled as of the date of this prospectus) and 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 connection with its conclusions regarding payroll
declarations and tax payments, the Audit Committee determined on
November 23, 2005, following the recommendation of our
senior management, that there was a need to restate our quarter
ended December 31, 2004 and prior financial statements.
Such restatement was reflected in our fiscal year 2005 Annual
Report. As of June 30, 2006, we have accrued an aggregate
of $21.6 million for the taxes, penalties and interest
attributable to underreported employee payroll, which we expect
to begin paying during the quarter ending September 30,
2006. Operating income for fiscal years 2006, 2005 and 2004
included $4.3 million, $3.8 million and
$4.2 million, respectively, attributable to this accrual.
Operating income for the first quarter fiscal year 2006 included
$0.9 million attributable to this accrual. No additional
amounts were incurred during the first quarter fiscal year 2007.
As we continue to respond to the SEC investigation and other
governmental authorities and take other actions relating to
improper activities that have been identified in connection with
the Internal Review, there can be no assurance that
restatements, in addition to those reflected in our Annual
Report on
Form 10-K
for fiscal year 2005, will not be required or that our
historical financial statements included in this prospectus will
not change or require further amendment. In addition, new issues
may be identified that may impact our financial statements and
the scope of the restatements described in this prospectus and
lead us to take other remedial actions or otherwise adversely
impact us.
During fiscal years 2005 and 2006 and first quarter fiscal year
2007, we incurred approximately $2.2 million,
$10.5 million and $0.1 million, respectively, in legal
and other professional costs in connection with the Internal
Review. We expect to incur additional costs associated with the
Internal Review, which will be expensed as incurred and which
could be significant in the fiscal quarters in which they are
recorded.
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 have disclosed the activities in Nigeria identified in the
Internal Review to affected customers, and one or more of these
customers may seek to cancel their contracts with us. One such
customer has conducted its own investigation and contract audit.
We have agreed with that customer on certain actions we will
take to address the findings of their audit, which in large part
are steps we have taken or had already planned to take. Since
our customers in Nigeria are affiliates of major international
petroleum companies with whom we do business throughout the
world, any actions which are taken by certain
74
customers could have a material adverse effect on our business,
financial position and results of operations, and these
customers may preclude us from bidding on future business with
them either locally or on a worldwide basis. In addition,
applicable governmental authorities may preclude us from bidding
on contracts to provide services in the countries where improper
activities took place.
In connection with the Internal Review, we also have terminated
our business relationship with certain agents and have taken
actions to terminate business relationships with other agents.
In November 2005, one of the terminated agents and his
affiliated entity have commenced litigation against two of our
foreign affiliated entities claiming damages of
$16.3 million for breach of contract.
We may be required to indemnify certain of our agents to the
extent that regulatory authorities seek to hold them responsible
in connection with activities identified in the Internal Review.
In a South American country where certain improper activities
took place, we are negotiating to terminate our ownership
interest in the joint venture that provides us with the local
ownership content necessary to meet local regulatory
requirements for operating in that country. We may not be
successful in our negotiations to terminate our ownership
interest in the joint venture, and the outcome of such
negotiations may negatively affect our ability to continue
leasing our aircraft to the joint venture or other unrelated
operating companies, to conduct other business in that country,
or to export our aircraft and inventory from that country. We
recorded an impairment charge of $1.0 million during fiscal
year 2006 to reduce the recorded value of our investment in the
joint venture. During fiscal years 2006 and 2005, the first
quarter fiscal year 2007 and the first quarter fiscal year 2006,
we derived approximately $8.0 million, $10.2 million,
$2.0 million and $2.0 million, respectively, of
leasing and other revenues from this joint venture, of which
$4.0 million, $3.2 million, $0.9 million and
$1.3 million, respectively, was paid by us to a third party
for the use of the aircraft. In addition, during fiscal year
2005, approximately $0.3 million of dividend income was
derived from this joint venture. No dividend income was derived
from this joint venture during the first quarter fiscal year
2007.
Without a joint venture partner, we will be unable to maintain
an operating license and our future activities in that country
may be limited to leasing our aircraft to unrelated operating
companies. Our joint venture partners and agents are typically
influential members of the local business community and
instrumental in aiding us in obtaining contracts and managing
our affairs in the local country. As a result of terminating
these relationships, our ability to continue conducting business
in these countries where the improper activities took place may
be negatively affected.
Many of the improper actions identified in the Internal Review
resulted in decreasing the costs incurred by us in performing
our services. The remedial actions we are taking have resulted
in an increase in these costs and, if we cannot raise our prices
simultaneously and to the same extent as our increased costs,
our operating income will decrease.
In addition, we face legal actions relating to the 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.
Restatement
of Previously Reported Amounts
As a result of the Internal Review findings discussed above, we
restated our previously issued quarter ended December 31,
2004 and prior historical financial statements to accrue for
payroll taxes, penalties and interest attributable to
underreported employee payroll. In connection with this matter,
our consolidated statements of income, as restated, reflect
reductions in operating income of $4.2 million and
$3.2 million for fiscal years 2004 and 2003, respectively,
and $4.6 million for earlier fiscal years from previously
reported
75
amounts. In addition, our consolidated statements of income, as
restated, reflect reductions in operating income of
$3.8 million for fiscal year 2005 from the amount announced
prior to the restatement.
In 2005, our management separately determined that we were not
reporting reimbursements received from our customers for costs
incurred on their behalf in accordance with United States
generally accepted accounting principles (GAAP). Our
customers reimburse us for certain costs incurred on their
behalf, which had historically been recorded by offsetting such
amounts against the related expenses. In addition, our
management determined that we did not properly record expenses
related to severance benefits for certain employees of a foreign
subsidiary and we did not properly record expenses related to
payroll taxes incurred by one of our foreign subsidiaries. In
accordance with GAAP, we restated our historical financial
statements for fiscal years 2004 and 2003 to reflect such
reimbursement as an increase in revenue and a corresponding
increase in expense, and we increased direct costs to reflect
the severance obligation and payroll taxes in the applicable
periods. With respect to customer reimbursements, operating
revenues and direct costs were increased $53.4 million and
$46.4 million for fiscal years 2004 and 2003, respectively,
from amounts reported prior to the restatement, with no impact
on income from operations or net income. With respect to the
severance benefits and payroll taxes, direct costs were
increased by $0.5 million and $0.2 million in fiscal
years 2004 and 2003, respectively. For all three items,
operating revenues were increased $55.3 million and direct
costs were increased by $56.3 million from the previously
announced amount for fiscal year 2005. Amounts for the fourth
quarter of fiscal year 2005 were not audited or filed with the
SEC prior to the restatement, but had been announced. Amounts
for the first three fiscal quarters in that year had been filed
prior to the restatement.
The restatement of previously reported amounts to reflect these
adjustments was reported in our Annual Report on
Form 10-K
for fiscal year 2005.
Internal
Control Matters
Material
Weaknesses Reported for Fiscal years 2006 and 2005
Internal control over financial reporting is defined in
Rule 13a-15(f)
and
15d-15(f)
promulgated under the Exchange Act as a process designed by, or
under the supervision of, our principal executive and principal
financial officers and effected by our board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
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pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of our company;
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provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
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provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial
statements.
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Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
A material weakness in internal control over financial reporting
is defined by Public Company Accounting Oversight Board
(PCAOB) Auditing Standard No. 2 as a control
deficiency, or combination of control deficiencies, that results
in more than a remote likelihood that a material misstatement of
the annual or interim financial statements will not be prevented
or detected.
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Our management identified certain material weaknesses in our
internal control over financial reporting as of March 31,
2005. Specifically, management concluded that: certain of our
former senior management and other management personnel failed
to establish or adhere to appropriate internal controls related
to our control environment and that former management failed to
establish and act with appropriate integrity and ethical values;
we did not have sufficient technical expertise to address or
establish adequate policies and procedures associated with
accounting matters; and we did not have sufficient technical tax
expertise to establish and maintain adequate policies and
procedures associated with the operations of certain complex tax
structures. As a result of these material weaknesses, we
restated our historical financial statements for fiscal years
2004 and 2003 to accrue for payroll taxes, penalties and
interest attributable to underreported employee payroll and to
report certain reimbursements received from our customers for
costs incurred on their behalf in accordance with GAAP.
Managements Response to Material
Weaknesses discusses the actions taken in fiscal year 2006
with respect to each of these weaknesses including actions to
fully remediate the first of these material weaknesses.
Our management has identified, and the report on
managements report on internal control over financial
reporting of KPMG LLP confirmed the presence of, the material
weaknesses in our internal controls over financial reporting as
of March 31, 2006 discussed below.
As of March 31, 2006, our management assessed the
effectiveness of our internal control over financial reporting.
Based on this assessment, management concluded that, as of
March 31, 2006, we did not maintain effective internal
control over financial reporting because of material weaknesses
described below:
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We did not have sufficient technical expertise to address or
establish adequate policies and procedures associated with
accounting matters. In addition, we did not maintain policies
and procedures to ensure adequate management review of the
information supporting the financial statements.
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We did not have sufficient technical tax expertise to establish
and maintain adequate policies and procedures associated with
the operation of certain complex tax structures. As a result, we
failed to establish proper procedures to ensure the actions
required to enable us to realize the benefits of these
structures as previously recognized in our financial statements
were performed.
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Each of these material weaknesses resulted in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.
Managements
Response to Material Weaknesses
As a result of the material weaknesses discussed above, we made
the following improvements in controls during fiscal year 2006
and the first quarter fiscal year 2007:
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The overall tone at the top of the organization including the
board of directors, Chief Executive Officer and senior
management was changed to establish a culture of integrity and
compliance. These values are not only communicated in writing
and verbally, but also demonstrated in appropriate decisions
even when those decisions have negative commercial consequence.
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Personnel enhancements:
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Former senior management and other management personnel were
terminated or required to resign;
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New members of senior and financial management with significant
technical expertise as well as experience related to compliance
and corporate governance were retained. We hired our current
Chief Financial Officer, who has 23 years of compliance,
accounting and financial reporting experience. Most recently, we
hired our Vice President, General Counsel and Corporate
Secretary, who has 27 years of compliance and corporate
legal experience;
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The corporate finance group was expanded to provide more
comprehensive review and monitoring of accounting, reporting,
planning and control assessment functions;
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Functional reporting lines of field accounting personnel were
realigned to report directly to the corporate accounting
function and not through operations management; and
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The internal audit staff was expanded to deepen its capabilities
in the information technology area and provide more coverage of
our operations including the compliance program.
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A comprehensive compliance program was adopted and implemented,
including the introduction and dissemination of a new Code of
Business Integrity to all employees and included the following:
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A position for a Chief Compliance Officer with primary
responsibility to administer and set compliance policy and
report to the Chief Executive Officer and board of directors on
matters concerning legal and ethical compliance;
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A zero tolerance policy with respect to improper payments,
including those prohibited by FCPA;
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Mandatory employee and director participation in company-wide
business integrity training;
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Online training of employees and one-day compliance seminars
with over 300 of our top management;
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Strict requirements on engaging or conducting business through
intermediaries, including affiliates, partners and agents;
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Communication of our compliance standards to our affiliates and
certification by non-employees of compliance with those
standards;
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Membership in a non-profit organization that specializes in
anti-bribery due diligence reviews and compliance training for
international commercial intermediaries;
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An enhanced Whistleblower hotline;
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Formal annual compliance certifications by our top 130 managers
and quarterly certifications from approximately 35 managers;
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Pre-approval and review of gifts and charitable contributions;
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Quarterly management compliance committee meetings;
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Quarterly compliance reporting to the Audit Committee of the
board of directors; and
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Compliance treated as an important component of
managements evaluation for annual incentive compensation.
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We developed a number of financial policies related to the
application of GAAP and other accounting procedures, which we
expect to implement in the near term.
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Clear corporate policies were established and communicated
related to employee expenses, delegation of authority, revenue
recognition and customer billings.
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Management of our tax structure was improved to comply with its
intended design. Further, in the first quarter fiscal year 2007,
we completed our evaluation of our prior tax structures and the
operation of those structures, which allowed us to begin the
self-reporting process for underpaid payroll taxes in various
jurisdictions.
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We terminated our relationships with agents in certain countries
in which compliance violations had been identified.
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Management believes that once the above changes have been
operating for a sufficient period of time, the material
weaknesses identified above will be remediated.
Document
Subpoena from U.S. Department of Justice
On June 15, 2005, we issued a press release disclosing that
one of our subsidiaries had received a document subpoena from
the DOJ. The subpoena relates 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;
however, our ability to review
78
this matter internally has been somewhat impacted by the fact
that certain of our former officers covered by the investigation
are no longer with our company. We have had discussions with the
DOJ and provided documents related to our operations in the
United States 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 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 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 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
and $0.6 million in legal and other professional fees in
fiscal year 2006 and the first quarter fiscal year 2007,
respectively, and significant expenditures may continue to be
incurred in the future. For additional information regarding the
DOJ investigation, see Risk Factors The DOJ
investigation could result in criminal proceedings and the
imposition of fines and penalties and
Business Legal Proceedings
Document Subpoena from U.S. Department of Justice
included elsewhere in this prospectus.
Quantitative
and Qualitative Disclosures about Market Risk
We may be exposed to certain market risks arising from the use
of financial instruments in the ordinary course of business.
This risk arises primarily as a result of potential changes in
the fair market value of financial instruments that would result
from adverse fluctuations in foreign currency exchange rates,
credit risk, and interest rates as discussed below.
Foreign
Currency Risk
Foreign currency transaction 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
the foreign currency transaction gains and losses are included
with cumulative translation gains and losses and are reported in
stockholders investment as accumulated other comprehensive
gains or losses. Translation adjustments, which are reported in
accumulated other comprehensive gains or losses, are the result
of translating a foreign entitys financial statements from
its functional currency to U.S. dollars, our reporting
currency. 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 equity are presented
at their historical average exchange rates. The resulting
difference after applying the different exchange rates is the
cumulative translation adjustment. The functional currency of
Bristow Aviation, one of our consolidated subsidiaries, is the
British pound sterling.
79
As a result of the change in exchange rates during fiscal year
2005 and the first quarter fiscal year 2007, we recorded foreign
currency transaction losses of $1.3 million and
$4.8 million, respectively, in each case primarily related
to the British pound sterling, compared to foreign currency
transaction gains of approximately $5.4 million and
$2.8 million during fiscal year 2006 and the first quarter
fiscal year 2006, respectively. These gains and losses arose
primarily as a result of U.S. dollar-denominated
transactions entered into by Bristow Aviation whose functional
currency is the British pound sterling and included cash and
cash equivalents held in U.S. dollar-denominated accounts,
U.S. dollar-denominated intercompany loans and revenues
from contracts which are settled in U.S. dollars. On
August 14, 2006, we entered into a derivative to mitigate
our exposure to exchange rate fluctuations on our
U.S. dollar-denominated balances. This derivative includes
a call option on £13.2 million and a put option on
$24.5 million, with a strike price of 1.895 U.S. dollars
per British pound sterling, and expires on November 14,
2006. The premium we paid on this transaction was
$0.4 million, which will be amortized to expense over the
term of the derivative.
During the first quarter fiscal year 2007, the exchange rate (of
one British pound sterling into U.S. dollars) ranged from a
low of $1.74 to a high of $1.89, with an average of $1.83. As of
June 30, 2006, the exchange rate was $1.85. During fiscal
year 2006, the exchange rate ranged from a low of $1.79 to a
high of $1.92, with an average of $1.86. As of March 31,
2006, the exchange rate was $1.74. During fiscal year 2005, the
rate ranged from a low of $1.75 to a high of $1.95, with an
average of $1.85. As of March 31, 2005, the exchange rate
was $1.89. During fiscal year 2004, the exchange rate ranged
from a low of $1.55 to a high of $1.90, with an average of
$1.70. As of March 31, 2004, the exchange rate was $1.84.
Approximately 41%, 32%, 36%, 36% and 39% of our gross revenue
for the first quarter fiscal year 2007, the first quarter fiscal
year 2006, and fiscal years 2006, 2005 and 2004, respectively,
was translated for financial reporting purposes from British
pounds sterling into U.S. dollars. Beginning in July 2006,
we reduced a portion of Bristow Aviations
U.S. dollar-denominated balances, and we expect to take
other actions in the near term to further mitigate this foreign
exchange exposure.
We occasionally use off-balance sheet hedging instruments to
manage risks associated with our operating activities conducted
in foreign currencies. In limited circumstances and when
considered appropriate, we will use forward exchange contracts
to hedge anticipated transactions. We have historically used
these instruments primarily in the buying and selling of spare
parts, maintenance services and equipment. As of June 30,
2006, we did not have any nominal forward exchange contracts
outstanding. As discussed above, in August 2006 we entered into
a derivative to mitigate our exposure to fluctuations in the
British pound sterling to U.S. dollar.
A hypothetical 10% decrease in the value of all our foreign
currencies relative to the U.S. dollar as of June 30,
2006 would result in a $9.7 million decrease in the fair
value of our net monetary assets denominated in currencies other
than U.S. dollars.
Credit
Risk
The market for our services and products is primarily the
offshore energy industry, and our customers consist primarily of
major integrated international oil companies and independent oil
and gas producers. We perform ongoing credit evaluations of our
customers and have not historically required material
collateral. We maintain reserves for potential credit losses,
and such losses have been within managements expectations.
Cash equivalents, which consist of funds invested in
highly-liquid debt instruments with original maturities of
90 days or less, are held by major banks or investment
firms, and we believe that credit risk in these instruments is
minimal.
Interest
Rate Risk
As of June 30, 2006, we have $261.5 million of debt
outstanding, none of which carries a variable rate of interest.
However, the market value of our fixed rate debt fluctuates with
changes in interest rates. The fair value of our fixed rate
long-term debt is estimated based on quoted market prices or
prices quoted from third-party financial institutions. The
estimated fair value of our total debt as of June 30, 2006
and
80
March 31, 2006 and 2005 was $245.4 million,
$252.6 million and $255.2 million, respectively, based
on quoted market prices for the publicly listed Senior Notes.
If prevailing market interest rates had been 1% higher as of
June 30, 2006, and all other factors affecting our debt
remained the same, the fair value of our Senior Notes would have
decreased by $11.4 million or 5.3%.
Borrowings under our Credit Facilities 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 are 0.0% and
1.25%, respectively. As of the date of filing this prospectus,
there are no amounts drawn under the Credit Facilities.
81
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 the U.S. Gulf of
Mexico and the North Sea, and operations in most of the other
major offshore oil and gas producing regions of the world,
including Alaska, Australia, Brazil, China, Mexico, Nigeria,
Russia and Trinidad. We have a long history in the helicopter
service industry, with our two principal legacy companies,
Bristow Helicopters Ltd. and Offshore Logistics, 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
June 30, 2006, we operated 333 aircraft (including 311
owned aircraft, 22 leased aircraft and five aircraft held for
sale), and our unconsolidated affiliates operated an additional
147 aircraft (excluding those aircraft leased from us). In
fiscal year 2006, our Helicopter Services segment contributed
approximately 91% of our operating revenue.
We are also a leading provider of production management services
for oil and gas production facilities in the U.S. Gulf of
Mexico. Our services include furnishing specialized production
operations personnel, engineering services, production operating
services, paramedic services and providing marine and helicopter
transportation of personnel and supplies between onshore bases
and offshore facilities. In connection with these activities,
our Production Management Services segment uses our helicopter
services. We also handle regulatory and production reporting for
some of our customers. As of June 30, 2006, we managed or
had personnel assigned to 315 production facilities in the
U.S. Gulf of Mexico.
Changes
at Our Company
Recent
Changes
While remaining committed to maintaining profitable growth and a
flexible capital structure, we completed a series of changes in
fiscal years 2005 and 2006 to better integrate our global
operations among previously independently managed businesses and
to improve various other aspects of our operations. We believe
that these changes will allow us to capitalize on our strengths
and the current strong levels of demand for our services, and
position our company as the preferred provider of helicopter
services to the offshore energy industry. These changes have
included:
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New Management Nine of the twelve members of
our senior management have joined the company since July 2004.
This management team is very experienced in the energy services
industry and in operating multinational businesses and has
brought an entirely new tone at the top of the company.
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New Corporate Functions We have created six
new corporate functions (business development, compliance,
legal, quality and safety, treasury and supply chain), some of
which had historically been performed on a local or divisional
basis. These new functions have brought the organization
together as one global team.
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New Culture The entire culture of the company
has changed over the past two years by operating as one
organization focused on common goals and objectives and guided
by common corporate values, including safety, quality, integrity
and profitability. These values are measured by key performance
indicators (such as compliance, safety and financial
performance), which are the basis for compensating the top
approximately 140 managers in the company.
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82
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ROCE We use return on capital employed
(ROCE) as one of our key performance indicators,
which balances our focus on profitability with the investment
required to produce that profit. Our shift in focus from
operating income to ROCE has established a disciplined approach
to asset allocation decisions based on risk adjusted financial
returns and begun to improve our margins.
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Global Fleet Management We manage our
aircraft fleet globally based on where we can achieve the
highest ROCE, while considering customer, employee and community
responsibilities. In making decisions on where and which markets
to operate our aircraft, we consider risk factors by requiring
higher levels of ROCE in response to political, operating,
market or other types of risk. Global fleet management focuses
on global, not just local, market demand, and results in higher
margins and better asset allocation decisions.
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Common Standards for Quality and Safety We
have instituted specific, company-wide processes to globalize
our industry-leading quality and safety technologies and
practices. These processes allow us to provide our customers in
all markets with consistent, high-quality, safe service, which
we believe gives us a competitive advantage over our regional
competitors.
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Geographic Business Units We have structured
our new business units based on geographic location. Managers of
these business units have operational control to optimize the
assets deployed within their region.
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Customer Relationships We have implemented
procedures to maintain and enhance relationships with our
customers corporate management, in addition to our
existing relationships with local management. We believe these
relationships help us to better understand and respond to our
customers needs on a global basis.
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Relocated Headquarters In August 2005, we
relocated our corporate headquarters to Houston, Texas, to be
nearer the headquarters of many global offshore energy customers.
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New Name In February 2006, we rebranded our
business as Bristow Group Inc. to reflect the significant
changes achieved in the company and to leverage the
Bristow brand which has broad international
recognition with our customers. At the same time, we continue to
use our Air Logistics and Grasso Production Management brands in
the U.S. Gulf of Mexico due to the strength of these brands
in that region.
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Aircraft
Fleet Expansion
In response to significant demand for our helicopter services,
we are expanding our fleet of aircraft. As of June 30,
2006, we had 51 aircraft on order and options to acquire an
additional 37 aircraft. The additional aircraft on order
are expected to provide incremental fleet capacity, with only a
small number of our existing aircraft expected to be replaced
with the new aircraft. We expect that these additional aircraft
on order will increase our total number of aircraft by 15%
assuming no aircraft are replaced, but will provide an even
larger increase in our passenger transportation capacity and
corresponding revenue due to the size of the new aircraft. All
of the aircraft under option and 48 of the 51 aircraft on order
are large- or medium-sized aircraft, as compared with our
existing fleet, of which about half are large- or medium-sized
aircraft.
Of the aircraft on order, 25 are expected to be delivered during
the last nine months in fiscal year 2007. All of these 25
aircraft have been dedicated to customers for specific projects,
including 18 under signed contracts. During fiscal year 2006 and
first quarter fiscal year 2007, we spent $141 million and
$44 million, respectively, on aircraft acquisitions. We
expect to spend an additional $395 million to acquire the
aircraft that were on order as of June 30, 2006, including
$211 million in the last nine months of fiscal year 2007.
Our options to acquire additional aircraft consist of options
for 13 large aircraft and 24 medium-sized aircraft. Options for
five large aircraft expire on September 30, 2006. We
anticipate that the total purchase price for all of the aircraft
under option as of June 30, 2006 will be $448 million
if we exercise all of these
83
options. Upon completion of this offering, we plan to exercise
options to acquire additional large aircraft, including the
options for five large aircraft that expire on
September 30, 2006.
The chart below presents (1) the number of helicopters in
our fleet (comprised of 311 owned aircraft, 22 leased aircraft
and five aircraft held for sale) and their distribution among
the business units of our Helicopter Services segment as of
June 30, 2006; (2) the number of helicopters which we
had on order or under option as of June 30, 2006; and
(3) the percentage of gross revenues which each of our
segments and business units provided during fiscal year 2006.
For additional information regarding our commitments and options
to acquire aircraft, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Liquidity Future Capital
Requirements Capital Commitments included
elsewhere in this prospectus.
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Aircraft in Fleet
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Percentage of
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Helicopters
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Fiscal Year 2006
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Small
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Medium
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Large
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Fixed Wing
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Total
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Revenues
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Helicopter Services
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North America
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137
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26
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5
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1
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169
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26%
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South and Central America
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2
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31
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1
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34
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6%
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Europe
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1
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6
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31
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38
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31%
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West Africa
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11
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32
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2
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6
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51
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14%
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Southeast Asia
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2
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5
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9
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16
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8%
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Other International
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8
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9
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3
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20
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4%
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EH Centralized Operations
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5
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5
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2%
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Production Management
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9%
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Total
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153
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108
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62
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10
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333
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100%
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Aircraft not currently in fleet
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On order
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3
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41
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7
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51
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Under option
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24
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13
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37
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We expect that the additional aircraft on order and any aircraft
we acquire pursuant to options will generally be deployed evenly
across our global business units, but with a bias towards those
units where we expect higher growth, such as our Other
International and Southeast Asia units.
Our
Industry
Increased Demand for Helicopter Services. We
are currently experiencing significant demand for our helicopter
services and, in certain of our markets (particularly the
U.S. Gulf of Mexico), we are unable to meet the full demand
and have been forced to decline customer orders. 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.
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
during the next two 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 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.
84
Aircraft Resale Market. Unlike equipment in
most sectors of the energy services industry, helicopters can be
used in a number of applications in addition to the offshore
energy industry. Aircraft have applications in numerous other
markets, including air medical, tourism, firefighting, corporate
transportation, traffic monitoring, police and military.
Accordingly, we are able to 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.
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 seven passengers), medium
(12 to 13 passengers) and large helicopters (18 to
25 passengers), each of which serves a different
transportation need of the offshore energy industry. Small
helicopters are generally used for daytime flights on shorter
routes and to reach production facilities that cannot
accommodate medium and large helicopters. With more than 4,000
active production facilities, many of which are unable to
accommodate medium or large helicopters, the U.S. Gulf of
Mexico is a significant market for helicopters of this type.
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.
Our
Strengths
We believe that we possess a number of strengths, including:
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We have a global footprint. We operate in
21 countries and have the largest fleet of helicopters
serving the offshore energy market in the world. We have the
largest fleet in the U.S. Gulf of Mexico and also have a
strong market position in other key markets, including the North
Sea and Nigeria. This global footprint allows us to provide our
global 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 provide a safe,
reliable service to our customers. Both our helicopter and
production management services segments have strong records of
safety performance, 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. In the
U.S. Gulf of Mexico, through our Air Logistics subsidiary,
we have made substantial safety improvements in the past five
years, including equipment related as well as behavior related
improvements such as a pre-flight risk matrix and increased
operational oversight. The pre-flight risk matrix was so
effective that the U.S. FAA now requires its use in the air
medical industry. We have also instituted increased operational
oversight under which supervisory pilot approval is required for
flights in harsh weather conditions. In the North Sea, through
our Bristow Aviation subsidiary, we use sophisticated safety
technology, such as Health Usage Monitoring System
(HUMS) to monitor the aircraft performance and
Helicopter Operational Monitoring Program (HOMP) to
monitor pilot performance. These safety advances are applied to
our global organization and monitored through our safety
reporting database and quality management program. We have
harmonized and improved processes for risk assessments and
safety cases. We also have a program (FOCUS) which emphasizes
continuous safety improvement in our ground operations.
|
85
As of June 30, 2006, the average age of the helicopters in
our consolidated fleet was approximately 16 years. The
average age of our fleet has been reduced with the addition of
21 new aircraft in fiscal year 2006, and will be further reduced
with the expected addition of 27 new aircraft in fiscal year
2007 and the periodic retirement of older aircraft. At
predetermined hour intervals of operation, each aircraft is
completely disassembled (including the seats, rotors, engines,
drives, electronics and wires) and rebuilt. We maintain global
electronic maintenance records, which track the flight hour use
of each major aircraft component and allows us to ensure
scheduled aircraft maintenance and efficient availability of
spare parts. This process maintains each helicopter in excellent
operating condition and extends its useful life. Our extensive
maintenance practices allow us to safely operate aircraft that
are almost 30 years old.
|
|
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|
|
We have strong, long-term relationships with our
customers. We have strong, long-term
relationships with our major customers, which include major,
independent, international and national energy companies. We are
the largest provider of helicopter services, by revenue, for the
Shell Companies and the BP Group companies. In addition, we have
entered a global agreement with ConocoPhillips that provides for
information sharing regarding future aircraft requirements,
coordination of our respective operations and business volume
discount arrangements. Our close relationships with these
companies have allowed us to expand our aircraft fleet to meet
customer needs and may present us with additional opportunities
where our customers operate. We have a history of providing
commercially and operationally competitive value and safe,
reliable services to these customers and have recently begun to
manage and improve the corporate level relationships with our
customers, which provides us better insight into long-term
demand and geographic needs of our multinational customers.
|
|
|
|
We have a history of revenue and profit
growth. We have a history of consistent revenue
growth, including 10% compounded annual growth over the past
four fiscal years and 14% in the most recent fiscal year, and
22% in the first quarter fiscal year 2007. Our growth has
translated into increases in net income of 8% compounded
annually over the past four fiscal years. The majority of our
revenue is attributable to production activity. 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 a more stable revenue base and experience less volatility
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.
|
|
|
|
We have the financial flexibility to pursue
growth. Our balance-sheet debt as a percentage of
total capital was 31% at June 30, 2006, and we had
$109.6 million of cash on hand. We have an un-drawn
$100 million revolving credit facility and
$20.9 million available under a $25 million letter of
credit facility as of the date of this prospectus. We believe
that this capital structure provides us with the financial
flexibility to pursue opportunities to grow our business,
including through the aircraft fleet expansion program described
above.
|
|
|
|
We have an experienced management team and a new
culture. Our management team is composed of the
approximately 140 managers, including representatives from
all our business units and significant locations. These managers
have 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. In addition, we evaluate our managers
performance using key performance indicators which directly link
to those values. For example, if a manager is involved in a
compliance violation, no incentive compensation (bonus) is paid
to that person, and he or she is subject to termination. In
addition, 20% of their incentive compensation is based on safety
performance. Accordingly, if a fatal accident occurs in a
location, the managers of that location, the related business
unit, division and corporate receive no safety bonus that year,
irrespective of the level of their personal involvement with the
accident. Also, each member of the management team submits an
annual certification of compliance with our code of business
integrity. Our senior management team is composed of twelve
managers with extensive experience in the energy services
industry, and includes several pilots. These executives have an
average of 30 years of experience. In
|
86
|
|
|
|
|
addition to the annual compliance certification, these
executives and another approximately 30 mid-level managers sign
quarterly reporting certifications.
|
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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|
|
|
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
high-quality service. We focus on maintaining relationships with
both our customers local and corporate management. We
believe that this focus helps us to provide our customers with
the right aircraft in the right place at the right time and to
better anticipate customer needs, which in turn allows us to
better manage our fleet. 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 customer service, safety and reliability, and not just
price.
|
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|
|
Integrate our operations. We have recently
completed a number of changes in our business to integrate our
global organization, and we intend to continue to identify and
implement further integration opportunities. These changes are
discussed under Overview Changes
at Our Company Recent Changes, and include
changes in our senior management team, the integration of our
operations among previously independently managed businesses,
improvements in global asset allocation and other changes in our
corporate operations. We anticipate that these improvements will
result in revenue growth, and may also generate cost savings.
|
|
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|
Grow our business internationally. We plan to
grow our business in most of the markets in which we operate. We
expect this growth to be particularly strong in international
markets outside our three largest markets (U.S. Gulf of
Mexico, North Sea and Nigeria), which represented 71% of our
fiscal 2006 revenues. Although we have a footprint in most major
oil and gas producing regions of the world, we have the
opportunity to expand and deepen our presence in many of these
markets, for example the Middle East and Southeast Asia. We
anticipate this growth to 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. 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.
|
Helicopter
Services
Overview
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. We classify our helicopter fleet into three
categories: small, medium and large. Small helicopters hold four
to seven passengers and are better suited for support of
production management activities and for daytime flights and
shorter routes. With more than 4,000 active production
facilities, many of which are unable to accommodate medium or
large helicopters, the U.S. Gulf of Mexico is a significant
market for helicopters of this type. Medium helicopters hold up
to 13 passengers and are the most versatile aircraft in our
fleet. Generally, they are equipped to fly in a variety of
different operating conditions and are capable of flying longer
distances and carrying larger payloads than small helicopters.
Similarly, large helicopters, which can hold up to 25
passengers, are generally equipped to fly in a variety of
conditions including harsh weather conditions, carry larger
payloads and fly longer distances. Medium and large helicopters
are most commonly used for crew changes on large offshore
87
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.
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 air medical, tourism, firefighting, corporate
transportation, traffic monitoring, police and military. Markets
which we do not serve include agricultural support and general
aviation activities. 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 and overhaul services, engineering and design
services, technical manpower support and transmission testing
from facilities located in the U.S. and U.K. While a portion 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
numerous 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. Because we do not
own a majority of the equity or maintain voting control of these
entities, we may not have the ability to control their policies,
management or affairs. We refer to these entities as
unconsolidated affiliates. We lease some of our aircraft to a
number of these unconsolidated affiliates which in turn provide
helicopter services to customers.
Our
Fleet
As of June 30, 2006, the aircraft in our fleet (comprised
of 311 owned aircraft, 22 leased aircraft and five aircraft held
for sale), 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
|
|
|
Under
|
|
|
Passenger
|
|
|
Speed
|
|
|
|
Type
|
|
In Fleet
|
|
|
Order(1)
|
|
|
Option(2)
|
|
|
Capacity
|
|
|
(MPH)(3)
|
|
|
Engine
|
|
Small Helicopters:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell 206L Series
|
|
|
76
|
|
|
|
3
|
|
|
|
|
|
|
|
6
|
|
|
|
115
|
|
|
Turbine
|
Bell 206B Jet Ranger
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
100
|
|
|
Turbine
|
Bell 407
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
132
|
|
|
Turbine
|
Bell 427
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
145
|
|
|
Twin Turbine
|
BK-117
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
160
|
|
|
Twin Turbine
|
BO-105
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
125
|
|
|
Twin Turbine
|
EC120
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
110
|
|
|
Turbine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
|
|
|
Under
|
|
|
Passenger
|
|
|
Speed
|
|
|
|
Type
|
|
In Fleet
|
|
|
Order(1)
|
|
|
Option(2)
|
|
|
Capacity
|
|
|
(MPH)(3)
|
|
|
Engine
|
|
Medium Helicopters:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell 212
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
115
|
|
|
Twin Turbine
|
Bell 412
|
|
|
33
|
|
|
|
3
|
|
|
|
|
|
|
|
13
|
|
|
|
125
|
|
|
Twin Turbine
|
EC155
|
|
|
6
|
|
|
|
4
|
|
|
|
|
|
|
|
13
|
|
|
|
167
|
|
|
Twin Turbine
|
Sikorsky
S-76
|
|
|
51
|
|
|
|
34
|
|
|
|
24
|
|
|
|
12
|
|
|
|
145
|
|
|
Twin Turbine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
|
|
|
|
41
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large Helicopters:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS332L Super Puma
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
144
|
|
|
Twin Turbine
|
Bell 214ST
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
144
|
|
|
Twin Turbine
|
Sikorsky
S-61
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
132
|
|
|
Twin Turbine
|
Sikorsky
S-92
|
|
|
1
|
|
|
|
3
|
|
|
|
13
|
|
|
|
19
|
|
|
|
158
|
|
|
Twin Turbine
|
Mil Mi-8
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
138
|
|
|
Twin Turbine
|
EC225
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
25
|
|
|
|
167
|
|
|
Twin Turbine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
7
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (includes fixed wing)
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated affiliates(4)
|
|
|
333
|
|
|
|
51
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional aircraft operated by
unconsolidated affiliates(4)
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents 51 aircraft on order. Of the aircraft on order, 25
are expected to be delivered during the remaining nine months in
fiscal year 2007. All of these 25 aircraft have been dedicated
to customers for specific projects, including 18 under signed
contracts. For additional information, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity Future Capital Requirements
Capital Commitments included elsewhere in this prospectus. |
|
(2) |
|
Represents 37 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 2008 and 2009, while the
medium aircraft would be delivered over the next five years,
principally in the later portion of that period. For additional
information, see Managements Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity Future Capital Requirements
Capital Commitments included elsewhere in this prospectus.
As of June 30, 2006, options with respect to six of these
aircraft were subject to availability, which means
that the delivery time for the aircraft subject to these options
will depend upon the number of manufacturing slots available at
the time the option is exercised. As a result, the delivery time
for these aircraft may be extended beyond those specified in the
purchase agreement with the manufacturer. |
|
(3) |
|
Represents the approximate normal cruise speed flying at gross
weight and at sea level under standard operating conditions. |
|
(4) |
|
We own 311 of the 333 aircraft reflected in the table above and
hold the remaining 22 aircraft under operating leases.
Unconsolidated affiliates leased 30 of our 333 aircraft in
addition to the 147 aircraft they operate. |
89
The following table shows the distribution of our small, medium
and large aircraft among our business units as of June 30,
2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EH
|
|
|
|
|
|
|
North
|
|
|
Central
|
|
|
|
|
|
West
|
|
|
Southeast
|
|
|
Other
|
|
|
Centralized
|
|
|
|
|
Type
|
|
America
|
|
|
America
|
|
|
Europe
|
|
|
Africa
|
|
|
Asia
|
|
|
International
|
|
|
Operations
|
|
|
Total
|
|
|
Small
|
|
|
137
|
|
|
|
2
|
|
|
|
1
|
|
|
|
11
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
Medium
|
|
|
26
|
|
|
|
31
|
|
|
|
6
|
|
|
|
32
|
|
|
|
5
|
|
|
|
8
|
|
|
|
|
|
|
|
108
|
|
Large
|
|
|
5
|
|
|
|
1
|
|
|
|
31
|
|
|
|
2
|
|
|
|
9
|
|
|
|
9
|
|
|
|
5
|
|
|
|
62
|
|
Other (includes fixed wing)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
169
|
|
|
|
34
|
|
|
|
38
|
|
|
|
51
|
|
|
|
16
|
|
|
|
20
|
|
|
|
5
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
Organization
In 2006, Bristow introduced a new organizational structure.
Helicopter services are segmented into Western and Eastern
Hemisphere divisions. The Western Hemisphere is managed from New
Iberia, Louisiana. The Eastern Hemisphere is managed from
Redhill, England (near London). Bristows Production
Management Services business is managed from the companys
headquarters in Houston, Texas.
North
America
As of June 30, 2006, we conducted our North America
Helicopter Services operations primarily from 13 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 13 operating facilities, our advanced
flight-following systems and our widespread and strategically
located offshore fuel stations. As of June 30, 2006, we
operated 153 aircraft in the U.S. Gulf of Mexico and 16
aircraft in Alaska. During fiscal year 2006 and first
91
quarter fiscal year 2007, our North America business unit
contributed 26% and 27%, respectively, 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 Alaska pipeline. The
U.S. Gulf of Mexico is a major offshore oil and gas
producing region with approximately 4,000 production platforms.
These platforms are typically unmanned and are serviced by our
small aircraft. In fiscal year 2006, Hurricane Katrina caused a
total loss of our Venice, Louisiana, shorebase facility, and
Hurricane Rita severely damaged our Creole, Louisiana, base and
flooded our Intracoastal City, Louisiana, base. We recorded a
$0.2 million net gain ($2.8 million in probable
insurance recoveries offset by $2.6 million of involuntary
conversion losses) during fiscal year 2006 related to property
damage to these facilities. We reopened our Intracoastal City,
Louisiana, base in December 2005, our Venice, Louisiana, base in
March 2006 and our Creole, Louisiana, base in April 2006.
South
and Central America
We conduct our South and Central America Helicopter Services
operations in Brazil, Colombia, Mexico and Trinidad. As of
June 30, 2006, we operated 34 helicopters in South and
Central America (seven in Brazil, three in Colombia, twelve in
Mexico and twelve in Trinidad). In Brazil and Mexico, operations
are conducted through affiliates in those countries, which are
unconsolidated. See discussion of these arrangements below.
During fiscal year 2006 and first quarter fiscal year 2007, our
South and Central America business unit contributed 6% of our
gross revenue.
Trinidad
We own a 40% interest in Bristow Caribbean Ltd. (Bristow
Caribbean), a joint venture in Trinidad with a local
partner (60% interest). Bristow Caribbean provides helicopter
services to a customer of ours in Trinidad. As 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.
Mexico
We own a 49% interest in HC, which provides onshore helicopter
services to the Mexican Federal Electric Commission and offshore
helicopter transportation to other companies on a contract and
ad hoc basis. HC owns three aircraft and leases eight aircraft
from us, nine aircraft from another affiliate of ours (discussed
below) and three aircraft from a third party to provide
helicopter services to its customers.
We own a 49% interest in RLR which owns six aircraft and leases
three aircraft from us, all of which it leases to HC.
Brazil
We own a 50% interest in Aeroleo Taxi Aereo S.A., or Aeroleo, a
Brazilian corporation. Aeroleo provides offshore helicopter
services primarily to the Brazilian national oil company and
also serves other oil and gas companies. Aeroleo owns one
aircraft and leases eight aircraft from us and two aircraft from
another affiliate of ours (discussed below).
We own a 50% interest in Helicopter Leasing Associates, or HLA,
a Louisiana limited liability company. HLA leases two aircraft
from a third party, which it leases to Aeroleo.
Europe
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 facilities in the North
Sea are large and require frequent crew change flight services.
We deploy the majority of our large aircraft in this region. In
addition to our oil and gas helicopter services, we are the sole
civil supplier of search and rescue services to Her
Majestys Coast Guard in the U.K. As of June 30, 2006,
we operated 38 aircraft in Europe. We also have an ownership
interest in and lease aircraft to Norsk for use
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in its North Sea operations (see discussion below). During
fiscal year 2006 and first quarter fiscal year 2007, our Europe
business unit contributed 31% of our gross revenue.
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 operated 11 aircraft, five of which are leased
from us. During the first quarter of fiscal year 2006, Norsk
completed the acquisition of Lufttransport AS, a Norwegian
company, and its sister company, Lufttransport AB, a Swedish
company, collectively operating 28 aircraft and engaged in
providing air ambulance services in Scandinavia. This brings the
number of aircraft operated by Norsk and its subsidiaries to 39.
In fiscal year 2006, Norsk committed to purchase three large
aircraft. The company, Norsk and the other equity owner in Norsk
each agreed to purchase one of the these three aircraft.
We own a 50% interest in each of FBS, FB Heliservices Limited
(FBH), and FB Leasing Limited (FBL)
(collectively, 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 a total of 59
aircraft.
West
Africa
As of June 30, 2006, we operated 51 aircraft in West Africa
(all of which were operating in Nigeria). As a result of the
potential cancellation by customers of their contracts with us
resulting from the findings of the Internal Review (although
none have been cancelled as of the date of filing this
prospectus), we may experience a substantial reduction in
business activity in Nigeria in future periods. During fiscal
year 2006 and first quarter fiscal year 2007, our West Africa
business unit contributed 14% of our gross revenue.
Southeast
Asia
We conduct our Southeast Asia operations in Australia, China and
Malaysia. As of June 30, 2006, we operated 16 helicopters
in our Southeast Asia business unit (12 of which were operating
in Australia). During fiscal year 2006 and first quarter fiscal
year 2007, our Southeast Asia business unit contributed 8% of
our gross revenue.
Other
International
We conduct our Other International operations in Egypt, India,
Kazakhstan, Mauritania, Russia and Turkmenistan. As of
June 30, 2006, we operated 20 aircraft in our Other
International business unit (10 of which were operating in
Russia). During fiscal year 2006 and first quarter fiscal year
2007, our Other International business unit contributed 4% of
our gross revenue.
In 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 36 aircraft
and leases two aircraft from us.
EH
Centralized Operations
Our EH Centralized Operations business unit is comprised of a
helicopter leasing subsidiary (which leased five helicopters to
Norsk at June 30, 2006), our technical services business,
other non-flight services
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business in the Eastern Hemisphere and corporate level expenses
for our Eastern Hemisphere businesses. These operations are
managed centrally by our Eastern Hemisphere management. During
fiscal year 2006 and first quarter fiscal year 2007, our EH
Centralized Operations business unit contributed 2% of our gross
revenue.
Our technical services portion of this business unit provides
helicopter repair and overhaul services from facilities located
in Redhill, England and Aberdeen, Scotland. In November 2004, we
sold certain contracts within this business to FBH.
Additionally, we began downsizing the remaining operations of
technical services in the U.K. by ceasing to perform certain
types of third-party work that had generated poor financial
results during fiscal years 2004 and 2003. The remaining
services include engine overhauls, engineering and design
services, technical manpower support and transmission testing.
While a portion of this work is performed on our own aircraft,
some of these services are performed for third parties.
Customers
and Contracts
The principal customers for our Helicopter Services are national
and international oil and gas companies. During fiscal years
2006, 2005 and 2004, the Shell Companies accounted for 10%, 11%
and 11%, respectively, of our gross revenue. No other customer
accounted for 10% or more of our gross revenue during those
periods. During fiscal year 2006, our top ten customers
accounted for 50% 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 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, equipment and
record of safety. An incumbent operator has a competitive
advantage in the bidding process based on its relationship with
the customer, its knowledge of the site characteristics and its
understanding of the cost structure for the operations.
Production
Management Services
Overview
We are a leading independent contract operator of oil and gas
production facilities in the U.S. Gulf of Mexico. As of
June 30, 2006, we managed or had personnel assigned to 315
production facilities in the U.S. Gulf of Mexico. Our
customers are typically independent oil and gas companies who
hire us to monitor and maintain their offshore production
facilities and provide other services for certain onshore
facilities. When servicing offshore oil and gas production
facilities, our employees normally live on the
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offshore facility in seven-day rotations. Our services include
furnishing specialized production operations personnel,
engineering services, production operating services, paramedic
services and providing marine and helicopter transportation of
personnel and supplies between onshore bases and offshore
facilities. Our Production Management Services segment also
leases helicopters from, and otherwise utilizes the services of,
our Helicopter Services segment. We also handle regulatory and
production reporting for some of our customers. During fiscal
year 2006 and first quarter fiscal year 2007, our Production
Management Services segment contributed 9% and 8%, respectively,
of our gross revenue.
The production management business depends primarily on
production activity levels in the U.S. offshore energy
industry. Since 90% of our production management costs consist
of labor and contracted transportation services, we are able to
scale our operations up or down according to market conditions.
Customers
and Contracts
Customers of our Production Management Services are primarily
independent oil and gas companies that own oil and gas
production facilities in the U.S. Gulf of Mexico but
outsource production management of their facilities to companies
such as our own. This practice allows these customers to focus
on the exploration for and development of additional oil and gas
reserves. During the fiscal years 2006, 2005 and 2004 and the
first quarter fiscal year 2007, no single production management
customer accounted for more than 10% of our consolidated gross
revenue, although one customer did account for 46%, 38%, 28% and
24% of our segment gross revenue during fiscal years 2006, 2005
and 2004 and the first quarter fiscal year 2007, respectively.
We enter into a master service agreement with each new
production management customer. When work is awarded to us, the
pricing agreement included in the bid submission, which details
the monthly rates for contract personnel and transportation
services as well as hourly rates for services provided outside
the scope of the contract, becomes a part of the master service
agreement with the customer. Revenue associated with
transportation services and other goods and services provided by
third parties is presented as reimbursable revenue as discussed
under Helicopter Services above.
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 one competitor
with a comparable number of aircraft in the U.S. Gulf of
Mexico and two significant competitors in the North Sea. We
believe that it is difficult for additional significant
competitors to enter our industry because it requires
considerable 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 in the offshore
energy industry have the capability to perform their own
helicopter services on a limited basis should they elect to do
so.
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,
operational experience, 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.
The production management business is also highly competitive.
There are a number of competitors providing production
management services throughout the U.S. Gulf of Mexico. In
addition, there are many smaller competitors that compete
locally or for single projects or jobs. Two key elements in
competing for production management contracts are personnel
costs and transportation costs. In addition, the reliability of
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the production manager and the quality of its personnel,
training programs and safety record are important competitive
factors.
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.
In first quarter fiscal year 2007, we had a helicopter accident
in the U.S. Gulf of Mexico which did not result in any
fatalities. In fiscal year 2006, we had one helicopter accident
in the U.S. Gulf of Mexico that resulted in two fatalities.
In fiscal year 2005, we had two helicopter accidents involving
fatalities: an accident in Alaska that resulted in one fatality
and an accident in the Gulf of Guinea, offshore Nigeria, that
resulted in four fatalities. We maintain insurance with respect
to the aircraft involved and related liabilities and believe
that our insurance coverage will be adequate to cover any claims
ultimately paid.
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. 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), 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.
Our Production Management Services operations are subject to the
normal risks associated with working on offshore oil and gas
production facilities. These risks could result in damage to or
loss of property and injury to or death of personnel. We carry
customary business insurance for these operations, including
general liability, workers compensation, and property and
casualty coverage. We also carry other insurance as required in
the U.S. by the Jones Act for certain offshore workers, and
liability insurance for our medics on board drilling vessels.
Employees
As of March 31, 2006, we employed approximately 4,200
employees. Approximately 3,700 of these employees are employed
in our Helicopter Services segment, approximately 470 are
employed in our Production Management Services segment and
approximately 30 are employed in our corporate office.
We employ approximately 300 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 a wage increase for
the pilot group and improvements to several benefit plans. We do
not believe that these increases will place us at a competitive,
financial or operational disadvantage.
Additionally, as of March 31, 2006, substantially all of
our employees in the U.K., Nigeria and Australia are represented
by collective bargaining or union agreements which are ongoing
with no specific termination dates.
We are currently involved in negotiations with the unions in
Nigeria and anticipate that we will increase certain benefits
for union personnel as a result of these negotiations. We do not
expect these benefit increases to have a material impact on our
results of operations.
Many of the employees of our affiliates are represented by
collective bargaining agreements.
96
Periodically, certain groups of our employees who are not
covered by a collective bargaining agreement consider entering
into such an agreement.
Activities engaged in by certain of our current and former
employees have been examined in the Internal Review, some of
which are discussed in greater detail in Legal
Proceedings. We have taken corrective actions intended to
ensure that each of our employees complies with the laws of the
countries in which we operate and with our own ethical
guidelines. See Managements Discussion and Analysis
of Financial Condition and Results of Operations
Internal Review, Governmental Investigations and Internal
Control Internal Control Matters
Managements Response to Material Weaknesses and
Risk Factors Risks Relating to Our Internal
Review, Governmental Investigations and Internal
Control The SEC investigation, any related
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 included elsewhere in this
prospectus.
We believe that our relations with our employees are
satisfactory.
Properties
The number and types of aircraft we operate are described under
Helicopter Services above. In addition,
we lease the significant properties listed below for use in our
operations.
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Approximately 18.6 acres of land at the Acadiana Regional
Airport in New Iberia, Louisiana, under a lease expiring in
fiscal year 2030. We have constructed on that site office,
training, parts facilities and helicopter maintenance facilities
comprising about 120,000 square feet of floor space, which
is used by our Western Hemisphere operations (primarily our
North America business unit). The property has access to the
airport facilities, as well as to a major highway.
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Approximately 77,000 square feet of facilities at Redhill
Aerodrome near London, England, including office and workshop
space under a lease expiring in 2075.
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A helicopter terminal, offices and hangar facilities totaling
approximately 138,000 square feet sitting on approximately
15 acres of property at Aberdeen Airport, Scotland, under a
lease expiring in 2013 with an option to extend to 2023. We also
maintain additional hangar and office facilities at Aberdeen
Airport under a lease expiring in 2030.
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Approximately 42,000 square feet of office and shop space
in a building in Tucson, Arizona, under a lease expiring in
2007, which is used by a technical services subsidiary within
our North America business unit.
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Approximately 17,800 square feet of office space in a
building in Houston, Texas, under a lease expiring in 2011,
which we use as our headquarters and for our Production
Management Services business.
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In addition to these facilities, we lease various office and
operating facilities worldwide, including facilities along the
U.S. Gulf of Mexico which support our North America
Helicopter Services operations and numerous residential
locations near our operating bases in the United Kingdom,
Australia, China, Russia, Nigeria and Trinidad primarily for
housing pilots and staff supporting those areas of operation.
These facilities are generally suitable for our operations and
can be replaced with other available facilities if necessary.
Additional information about our properties can be found in
Note 6 in the Notes to Consolidated Financial
Statements and in Note 4 in the Condensed Notes
to Consolidated Financial Statements included elsewhere in
this prospectus (under the captions Aircraft Purchase
Contracts and Operating Leases). A detail of
our long-lived assets by geographic area as of March 31,
2006 and 2005 can be found in Note 11 in the Notes to
Consolidated Financial Statements included elsewhere in
this prospectus.
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Government
Regulation
United
States
As a commercial operator of small 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 Federal Aviation Administration
(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 United States 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 United States and an operating certificate may be granted
only to a citizen of the United States. For purposes of these
requirements, a corporation is deemed to be a citizen of the
United States only if, among other things, at least 75% of its
voting interests are owned or controlled by United States
citizens. If persons other than United States 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 United States. 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. 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, 2006,
approximately 1,404,000 shares of our common stock were
held by persons with foreign addresses. These shares represented
approximately 6.0% of our total outstanding common shares as of
March 31, 2006. Because a substantial portion of our common
stock is publicly traded, our foreign ownership may fluctuate on
each trading day.
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 ownership and control requirements of Council
Regulation 2407/92. This means that the entity that
operates under the license must be owned directly or through
majority ownership by European Union nationals, and must at all
times be effectively controlled by them.
The CAA regulates our U.K. flight operations and exercises
jurisdiction over personnel, aircraft, ground facilities and
certain technical aspects of those operations. Accident
investigations are carried out by an inspector from the Air
Accidents Investigation Branch of the Department for Transport.
The CAA often imposes improved safety standards on the basis of
a report of the inspector. 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 United States and the
U.K. 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
98
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.
Production
Management
The Minerals Management Service Bureau of the United States
Department of the Interior regulates the operations of oil and
gas producers in the outer continental shelf of the Gulf of
Mexico and, in this respect, exercises jurisdiction over
personnel, production facilities and certain technical aspects
of our operations.
Environmental
All of our operations are subject to U.S. federal, state and
local and foreign 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 of
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, 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 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
99
responsible party in connection with certain sites. See
Business Legal Proceedings included
elsewhere in this prospectus.
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 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 United States. The discharge of
pollutants into jurisdictional waters is prohibited unless the
discharge is permitted by the Environmental Protection Agency 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 United States. 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 potentially 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 not assurance, however, that this trend
of compliance will continue in the future or that such
compliance will not be material.
Legal
Proceedings
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 such special outside counsel to cover operations in
other countries and other issues. In connection with this
review, special outside counsel to the Audit Committee retained
forensic accountants. As a result of the findings of the
Internal Review, our quarter ended December 31, 2004 and
prior financial statements were restated. For further
information on the restatements, see Managements
Discussion and Analysis of Financial Condition and Results of
Operations Internal Review, Restatement,
Governmental Investigations and Internal Control
Restatement of Previously Reported Amounts.
100
The SEC then notified us that it had initiated an informal
inquiry and requested that we provide certain documents on a
voluntary basis. The SEC thereafter advised us that the inquiry
has become a formal investigation. We have responded to the
SECs requests for documents and intend to continue to
do so.
The Internal Review is complete. All known required restatements
were reflected in the financial statements included in our
Annual Report on
Form 10-K
for fiscal year 2005, and no further restatements were required
in our Annual Report on
Form 10-K
for fiscal year 2006 or our financial statements presented in
our
Form 10-Q
for the first quarter fiscal year 2007. As a
follow-up to
matters identified during the course of the Internal Review,
special counsel to the Audit Committee may be called upon to
undertake additional work in the future to assist in responding
to inquiries from the SEC, from other governmental authorities
or customers, or as
follow-up to
the previous work performed by such special counsel.
In October 2005, the Audit Committee reached certain conclusions
with respect to findings to date from the Internal Review. The
Audit Committee concluded that, over a considerable period of
time, (1) improper payments were made by, and on behalf of,
certain foreign affiliated entities directly or indirectly to
employees of the Nigerian government, (2) improper payments
were made by certain foreign affiliated entities to Nigerian
employees of certain customers with whom we have contracts,
(3) inadequate employee payroll declarations and, in
certain instances, tax payments were made by us or our
affiliated entities in certain jurisdictions,
(4) inadequate valuations for customs purposes may have
been declared in certain jurisdictions resulting in the
underpayment of import duties, and (5) an affiliated entity
in a South American country, with the assistance of our
personnel and two of our other affiliated entities, engaged in
transactions which appear to have assisted the South American
entity in the circumvention of currency transfer restrictions
and other regulations. In addition, as a result of the Internal
Review, the Audit Committee and management determined that there
were deficiencies in our books and records and internal controls
with respect to the foregoing and certain other activities.
Based on the Audit Committees findings and
recommendations, the board of directors has taken disciplinary
action with respect to our personnel who it determined bore
responsibility for these matters. The disciplinary actions
included termination or resignation of employment (including of
certain members of senior management), changes of job
responsibility, reductions in incentive compensation payments
and reprimands. One of our affiliates has also obtained the
resignation of certain of its personnel.
We have initiated remedial action, including initiating action
to correct underreporting of payroll tax, disclosing to certain
customers inappropriate payments made to customer personnel and
terminating certain agency, business and joint venture
relationships. We also have taken steps to reinforce our
commitment to conduct our business with integrity by creating an
internal corporate compliance function, instituting a new code
of business conduct and developing and implementing a training
program for all employees. In addition to the disciplinary
actions referred to above, we have also taken steps to
strengthen our control environment by hiring new key members of
senior and financial management, including persons with
appropriate technical accounting expertise, expanding our
corporate finance group and internal audit staff, realigning
reporting lines within the accounting function so that field
accounting reports directly to the corporate accounting function
instead of operations management, and improving the management
of our tax structure to comply with its intended design. Our
compliance program has also begun full operation, and clear
corporate policies have been established and communicated to our
relevant personnel related to employee expenses, delegation of
authority, revenue recognition and customer billings.
We have communicated the Audit Committees conclusions with
respect to the findings of the Internal Review to regulatory
authorities in some, but not all, of the jurisdictions in which
the relevant activities took place. We are in the process of
gathering and analyzing additional information related to these
matters, and expect to disclose the Audit Committees
conclusions to regulatory authorities in other jurisdictions
once this process has been completed. Such disclosure may result
in 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
101
imposition of fines and other penalties, remedies
and/or
sanctions, including precluding us from participating in
business operations in their countries. To the extent that
violations of the law may have occurred in several countries in
which we operate, we do not yet know whether such violations can
be cured merely by the payment of fines or whether other actions
may be taken against us, including requiring us to curtail our
business operations in one or more such countries for a period
of time. In the event that we curtail our business operations in
any such country, we then may face difficulties exporting our
aircraft from such country. As of June 30, 2006, the book
values of our aircraft in Nigeria and the South American country
where certain improper activities took place were approximately
$118.3 million and $8.1 million, respectively.
We cannot predict the ultimate outcome of the SEC investigation,
nor can we predict whether other applicable U.S. and foreign
governmental authorities will initiate separate investigations.
The outcome of the SEC investigation and any related legal and
administrative proceedings could include the institution of
administrative, civil injunctive or criminal proceedings
involving us
and/or
current or former employees, officers
and/or
directors, the imposition of fines and other penalties, remedies
and/or
sanctions, modifications to business practices and compliance
programs
and/or
referral to other governmental agencies for other appropriate
actions. It is not possible to accurately predict at this time
when matters relating to the SEC investigation will be
completed, the final outcome of the SEC investigation, what if
any actions may be taken by the SEC or by other governmental
agencies in the U.S. or in foreign jurisdictions, or the
effect that such actions may have on our consolidated financial
statements. In addition, in view of the findings of the Internal
Review, we may encounter difficulties in the future conducting
business in Nigeria and a South American country, and with
certain customers. It is also possible that certain of our
existing contracts may be cancelled (although none have been
cancelled as of the date of this prospectus) and 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 connection with its conclusions regarding payroll
declarations and tax payments, the Audit Committee determined on
November 23, 2005, following the recommendation of our
senior management, that there was a need to restate our quarter
ended December 31, 2004 and prior financial statements.
Such restatement was reflected in our Annual Report on
Form 10-K
for fiscal year 2005. As of June 30, 2006, we have accrued
an aggregate of $21.6 million for the taxes, penalties and
interest attributable to underreported employee payroll.
Operating income for fiscal years 2006, 2005 and 2004 included
$4.3 million, $3.8 million and $4.2 million,
respectively, attributable to this accrual. Operating income for
first quarter fiscal year 2006 included $0.9 million
attributable to this accrual. No additional amounts were
incurred during the first quarter fiscal year 2007. At this
time, we cannot estimate what additional payments, fines,
penalties
and/or
litigation and related expenses may be required in connection
with the matters identified as a result of the Internal Review,
the SEC investigation,
and/or any
other related regulatory investigation that may be instituted or
third-party litigation; however, such payments, fines, penalties
and/or
expenses could have a material adverse effect on our business,
financial condition and results of operations.
As we continue to respond to the SEC investigation and other
governmental authorities and take other actions relating to
improper activities that have been identified in connection with
the Internal Review, there can be no assurance that
restatements, in addition to those reflected in our Annual
Report on
Form 10-K
for fiscal year 2005, will not be required or that our
historical financial statements included in this prospectus will
not change or require further amendment. In addition, new issues
may be identified that may impact our financial statements and
the scope of the restatements described in this prospectus and
lead us to take other remedial actions or otherwise adversely
impact us.
In addition, we face legal actions relating to the 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
102
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.
Document
Subpoena from U.S. Department of Justice
On June 15, 2005, we issued a press release disclosing that
one of our subsidiaries had received a document subpoena from
the DOJ. The subpoena relates 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;
however, our ability to review this matter internally has been
somewhat impacted by the fact that certain of our former
officers covered by the DOJ investigation are no longer with our
company. We have had discussions with the DOJ and provided
documents related to our operations in the United States 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
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 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 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
and $0.6 million in legal and other professional fees in
fiscal year 2006 and the first quarter fiscal year 2007,
respectively, and significant expenditures may continue to be
incurred in the future. See Risk Factors The
DOJ 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 civil litigation,
the incurrence of expenses, the loss of business and other
adverse effects on our company included elsewhere in this
prospectus.
103
Environmental
Contingencies
The United States Environmental Protection Agency
(EPA) has in the past notified us that we are a
potential responsible party, or PRP, at four former waste
disposal facilities, three of which are currently 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. 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.
Other
Matters
Although infrequent, flight accidents have occurred in the past,
and substantially all of the related losses and liability claims
have been covered by insurance. 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.
104
MANAGEMENT
Executive
Officers and Directors
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position Held
|
|
William E. Chiles
|
|
|
57
|
|
|
President, Chief Executive Officer
and Director
|
Perry L. Elders
|
|
|
45
|
|
|
Executive Vice President and Chief
Financial Officer
|
Richard D. Burman
|
|
|
53
|
|
|
Senior Vice President, Eastern
Hemisphere
|
Michael R. Suldo
|
|
|
60
|
|
|
Senior Vice President, Western
Hemisphere
|
Bill D. Donaldson
|
|
|
66
|
|
|
Senior Vice President, Production
Management
|
Mark B. Duncan
|
|
|
44
|
|
|
Senior Vice President, Global
Business Development
|
William H. Hopkins
|
|
|
64
|
|
|
Vice President of Human Resources,
Quality & Safety
|
Gavin Sinclair
|
|
|
54
|
|
|
Vice President Compliance
|
Michael W. Meyer
|
|
|
49
|
|
|
Vice President, Global Supply
Chain and Information Management
|
Joseph A. Baj
|
|
|
48
|
|
|
Vice President and Treasurer
|
Elizabeth D. Brumley
|
|
|
47
|
|
|
Vice President, Chief Accounting
Officer and Controller
|
Randall A. Stafford
|
|
|
50
|
|
|
Vice President and General
Counsel, Corporate Secretary
|
Thomas C. Knudson
|
|
|
60
|
|
|
Director and Chairman of the Board
|
Thomas N. Amonett
|
|
|
62
|
|
|
Director
|
Charles F. Bolden, Jr.
|
|
|
59
|
|
|
Director
|
Peter N. Buckley(1)
|
|
|
63
|
|
|
Director
|
Stephen J. Cannon
|
|
|
52
|
|
|
Director
|
Jonathan H. Cartwright(1)
|
|
|
52
|
|
|
Director
|
Michael A. Flick
|
|
|
58
|
|
|
Director
|
Ken C. Tamblyn
|
|
|
63
|
|
|
Director
|
Robert W. Waldrup
|
|
|
62
|
|
|
Director
|
|
|
|
(1) |
|
Peter N. Buckley and Jonathan H. Cartwright, directors and
executive officers of Caledonia Industrial & Services
Limited (CIS), were designated by CIS and elected to
our board of directors in February 1997 pursuant to a Master
Agreement dated December 12, 1996 among CIS, us and certain
other persons in connection with our acquisition of 49% and
other substantial interests in Bristow Aviation Holdings
Limited. The Master Agreement provides that so long as CIS owns
(1) at least 1,000,000 shares of our common stock or
(2) at least 49% of the total outstanding ordinary shares
of Bristow Aviation Holdings Limited, CIS will have the right to
designate two persons for nomination of our board of directors
and to replace any directors so nominated. On December 4,
2002, CIS transferred its rights and obligations under the
Master Agreement to Caledonia Investments plc. For a further
discussion of this transfer, see Certain Relationships and
Related Party Transactions. |
William E. Chiles joined us in July 2004 as Chief
Executive Officer and President. Mr. Chiles was elected
Chief Financial Officer upon Mr. Brian Voegeles
resignation from our company in December 2005 and served in that
capacity until Mr. Elders was elected to the position in
February 2006. Mr. Chiles has been a member of our Board
since 2004. Prior to his employment by our company,
Mr. Chiles was employed by Grey Wolf, Inc., an onshore oil
and gas drilling company traded on the American Stock
105
Exchange, from March 2003 until June 21, 2004 as Executive
Vice President and Chief Operating Officer. Mr. Chiles
served as Vice President of Business Development at ENSCO
International Incorporated, an offshore oil and gas drilling
company listed on the New York Stock Exchange, from August 2002
until March 2003. From August 1997 until its merger into an
ENSCO International affiliate in August 2002, Mr. Chiles
served as President and Chief Executive Officer of Chiles
Offshore, Inc. Mr. Chiles serves as a director of Basic
Energy Services, L.P., a contractor for land based oil and gas
services. He has served as a member of our Executive Committee
since 2004.
Perry L. Elders joined us in February 2006 as Executive
Vice President and Chief Financial Officer. Prior to joining our
company, Mr. Elders was a Director with Sirius Solutions,
L.L.P. from June 2005 to February 2006, during which time
Mr. Elders was Senior Financial Advisor to our company from
November 2005 to February 2006 under a consulting arrangement
with Sirius Solutions. From August 2004 to May 2005,
Mr. Elders was with Vetco International Limited, a global
oilfield equipment manufacturer and construction company,
initially as a consultant and then as Vice President Finance and
Chief Accounting Officer. From July 2002 to September 2003,
Mr. Elders was a partner in the Houston audit practice of
PricewaterhouseCoopers LLP. From September 1983 to June 2002,
Mr. Elders was employed with the Houston audit practice of
Arthur Andersen LLP, including as a partner for the last seven
years and concluding as head of the energy service practice in
the Houston, New Orleans, Austin and San Antonio markets.
Mr. Elders is a Certified Public Accountant and member of
the American Institute of Certified Public Accountants.
Richard D. Burman joined us in 2004 as Senior Vice
President, Eastern Hemisphere. He also serves as Managing
Director of Bristow Helicopters. Prior to joining us,
Mr. Burman held various positions within the Baker Hughes
group of companies, most recently Region General Manager,
Mediterranean and Africa for Baker Hughes INTEQ.
Michael R. Suldo joined us in 2002 as Assistant General
Manager of Air Logistics and was elected General Manager in
2003. In June 2005, Mr. Suldo was promoted to Senior Vice
President, Western Hemisphere and President of Air Logistics,
L.L.C. Prior to joining us, Mr. Suldo was employed at
Petroleum Helicopters Inc. from July 1988 until March 2002 in
Gulf of Mexico operations in various managerial positions.
Before 1988, Mr. Suldo developed a 20 year career in
the US Navy, from which he retired as a Commander.
Bill D. Donaldson joined us in 1995 as Vice President,
Marketing of Grasso Production Management, Inc.
(GPM). Mr. Donaldson was appointed President of
GPM in 1996, Executive Vice President, Production Management in
2004, and Senior Vice President in 2005, and currently serves as
President of GPM and Senior Vice President. Mr. Donaldson
has 40 years experience in the offshore oil service
business in the Gulf of Mexico. Prior to joining us,
Mr. Donaldson held the positions of President of Savage
Drilling, Inc. and Vice President, Operations for Tidewater, Inc.
Mark B. Duncan joined us in January 2005 as Vice
President, Global Business Development and was promoted to
Senior Vice President, Global Business Development effective
January 1, 2006. Prior to joining our company,
Mr. Duncan worked at ABB Lummus Global Inc. from 2002 to
2005. At ABB, Mr. Duncan served as Commercial Director in
the Deepwater Floating Production Systems division, based in
Houston, Texas. From 1985 to 2002, Mr. Duncan worked for
the Halliburton/Brown Root Group, mostly in the subsea sector
where he filled various positions working in the North Sea,
Brazil and several other International areas, ultimately holding
the position of Senior Global Vice President Commercial for the
Subsea7 entity.
William H. Hopkins joined us in August 2004 as Vice
President of Human Resources, Quality & Safety. From
September 2002 to August 2004, Mr. Hopkins was Manager of
Employee Development at ENSCO based in Dallas, Texas. In 1997,
Mr. Hopkins became a part of the founding group of officers of
Chiles Offshore Inc. in Houston, Texas, after having spent three
years in New Orleans, Louisiana, and Houston, Texas, as an area
executive and senior consultant for Right Management
Consultants, an international human resources management
consulting firm.
106
Gavin Sinclair joined us in January 2005 and was promoted
to Vice President Compliance in July 2005. Prior to joining our
company, Mr. Sinclair was Senior Region Counsel (Europe,
Middle East, Africa & CIS) for Baker Hughes Inc., a position
held since 1998. From 1995 to 1998, Mr. Sinclair was
Eastern Hemisphere Legal Director for Cummins Inc, and from 1992
to 1995 was General Counsel for Baker Hughes INTEQ, based in
Houston, Texas.
Michael W. Meyer joined us in September 1993 as Group
Director of Information Management and was promoted to Vice
President, Global Supply Chain and Information Management in
December 2005. From September 1992 to September 1993 he served
as Logistics Systems Manager for United Parcel Service and from
March 1991 to July 1992 he served as Systems Manager
Europe for Air Express International.
Joseph A. Baj joined us in July 2005 as Assistant
Treasurer. In November 2005, Mr. Baj was elected Vice
President, Treasurer and Secretary upon Mr. Voegeles
resignation from these positions. In May 2006, Mr. Baj
resigned his position as Secretary upon Mr. Stafford
joining our company. Prior to joining our company, Mr. Baj
was a treasury consultant from 2004 to 2005. Prior to 2004,
Mr. Baj was Assistant Treasurer with Transocean Inc. from
1997 to 2003, held various treasury and investor relations
positions with Sterling Chemicals, Inc. from 1987 to 1997, and
worked in the treasury group of Anderson, Clayton and Co. from
1983 to 1987.
Elizabeth D. Brumley joined us and was elected Controller
in November 2005. Ms. Brumley was subsequently elected Vice
President and Chief Accounting Officer and Controller of our
company in December 2005. Before joining our company,
Ms. Brumley was the Vice President and Controller of Noble
Drilling Services, Inc., a drilling company, from March 2005 to
September 2005. From 1996 to March 2005, she served with MAXXAM
Inc., a forest products, real estate investment and development,
and racing company, where she served as Controller beginning in
January 1999 and ultimately becoming Vice President and
Controller in December 2003. She has also worked for GulfMark
Offshore, Inc. (formerly GulfMark International, Inc.), an
offshore marine services company, serving as Controller from
1990 until 1996. A Certified Public Accountant, Ms. Brumley
was a senior auditor with Arthur Andersen LLP prior to joining
GulfMark in 1987.
Randall A. Stafford joined us in May 2006 as Vice
President and General Counsel, Corporate Secretary. Prior to
joining our company, Mr. Stafford was Vice President,
General Counsel and Corporate Secretary of TODCO from January
2003 to May 2006. From January 2001 until January 2003,
Mr. Stafford served as Associate General Counsel of
Transocean Inc. From January 2000 until January 2001,
Mr. Stafford served as Counsel to R&B Falcon prior to
its acquisition by Transocean Inc. From January 1990 until
January 2000, Mr. Stafford was employed as Associate
General Counsel of Pool Energy Services Company, an
international oil and gas drilling and well servicing company
that was acquired by Nabors Industries in November 1999.
Thomas C. Knudson joined our Board in June 2004 and
serves as the Chairman of our Board. Following seven years of
active duty as a U.S. Naval aviator and an aerospace
engineer, he joined Conoco in 1975. His diverse corporate career
included engineering, operations, business development and
commercial assignments across a broad spectrum of ConocoPhillips
businesses, including service as the Chairman of Conoco Europe
Exploration and Production. He retired from ConocoPhillips on
January 1, 2004 as Senior Vice President, Human Resources,
Government Affairs and Communications. Mr. Knudson is also
a director of NATCO Group, Inc., a leading provider of wellhead
process equipment, systems and services used in the production
of oil and gas and a director of Williams Partners L.P., a
provider of midstream natural gas processing and transportation
services. Mr. Knudson has served on our Compensation
Committee and Corporate Governance and Nominating Committee
since 2004.
Thomas N. Amonett joined our Board in February 2006.
Mr. Amonett has served as President, Chief Executive
Officer and a director of Champion Technologies, Inc. since
1999. Champion Technologies, Inc. is an international provider
of specialty chemicals and related services primarily to the
oilfield production sector. Mr. Amonett serves as Chairman
of the Board of TODCO, where he serves on the Corporate
Governance and Executive Compensation Committees, and a director
of Reunion Industries, Inc., where he
107
serves on the Compensation and Audit Committees.
Mr. Amonett served as director of Stelmar Shipping Ltd.
from 2002 to January 2005 and served on the Audit Committee
during his tenure, serving as chairman of the Audit Committee
from 2003 to 2005.
Charles F. Bolden, Jr. joined our board in August
2006. Mr. Bolden was a space shuttle pilot astronaut for
the National Aeronautics and Space Administration (NASA) for
13 years. Mr. Bolden retired from the United States
Marine Corps on January 1, 2003 after serving more than
30 years. Following his retirement from military service,
Mr. Bolden was the President and Chief Operating Officer of
American PureTex Water Corporation and PureTex Water Works from
January to April 2003. He was Senior Vice President at TechTrans
International, Inc. from April 2003 until January 1, 2005.
Mr. Bolden is currently Chief Executive Officer of
JackandPanther LLC, a privately-held military and aerospace
consulting firm. He is also a director of GenCorp Inc., Palmetto
GBA and Marathon Oil Corporation.
Peter N. Buckley joined our board in February 1997.
Mr. Buckley currently serves as the Chairman of Caledonia
Investments plc (a U.K. listed investment trust company).
Mr. Buckley joined our Board in connection with our
investment in Bristow Aviation Holdings Limited.
Mr. Buckley serves as Chairman of the Cayzer Trust Company
Ltd. He also serves as a director of Kerzner International,
Ltd., whose shares trade on the New York Stock Exchange, and as
a director of Close Brothers Group plc. He has served as a
member of our Executive Committee since 2000.
Stephen J. Cannon joined our board in September 2002. He
was the President and Chief Executive Officer of DynCorp
International LLC, a technology company with annual revenues in
excess of $2 billion until his retirement in July 2006.
From 1997 to 2000 he was Senior Vice President of DynCorp
International, and from 2000 to February 2005 he was President
of DynCorp. Mr. Cannon has worked at DynCorp for
approximately 25 years and served in a variety of other
capacities, including General Manager of its technical service
subsidiary and Vice President of its aerospace technology
subsidiary. He has served as a member of our Audit Committee
since 2002 and served as a member of our Corporate Governance
and Nominating Committee during 2004.
Jonathan H. Cartwright joined our board in February 1997.
Mr. Cartwright is the Finance Director of Caledonia
Investments plc. Like Mr. Buckley, Mr. Cartwright
joined our Board in conjunction with our investment in Bristow
Aviation Holdings Limited. Mr. Cartwright joined Caledonia
in 1989 and has served as its Financial Director since 1991.
From 1984 until 1989, Mr. Cartwright held a variety of
positions at Hanson PLC, including Group Financial Controller
and director of various subsidiaries. From 1983 to 1984,
Mr. Cartwright served as Finance Director of Transworld
Petroleum (U.K.) Limited. From 1980 to 1983, he served as Group
Controller of Shelton (GB) Limited, a subsidiary of the American
Cyanamid Group. From 1975 to 1980, Mr. Cartwright was a
Chartered Accountant with Peat Marwick, a predecessor of KPMG.
Michael A. Flick joined our board in August 2005.
Mr. Flick began his career in commercial banking in 1970 at
First National Bank, which subsequently became a wholly owned
subsidiary of First Commerce Corporation, whose shares were
traded on the NASDAQ. Mr. Flick held a variety of positions
at First Commerce Corporation, including Chief Financial Officer
and Chief Credit Policy Officer, and retired in 1998 as the
Executive Vice President and Chief Administrative Officer. He
serves as a director and member of the Audit Committee of
Community Coffee Company, a privately held company. He also
serves as a director of the University of New Orleans Foundation
and chairman of its audit committee.
Ken C. Tamblyn joined our board in September 2002.
Mr. Tamblyn spent the first 20 years of his business
career as a certified public accountant with Peat Marwick, a
predecessor of KPMG. In 1986 he joined Tidewater, Inc. as
Executive Vice President and Chief Financial Officer. He served
in that capacity until his retirement in August 2000.
Mr. Tamblyn currently serves as a director of Gulf Island
Fabrication, Inc. where he serves on the Audit Committee.
Mr. Tamblyn has served on our Audit Committee since 2002.
Robert W. Waldrup joined our board in September 2001.
Mr. Waldrup is one of the founders of Newfield Exploration
Company where he served as the Vice President of Operations and
as a director from
108
1992 until his retirement in 2001. Mr. Waldrup currently
serves as the director of a privately-held company, Marine Spill
Response Corporation, which provides environmental clean up
services and on whose compensation committee he serves. He has
served on our Executive Committee since 2004 and has served on
our Compensation Committee since 2001.
Board
Structure and Committees
For fiscal years 2006 and 2007, the board of directors has fixed
the number of directors at eleven and ten, respectively. The
term of office of all of our present directors will expire no
later than the day of the annual meeting of stockholders upon
the election of their successors. The directors elected at the
annual meeting of stockholders will serve until their respective
successors are elected and qualified or until their earlier
death, resignation or removal.
Our board of directors has the following committees, the
membership of which as of August 3, 2006, was as set forth
below. Each committee acts in accordance with its charter.
Executive
Committee
Messrs. Buckley, Chiles, Knudson and Waldrup serve on our
Executive Committee. Our Executive Committee acts on behalf of
the full board of directors on those occasions when the Chairman
of the Board determines it is not practical or convenient for
the full board of directors to meet and that action by the
Executive Committee, in lieu of a meeting of the full board of
directors, is in best interests of our company. The Executive
Committee reviews and reassesses this charter annually and
recommends any proposed changes to the board of directors.
Audit
Committee
Messrs. Tamblyn, Amonett, Cannon and Flick serve on our
Audit Committee. Our Audit Committees principal functions
are to select each year a firm of independent auditors, to
assist the board of directors in fulfilling its responsibility
for oversight of our accounting and internal control systems and
principal accounting policies, to recommend to the board of
directors, based on its discussions with our management and
independent auditors, the inclusion of the audited financial
statements in our Annual Reports on
Form 10-K
and to oversee the entire independent audit function. We believe
that each of the four members of the Audit Committee satisfy the
requirements of the applicable rules of the SEC and the NYSE as
to independence, financial literacy and experience. The board of
directors has determined that at least one member, Ken C.
Tamblyn, is an audit committee financial expert as defined by
the SEC.
Compensation
Committee
Messrs. Waldrup, Amonett and Bolden serve on our
Compensation Committee. On an annual basis, the Compensation
Committee, with the assistance of its advisors, evaluates the
effectiveness of the overall program and compares the
compensation levels of our executives and our performance to the
compensation received by executives and the performance of
similar oilfield services companies.
Corporate
Governance and Nominating
Messrs. Knudson, Bolden and Flick serve on our Corporate
Governance and Nominating Committee. The purpose of our
Corporate Governance and Nominating Committee is to recommend
corporate governance guidelines to our board of directors and
review these guidelines annually to ensure that they remain
suitable for our needs and recommend any necessary changes in
the guidelines to our board of directors. The Corporate
Governance and Nominating Committee also assists each committee
of the board of directors in coordinating and maintaining
appropriate charters for each committee and assists the board in
defining the content and operations of our legal and ethical
compliance programs. Furthermore, the Corporate Governance and
Nominating Committee assists the board of directors to identify
individuals qualified to become directors, to recommend director
nominees for the next annual meeting of stockholders and
director nominees for membership on, and the chairmanship of,
each committee. The Corporate
109
Governance and Nominating Committee also assists the board of
directors in its annual review of its performance.
Director
Compensation
During the fiscal year 2006, each non-employee member of the
board of directors (other than Mr. Jones, whose
compensation is discussed below) received $7,500 per
quarter and $1,500 for each meeting attended, including
committee meetings. The Audit Committee chairman received $5,000
for each committee meeting chaired. Each other committee
chairman (other than the Chairman of the Board) received $2,500
(in lieu of the $1,500 per meeting fee) for each committee
meeting chaired. In addition, pursuant to the 2003 Nonqualified
Stock Option Plan for Non-employee Directors (the 2003
Plan), on February 6, 2006 and August 3, 2006
each Non-employee Director (as defined in the plan) received
options to purchase 5,000 shares of our common stock at an
exercise price equal to its then fair market value.
For fiscal year 2007, the board of directors has approved a 10%
increase in cash compensation paid to directors. As a result,
each non-employee member of the board of directors will receive
$8,250 per quarter and $1,650 for each meeting attended,
including committee meetings. The Audit Committee Chairman will
receive $5,500 for each committee meeting chaired. Each other
committee chairman will receive $2,750 (in lieu of the
$1,650 per meeting fee) for each committee meeting chaired.
The 2003 Plan provides for the granting to directors who are not
our employees (the Non-employee Directors) of
nonqualified options to purchase common stock. The 2003 Plan is
administered by the Compensation Committee of the board of
directors. A total of 250,000 shares of common stock have
been reserved for issuance upon the exercise of options under
the 2003 Plan, subject to adjustment in the event of stock
splits, stock dividends and similar changes in our capital stock.
As of the date of our annual meeting of stockholders in each
year that the 2003 Plan is in effect beginning with the annual
meeting of stockholders held on September 15, 2003, each
Non-employee Director who is elected or re-elected, or otherwise
continues as a director following such annual meeting, will be
granted an award to purchase 5,000 shares of common stock.
However, no such options shall be granted to any Non-employee
Director who during the preceding 12 months missed 50% or
more of the meetings of the board of directors and committees on
which he served.
The option price per share for each option granted under the
2003 Plan is the fair market value of the common stock on the
date of grant. Under the 2003 Plan, options are not exercisable
until six months after the date of the grant. The 2003 Plan
terminates on, and no options shall be issued after, the date of
the annual meeting of stockholders in 2012 and any options
outstanding on that date will remain outstanding until they have
either expired or been exercised.
Effective October 1, 2001, the Chairman ceased receiving
quarterly and per meeting director fees. Instead, the
Chairmans directors fees were set at
$12,000 per month. On February 11, 2002, the Chairman
of the Board received options to purchase 50,000 shares of
our common stock at an exercise price equal to the fair market
value on the date of grant with an expiration date of
February 11, 2012, and subsequently elected to forego the
September 16, 2002 annual grant under the 1991 Nonqualified
Stock Option Plan for Non-employee Directors (the 1991
Plan). In August 2006 the compensation of the Chairman was
set at $144,000 per year plus applicable meeting fees.
Executive
Officer Compensation
The following table sets forth the aggregate cash and non-cash
compensation paid by us and our subsidiaries for services
rendered during the last three fiscal years to our Chief
Executive Officer, Chief
110
Financial Officer and our four other most highly compensated
executive officers who were serving as such on March 31,
2006:
Summary
Compensation Table
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Long-Term
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Compensation
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Awards(3)
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Annual
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Other
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Securities
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Fiscal
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Compensation
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Annual
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Restricted
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Underlying
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All Other
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Year
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Salary
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Bonus
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Compensation
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Stock Award(s)
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Options/
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Compensation
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Name & Principal Position
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Ended
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($)(6)
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($)(1)(6)
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($)(2)
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($)
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SARs(#)
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($)(4)
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William E. Chiles(5)
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2006
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$
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442,000
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$
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341,686
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$
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$
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610,910
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20,000
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$
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162,736
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President and Chief
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2005
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$
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301,042
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$
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331,193
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$
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$
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680,250
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75,000
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$
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39,339
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Executive Officer
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2004
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$
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$
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$
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$
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$
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Perry L. Elders(5)
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2006
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$
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41,282
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$
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93,552
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$
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$
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335,780
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10,000
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$
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1,238
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Executive Vice President
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2005
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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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and Chief Financial Officer
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2004
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$
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$
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$
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$
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$
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Richard D. Burman(5)
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2006
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$
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248,063
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$
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67,741
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$
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$
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152,728
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5,000
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$
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31,008
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Senior Vice President,
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2005
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$
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114,349
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$
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55,267
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$
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$
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24,000
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$
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14,294
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Eastern Hemisphere
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2004
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$
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$
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$
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$
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$
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Michael R. Suldo(5)
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2006
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$
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213,667
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$
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82,283
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$
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$
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262,630
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8,700
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$
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31,758
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Senior Vice President
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2005
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$
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125,000
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$
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38,407
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$
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$
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10,000
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$
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Western Hemisphere
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2004
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$
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110,000
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$
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42,867
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$
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$
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10,000
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$
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Bill D. Donaldson(5)
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2006
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$
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195,000
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$
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103,603
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$
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$
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97,746
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3,200
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$
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25,168
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Senior Vice President,
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2005
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$
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195,000
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$
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119,851
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$
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$
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24,000
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$
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44,681
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Production Management
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2004
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$
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188,000
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$
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104,938
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$
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$
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24,000
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$
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42,780
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Mark B. Duncan(5)
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2006
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$
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217,500
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$
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103,353
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$
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$
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152,728
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5,000
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$
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25,333
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Senior Vice President
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2005
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$
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37,949
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$
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15,429
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$
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$
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12,000
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$
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Global Business Development
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2004
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$
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$
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$
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$
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$
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(1) |
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Cash bonuses are listed in the fiscal year earned but were paid
partially or entirely in the following fiscal year. Under the
terms of the 1994 Long-Term Management Incentive Plan (the
1994 Plan), certain participants may elect to
receive all or a portion of their awarded bonus in the form of
restricted stock. These amounts (including the 20% additional
awards in restricted stock provided as a deferral incentive) are
reflected in the Restricted Stock Award(s) column,
although the restricted stock awards were not made until the
following year. |
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(2) |
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The stated amounts exclude perquisites and other personal
benefits because the aggregate amounts paid to or for any
executive officer as determined in accordance with the rules of
the SEC relating to executive compensation did not exceed the
lesser of $50,000 or 10% of salary and bonus for fiscal years
2006, 2005 and 2004. |
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(3) |
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Mr. Chiles was awarded 25,000 restricted stock units in
fiscal 2005. We awarded no other restricted stock units for the
2005 or 2004 fiscal years. We awarded the following persons
restricted stock units, in the following amounts, in fiscal
2006: William E. Chiles 20,000; Perry L.
Elders 10,000; Richard D. Burman 5,000;
Michael R. Suldo 8,700; Bill D.
Donaldson 3,200; and Mark B. Duncan
5,000. 144,667 of the options granted to Messrs. Chiles,
Donaldson and Suldo were awarded pursuant to the 1994 Plan.
31,900 of the options granted to Messrs. Chiles, Donaldson
and Suldo were awarded pursuant to the 2004 Stock Incentive Plan
(2004 Plan). All of the options granted to
Messrs. Elders, Burman and Duncan were awarded pursuant to
the 2004 Plan. |
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(4) |
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The stated amounts for Messrs. Chiles, Donaldson and Suldo
consist of our contributions made pursuant to our Employee
Savings and Retirement Plan (the 401(k) Plan), 20%
of which was vested with respect to Mr. Chiles, 100% of
which was vested with respect to Mr. Donaldson and 60% of
which was vested with respect to Mr. Suldo, our
contributions made pursuant to the Deferred Compensation Plan
(defined below) and the cost to us for premiums on life
insurance policies that we maintained for certain key employees.
During fiscal year 2006, our contributions made pursuant to the
Deferred Compensation Plan were $141,189, $24,889 and $12,074
for Messrs. Chiles, Suldo and Duncan, respectively, our
expense for the life insurance premiums were $8,820, $870 and
$1,360 for Messrs. Chiles, Duncan |
111
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and Suldo, respectively, and our contributions to the 401(k)
Plan were $12,727, $7,475, $12,388, $1,238 and $5,510 for
Messrs. Chiles, Donaldson, Duncan, Elders and Suldo,
respectively. The stated amount for Mr. Donaldson consists
of our contributions ($7,475) made pursuant to the 401(k) Plan,
all of which are 100% vested and our contributions ($17,693)
made pursuant to the Deferred Compensation Plan. The stated
amount for Mr. Burman consists of our contributions made
pursuant to Bristow Aviations defined contribution
retirement plan. |
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(5) |
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For additional information regarding the compensation of these
individuals, see Employment, Severance and
Change-of-Control
Arrangements. |
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(6) |
|
Under the terms of our non-qualified deferred compensation plan
for senior executives (the Deferred Compensation
Plan) participants can elect to defer a portion of their
compensation for distribution at a later date. The Salary and
Bonus columns include $97,501 and $59,926 deferred pursuant to
the Deferred Compensation Plan during fiscal 2006 by Bill
Donaldson. We have general contractual obligations to pay the
deferred compensation upon the participants termination of
employment for any reason, including but not limited to death,
disability or retirement. |
Option/SAR
Grants in Last Fiscal Year
The following table shows, as to the named executive officers,
information about option/SAR grants during fiscal year 2006:
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Individual Grants
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Number of
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% of Total
|
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Securities
|
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Options/SARs
|
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|
|
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|
|
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Underlying
|
|
|
Granted to
|
|
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Exercise
|
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|
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|
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Options/SARs
|
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Employees in
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Price
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Expiration
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Grant Date
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Name
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Granted(1)
|
|
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Fiscal Year
|
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($/Share)
|
|
|
Date
|
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Present Value(2)
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|
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William E. Chiles
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20,000
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|
|
|
14.1%
|
|
|
$
|
29.17
|
|
|
|
12/29/2015
|
|
|
$
|
159,600
|
|
Perry L. Elders
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|
|
10,000
|
|
|
|
7.0%
|
|
|
$
|
30.25
|
|
|
|
2/16/2016
|
|
|
$
|
83,900
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|
Richard D. Burman
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|
|
5,000
|
|
|
|
3.5%
|
|
|
$
|
29.17
|
|
|
|
12/29/2015
|
|
|
$
|
39,900
|
|
Michael R. Suldo
|
|
|
5,000
|
|
|
|
3.5%
|
|
|
$
|
29.17
|
|
|
|
12/29/2015
|
|
|
$
|
39,900
|
|
|
|
|
3,700
|
|
|
|
2.6%
|
|
|
$
|
31.50
|
|
|
|
6/1/2015
|
|
|
$
|
30,969
|
|
Bill D. Donaldson
|
|
|
3,200
|
|
|
|
2.3%
|
|
|
$
|
29.17
|
|
|
|
12/29/2015
|
|
|
$
|
25,536
|
|
Mark B. Duncan
|
|
|
5,000
|
|
|
|
3.5%
|
|
|
$
|
29.17
|
|
|
|
12/29/2015
|
|
|
$
|
39,900
|
|
|
|
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(1) |
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Each of these awards was made pursuant to the 2004 Plan, has a
ten-year term, has an exercise price equal to the fair market
value (as defined in the 2004 Plan) of the common stock on the
grant date, and gives us the right to purchase all or any part
of the shares of common stock issuable upon exercise of the
options by paying to the optionee an amount, in cash or common
stock, equal to the excess of the fair market value of our
common stock on the effective date of such purchase over the
exercise price per share. These options will vest in annual
installments of one-third each beginning on the first
anniversary of the grant date. Options granted under the 2004
Plan may be exercised for cash and may also be paid for by
delivering to us unrestricted common stock already owned by the
optionee or by our withholding shares otherwise issuable upon
exercise of the options (or a combination thereof), as well as
in such other manner as may be authorized by the committee
administering the 2004 Plan (the 2004 Plan
Committee). Options under the 2004 Plan also grant the
optionee the right, if the optionee makes payment of the
exercise price by delivering shares of common stock held by the
optionee, to purchase the number of shares of common stock
delivered by the optionee in payment of the exercise price (a
Reload Option). Reload Options are exercisable at a
price equal to the fair market value of our common stock as of
the date of the grant of the Reload Option. The options granted
under the 2004 Plan also provide for certain adjustments
following a Change In Control (as defined in the
2004 Plan). The options granted under the 2004 Plan also provide
that, subject to certain conditions, the 2004 Plan Committee may
permit the optionee to pay all or a portion of any taxes due
with respect to exercise of the options (1) by electing to
have us withhold shares of common stock due to |
112
|
|
|
|
|
the optionee upon exercise of the option or (2) by
delivering to us previously owned shares of common stock. |
|
(2) |
|
The present value for these options was estimated at the date of
grant, using the Black-Scholes option-pricing model. The
following assumptions were used to obtain the grant-date present
value for the options granted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1,
|
|
|
December 29,
|
|
|
February 16,
|
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
Risk free interest rate
|
|
|
3.95
|
%
|
|
|
4.37
|
%
|
|
|
4.59
|
|
Expected life (years)
|
|
|
4.1
|
|
|
|
4.1
|
|
|
|
4.1
|
|
Volatility
|
|
|
24.73
|
%
|
|
|
24.73
|
%
|
|
|
24.73
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregated
Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option/SAR Values
The following table shows, as to the named executive officers,
the aggregate option exercises during fiscal year 2006 and the
values of unexercised options as of March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
Shares
|
|
|
|
|
|
Underlying Unexercised
|
|
|
In-the-Money
|
|
|
|
Acquired
|
|
|
Value
|
|
|
Options/SARs at FY End
|
|
|
Options/SARs at FY End(1)
|
|
Name
|
|
on Exercise
|
|
|
Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
William E. Chiles
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
70,000
|
|
|
$
|
92,250
|
|
|
$
|
219,100
|
|
Perry L. Elders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
$
|
|
|
|
$
|
6,500
|
|
Richard D. Burman
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
21,000
|
|
|
$
|
|
|
|
$
|
8,650
|
|
Michael R. Suldo
|
|
|
|
|
|
|
|
|
|
|
12,999
|
|
|
|
18,701
|
|
|
$
|
130,658
|
|
|
$
|
95,093
|
|
Bill D. Donaldson
|
|
|
|
|
|
|
|
|
|
|
22,667
|
|
|
|
27,200
|
|
|
$
|
228,725
|
|
|
$
|
212,976
|
|
Mark B. Duncan
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
13,000
|
|
|
$
|
4,320
|
|
|
$
|
17,290
|
|
|
|
|
(1) |
|
The dollar amounts shown in this column represent the aggregate
excess of the market value of the shares underlying the
unexercised
in-the-money
options as of March 31, 2006, over the aggregate exercise
price of the options. |
Employment,
Severance and
Change-of-Control
Arrangements
We have entered into a change of control agreement (the
Change of Control Agreement) with
Mr. Donaldson. The Change of Control Agreement for
Mr. Donaldson provides for continued employment for a
three-year period following a Change of Control, as defined (the
Employment Term). Should his employment be
terminated during the Employment Term for any reason other than
death, disability or Cause, as defined, or should he
terminate his employment for Good Reason, as
defined, he will become entitled to certain benefits. The
benefits include a lump sum payment equal to three times the sum
of Mr. Donaldsons Annual Base Salary, as
defined, and Highest Annual Bonus, as defined. Also,
he will be entitled to continued welfare benefits under various
company plans and programs for a minimum of thirty-six months
following the Date of Termination, as defined, as
well as outplacement services and other benefits. In the event
that any payments by us to or for the benefit of
Mr. Donaldson (a Payment) would be subject to
the excise tax imposed by Section 4999 of the Internal
Revenue Code (Excise Tax), then he will be entitled
to an additional payment (Gross-Up Payment) in an
amount such that, after payment by him of all taxes imposed on
the Gross-Up Payment, he retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. The
Change of Control Agreements also provide that no award granted
under the 2004 Plan or pursuant to any other plan or
arrangements maintained by us will be reduced as a result of
being potentially non-deductible under Section 280G of the
Internal Revenue Code.
113
Under the terms of the 1994 Plan and the 2004 Plan, if a
Change in Control (as defined in each such Plan)
occurs, all outstanding options and SARs held by the employee
participant become immediately exercisable and any then
outstanding shares of Restricted Stock, Restricted Stock Units,
Deferred Stock or other stock based awards made pursuant to
either plan become free of all restrictions, if any, fully
vested and transferable to the full extent of the award. Also,
under the 1994 Plan, for a sixty-day period following a Change
in Control, unless the 1994 Plan Committee determines otherwise
at the time of the award, the participant has the right to elect
to surrender to us all or part of the stock options in exchange
for a cash payment equal to the spread between the Change
in Control Price (as defined in the 1994 Plan) and the
option exercise price. Likewise, the 2004 Plan Committee may in
its discretion make certain equitable adjustments following a
change in control, including the cancellation of stock options
granted under the 2004 Plan in exchange for a cash payment equal
to the excess, if any, of the consideration being paid for each
underlying share of common stock pursuant to the change in
control transaction over the exercise price of the option.
On June 6, 2006 we entered into an amended and restated
employment agreement with Mr. Chiles. As amended and
restated, Mr. Chiles employment agreement has a term
of three years beginning on June 21, 2004 (the date of his
original employment agreement), and, upon each anniversary, this
term will be automatically extended by successive one-year
periods unless either party thereto gives appropriate notice of
nonrenewal. Under the agreement, Mr. Chiles serves as
President and Chief Executive Officer of our company and reports
to the board of directors. Effective April 1, 2006,
Mr. Chiles annual base salary is $486,200 and he will
be eligible for an annual cash bonus, if he and our company meet
certain performance targets, of up to 150% of his base salary.
The company will also credit an annual amount equal to 20% of
Mr. Chiles annual salary and bonus to Mr. Chiles
pursuant to the Deferred Compensation Plan. The company will
provide Mr. Chiles a ten-year term life insurance policy in
the amount of $3 million payable to his designated
beneficiaries. In addition, Mr. Chiles receives a car
allowance of $1,500 per month. If Mr. Chiles
employment is terminated by us without Cause or by him for Good
Reason (as those terms are defined in Mr. Chiles
employment agreement) or under certain other circumstances
specified in the agreement, he will be entitled to a lump sum
cash payment calculated pursuant to a formula set forth in the
agreement, along with other benefits. The lump sum payment is
equal to (1) if the termination occurs within two years of
a Change of Control, as defined, three times the sum of
Mr. Chiles Annual Base Salary, as defined, and
Highest Annual Bonus, as defined and (2) if the termination
occurs at any other time, two times the sum of
Mr. Chiles Annual Base Salary and Target Annual
Bonus, as defined. The agreement also contains confidentiality,
non-competition, non-employee solicitation,
change-of-control
and other provisions.
Mr. Elders entered into an Employment Agreement with us,
effective as of February 16, 2006. The agreement has an
initial term of two years, and, beginning on February 16,
2008, this term will be automatically extended by successive
one-year periods unless either party gives appropriate notice.
Under the agreement, Mr. Elders serves as our Executive
Vice President and Chief Financial Officer and reports to our
President and Chief Executive Officer. Mr. Elders
base salary is currently set at $365,000, and he is eligible for
a cash bonus, if he and our company meet certain performance
targets, of up to 150% of his base salary. We will also credit
an annual amount equal to 15% of Mr. Elders annual
salary and bonus to Mr. Elders pursuant to our Deferred
Compensation Plan. Upon signing the agreement, Mr. Elders
received options to purchase 10,000 shares of our common
stock and 10,000 Performance Accelerated Restricted Stock Units.
We provide Mr. Elders with a term life insurance policy in
the amount of $500,000 payable to his designated beneficiaries.
In addition, Mr. Elders receives a car allowance of
$1,500 per month. If Mr. Elders employment is
terminated by us without Cause or by him for Good
Reason (as those terms are defined in
Mr. Elders employment agreement) or under certain
other circumstances specified in Mr. Elders
employment agreement, he will be entitled to a lump sum cash
payment calculated pursuant to a formula set forth therein,
along with other benefits. The agreement also contains change of
control, confidentiality, non-competition, employee
non-solicitation and other provisions.
On June 6, 2006, we entered into an amended and restated
employment agreement with Mr. Duncan. As amended and
restated, Mr. Duncans employment agreement has an
initial term of two years beginning
114
on January 24, 2005 (the date of his original employment
agreement), and, beginning on January 24, 2007, this term
will be automatically extended by successive one-year periods
unless either party gives appropriate notice of nonrenewal.
Under the agreement, Mr. Duncan serves as our Senior Vice
President, Global Business Development and reports to our
President and Chief Executive Officer. Effective April 1,
2006, Mr. Duncans annual base salary is $260,000 and
he will be eligible for an annual cash bonus, if he and our
company meet certain performance targets, of up to 100% of his
base salary. We will also credit an annual amount equal to 15%
of Mr. Duncans annual salary and bonus to
Mr. Duncan pursuant to our Deferred Compensation Plan. We
will provide Mr. Duncan with a term life insurance policy
in the amount of $500,000 payable to his designated
beneficiaries. In addition, Mr. Duncan receives a car
allowance of $1,500 per month. If Mr. Duncans
employment is terminated by us without Cause or by him for Good
Reason (as those terms are defined in the agreement) or under
certain other circumstances specified in the agreement, he will
be entitled to a lump sum cash payment calculated pursuant to a
formula set forth in the agreement, along with other benefits.
The lump sum payment is equal to (1) if the termination
occurs within two years of a Change of Control, as defined, two
and one half times the sum of Mr. Duncans Annual Base
Salary, as defined, and Highest Annual Bonus, as defined and
(2) if the termination occurs at any other time, one and
one half times the sum of Mr. Duncans Annual Base
Salary and Target Annual Bonus, as defined. The agreement also
contains confidentiality, non-competition, employee
non-solicitation,
change-of-control
and other provisions.
Mr. Suldo entered into an Employment Agreement with us,
effective as of June 1, 2005. The agreement initially has a
term of two years, and, on May 31, 2007, this term will be
automatically extended by successive one-year periods unless
either party gives appropriate notice. Under the agreement,
Mr. Suldo serves as our Senior Vice President and reports
to our President and Chief Executive Officer.
Mr. Suldos base salary is currently set at $260,000
and he will be eligible for a cash bonus, if he and our company
meet certain performance targets, of up to 100% of his base
salary. We will also credit an annual amount equal to 15% of
Mr. Suldos annual salary and bonus to Mr. Suldo
pursuant to the Deferred Compensation Plan. Upon signing the
agreement, Mr. Suldo received options to purchase
3,700 shares of our common stock with an exercise price
equal to the common stocks closing price on the date of
the grant. In addition, he received 3,700 Performance
Accelerated Restricted Stock Units, the material terms of which
are described in the form of Restricted Stock Unit Award
Agreement filed previously. We will provide Mr. Suldo a
term life insurance policy in the amount of $500,000 payable to
his designated beneficiaries. If Mr. Suldos
employment is terminated by us without Cause or by him for Good
Reason (as those terms are defined in Mr. Suldos
employment agreement) or under certain other circumstances
specified in the agreement, he will be entitled to a lump sum
cash payment calculated pursuant to a formula set forth therein,
along with other benefits. Mr. Suldos Employment
Agreement also contains change of control, confidentiality,
non-competition, employee non-solicitation and other provisions.
On March 8, 2006, Mr. Suldos employment
agreement was amended to revise the definition of Good
Reason.
Mr. Burman and one of our affiliates entered into an
Employment Agreement, effective as of October 15, 2004. The
agreement continues unless terminated by either party upon
twelve months notice. The agreement also terminates when
Mr. Burman attains age 60. Mr. Burman currently
serves as our Senior Vice President and Managing Director of
Bristow Helicopters. We pay Mr. Burman a base salary of
£148,570 and he is eligible for a cash bonus, if he and our
company meet certain performance targets, of up to 100% of his
base salary. We also credit an annual amount equal to 12.5% of
Mr. Burmans annual salary to Mr. Burmans
retirement account pursuant to the Bristow Helicopter Group
Limited Defined Contribution Retirement Plan. Mr. Burman
also receives a car allowance of £908 per month and
reimbursement of expenses related to membership in a local golf
club.
115
SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Security
Ownership of Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of August 1,
2006 by each person, or group of affiliated persons, known to us
to beneficially own 5% or more of our outstanding common stock.
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
Beneficially
|
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Owned
|
|
|
Class(1)
|
|
|
Caledonia Investments plc
|
|
|
1,300,000
|
(2)
|
|
|
5.5
|
%
|
Cayzer House, 30 Buckingham
Gate
London, England SW1 E6NN
|
|
|
|
|
|
|
|
|
FMR Corp.
|
|
|
2,330,700
|
(3)
|
|
|
9.9
|
%
|
82 Devonshire Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors,
Inc.
|
|
|
1,990,686
|
(4)
|
|
|
8.5
|
%
|
1299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401
|
|
|
|
|
|
|
|
|
Neuberger Berman, Inc.
|
|
|
1,610,207
|
(5)
|
|
|
6.9
|
%
|
605 Third Avenue
New York, NY 10158
|
|
|
|
|
|
|
|
|
Franklin Resources, Inc.
|
|
|
1,231,175
|
(6)
|
|
|
5.3
|
%
|
One Parker Plaza,
9th Floor
Fort Lee, NJ 07024
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Percentage of our common stock outstanding as of August 1,
2006. |
|
(2) |
|
According to a Schedule 13D/A filed on July 29, 2003,
with the Securities and Exchange Commission by
(1) Caledonia Investments plc (Caledonia) as
the direct beneficial owner of 1,300,000 of such shares of
common stock; and (2) The Cayzer Trust Company Limited
(Cayzer Trust) as an indirect beneficial owner given
its direct holdings of the securities of Caledonia. Caledonia
and Cayzer Trust have shared voting and dispositive power over
the 1,300,000 shares of common stock. |
|
(3) |
|
According to Schedule 13G/A filed on February 14, 2006
with the Securities and Exchange Commission, FMR Corp. has sole
voting power with respect to none of such shares of common
stock, sole dispositive power with respect to 2,330,700 of such
shares of common stock, and beneficially owns 2,330,700 of such
shares of common stock. Fidelity Management & Research
Company, a wholly-owned subsidiary of FMR Corp., is the
beneficial owner of 2,330,700 shares of the common stock as
a result of acting as investment adviser to various investment
companies. The ownership of one investment company, Fidelity Low
Priced Stock Fund, amounted to 2,330,700 shares of the
common stock outstanding. FMR Corp., through its ultimate
control of the investment company has sole power to dispose of
the 2,330,700 shares owned by the investment company. FMR
Corp. does not have the sole power to vote or direct the voting
of the shares owned directly by the investment company, which
power resides with the funds Boards of Trustees. Fidelity
Management & Research Company carries out the voting of
the shares under written guidelines established by the
funds Boards of Trustees. |
|
(4) |
|
According to a Schedule 13G/A filed on February 6,
2006 with the Securities and Exchange Commission, Dimensional
Fund Advisors, Inc. has sole voting and dispositive power
with respect to and beneficially owns all such shares of common
stock. |
|
(5) |
|
According to a Schedule 13G/A filed on February 14,
2006 with the Securities and Exchange Commission, Neuberger
Berman, Inc. has sole voting power with respect to 104,140 of
such shares of common stock shared voting power with respect to
895,597 shares of common stock, shared dispositive power
with respect to 1,610,207 of such shares of common stock, and
beneficially owns 1,610,207 of such shares of common stock. |
116
|
|
|
(6) |
|
According to a Schedule 13G filed on February 7, 2006
with the Securities and Exchange Commission, the securities are
beneficially owned by one or more open or closed-end investment
companies or other managed accounts which are advised by direct
and indirect investment advisory subsidiaries (the Adviser
Subsidiaries) of Franklin Resources, Inc.
(FRI). Such advisory contracts grant to such Adviser
Subsidiaries all investment
and/or
voting power over the securities owned by such advisory clients.
Franklin Advisory Services, LLC, has sole voting power with
respect to 1,213,700 shares of common stock and sole
dispositive power with respect to 1,215,200 shares of
common stock. Fiduciary Trust Company International has sole
voting and dispositive power with respect to 15,975 shares
of common stock. |
Security
Ownership of Directors, Nominees and Executive
Officers
The following table shows, as of August 10, 2006, certain
information with respect to beneficial ownership of our common
stock by (1) each director or nominee, (2) each of the
executive officers named in the Summary Compensation Table under
Management Executive Officer
Compensation of this prospectus and (3) all of our
directors, nominees and executive officers as a group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
Beneficially
|
|
|
Title of
|
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Owned(1)
|
|
|
Class
|
|
|
Class(2)
|
|
|
Thomas N. Amonett
|
|
|
5,000
|
|
|
|
Common
|
|
|
|
*
|
|
Charles F. Bolden, Jr.
|
|
|
|
|
|
|
Common
|
|
|
|
*
|
|
Peter N. Buckley
|
|
|
1,327,000
|
(3)
|
|
|
Common
|
|
|
|
5.7
|
%
|
Richard D. Burman
|
|
|
8,000
|
|
|
|
Common
|
|
|
|
*
|
|
Stephen J. Cannon
|
|
|
10,000
|
|
|
|
Common
|
|
|
|
*
|
|
Jonathan H. Cartwright
|
|
|
1,327,000
|
(3)
|
|
|
Common
|
|
|
|
5.7
|
%
|
William E. Chiles
|
|
|
50,000
|
|
|
|
Common
|
|
|
|
*
|
|
Bill D. Donaldson
|
|
|
38,667
|
|
|
|
Common
|
|
|
|
*
|
|
Mark B. Duncan
|
|
|
4,000
|
|
|
|
Common
|
|
|
|
*
|
|
Perry L. Elders
|
|
|
|
|
|
|
Common
|
|
|
|
*
|
|
Michael A. Flick
|
|
|
6,000
|
|
|
|
Common
|
|
|
|
*
|
|
Thomas C. Knudson
|
|
|
10,000
|
|
|
|
Common
|
|
|
|
*
|
|
Michael R. Suldo
|
|
|
20,916
|
|
|
|
Common
|
|
|
|
*
|
|
Ken C. Tamblyn
|
|
|
18,000
|
|
|
|
Common
|
|
|
|
*
|
|
Robert W. Waldrup
|
|
|
34,000
|
|
|
|
Common
|
|
|
|
*
|
|
All Directors, Nominees and
Executive Officers as a Group (21 persons)(3)
|
|
|
1,577,975
|
|
|
|
|
|
|
|
6.7
|
%
|
117
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Based on information as of August 10, 2006 supplied by
directors, nominees and executive officers. Unless otherwise
indicated, all shares are held by the named individuals with
sole voting and investment power. Stock ownership described in
the table includes for each of the following directors or
executive officers options to purchase within 60 days after
August 10, 2006 the number of shares of common stock
indicated after such directors or executive officers
name: Thomas N. Amonett 5,000 shares; Peter N.
Buckley 27,000 shares; Richard
Burman 8,000 shares; Stephen J.
Cannon 10,000 shares; Jonathan H.
Cartwright 27,000 shares; William E.
Chiles 50,000 shares; Bill
Donaldson 38,667 shares; Mark B.
Duncan 4,000 shares; Michael A.
Flick 5,000 shares; Thomas C.
Knudson 10,000 shares; Michael R.
Suldo 20,899 shares; Ken C. Tamblyn
17,000 shares; and Robert W. Waldrup
19,000 shares. Our directors, nominees for director and
executive officers, as a group, held options to purchase
260,631 shares of our common stock which may be acquired
within 60 days after the Record Date. Also includes
344 shares of common stock which were vested at
August 10, 2006, under our Employee Savings and Retirement
Plan (the 401(k) Plan). Shares held in the 40l(k)
Plan are voted by the trustee. |
|
(2) |
|
Percentages of our common stock outstanding as of August 1,
2006. |
|
(3) |
|
Because of the relationship of Messrs. Buckley and
Cartwright to Caledonia, Messrs. Buckley and Cartwright may
be deemed indirect beneficial owners of the
1,300,000 shares of common stock owned by Caledonia (see
Holdings of Principal Stockholders). Pursuant to
Rule 16a-1(a)(3),
both Mr. Buckley and Mr. Cartwright are reporting
indirect beneficial ownership of the entire amount of our
securities owned by Caledonia. Messrs. Buckley and
Cartwright disclaim beneficial ownership of the securities owned
by Caledonia. |
118
CERTAIN
RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
On December 19, 1996, we acquired 49% of the common stock
and other significant economic interest in Bristow Aviation, a
U.K. corporation, which holds all of the outstanding shares in
Bristow Helicopters, pursuant to a Master Agreement dated
December 12, 1996, among CIS, us and certain other persons
(the Master Agreement). As a result primarily of
that transaction, CIS became the beneficial owners of
1,752,754 shares of our common stock. The Master Agreement
provides that so long as CIS owns (1) at least
1,000,000 shares of our common stock or (2) at least
49% of the total outstanding ordinary shares of Bristow
Aviation, CIS will have the right to designate two persons for
nomination to our board of directors and to replace any
directors so nominated. Pursuant to the Master Agreement, CIS
designated Peter N. Buckley and Jonathan H. Cartwright for
nomination to our board of directors, and they were duly elected
in February 1997. Mr. Buckley is the Chairman of the board
of directors and Mr. Cartwright is the Financial Director
of Caledonia Investments, plc (Caledonia), which was
then the holder of all the outstanding stock of CIS. On
December 4, 2002, CIS: (1) sold to Caledonia all its
holdings of our common stock and our 6% Convertible
Subordinated Notes (the 6% Notes) and
(2) transferred to Caledonia all of its rights and
obligations under the Master Agreement and related documents. On
July 29, 2003, we redeemed the 6% Notes with a portion
of the proceeds from our sale of $230.0 million principal
amount of Senior Notes. This reduced the amount of our common
stock beneficially owned by Caledonia to 1,300,000 shares
(see Security Ownership of Principle Stockholders and
Management).
The 1996 transaction also included certain executory obligations
of the parties that remain in effect between us and Caledonia
and its affiliates, certain of which are described below. All
such obligations were the result of arms length
negotiations between the parties that were concluded before
Messrs. Buckley and Cartwright were nominated or elected to
our board of directors and are, in our view, fair and reasonable
to us.
In connection with the Bristow Aviation transaction, we and
Caledonia also entered into a Put/Call Agreement whereunder,
upon giving specified prior notice, we have the right to buy all
the Bristow Aviation shares held by Caledonia, who, in turn, has
the right to sell such shares to us. Under the current English
law, we would be required, in order for Bristow Aviation to
retain its operating license, to find a qualified European Union
investor to own any Bristow Aviation shares we have a right or
obligation to acquire pursuant to the Put/Call Agreement. Any
such investor will be subject to the approval of the Civil
Aviation Authority.
In connection with the Bristow Aviation transaction, we acquired
£91.0 million (approximately $144.0 million) in
principal amount of 13.5% subordinated unsecured loan stock
(debt) of Bristow Aviation. Bristow Aviation had the right and
elected to defer payment of interest on the loan stock. Any
deferred interest also accrues interest at an annual rate of
13.5%. With our agreement, no interest payments have been made
through June 30, 2006.
In January 1998, we loaned £50.0 million
(approximately $84.0 million) to Bristow Helicopters to
refinance certain of its indebtedness. The loan matures on
January 15, 2008 and bears interest at an annual rate of
8.335%. In December 2002, Bristow Helicopters advanced to us
$10.0 million under a demand note that bears interest at an
annual rate of 8.335%. In March 2004, Bristow Helicopters
advanced to us $11.4 million under a demand note. This
amount was repaid to Bristow Helicopters in June 2004. In
December 2005, Bristow Helicopters advanced to us
$15 million under a demand note that bears interest at an
annual rate of 8.335%, of which $10.5 million was repaid
March 2006. In June 2006 and July 2006, Bristow Helicopters
advanced us $5.0 million under demand notes that bear
interest at an annual rate of 8.335%.
During fiscal years 2004, 2005 and 2006, we leased
approximately 24, 27 and 27 aircraft, respectively, to
Bristow Aviation and received total lease payments of
approximately $15.5 million, $17.7 million and
$19.8 million, respectively. During fiscal 2004, 2005 and
2006, Bristow Aviation leased approximately five, four and four
aircraft, respectively, to us, and we paid total lease payments
of $3.0 million, $2.4 million and $3.2 million,
respectively. During first quarters 2006 and 2007, we leased
approximately 28 and 32 aircraft, respectively, to Bristow
Aviation and received total lease payments of approximately
$4.8 million and
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$5.3 million, respectively. During first quarters 2006 and
2007, Bristow Aviation leased approximately four and five
aircraft, respectively, to us, and we paid total lease payments
of $0.5 million and $1.6 million, respectively.
The foregoing transactions with Bristow Aviation are eliminated
for financial reporting purposes in consolidation.
In March 2004, we prepaid a portion of the put/call option price
to Caledonia, representing the amount of guaranteed return since
inception, amounting to $11.4 million. In consideration of
this, the shareholders of Bristow Aviation agreed to reduce the
guaranteed return factor used in calculating the put/call option
price, effective April 1, 2004, from 12% per annum to
LIBOR plus 3%. 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). Bristow Aviation used these
proceeds to redeem £8 million ($14.4 million) of
its ordinary share capital at par value on a pro rata basis from
all its outstanding shareholders, including us. The result of
these changes will be to reduce the cost of the guaranteed
return to the other shareholders by $2.3 million on an
annual basis.
Beginning in September 2004, we began paying to Caledonia the
amount of guaranteed return on the put/call on a quarterly
basis. In fiscal 2006, the amount paid to Caledonia was
£72,141 ($128,887) representing the amount due from
January 1, 2005 to December 31, 2005. Subsequent to
March 31, 2006, we have paid to Caledonia £16,858
($29,655) representing the amount due from January 1, 2006
to March 31, 2006.
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DESCRIPTION
OF MANDATORY CONVERTIBLE PREFERRED STOCK
The following is a summary of certain provisions of the
certificate of designation for our % Mandatory
Convertible Preferred Stock (which we will refer to as the
mandatory convertible preferred stock). A copy of
the certificate of designation and the form of mandatory
convertible preferred stock share certificate are available upon
request from us at the address set forth under Where You
Can Find More Information. The following summary of the
terms of mandatory convertible preferred stock does not purport
to be complete and is subject to, and qualified in its entirety
by reference to, the provisions of the certificate of
designation. As used in this section, the terms the
company, us, we or
our refer to Bristow Group Inc. and not any of its
subsidiaries.
General
Under our certificate of incorporation, our board of directors
is authorized, without further shareholder action, to issue up
to 8,000,000 shares of preferred stock, par value
$0.01 per share, in one or more series, with such voting
powers or without voting powers, and with such designations,
preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions,
as shall be set forth in the resolutions providing therefor. The
board of directors has also authorized the issuance of up to
1,000,000 shares of Series A Junior Participating
Preferred Stock in connection with the adoption of our
stockholder rights plan in February 1996 (as amended, the
Rights Agreement). None of these shares are
currently outstanding. At the consummation of this offering, we
will issue 4,000,000 shares of mandatory convertible
preferred stock. In addition, we have granted the underwriters
an option to purchase up to 600,000 additional shares in
accordance with the procedures set forth in
Underwriting. Please read Description of
Capital Stock.
When issued, the mandatory convertible preferred stock and any
common stock issued upon the conversion of the mandatory
convertible preferred stock will be fully paid and
nonassessable. The holders of the mandatory convertible
preferred stock will have no preemptive or preferential right to
purchase or subscribe to our stock, obligations, warrants or
other securities of any class. The transfer agent, registrar,
redemption, conversion and dividend disbursing agent for shares
of both the mandatory convertible preferred stock and common
stock is Mellon Investor Services LLC.
Ranking
The mandatory convertible preferred stock, with respect to
dividend rights or rights upon our liquidation,
winding-up
or dissolution, ranks:
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senior to our common stock and to the Series A Junior
Participating Preferred Stock and each other class of capital
stock or series of preferred stock established after the
original issue date of the mandatory convertible preferred stock
(which we will refer to as the Issue Date), the
terms of which do not expressly provide that such class or
series ranks senior to or on a parity with the mandatory
convertible preferred stock as to dividend rights or rights upon
our liquidation,
winding-up
or dissolution (which we will refer to collectively as
Junior Stock);
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on parity with any class of capital stock or series of preferred
stock established after the Issue Date, the terms of which
expressly provide that such class or series will rank on a
parity with the mandatory convertible preferred stock as to
dividend rights or rights upon our liquidation,
winding-up
or dissolution (which we will refer to collectively as
Parity Stock); and
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junior to each class of capital stock or series of preferred
stock established after the Issue Date, the terms of which
expressly provide that such class or series will rank senior to
the mandatory convertible preferred stock as to dividend rights
or rights upon our liquidation,
winding-up
or dissolution (which we will refer to collectively as
Senior Stock).
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While any shares of mandatory convertible preferred stock are
outstanding, we may not authorize or issue any class or series
of Senior Stock (or any security convertible into Senior Stock)
without the affirmative vote or consent of the holders of at
least
66 2/3%
of the outstanding shares of mandatory
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convertible preferred stock and any class or series of Parity
Stock then outstanding, voting together as a single class, with
each series or class having a number of votes proportionate to
the aggregate liquidation preference of its outstanding shares.
Without the consent of any holder of mandatory convertible
preferred stock, however, we may authorize, increase the
authorized amount of, or issue any class or series of Parity
Stock or Junior Stock. See Voting Rights
below.
Dividends
Holders of shares of mandatory convertible preferred stock will
be entitled to receive, when, as and if declared by our board of
directors out of funds legally available for payment, cumulative
dividends in cash at the rate per annum of % per
share on the liquidation preference thereof of $50 per
share of mandatory convertible preferred stock (equivalent to
$ per annum per share).
Dividends on the mandatory convertible preferred stock will be
payable quarterly
on , ,
and
of each year up to and including the mandatory conversion date,
commencing ,
2006 (each, a Dividend Payment Date) at such annual
rate, and shall accumulate from the most recent date as to which
dividends shall have been paid or, if no dividends have been
paid, from the Issue Date, whether or not in any dividend period
or periods there have been funds legally available for the
payment of such dividends. Dividends will be payable to holders
of record as they appear on our stock register on the
immediately
preceding , ,
and
(each, a Record Date). Accumulations of dividends on
shares of mandatory convertible preferred stock do not bear
interest. Dividends payable on the mandatory convertible
preferred stock for any period other than a full dividend period
(based upon the number of days elapsed during the period) are
computed on the basis of a
360-day year
consisting of twelve
30-day
months. The initial dividend on the mandatory convertible
preferred stock for the first dividend period, assuming the
issue date
is ,
2006, will be $ per share and
will be payable, when and if declared
on ,
2006. Each subsequent quarterly dividend on the mandatory
convertible preferred stock, when and if declared, will be
$ per share, subject to
adjustments for stock splits, contributions, reclassifications
or other similar events involving our mandatory convertible
preferred stock.
No dividend will be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding share of the
mandatory convertible preferred stock with respect to any
dividend period unless all dividends for all preceding dividend
periods have been declared and paid or declared and a sufficient
sum or number of shares of common stock have been set apart for
the payment of such dividend, upon all outstanding shares of
mandatory convertible preferred stock.
Our ability to declare and pay cash dividends and make other
distributions with respect to our capital stock, including the
mandatory convertible preferred stock, is limited by the terms
of our outstanding indebtedness. For example, our Credit
Facilities currently limit our ability to pay cash dividends on
our preferred stock to $15 million annually. In addition,
our ability to declare and pay dividends may be limited by
applicable Delaware law. See Risk Factors We
may not be able to pay cash dividends on the mandatory
convertible preferred stock.
Payment
Restrictions
Unless all accrued, cumulated and unpaid dividends on the
mandatory convertible preferred stock for all past quarterly
dividend periods shall have been paid in full, or shall have
been declared and a sum sufficient for the payment thereof set
aside, we will not:
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declare or pay any dividend or make any distribution of assets
on any Junior Stock, other than dividends or distributions in
the form of Junior Stock and cash solely in lieu of fractional
shares in connection with any such dividend or distribution;
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redeem, purchase or otherwise acquire any shares of Junior Stock
or pay or make any monies available for a sinking fund for such
shares of Junior Stock, other than (A) upon conversion or
exchange for other Junior Stock, (B) redemptions or
purchases of any Series A Junior Participating Preferred
Stock purchase rights or (C) the purchase of fractional
interests in shares of any Junior Stock pursuant to the
conversion or exchange provisions of such shares of Junior Stock;
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redeem, purchase or otherwise acquire any shares of Parity
Stock, except upon conversion into or exchange for other Parity
Stock or Junior Stock and cash solely in lieu of fractional
shares in connection with any such conversion or exchange,
provided, however, that in the case of a redemption, purchase or
other acquisition of Parity Stock upon conversion into or
exchange for shares of other Parity Stock (A) the aggregate
amount of the liquidation preference of such other Parity Stock
does not exceed the aggregate amount of the liquidation
preference, plus accrued, cumulated and unpaid dividends, of the
shares of Parity Stock that are converted into or exchanged for
such other shares of Parity Stock, (B) the aggregate number
of shares of our common stock issuable upon conversion,
redemption or exchange of such other Parity Stock does not
exceed the aggregate number of shares of our common stock
issuable upon conversion, redemption or exchange of the shares
of Parity Stock that are converted into or exchanged for such
other shares of Parity Stock and (C) such other shares of
Parity Stock contain terms and conditions (including, without
limitation, with respect to the payment of dividends, dividend
rates, liquidation preferences, voting and representation
rights, payment restrictions, anti-dilution rights, change of
control rights, covenants, remedies and conversion and
redemption rights) that are not in the good faith judgment of
our board of directors materially less favorable, taken as a
whole, to us or the holders of the mandatory convertible
preferred stock than those contained in the shares of Parity
Stock that are converted or exchanged for such other shares of
Parity Stock.
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Redemption
The mandatory convertible preferred stock will not be redeemable.
Liquidation
Preference
In the event of our voluntary or involuntary liquidation,
winding-up
or dissolution, subject to the rights of holders of any
outstanding Senior Stock or Parity Stock, each holder of
mandatory convertible preferred stock will be entitled to
receive and to be paid out of our assets available for
distribution to our shareholders, before any payment or
distribution is made to holders of Junior Stock (including
common stock), a liquidation preference in the amount of
$50 per share of the mandatory convertible preferred stock
(subject to adjustment for stock splits, combinations,
reclassifications or other similar events involving the
mandatory convertible preferred stock), plus accumulated and
unpaid dividends on the shares to the date fixed for
liquidation,
winding-up
or dissolution. If, upon our voluntary or involuntary
liquidation,
winding-up
or dissolution, the amounts payable with respect to the
liquidation preference of the mandatory convertible preferred
stock and all Parity Stock are not paid in full, the holders of
the mandatory convertible preferred stock and the Parity Stock
will share equally and ratably in any distribution of our assets
in proportion to the full liquidation preference and accumulated
and unpaid dividends to which they are entitled. After payment
of the full amount of the liquidation preference and accumulated
and unpaid dividends to which they are entitled, the holders of
the mandatory convertible preferred stock will have no right or
claim to any of our remaining assets. Neither the sale of all or
substantially all our assets or business (other than in
connection with our liquidation,
winding-up
or dissolution), nor our merger or consolidation into or with
any other person, will be deemed to be our voluntary or
involuntary liquidation,
winding-up
or dissolution.
The certificate of designation will not contain any provision
requiring funds to be set aside to protect the liquidation
preference of the mandatory convertible preferred stock even
though it is substantially in excess of the par value thereof.
Voting
Rights
The holders of the mandatory convertible preferred stock will
have no voting rights except as set forth below or as otherwise
required by Delaware law from time to time.
If dividends on the mandatory convertible preferred stock or any
other Parity Stock are in arrears and unpaid for six or more
quarterly periods (whether or not consecutive), the holders of
the mandatory convertible preferred stock, voting as a single
class with any other preferred stock or preference securities
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having similar voting rights that are exercisable, will be
entitled at our next regular or special meeting of shareholders
to elect two additional directors to our board of directors.
Upon the election of any additional directors, the number of
directors that comprise our board shall be increased by such
number of additional directors. Such voting rights and the terms
of the directors so elected will continue until such time as the
dividend arrearage on the mandatory convertible preferred stock
or any other Parity Stock has been paid in full.
In addition, the affirmative vote or consent of the holders of
at least
662/3%
of the outstanding mandatory convertible preferred stock and any
class or series of Parity Stock, voting as a single class, will
be required for the authorization or issuance of any class or
series of Senior Stock (or any security convertible into Senior
Stock). The certificate of designation will provide that the
authorization of, the increase in the authorized amount of, or
the issuance of any shares of any class or series of Parity
Stock or Junior Stock will not require the consent of the
holders of the mandatory convertible preferred stock, and will
not be deemed to adversely affect the rights of the holders of
the mandatory convertible preferred stock. The affirmative vote
or consent of the holders of at least
662/3%
of the outstanding mandatory convertible preferred stock will be
required for amendments to our certificate of incorporation or
any certificate of designation, whether by merger,
consolidation, combination or otherwise, that would affect
adversely the rights of holders of the mandatory convertible
preferred stock.
In all cases in which the holders of mandatory convertible
preferred stock shall be entitled to vote, each share of
mandatory convertible preferred stock shall be entitled to one
vote.
Mandatory
Conversion
Each share of the mandatory convertible preferred stock, unless
previously converted, will automatically convert
on ,
2009, which we call the mandatory conversion date, into a number
of shares of common stock equal to the conversion rate described
below. In addition to the common stock issuable upon conversion
of each share of mandatory convertible preferred stock on the
mandatory conversion date, holders will have the right to
receive an amount in cash equal to all accrued, cumulated and
unpaid dividends on the mandatory convertible preferred stock,
whether or not declared prior to that date, for the then-current
dividend period until the mandatory conversion date and all
prior dividend periods (other than previously declared dividends
on the mandatory convertible preferred stock payable to holders
of record as of a prior date), provided that we are legally
permitted to pay such dividends at such time.
The conversion rate, which is the number of shares of common
stock issuable upon conversion of each share of mandatory
convertible preferred stock on the applicable conversion date,
will, subject to adjustment as described under
Anti-dilution Adjustments below, be as
follows:
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if the applicable market value (as defined below) of our common
stock is equal to or greater than
$ , which we call the
threshold appreciation price, then the conversion
rate will
be shares
of common stock per share of mandatory convertible preferred
stock (the minimum conversion rate), which is equal
to $50 divided by $ (the threshold
appreciation price);
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if the applicable market value of our common stock is less than
$ (the threshold appreciation
price) but greater than $ , which
we call the initial price, then the conversion rate
will be equal to $50 divided by the applicable market value of
our common stock; or
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if the applicable market value of our common stock is less than
or equal to $ (the initial price),
then the conversion rate will
be shares
of common stock per share of mandatory convertible preferred
stock (the maximum conversion rate), which is equal
to $50 divided by $ (the initial
price).
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We refer to the minimum conversion rate and the maximum
conversion rate collectively as the fixed conversion
rates.
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Accordingly, assuming that the market price of our common stock
on the mandatory conversion date is the same as the applicable
market value, the aggregate market value of the shares of common
stock you receive upon conversion will be:
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greater than the liquidation preference of the mandatory
convertible preferred stock if the applicable market value is
greater than the threshold appreciation price,
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equal to the liquidation preference if the applicable market
value is less than or equal to the threshold appreciation price
and greater than or equal to the initial price, and
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less than the liquidation preference if the applicable market
value is less than the initial price.
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Applicable market value means the average of the
closing prices 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. The
initial price is the closing price of our common
stock on the NYSE
on ,
2006. The threshold appreciation price represents an
approximately % appreciation over the initial price.
The closing price of our common stock or any
securities distributed in a spin-off, as the case may be, on any
date of determination means the closing sale price or, if no
closing sale price is reported, the last reported sale price of
shares of our common stock or such other securities on the New
York Stock Exchange on that date. If our common stock or such
other securities are not traded on the New York Stock Exchange
on any date of determination, the closing price of our common
stock or such other securities on any date of determination
means the closing sale price as reported in the composite
transactions for the principal U.S. national or regional
securities exchange on which our common stock or such other
securities are so listed or quoted, or if our common stock or
such other securities not so listed or quoted on a
U.S. national or regional securities exchange, as reported
by the Nasdaq stock market, or, if no closing price for our
common stock or such other securities are so reported, the last
quoted bid price for our common stock or such other securities
are in the
over-the-counter
market as reported by the National Quotation Bureau or similar
organization, or, if that bid price is not available, the market
price of our common stock or such other securities are on that
date as determined by a nationally recognized independent
investment banking firm retained by us for this purpose.
A trading day is a day on which shares of our common
stock:
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are not suspended from trading on any national or regional
securities exchange or association or
over-the-counter
market at the close of business; and
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has traded at least once on the national or regional securities
exchange or association or
over-the-counter
market that is the primary market for the trading of our common
stock.
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For purposes of this prospectus, all references herein to the
closing price of our common stock on the New York Stock Exchange
shall be such closing price as reflected on the website of the
New York Stock Exchange (www.nyse.com) and as reported by
Bloomberg Professional Service; provided that in the event that
there is a discrepancy between the closing sale price as
reflected on the website of the New York Stock Exchange and as
reported by Bloomberg Professional Service, the closing sale
price on the website of the New York Stock Exchange shall govern.
Conversion
Conversion into shares of common stock will occur on the
mandatory conversion date, unless:
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we have caused the conversion of the mandatory convertible
preferred stock prior to the mandatory conversion date in the
manner described in Provisional Conversion at
Our Option; or
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you have converted your shares of mandatory convertible
preferred stock prior to the mandatory conversion date, in the
manner described in Conversion at the Option
of the Holder or Conversion Upon Cash
Acquisition; Cash Acquisition Dividend Make-Whole Amount.
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On the mandatory conversion date certificates representing
shares of our common stock will be issued and delivered to you
or your designee upon presentation and surrender of the
certificate evidencing the mandatory convertible preferred
stock, if shares of the mandatory convertible preferred stock
are held in certificated form, and compliance with some
additional procedures.
The person or persons entitled to receive the shares of common
stock issuable upon conversion of the mandatory convertible
preferred stock will be treated as the record holder(s) of such
shares as of the close of business on the applicable conversion
date. Prior to the close of business on the applicable
conversion date, the shares of common stock issuable upon
conversion of the mandatory convertible preferred stock will not
be deemed to be outstanding for any purpose, and you will have
no rights with respect to such shares of common stock, including
voting rights, rights to respond to tender offers and rights to
receive any dividends or other distributions on the common
stock, by virtue of holding the mandatory convertible preferred
stock.
Provisional
Conversion at Our Option
Prior to the mandatory conversion date, if the closing price per
share of our common stock has exceeded 150% of the threshold
appreciation price, or $ , subject
to anti-dilution adjustments, for at least 20 trading days
within a period of 30 consecutive trading days ending on the
trading day prior to the date that we notify you of the optional
conversion, we may, at our option, cause the conversion of all,
but not less than all, of the shares of mandatory convertible
preferred stock then outstanding into our common stock. Such
conversion shall be made at the minimum conversion rate
of shares
of common stock for each share of mandatory convertible
preferred stock, subject to adjustment as described under
Anti-dilution Adjustments below. We will
provide a notice of such conversion to each holder of mandatory
convertible preferred stock by mail and issue a press release
and publish such information on our website; provided that the
failure to issue such press release or publish such information
on our website will not act to prevent or delay such conversion.
The date specified in such notice for the optional conversion
shall be at least 30 days but no more than 60 days
from the date of such notice. We will be able to cause this
conversion only if, in addition to issuing you the shares of
common stock as described above, we are then legally permitted
to, and do, pay you in cash (i) an amount equal to any
accrued, cumulated and unpaid dividends on your shares of
mandatory convertible preferred stock then outstanding, whether
or not declared (other than previously declared dividends on
your shares of mandatory convertible preferred stock payable to
holders of record as of a prior date), plus (ii) the
present value of all remaining future dividend payments on your
shares of mandatory convertible preferred stock through and
including ,
2009. The present value of the remaining future dividend
payments will be computed using a discount rate equal
to %.
Conversion
at the Option of the Holder
Holders of the mandatory convertible preferred stock have the
right to convert the mandatory convertible preferred stock, in
whole or in part, at any time prior to the mandatory conversion
date, into shares of our common stock at the minimum conversion
rate
of shares
of common stock per share of mandatory convertible preferred
stock, subject to adjustment as described under
Anti-dilution Adjustments below.
In addition to the number of shares of common stock issuable
upon conversion of each share of mandatory convertible preferred
stock at the option of the holder on the effective date of any
early conversion (herein referred to as the early conversion
date), each converting holder will have the right to receive an
amount in cash equal to all accrued, cumulated and unpaid
dividends on such converted share(s) of mandatory convertible
preferred stock, whether or not declared prior to that date, for
the portion of the then current dividend period until the early
conversion date and all prior dividend periods (other than
previously declared dividends on our mandatory convertible
preferred stock payable to holders of record as of a prior
date), provided that we are then legally permitted to pay such
dividends. Except as described above, upon any optional
conversion of our mandatory convertible preferred stock, we will
make no payment or allowance for unpaid dividends on our
mandatory convertible preferred stock.
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Conversion
Upon Cash Acquisition; Cash Acquisition Dividend Make-Whole
Amount
General. If a cash acquisition (as defined
below) occurs, we will provide for the conversion of shares of
our mandatory convertible preferred stock and a cash acquisition
dividend make-whole amount (as defined below) by:
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permitting holders to submit their shares of our mandatory
convertible preferred stock for conversion at any time during
the period (the cash acquisition conversion period)
beginning on the date that is 15 days prior to the
anticipated effective date of such cash acquisition and ending
on the date that is 15 days after the actual effective date
(the effective date) at the conversion rate (the
cash acquisition conversion rate) specified in the
table below; and
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paying converting holders an amount equal to the sum of
(a) any accumulated and unpaid dividends on their shares of
our mandatory convertible preferred stock plus (b) the
present value of all remaining dividend payments on their shares
of mandatory convertible preferred stock through and including
the mandatory conversion date, calculated as set forth below
(subject to our ability to satisfy the make-whole amount by
increasing the number of shares to be issued on conversion).
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We will notify holders, at least 20 days prior to the
anticipated effective date of such cash acquisition, of the
anticipated effective date of such transaction. In addition, if
we elect to deliver some or all of the amount of cumulated and
unpaid dividends and the present value of all remaining dividend
payments on your mandatory convertible preferred stock through
and including the mandatory conversion date, in shares of our
common stock (as described below), such notice will indicate
whether such amount will be payable in full in shares of our
common stock or any combination of cash and shares of our common
stock, and we will specify the combination in the notice. In the
case of a public acquirer change of control (see
Public Acquirer Change of Control
below), if we elect that the right of the holder to convert each
share of mandatory convertible preferred stock will be changed
into a right to convert such share into a number of shares of
acquirer common stock as described under
Public Acquirer Change of Control below,
such notice will indicate such election.
Cash Acquisition Conversion Rate. The
following table sets forth the cash acquisition conversion rate
per share of mandatory convertible preferred stock for each
hypothetical stock price and effective date set forth below:
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Effective Date
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Stock Price on Effective Date
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A cash acquisition will be deemed to have occurred
at such time after the original issuance of the mandatory
convertible preferred stock upon the consummation of any
acquisition (whether by means of a liquidation, share exchange,
tender offer, consolidation, recapitalization, reclassification,
merger of us or any sale, lease or other transfer of the
consolidated assets of ours and our subsidiaries) or a series of
related transactions or events pursuant to which all or
substantially all of our common stock is exchanged for,
converted into or constitutes solely the right to receive cash,
securities or other property more than 10% of which consists of
cash, securities or other property that are not, or upon
issuance will not be, traded on the NYSE or quoted on the Nasdaq
National Market.
The cash acquisition conversion rate will be determined by
reference to the table above and is based on the effective date
and the price (the stock price) paid per share of
our common stock in such transaction. If the holders of our
common stock receive only cash in the cash acquisition, the
stock price shall be the cash amount paid per share. Otherwise
the stock price shall be the average of the closing price per
share of our common stock on the 10 trading days up to but not
including the effective date.
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The stock prices set forth in the first row of the table (i.e.,
the column headers) will be adjusted as of any date on which the
fixed conversion rates of our mandatory convertible preferred
stock are 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 minimum
conversion rate immediately prior to the adjustment giving rise
to the stock price adjustment and the denominator of which is
the minimum conversion rate as so adjusted. Each of the
conversion rates in the table will be subject to adjustment in
the same manner as each fixed conversion rate as set forth under
Anti-dilution Adjustments.
The exact stock price and effective dates may not be set forth
on the table, in which case:
1. if the stock price is between two stock price amounts on
the table or the effective date is between two dates on the
table, the cash acquisition conversion rate will be determined
by straight-line interpolation between the cash acquisition
conversion rates set forth for the higher and lower stock price
amounts and the two dates, as applicable, based on a
365-day year;
2. if the stock price is in excess of
$ per share (subject to
adjustment as described above), then the cash acquisition
conversion rate will be the minimum conversion rate, subject to
adjustment; and
3. if the stock price is less than
$ per share (subject to
adjustment as described above), then the cash acquisition
conversion rate will be the maximum conversion rate, subject to
adjustment.
Cash Acquisition Dividend Make-Whole
Payment. For any shares of mandatory convertible
preferred stock that are converted during the cash acquisition
conversion period, in addition to the shares of common stock
issued upon conversion, we must, in our sole discretion, either
(a) pay you in cash, the sum of (which we refer to as the
cash acquisition dividend make-whole amount)
(1) an amount equal to any accumulated and unpaid dividends
on your shares of our mandatory convertible preferred stock,
whether or not declared, plus (2) the present value of all
remaining dividend payments on your shares of mandatory
convertible preferred stock through and including the mandatory
conversion date, in each case, out of legally available assets,
or (b) increase the number of shares of our common stock to
be issued on conversion by an amount equal to the cash
acquisition dividend make-whole amount, divided by the stock
price of shares of our common stock. The present value of the
remaining dividend payments will be computed using a discount
rate equal to %. For purposes of the preceding
sentence, the stock price of shares of our common
stock, on any date of determination means the average of the
closing prices of our common stock for each of the ten
consecutive trading days (appropriately adjusted to take into
account the occurrence during such period of stock splits and
similar events) ending on the effective date.
Our obligation to deliver shares at the cash acquisition
conversion rate and pay the cash acquisition dividend make-whole
amount could be considered a penalty, in which case the
enforceability thereof would be subject to general principles of
reasonableness of economic remedies.
Public Acquirer Change of
Control. Notwithstanding the foregoing, and in
lieu of permitting conversion at the cash acquisition conversion
rate and paying the cash acquisition dividend make whole amount
as set forth above, in the case of a public acquirer
change of control (as defined below) we may elect that the
right to convert a share of mandatory convertible preferred
stock will be changed into a right to convert such share into a
number of shares of acquirer common stock (as
defined below). Each fixed conversion rate following the
effective date of such transaction will be a number of shares of
acquirer common stock equal to the product of:
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such fixed conversion rate in effect immediately prior to the
effective date of such public acquirer change of control,
multiplied by
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the average of the quotients obtained, for each trading day in
the 10 consecutive trading-day period commencing on the trading
day next succeeding the effective date of such public acquirer
change of control (the valuation period), of:
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(i)
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the acquisition value (as defined below) of our
common stock on each such trading day in the valuation period,
divided by
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(ii)
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the closing sale price of the acquirer common stock on each such
trading day in the valuation period.
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In addition to the adjustments to the fixed conversion rates, a
corresponding adjustment will be made to the threshold
appreciation price and the initial price. The acquisition
value of our common stock means, for each trading day in
the valuation period, the value of the consideration paid per
share of our common stock in connection with such public
acquirer change of control, in an amount equal to the face
amount of such cash, the closing sale price of such acquirer
common stock on each such trading day, and the fair market value
of any other security, asset or property on each such trading
day, as determined by two independent nationally recognized
investment banks selected by the transfer agent for this
purpose, as the case may be.
After the adjustment of the fixed conversion rates in connection
with a public acquirer change of control, the conversion rates
will be subject to further similar adjustments in the event that
any of the events described above occur thereafter.
A public acquirer change of control is any cash
acquisition where the acquirer of a majority of our common stock
or the person formed by or surviving such cash acquisition, or
any entity that is a direct or indirect beneficial
owner (as defined in
Rule 13d-3
under the Exchange Act) of more than 50% of the total voting
power of all shares of such acquirers capital stock that
are entitled to vote generally in the election of directors, but
in each case other than us, has a class of common stock traded
on the New York Stock Exchange or quoted on the Nasdaq National
Market. We refer to such acquirers or other entitys
class of common stock traded on the New York Stock Exchange or
quoted on the Nasdaq National Market as the acquirer
common stock.
Fractional
Shares
No fractional shares of our common stock will be issued to
holders of our mandatory convertible preferred stock upon
conversion. In lieu of any fractional common share otherwise
issuable in respect of the aggregate number of shares of our
mandatory convertible preferred stock of any holder that are
converted, that holder will be entitled to receive an amount in
cash (computed to the nearest cent) equal to the same fraction
of:
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in the case of mandatory conversion, an early conversion at our
option or a cash acquisition conversion, the average of the
daily closing price per common share for each of the five
consecutive trading days preceding the trading day immediately
preceding the date of conversion; or
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in the case of each early conversion at the option of a holder,
the closing price per common share determined as of the second
trading day immediately preceding the effective date of
conversion.
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If more than one share of our mandatory convertible preferred
stock is surrendered for conversion at one time by or for the
same holder, the number of full shares of our common stock
issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares of our mandatory convertible
preferred stock so surrendered.
Anti-dilution
Adjustments
Each fixed conversion rate and the number of shares of common
stock to be delivered upon conversion will be adjusted if:
(1) We pay dividends (and other distributions) on our
common stock in shares of common stock.
(2) We issue to all holders of our common stock rights or
warrants (other than rights or warrants issued pursuant to a
dividend reinvestment plan or share purchase plan or other
similar plans) entitling them, for a period of up to
45 days from the date of issuance of such rights or
warrants, to subscribe for or purchase our shares of common
stock at less than the current market price, as
defined below, of our common stock on the date fixed for the
determination of shareholders entitled to receive such rights or
warrants.
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(3) We subdivide, split or combine our common stock.
(4) We distribute to all holders of our common stock
evidences of our indebtedness, shares of capital stock,
securities, cash or other assets (excluding any dividend or
distribution covered by clauses (1) or (3) above, any
rights or warrants referred to in (2) above, any dividend
or distribution paid exclusively in cash, any consideration
payable in connection with a tender or exchange offer made by us
or any of our subsidiaries, and any dividend of shares of
capital stock of any class or series, or similar equity
interests, of or relating to a subsidiary or other business unit
in the case of certain spin-off transactions as described
below), in which event each fixed conversion rate in effect
immediately prior to the close of business on the date fixed for
the determination of shareholders entitled to receive such
distribution will be multiplied by a fraction,
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the numerator of which is the current market price per share of
our common stock on the date fixed for determination, and
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the denominator of which is the current market price per share
of our common stock on the date fixed for determination minus
the fair market value, as determined by our board of directors,
except as described in the following paragraph, of the portion
of the evidences of indebtedness, shares, securities, cash or
other assets so distributed applicable to one share of common
stock.
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In the event that we make a distribution to all holders of
shares of our common stock consisting of capital stock of, or
similar equity interests in, or relating to a subsidiary or
other business unit of ours (herein referred to as a
spin-off), each fixed conversion rate will be
adjusted by multiplying such conversion rate in effect
immediately prior to the close of business on the date fixed for
the determination of shareholders entitled to receive such
distribution by a fraction, the numerator of which is the
current market price per share of our common stock as of the
fifteenth trading day after the ex-date for such
distribution, plus the fair market value of the portion of those
shares of capital stock or similar equity interests so
distributed applicable to one share of common stock as of the
fifteenth trading day after the ex-date for such
distribution, and the denominator of which is the current market
price per share of our common stock, in each case as of the
fifteenth trading day after the ex-date for such
distribution.
(5) We make a distribution consisting exclusively of cash
to all holders of our common stock, excluding (a) any cash
that is distributed in a reorganization event (as described
below) or as part of a distribution referred to in
clause (4) above, (b) any dividend or distribution in
connection with our liquidation, dissolution or winding up, and
(c) any consideration payable in connection with a tender
or exchange offer made by us or any of our subsidiaries, in
which event, each fixed conversion rate in effect immediately
prior to the close of business on the date fixed for
determination of the holders of our common stock entitled to
receive such distribution will be multiplied by a fraction;
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the numerator of which will be the current market price of our
common stock on the date fixed for such determination; and
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the denominator of which will be the current market price of our
common stock on the date fixed for such determination less the
amount per share of such dividend or distribution.
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(6) We or any of our subsidiaries successfully complete a
tender or exchange offer for our common stock to the extent that
the cash and the value of any other consideration included in
the payment per share of our common stock exceeds the current
market price per share of our common stock on the seventh
trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer,
in which event each fixed conversion rate in effect immediately
prior to the opening of business on the eighth trading day after
the date of expiration of the tender or exchange offer will be
multiplied by a fraction:
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the numerator of which shall be equal to (A) the product of
(I) the current market price per share of our common stock
on the seventh trading day after the date of expiration of the
tender or exchange offer multiplied by (II) the number of
shares of common stock outstanding (including any
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shares validly tendered and not withdrawn) less the number of
all shares validly tendered and not withdrawn as of the
expiration time at such time plus (B) the amount of cash
plus the fair market value, as determined by our board of
directors, of the aggregate consideration payable for all the
shares of common stock purchased in such tender or exchange
offer, and
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the denominator of which will be the product of the number of
shares of common stock outstanding (including any shares validly
tendered and not withdrawn) and the current market price per
share of common stock on the seventh trading day after the
expiration of the tender or exchange offer.
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(7) To the extent that we have a rights plan in effect with
respect to our common stock on any conversion date, upon
conversion of any shares of the mandatory convertible preferred
stock, you will receive, in addition to shares of our common
stock, the rights under the rights plan, unless, prior to such
conversion date, the rights have separated from shares of our
common stock, in which case each fixed conversion rate will be
adjusted at the time of separation as if we made a distribution
to all holders of shares of our common stock as described in
clause (4) above, subject to readjustment in the event of
the expiration, termination or redemption of such rights. In
lieu of any such adjustment, we may amend our stockholder rights
plan to provide that upon conversion of our mandatory
convertible preferred stock, the holders will receive, in
addition to shares of our common stock issuable upon such
conversion, the rights that would have attached to such common
stock if the rights had not been separated from our common stock
under our stockholder rights plan.
The current market price is the average of the daily
closing price per share of our common stock on each of the five
consecutive trading days preceding the earlier of the day
preceding the date in question and the day before the
ex-date with respect to the issuance or distribution
requiring such computation. For purposes of this paragraph, the
term ex-date, when used with respect to any such
issuance or distribution, means the first date on which share of
our common stock trade without the right to receive such
issuance or distribution. For the purposes of determining the
adjustment to the fixed conversion rate for the purposes of
clause (4) in the event of a spin-off, the current
market price per share of our common stock means the
average of the closing prices over the first ten trading days
commencing on and including the fifth trading day following the
ex-date for such distribution.
In the event of (a) any consolidation or merger of us with
or into another person (other than a merger or consolidation in
which we are the continuing corporation and in which the shares
of our common stock outstanding immediately prior to the merger
or consolidation are not exchanged for cash, securities or other
property of us or another person), (b) any sale, transfer,
lease or conveyance to another person of all or substantially
all of our property and assets, (c) any reclassification of
our common stock into securities including securities other than
our common stock, or (d) any statutory exchange of our
securities with another person (other than in connection with a
merger or acquisition) (herein referred to as
reorganization events), each share of mandatory
convertible preferred stock outstanding immediately prior to
such reorganization event shall, without the consent of the
holders of the mandatory convertible preferred stock, become
convertible into the kind and amount of securities, cash and
other property that such holders would have been entitled to
receive if such holder had converted its mandatory convertible
preferred stock into common stock immediately prior to such
reorganization event. For purposes of the foregoing, the kind
and amount of consideration that a holder of mandatory
convertible preferred stock would have been entitled to receive
as a holder of our common stock in the case of any
reorganization event or other transaction that 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) will be deemed to be the weighted
average of the types and amounts of consideration received by
the holders of our common stock that affirmatively make such an
election. In such event, on the applicable conversion date, the
applicable conversion rate then in effect will be applied to
determine the amount and value of securities, cash or property a
holder of one share of common stock would have received in such
transaction (without interest thereon and without any right to
dividends or distributions thereon which have a record date
prior to the date such shares of mandatory convertible preferred
stock are actually converted). The applicable conversion rate
shall be (a) the minimum conversion rate, in the case of an
early conversion date or a provisional conversion date, and
(b) determined based upon the definition of the conversion
rate in the case of the
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mandatory conversion date, in each case, determined using the
applicable market value of the exchanged property. Holders have
the right to convert their shares of mandatory convertible
preferred stock early in the event of certain cash mergers as
described under Conversion Upon Cash
Acquisition; Cash Acquisition Dividend Make-Whole Amount.
In addition, we may make such increases in each fixed conversion
rate as we deem advisable in order to avoid or diminish any
income tax to holders of our common stock resulting from any
dividend or distribution of our shares (or issuance of rights or
warrants to acquire our shares) or from any event treated as
such for income tax purposes or for any other reason. We may
only make such a discretionary adjustment if we make the same
proportionate adjustment to each fixed conversion rate.
In the event of a taxable distribution to holders of shares of
our common stock that in our discretion results in an adjustment
of each fixed conversion rate, holders of mandatory convertible
preferred stock may, in certain circumstances, be deemed to have
received a distribution subject to U.S. federal income tax
as a dividend. In addition,
non-U.S. holders
of mandatory convertible preferred stock may, in certain
circumstances, be deemed to have received a distribution subject
to U.S. federal withholding tax requirements. See
U.S. Federal Income Tax Considerations
Consequences to U.S. Holders of Mandatory Convertible
Preferred Stock or Common Stock Adjustment of
Conversion Rate in this prospectus.
Adjustments to the conversion rate will be calculated to the
nearest 1/10,000th of a share. Prior
to ,
2009, no adjustment in the conversion rate will be required
unless the adjustment would require an increase or decrease of
at least one percent in the conversion rate. If any adjustment
is not required to be made because it would not change the
conversion rate by at least one percent, then the adjustment
will be carried forward and taken into account in any subsequent
adjustment; provided, however, that
on ,
2009, adjustments to the conversion rate will be made with
respect to any such adjustment carried forward and which has not
been taken into account before such date.
No adjustment to the conversion rate need be made if holders may
participate in the transaction that would otherwise give rise to
an adjustment, so long as the distributed assets or securities
the holders would receive upon conversion of the mandatory
convertible preferred stock, if convertible, exchangeable, or
exercisable, are convertible, exchangeable or exercisable, as
applicable, without any loss of rights or privileges for a
period of at least 45 days following conversion of the
mandatory convertible preferred stock.
The applicable conversion rate will not be adjusted:
(a) 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;
(b) upon the issuance of any shares of our common stock or
rights or warrants 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;
(c) upon the issuance of any shares of our common stock
pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the date
the mandatory convertible preferred stock were first issued;
(d) for a change in the par value or to no par value of our
common stock; or
(e) for accrued, cumulated and unpaid dividends.
We will be required, as soon as practicable after the conversion
rate is adjusted, to provide or cause to be provided written
notice of the adjustment to the holders of shares of mandatory
convertible preferred stock. We will also be required to deliver
a statement setting forth in reasonable detail the method by
which the adjustment to each fixed conversion rate was
determined and setting forth each revised fixed conversion rate.
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If an adjustment is made to the fixed conversion rates, an
adjustment also will generally be made to the threshold
appreciation price and the initial price solely for the purposes
of determining which clauses of the definition of the conversion
rate will apply on the conversion date.
Consolidation,
Merger and Sale of Assets
The certificate of designation provides that we may, without the
consent of the holders of any of the outstanding mandatory
convertible preferred stock, consolidate with or merge into any
other person or convey, transfer or lease all or substantially
all our assets to any person or may permit any person to
consolidate with or merge into, or transfer or lease all or
substantially all its properties to, us; provided, however, that
(a) the successor, transferee or lessee is organized under
the laws of the United States or any political subdivision
thereof; (b) the shares of mandatory convertible preferred
stock will become shares of such successor, transferee or
lessee, having in respect of such successor, transferee or
lessee the same powers, preferences and relative participating,
optional or other special rights and the qualification,
limitations or restrictions thereon, the mandatory convertible
preferred stock had immediately prior to such transaction; and
(c) certain procedural conditions are met.
Under any consolidation by us with, or merger by us into, any
other person or any conveyance, transfer or lease of all or
substantially all our assets as described in the preceding
paragraph, the successor resulting from such consolidation or
into which we are merged or the transferee or lessee to which
such conveyance, transfer or lease is made, will succeed to, and
be substituted for, and may exercise every right and power of,
ours under the shares of mandatory convertible preferred stock,
and thereafter, except in the case of a lease, the predecessor
(if still in existence) will be released from its obligations
and covenants with respect to the mandatory convertible
preferred stock.
SEC
Reports
Whether or not we are required to file reports with the SEC, if
any shares of mandatory convertible preferred stock are
outstanding, we will file with the SEC all such reports and
other information as we would be required to file with the SEC
by Section 13(a) or 15(d) under the Exchange Act. See
Where You Can Find More Information. We will supply
each holder of mandatory convertible preferred stock, upon
request, without cost to such holder, copies of such reports or
other information.
Book-Entry,
Delivery and Form
We will initially issue the mandatory convertible preferred
stock in the form of one or more global securities. The global
securities will be deposited with, or on behalf of, the
Depositary and registered in the name of the Depositary or its
nominee. Except as set forth below, the global securities may be
transferred, in whole and not in part, only to the Depositary or
another nominee of the Depositary. Investors may hold their
beneficial interests in the global securities directly through
the Depositary if they have an account with the Depositary or
indirectly through organizations which have accounts with the
Depositary.
Shares of mandatory convertible preferred stock that are issued
as described below under Certificated
mandatory convertible preferred stock will be issued in
definitive form. Upon the transfer of mandatory convertible
preferred stock in definitive form, such mandatory convertible
preferred stock will, unless the global securities have
previously been exchanged for mandatory convertible preferred
stock in definitive form, be exchanged for an interest in the
global securities representing the liquidation preference of
mandatory convertible preferred stock being transferred.
The Depositary has advised us as follows: The Depositary is a
limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a
clearing corporation within the meaning of the New
York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary was created to hold securities of
institutions that have accounts with the Depositary
(participants) and to facilitate the clearance and
settlement of securities transactions among its participants in
such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for
physical
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movement of securities certificates. The Depositarys
participants include securities brokers and dealers (which may
include the underwriters), banks, trust companies, clearing
corporations and certain other organizations. Access to the
Depositarys book-entry system is also available to others
such as banks, brokers, dealers and trust companies
(indirect participants) that clear through or
maintain a custodial relationship with a participant, whether
directly or indirectly.
We expect that pursuant to procedures established by the
Depositary, upon the deposit of the global securities with, or
on behalf of, the Depositary, the Depositary will credit, on its
book-entry registration and transfer system, the liquidation
preference of the mandatory convertible preferred stock
represented by such global securities to the accounts of
participants. The accounts to be credited shall be designated by
the underwriters of such mandatory convertible preferred stock.
Ownership of beneficial interests in the global securities will
be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the
global securities will be shown on, and the transfer of those
ownership interests will be effected only through, records
maintained by the Depositary (with respect to participants
interests) and such participants and indirect participants (with
respect to the owners of beneficial interests in the global
securities other than participants). The laws of some
jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form.
Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the global securities.
So long as the Depositary, or its nominee, is the registered
holder and owner of the global securities, the Depositary or
such nominee, as the case may be, will be considered the sole
legal owner and holder of the mandatory convertible preferred
stock evidenced by the global certificates for all purposes of
such mandatory convertible preferred stock and the certificate
of designation. Except as set forth below as an owner of a
beneficial interest in the global certificates, you will not be
entitled to have the mandatory convertible preferred stock
represented by the global securities registered in your name,
will not receive or be entitled to receive physical delivery of
certificated mandatory convertible preferred stock in definitive
form and will not be considered to be the owner or holder of any
mandatory convertible preferred stock under the global
securities. We understand that under existing industry practice,
in the event an owner of a beneficial interest in the global
securities desires to take any action that the Depositary, as
the holder of the global securities, is entitled to take, the
Depositary will authorize the participants to take such action,
and that the participants will authorize beneficial owners
owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning
through them.
All payments on mandatory convertible preferred stock
represented by the global securities registered in the name of
and held by the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered
owner and holder of the global securities.
We expect that the Depositary or its nominee, upon receipt of
any payment on the global securities, will credit
participants accounts with payments in amounts
proportionate to their respective beneficial interests in the
liquidation preference of the global securities as shown on the
records of the Depositary or its nominee. We also expect that
payments by participants or indirect participants to owners of
beneficial interest in the global securities held through such
participants or indirect participants will be governed by
standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We
will not have any responsibility or liability for any aspect of
the records relating to, or payments made on account of,
beneficial ownership interests in the global securities for any
mandatory convertible preferred stock or for maintaining,
supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship
between the Depositary and its participants or indirect
participants or the relationship between such participants or
indirect participants and the owners of beneficial interests in
the global securities owning through such participants or
indirect participants.
Although the Depositary has agreed to the foregoing procedures
in order to facilitate transfers of interests in the global
securities among participants or indirect participants of the
Depositary, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued
at any time. Neither we nor the transfer agent will have any
responsibility or liability for the performance by
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the Depositary or its participants or indirect participants of
their respective obligations under the rules and procedures
governing their operations.
Certificated
Mandatory Convertible Preferred Stock
Subject to certain conditions, the mandatory convertible
preferred stock represented by the global securities is
exchangeable for certificated mandatory convertible preferred
stock in definitive form of like tenor as such mandatory
convertible preferred stock if (1) the Depositary notifies
us that it is unwilling or unable to continue as Depositary for
the global securities or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act and, in
either case, a successor is not appointed within 90 days or
(2) we in our discretion at any time determine not to have
all of the mandatory convertible preferred stock represented by
the global securities. Any mandatory convertible preferred stock
that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated mandatory convertible preferred
stock issuable for such number of shares and registered in such
names as the Depositary shall direct. Subject to the foregoing,
the global securities are not exchangeable, except for global
securities representing the same aggregate number of shares and
registered in the name of the Depositary or its nominee.
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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.
We are authorized to issue 35,000,000 shares of common
stock, par value $.01 per share, 8,000,000 shares of
preferred stock, par value $.01 per share and
1,000,000 shares of Junior Participating Preferred Stock.
Our common stock is listed on the NYSE.
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.
Preferred
Stock
The rights of holders of common stock are subject to the rights
of holders of any preferred stock which may be issued in the
future. 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 are the description
and number of shares to constitute each series, the annual
dividend rates, whether such dividends shall be cumulative, the
time and price of redemption and the liquidation preference
applicable to the series, whether the series will be subject to
the operation of a sinking or purchase
fund and, if so, the terms and provisions thereof, whether the
shares of such series shall be convertible into shares of any
other class or classes and the terms and provisions of such
conversion rights and the voting rights, if any, of the shares
of such series. 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
been issued. 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 interest of our stockholders, the Board
could authorize the issuance of a series of preferred
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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.
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.
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 own or
control more than the Permitted Foreign Ownership Percentage,
the voting rights of the shares of common 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
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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.
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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.
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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 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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Transfer
Agent and Registrar
The transfer agent and registrar for our common stock is Mellon
Investor Services LLC.
U.S. FEDERAL
INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income
tax, and in the case of non-U.S. holders (as defined below),
estate tax, consequences relevant to the purchase, ownership,
and disposition of our mandatory convertible preferred stock and
common stock received in respect thereof. The following summary
is based upon current provisions of the Internal Revenue Code of
1986, as amended (the Code), Treasury Regulations
and judicial and administrative authority, all of which are
subject to change, possibly with retroactive effect, or to
different interpretations. This summary does not purport to deal
with all aspects of U.S. federal income taxation that may
be relevant to an investors decision to purchase shares of
mandatory convertible preferred stock, nor to any tax
consequences under the laws of any state, local or foreign
jurisdiction. This summary also does not address tax
consequences that may be applicable to special classes of
investors including, but not limited to, tax-exempt
organizations, insurance companies, banks or other financial
institutions, partnerships or other entities classified as
partnerships for U.S. federal income tax purposes, dealers
in securities, persons liable for the alternative minimum tax,
U.S. expatriates and former long-term U.S. residents,
traders in securities that elect to use a
mark-to-market
method of accounting for their securities holdings, and persons
that will hold our mandatory convertible preferred stock or
common stock as a position in a hedging transaction,
straddle, conversion transaction or
other risk reduction transaction. The summary is limited to
taxpayers who will hold our mandatory convertible preferred
stock and our common stock received in respect thereof as
capital assets (generally, held for investment).
Each potential investor should consult with its own tax adviser
as to the federal, state, local, foreign and any other tax
consequences with respect to the purchase, ownership,
conversion, and disposition of our mandatory convertible
preferred stock and common stock.
If a partnership (including an entity or arrangement treated as
a partnership for U.S. federal income tax purposes) holds
our mandatory convertible preferred stock or common stock, the
tax treatment of a partner generally will depend upon the status
of the partner and the activities of the partnership. If you are
a partner of a partnership considering the purchase of our
mandatory convertible preferred stock, you should consult your
tax adviser.
Consequences
to U.S. Holders of Mandatory Convertible Preferred Stock or
Common Stock
The discussion in this section is addressed to a holder of our
mandatory convertible preferred stock and common stock received
in respect thereof that is a U.S. holder for federal income
tax purposes. You are a U.S. holder for U.S. federal
income tax purposes if you are a beneficial owner of mandatory
convertible preferred stock or common stock that is, for
U.S. federal income tax purposes:
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an individual citizen or resident of the United States,
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a corporation created or organized in the United States or under
the laws of the United States or of any state (including the
District of Columbia),
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an estate whose income is subject to U.S. federal income
tax regardless of its source or
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a trust if (x) a United States court can exercise primary
supervision over the trusts administration and one or more
United States persons are authorized to control all substantial
decisions of the trust or (y) certain circumstances apply
and the trust has validly elected to be treated as a United
States person.
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Dividends. Distributions with respect to our
mandatory convertible preferred stock and our common stock
(other than certain stock distributions) will be taxable as
dividend income when paid to the extent of our current and
accumulated earnings and profits as determined for
U.S. federal income tax purposes. To the extent that the
amount of a distribution with respect to our mandatory
convertible preferred stock or common stock exceeds our current
and accumulated earnings and profits, such distribution will be
treated
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first as a tax-free return of capital to the extent of the
U.S. holders adjusted tax basis in such mandatory
convertible preferred stock or common stock, as the case may be,
and thereafter as capital gain (and such amount of the
distribution will not be eligible for the dividends received
deduction). If we are not able to make distributions on the
preferred stock, the liquidation preference of the preferred
stock will increase, and such increase may give rise to deemed
dividend income to holders of the preferred stock in the amount
of all, or a portion of, such increase.
In certain circumstances, investors may receive a dividend on
our mandatory convertible preferred stock that constitutes an
extraordinary dividend (as defined in
Section 1059 of the Code). Investors that are
U.S. corporations that receive an extraordinary
dividend paid in respect of our mandatory convertible
preferred stock are required to (i) reduce their stock
basis in our mandatory convertible preferred stock (but not
below zero) by the portion of such a dividend that is not taxed
because of the dividends received deduction and (ii) to the
extent that the non-taxed portion of such dividend exceeds such
U.S. corporations basis in its shares, treat the
non-taxed portion of such dividend as gain from the sale or
exchange of our mandatory convertible preferred stock for the
taxable year in which such dividend is received. Non-corporate
U.S. holders who receive an extraordinary
dividend would be required to treat any losses on the sale
of mandatory convertible preferred stock as long-term capital
losses to the extent of dividends received by them that qualify
for the 15% tax rate (see below).
Subject to certain exceptions for short-term and hedged
positions, distributions constituting dividends received by
non-corporate holders prior to January 1, 2011 in respect
of our mandatory convertible preferred stock and common stock
generally are subject to taxation at a maximum rate of 15%.
Subject to similar exceptions for short-term and hedged
positions, distributions on our mandatory convertible preferred
stock and common stock constituting dividend income paid to
holders that are U.S. corporations will qualify for the
dividends received deduction. A U.S. holder should consult
its own tax adviser regarding the availability of the reduced
dividend tax rate and the dividends received deduction in the
light of its particular circumstances.
Sale or Other Disposition. A U.S. holder
will generally recognize capital gain or loss on a sale or
exchange of our mandatory convertible preferred stock or our
common stock equal to the difference between the amount realized
upon the sale or exchange (not including any proceeds
attributable to declared and unpaid dividends, which will be
taxable as described above to U.S. holders of record who
have not previously included such dividends in income) and the
holders adjusted tax basis in the shares sold or
exchanged. Such capital gain or loss will be long-term capital
gain or loss if the holders holding period for the shares
sold or exchanged is more than one year. Long-term capital gains
of non-corporate taxpayers currently are taxed at a maximum 15%
rate. The deductibility of capital losses is subject to
limitations.
Conversion of Mandatory Convertible Preferred Stock into
Common Stock. As a general rule, a
U.S. holder will not recognize any gain or loss upon the
conversion of our mandatory convertible preferred stock, except
with respect to cash received in respect of accrued, cumulated
and unpaid dividends, which will be taxed as described under
Dividends, and cash received in lieu of fractional
shares (as described below). The adjusted tax basis of common
stock received on conversion will equal the adjusted tax basis
of the mandatory convertible preferred stock converted (reduced
by the portion of adjusted tax basis allocated to any fractional
common stock exchanged for cash), and the holding period of such
common stock received on conversion will generally include the
period during which the converted mandatory convertible
preferred stock was held prior to conversion.
Cash received in lieu of a fractional common share will
generally be treated as a payment in a taxable exchange for such
fractional common share, and gain or loss will be recognized on
the receipt of cash in an amount equal to the difference between
the amount of cash received and the amount of adjusted tax basis
allocable to the fractional common share.
In the event we cause an early conversion of the mandatory
convertible preferred stock, or U.S. holders elect to
convert their mandatory convertible preferred stock in the case
of certain acquisitions, and in respect of any such conversion,
we pay a U.S. holder cash in respect of the net present
value of future dividends (see Description of Mandatory
Convertible Preferred Stock Provisional Conversion
at Our
143
Option and Conversion Upon Cash
Acquisition; Cash Acquisition Dividend
Make-Whole
Amount), although not free from doubt, the receipt of such
cash should be taxable (to the extent of gain realized by the
U.S. holder) as capital gain. For this purpose, a
U.S. holder realizes gain on the conversion equal to the
excess, if any, of the sum of the fair market value of the cash
received attributable to future dividends over the
U.S. holders adjusted tax basis in our mandatory
convertible preferred stock immediately prior to conversion. To
the extent the amount of cash received in respect of the net
present value of future dividends exceeds the gain realized, the
excess amount will not be taxable to such U.S. holder but
will reduce its adjusted tax basis in our common stock. A
U.S. holder will not be permitted to recognize any loss
realized by it upon conversion of mandatory convertible
preferred stock into common stock.
U.S. holders should be aware that the tax treatment
described above in respect of the payments made in respect of
future dividends is not entirely certain and may be challenged
by the Internal Revenue Service (IRS) on grounds
that the amount received attributable to future dividends
represents a taxable dividend to the extent we have earnings and
profits at the time of conversion and there has not been a
meaningful reduction in the U.S. holders equity
interest in us. Under this characterization, the
U.S. holder would be taxable on cash received on account of
future dividends even if it realized a loss on its conversion of
our mandatory convertible preferred stock into our common stock.
In the event a U.S. holders mandatory convertible
preferred stock is converted pursuant to certain other
transactions, including our consolidation or merger into another
person (see Description of Mandatory Convertible Preferred
Stock Anti-dilution Adjustments) the tax
treatment of such a conversion will depend upon the facts
underlying the particular transaction triggering such a
conversion. Each U.S. holder should consult its tax adviser
to determine the specific tax treatment of a conversion under
such circumstances.
Adjustment of Conversion Rate. The conversion
rate of the mandatory convertible preferred stock is subject to
adjustment under certain circumstances. Treasury Regulations
promulgated under Section 305 of the Code would treat a
U.S. holder of our mandatory convertible preferred stock as
having received a constructive distribution includable in such
U.S. holders income in the manner described under
Dividends, above, if and to the extent that certain
adjustments in the conversion rate increase the proportionate
interest of a U.S. holder in our earnings and profits. For
example, an increase in the conversion ratio to reflect a
taxable dividend to holders of common stock will generally give
rise to a deemed taxable dividend to the holders of mandatory
convertible preferred stock to the extent of our current and
accumulated earnings and profits. Thus, under certain
circumstances, U.S. holders may recognize income in the
event of a constructive distribution even though they may not
receive any cash or property. Adjustments to the conversion rate
made pursuant to a bona fide reasonable adjustment formula which
has the effect of preventing dilution in the interest of the
U.S. holders of the mandatory convertible preferred stock,
however, will generally not be considered to result in a
constructive dividend distribution.
Information Reporting and Backup Withholding on
U.S. Holders. Certain U.S. holders may
be subject to backup withholding with respect to the payment of
dividends on our mandatory convertible preferred stock or common
stock and to certain payments of proceeds on the sale of our
mandatory convertible preferred stock unless such
U.S. holders provide proof of an applicable exemption or a
correct taxpayer identification number, and otherwise comply
with applicable requirements of the backup withholding rules.
Any amount withheld under the backup withholding rules from a
payment to a holder is allowable as a credit against such
holders U.S. federal income tax, which may entitle
the holder to a refund, provided that the holder provides the
required information to the IRS. Moreover, certain penalties may
be imposed by the IRS on a holder who is required to furnish
information but does not do so in the proper manner. Holders are
urged to consult their own tax advisors regarding the
application of backup withholding in their particular
circumstances and the availability of and procedure for
obtaining an exemption from backup withholding under current
Treasury Regulations.
144
Consequences
to
non-U.S. Holders
of Mandatory Convertible Preferred Stock or Common
Stock
The discussion in this section is addressed to holders of our
mandatory convertible preferred stock and common stock received
in respect thereof that are
non-U.S. holders.
You are a
non-U.S. holder
if you are a beneficial owner of mandatory convertible preferred
stock or common stock that is not a U.S. holder.
Dividends. Generally, dividends (including any
constructive distributions taxable as dividends as described
below and any cash paid upon an early conversion that is treated
as a dividend) paid to a
non-U.S. holder
with respect to our mandatory convertible preferred stock or our
common stock will be subject to a 30% U.S. withholding tax,
or such lower rate as may be specified by an applicable tax
treaty, unless the dividends are (i) effectively connected
with a trade or business carried on by the
non-U.S. holder
within the United States and (ii) if a tax treaty applies,
attributable to a U.S. permanent establishment maintained
by the
non-U.S. holder.
Dividends effectively connected with such trade or business,
and, if a treaty applies, attributable to such permanent
establishment, will generally be subject to U.S. federal
income tax on a net basis at applicable individual or corporate
rates but will not be subject to U.S. withholding tax if
certain certification requirements are satisfied. You can
generally meet the certification requirements by providing a
properly executed IRS
Form W-8ECI
or appropriate substitute form to us or our paying agent. A
non-U.S. holder
that is a corporation may also be subject to a branch
profits tax at a 30% rate (or such lower rate as may be
specified by an applicable income tax treaty) on the deemed
repatriation from the United States of its effectively
connected earnings and profits, subject to certain
adjustments. Under applicable Treasury Regulations, a
non-U.S. holder
(including, in certain cases of
non-U.S. holders
that are entities, the owner or owners of such entities) will be
required to satisfy certain certification requirements in order
to claim a reduced rate of withholding pursuant to an applicable
income tax treaty.
Sale or Other Disposition. A
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax on income or gain realized on the sale or
exchange of our mandatory convertible preferred stock or our
common stock (not including any amounts attributable to declared
and unpaid dividends, which will be taxable to a
non-U.S. holder
of record as described above under Consequences to
non-U.S. Holders
of Mandatory Convertible Preferred Stock or Common
Stock-Dividends) unless:
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the gain is effectively connected with a U.S. trade or
business of the holder (and, if a tax treaty applies, the gain
is attributable to a U.S. permanent establishment
maintained by such
non-U.S. holder);
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in the case of a nonresident alien individual, such holder is
present in the United States for 183 or more days in the taxable
year of the sale or disposition and certain other conditions are
met; or
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we are, or have been within the five years preceding the
holders disposition of the mandatory convertible preferred
stock or common stock, a United States real property
holding corporation (USRPHC) for
U.S. federal income tax purposes.
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We do not believe that we currently are a USRPHC or that we will
become a USRPHC in the future. If we nevertheless were a USRPHC,
an exemption would apply to a non-U.S. holder who at no time,
actually and constructively, owned more than 5% of the mandatory
convertible preferred stock or of our common stock.
Non-U.S. holders
that may be treated as actually or constructively owning more
than 5% of our mandatory convertible preferred stock or common
stock should consult their own tax advisors with respect to the
U.S. federal income tax consequences of the ownership and
disposition of mandatory convertible preferred stock or common
stock.
Conversion into Common
Stock. Non-U.S. Holders
will generally not recognize any gain or loss in respect of the
receipt of common stock upon the conversion of our mandatory
convertible preferred stock, except with respect to any cash
received in lieu of a fractional share, as described above under
Sale or Other Disposition, and cash received in
respect of accrued, cumulated and unpaid dividends, which will
be taxed as described under Dividends. A
non-U.S. holder
may recognize capital gain or dividend income
145
when the holder receives an additional amount attributable to
future dividends, as described above under Consequences to
U.S. Holders of Mandatory Convertible Preferred Stock or
Common Stock Conversion of Mandatory Convertible
Preferred Stock into Common Stock.
Adjustment of Conversion Rate. As described
above under Consequences to U.S. Holders of
Mandatory Convertible Preferred Stock or Common
Stock Adjustment of Conversion Rate, certain
adjustments in the conversion rate that increase the
proportionate interest of a non-U.S. holder in our earning and
profits would result in deemed distributions to the non-U.S.
holder that are taxed as described under
Dividends.
Federal Estate Tax. Our mandatory convertible
preferred stock and common stock owned or treated as owned by an
individual who is not a citizen or resident of the United States
at the time of death will be included in the individuals
gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax or other treaty provides otherwise and,
therefore, may be subject to U.S. federal estate tax.
Information Reporting and Backup Withholding on
Non-U.S. Holders. Payment
of dividends (including constructive dividends), and the tax
withheld with respect thereto, is subject to information
reporting requirements. These information reporting requirements
apply regardless of whether withholding was reduced or
eliminated by an applicable income tax treaty or withholding was
not required because the dividends were effectively connected
with a trade or business in the United States conducted by the
non-U.S. holder.
Copies of the information returns reporting such dividends and
withholding may also be made available under the provisions of
an applicable income tax treaty or agreement with the tax
authorities in the country in which the
non-U.S. holder
resides. U.S. backup withholding will generally apply to
the payment of dividends to
non-U.S. holders
unless such
non-U.S. holders
furnish to the payor a
Form W-8BEN
(or other applicable form), or otherwise establish an exemption.
Payment by a U.S. office of a broker of the proceeds of a
sale of our mandatory convertible preferred stock or common
stock is subject to both backup withholding and information
reporting unless the
non-U.S. holder,
or beneficial owner thereof, as applicable, certifies that it is
a
non-U.S. holder
on
Form W-8BEN,
or otherwise establishes an exemption. Subject to certain
exceptions, backup withholding and information reporting
generally will not apply to a payment of proceeds from the sale
of our mandatory convertible preferred stock or common stock if
such sale is effected through a foreign office of a broker.
Any amount withheld under the backup withholding rules from a
payment to a
non-U.S. holder
is allowable as a credit against such holders
U.S. federal income tax, which may entitle the holder to a
refund, provided that the holder provides the required
information to the IRS. Moreover, certain penalties may be
imposed by the IRS on a
non-U.S. holder
who is required to furnish information but does not do so in the
proper manner.
Non-U.S. holders
are urged to consult their own tax advisers regarding the
application of backup withholding in their particular
circumstances and the availability of and procedure for
obtaining an exemption from backup withholding under current
Treasury Regulations.
146
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement
dated ,
2006, we have agreed to sell to the underwriters named below,
for whom Credit Suisse Securities (USA) LLC is acting as a
representative, the following respective numbers of shares of
mandatory convertible preferred stock:
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Number of
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Underwriter
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Shares
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Credit Suisse Securities (USA) LLC
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Total
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The underwriting agreement provides that the underwriters are
obligated to purchase all the shares of mandatory convertible
preferred stock in the offering if any are purchased, other than
those shares covered by the over-allotment option described
below. The underwriting agreement also provides that if an
underwriter defaults, 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 on a pro rata basis up
to
additional shares. The option may be exercised only to cover any
over-allotments of mandatory convertible preferred stock.
The underwriters propose to offer the shares of mandatory
convertible preferred stock initially at the public offering
price on the cover page of this prospectus and to selling group
members at that price less a selling concession of
$ per share. The underwriters
and selling group members may allow a discount of
$ per share on sales to other
broker/dealers. After the 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:
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Per Share
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Total
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Without
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With
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Without
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With
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Over-allotment
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Over-allotment
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Over-allotment
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Over-allotment
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Underwriting discounts and
commissions paid by us
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$
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$
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$
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$
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Expenses payable by us
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$
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$
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$
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$
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We estimate that our out of pocket expenses for this offering
will be approximately $ .
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the SEC a registration statement under the Securities Act
relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, or publicly disclose the intention to make
any offer, sale, pledge, disposition or filing, without the
prior written consent of Credit Suisse Securities (USA) LLC for
a period of 90 days after the date of this prospectus,
except the sale of any shares of mandatory convertible preferred
stock to the underwriters pursuant to the underwriting
agreement, any private sales of up to 2,000,000 shares of
our common stock or other securities 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 grants pursuant to
the employee benefit plans described in this prospectus.
However, in the event that either (1) during the last
17 days of the lock-up period, we release
earnings results or material news or a material event relating
to us occurs or (2) prior to the expiration of the
lock-up period, we announce that we will
release earnings results during the
16-day
period beginning on the last day of the
lock-up period, then in either case the
expiration of the lock-up will be extended until the
expiration of the
18-day
period beginning on the date of the release of the earnings
results or the occurrence of the material news or event, as
applicable, unless Credit Suisse Securities (USA) LLC waives, in
writing, such an extension.
147
Our directors and executive officers 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, 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,
whether any of these transactions are to be settled by delivery
of our common stock or other securities, in cash or otherwise,
or publicly disclose the intention to make any offer, sale,
pledge or disposition, or to enter into any transaction, swap,
hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse Securities (USA) LLC for a
period of 90 days after the date of this prospectus, except
transfers as bona fide gifts or by will or intestacy by our
executive officers and directors in which the purchaser agrees
to be bound by the restrictions described in the paragraph
above. However, in the event that either (1) during the
last 17 days of the lock-up period, we release
earnings results or material news or a material event relating
to us occurs or (2) prior to the expiration of the
lock-up period, we announce that we will release
earnings results during the
16-day
period beginning on the last day of the lock-up
period, then in either case the expiration of the
lock-up will be extended until the expiration of the
18-day
period beginning on the date of the release of the earnings
results or the occurrence of the material news or event, as
applicable, unless Credit Suisse Securities (USA) LLC waives, in
writing, such an extension.
From time to time, some of the underwriters have provided, and
continue to provide, investment banking and other services to us
for which they receive customary fees and commissions.
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments that 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 in accordance with
Regulation M under the Exchange Act.
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
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Over-allotment involves sales by the underwriters of shares in
excess of the number of shares 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 number of shares
over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the over-allotment option.
In a naked short position, the number of shares involved is
greater than the number of shares in the over-allotment option.
The underwriters may close out any covered short position by
either exercising their over-allotment option
and/or
purchasing shares in the open market.
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Syndicate covering transactions involve purchases of the shares
in the open market after the distribution has been completed in
order to cover syndicate short positions. In determining the
source of shares to close out the short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase shares through the
over-allotment option. If the underwriters sell more shares than
could be covered by the over-allotment option, a naked short
position, the position can only be closed out by buying shares
in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there could be
downward pressure on the price of the shares in the open market
after pricing that could adversely affect investors who purchase
in the offering.
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Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the shares originally
sold by the syndicate member is purchased in a stabilizing or
syndicate covering transaction to cover syndicate short
positions.
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These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our mandatory convertible preferred stock or
preventing or retarding a decline in the market price of the
mandatory convertible preferred stock. As a result the price of
148
our mandatory convertible preferred stock may be higher than the
price that might otherwise exist in the open market. These
transactions may be effected on the NYSE or otherwise and, if
commenced, may be discontinued at any time.
Each of the underwriters has represented and agreed that:
(a) it has not made or will not make an offer of shares to
the public in the United Kingdom within the meaning of
section 102B of the Financial Services and Markets Act 2000
(as amended) (FSMA) except to legal entities which are
authorised or regulated to operate in the financial markets or,
if not so authorised or regulated, whose corporate purpose is
solely to invest in securities or otherwise in circumstances
which do not require the publication by the company of a
prospectus pursuant to the Prospectus Rules of the Financial
Services Authority (FS);
(b) 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 FSMA) to persons who
have professional experience in matters relating to investments
falling with Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 or in
circumstances in which section 21 of FSMA does not apply to
the company; and
(c) it has complied with, and will comply with all
applicable provisions of FSMA with respect to anything done by
it in relation to the shares in, from or otherwise involving the
United Kingdom.
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 Shares to the public in that Relevant Member State
prior to the publication of a prospectus in relation to the
Shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with
the Prospectus Directive, except that it may, with effect from
and including the Relevant Implementation Date, make an offer of
Shares to the public in that Relevant Member State at any time:
(a) to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
(b) 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; or
(c) in any other circumstances which do not require the
publication by the Issuer of a prospectus pursuant to
Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
offer of Shares to the public in relation to any
Shares 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 Shares to be offered so as to enable an
investor to decide to purchase or subscribe the Shares, as the
same may be varied in that Relevant Member State by any measure
implementing the Prospectus Directive in that Relevant Member
State and the expression Prospectus Directive means Directive
2003/71/EC and includes any relevant implementing measure in
each Relevant Member State.
The shares may not be offered or sold by means of any document
other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public
within the meaning of the Companies Ordinance (Cap. 32) of
Hong Kong, and no advertisement, invitation or document relating
to the shares may be issued, whether in Hong Kong or elsewhere,
which is directed at, or the contents of which are likely to be
accessed or read by, the public in Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other
than with respect to shares which are or are intended to be
disposed of only to persons outside Hong Kong or
149
only to professional investors within the meaning of
the Securities and Futures Ordinance (Cap 571) of Hong Kong
and any rules made thereunder.
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of the
shares may not be circulated or distributed, nor may the shares
be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures
Act, Chapter 289 of Singapore (the SFA), (ii)
to a relevant person, or any person pursuant to
Section 275(1A), and in accordance with the conditions,
specified in Section 275 of the SFA or (iii) otherwise
pursuant to, and in accordance with the conditions of, any other
applicable provision of the SFA.
Where the shares are subscribed or purchased under
Section 275 by a relevant person which is: (a) a
corporation (which is not an accredited investor) the sole
business of which is to hold investments and the entire share
capital of which is owned by one or more individuals, each of
whom is an accredited investor; or (b) a trust (where the
trustee is not an accredited investor) whose sole purchase is to
hold investments and each beneficiary is an accredited investor,
shares, debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest in
that trust shall not be transferable for 6 months after
that corporation or that trust has acquired the shares under
Section 275 except: (1) to an institutional investor
under Section 274 of the SFA or to a relevant person, or
any person pursuant to Section 275(1A), and in accordance
with the conditions, specified in Section 275 of the SFA;
(2) where no consideration is given for the transfer; or
(3) by operation of law.
The securities have not been and will not be registered under
the Securities and Exchange Law of Japan (the Securities and
Exchange Law) and each underwriter has agreed that it will not
offer or sell any securities, directly or indirectly, in Japan
or to, or for the benefit of, any resident of Japan (which term
as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any
other applicable laws, regulations and ministerial guidelines of
Japan.
LEGAL
MATTERS
Certain legal matters will be passed upon for us by Baker Botts
L.L.P., Houston, Texas, and for the underwriters by
Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Bristow Group Inc. as
of March 31, 2006 and 2005, and for each of the years in
the three-year period ended March 31, 2006 have been
included herein and in the registration statement in reliance
upon the reports of KPMG LLP, independent registered public
accounting firm, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for
the periods ended June 30, 2006 and 2005, included herein,
the independent registered public accounting firm has reported
that they applied limited procedures in accordance with
professional standards for a review of such information.
However, their separate report included in the companys
quarterly report on
Form 10-Q
for the quarter ended June 30, 2006, and included herein,
states that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be
restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act of
1933 (the 1933 Act) for their report on the
unaudited interim financial information because that report is
not a report or a part of the
registration statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the 1933 Act.
150
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange
Act, and file reports, proxy statements and other information
with the SEC. We have also filed with the SEC a registration
statement on
Form S-1
under the Securities Act of 1933 registering the shares of
common stock to be sold in this offering. As permitted by the
rules and regulations of the SEC, this prospectus does not
contain all of the information included in the registration
statement and the exhibits and schedules filed as a part of the
registration statement. For more information concerning us and
the shares of common stock to be sold in this offering, you
should refer to the registration statement and to the exhibits
and schedules filed as part of the registration statement.
Statements contained in this prospectus regarding the contents
of any agreement or other document filed as an exhibit to the
registration statement are not necessarily complete, and in each
instance reference is made to the copy of the agreement filed as
an exhibit to the registration statement, with each statement
being qualified by this reference.
The registration statement, including the exhibits and schedules
filed as a part of the registration statement, may be inspected
at the public reference room of the SEC at 100 F Street, N.E.,
Washington, DC 20549, and copies of all or any part thereof may
be obtained from that office upon payment of the prescribed
fees. You may call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room, and you can request copies of the documents upon payment
of a duplicating fee, by writing to the SEC. In addition, the
SEC maintains a web site that contains reports, proxy and
information statements and other information regarding
registrants, including us, that file electronically with the SEC
which can be accessed at http://www.sec.gov.
151
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
Consolidated Financial
Statements for the Fiscal Years Ended March 31, 2006, 2005
and 2004
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
Interim Consolidated Financial
Statements for the Three Months Ended June 30, 2006 and
2005 (Unaudited)
|
|
|
|
|
|
|
|
F-57
|
|
|
|
|
F-58
|
|
|
|
|
F-59
|
|
|
|
|
F-60
|
|
|
|
|
F-61
|
|
F-1
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bristow Group Inc.:
We have audited the accompanying consolidated balance sheets of
Bristow Group Inc. (the Company) and subsidiaries as of
March 31, 2006 and 2005, 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, 2006. 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, 2006 and 2005, and the results of their
operations and their cash flows for each of the years in the
three-year period ended March 31, 2006, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of March 31, 2006, 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 June 8,
2006, expressed an unqualified opinion on managements
assessment of, and an adverse opinion on the effective operation
of, internal control over financial reporting.
New Orleans, Louisiana
June 8, 2006
F-2
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue from
non-affiliates
|
|
$
|
636,887
|
|
|
$
|
545,233
|
|
|
$
|
488,081
|
|
Operating revenue from affiliates
|
|
|
51,832
|
|
|
|
63,689
|
|
|
|
70,056
|
|
Reimbursable revenue from
non-affiliates
|
|
|
75,861
|
|
|
|
61,969
|
|
|
|
54,561
|
|
Reimbursable revenue from
affiliates
|
|
|
4,360
|
|
|
|
2,755
|
|
|
|
4,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
768,940
|
|
|
|
673,646
|
|
|
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
512,518
|
|
|
|
454,836
|
|
|
|
417,359
|
|
Reimbursable expense
|
|
|
78,525
|
|
|
|
63,303
|
|
|
|
58,090
|
|
Depreciation and amortization
|
|
|
42,256
|
|
|
|
40,693
|
|
|
|
39,543
|
|
General and administrative
|
|
|
61,948
|
|
|
|
45,245
|
|
|
|
38,892
|
|
Gain on disposal of assets
|
|
|
(102
|
)
|
|
|
(8,039
|
)
|
|
|
(3,943
|
)
|
Curtailment gain
|
|
|
|
|
|
|
|
|
|
|
(21,665
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
695,145
|
|
|
|
596,038
|
|
|
|
528,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
73,795
|
|
|
|
77,608
|
|
|
|
88,725
|
|
Earnings from unconsolidated
affiliates, net of losses
|
|
|
6,758
|
|
|
|
9,600
|
|
|
|
11,039
|
|
Interest income
|
|
|
4,159
|
|
|
|
3,188
|
|
|
|
1,689
|
|
Interest expense
|
|
|
(14,689
|
)
|
|
|
(15,665
|
)
|
|
|
(16,829
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(6,205
|
)
|
Other income (expense), net
|
|
|
4,612
|
|
|
|
(1,126
|
)
|
|
|
(7,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
74,635
|
|
|
|
73,605
|
|
|
|
70,609
|
|
Provision for income taxes
|
|
|
16,607
|
|
|
|
21,835
|
|
|
|
19,402
|
|
Minority interest
|
|
|
(219
|
)
|
|
|
(210
|
)
|
|
|
(1,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.48
|
|
|
$
|
2.24
|
|
|
$
|
2.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.45
|
|
|
$
|
2.21
|
|
|
$
|
2.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-3
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
122,482
|
|
|
$
|
146,440
|
|
Accounts receivable from
non-affiliates, net of allowance for doubtful accounts of
$4.6 million and $6.9 million, respectively
|
|
|
144,521
|
|
|
|
118,260
|
|
Accounts receivable from
affiliates, net of allowance for doubtful accounts of
$4.6 million and $2.4 million, respectively
|
|
|
15,884
|
|
|
|
15,579
|
|
Inventories
|
|
|
147,860
|
|
|
|
140,706
|
|
Prepaid expenses and other
|
|
|
16,519
|
|
|
|
11,459
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
447,266
|
|
|
|
432,444
|
|
Investment in unconsolidated
affiliates
|
|
|
39,912
|
|
|
|
37,176
|
|
Property and equipment
at cost:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
40,672
|
|
|
|
32,543
|
|
Aircraft and equipment
|
|
|
838,314
|
|
|
|
827,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
878,986
|
|
|
|
859,574
|
|
Less Accumulated
depreciation and amortization
|
|
|
(263,072
|
)
|
|
|
(250,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
615,914
|
|
|
|
609,062
|
|
Goodwill
|
|
|
26,837
|
|
|
|
26,809
|
|
Prepaid pension costs
|
|
|
37,207
|
|
|
|
36,543
|
|
Other assets
|
|
|
9,277
|
|
|
|
7,542
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,176,413
|
|
|
$
|
1,149,576
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
49,714
|
|
|
$
|
35,640
|
|
Accrued wages, benefits and
related taxes
|
|
|
45,958
|
|
|
|
46,548
|
|
Income taxes payable
|
|
|
6,537
|
|
|
|
19,486
|
|
Other accrued taxes
|
|
|
6,471
|
|
|
|
6,269
|
|
Deferred revenues
|
|
|
9,994
|
|
|
|
12,411
|
|
Other accrued liabilities
|
|
|
22,596
|
|
|
|
28,221
|
|
Deferred taxes
|
|
|
5,025
|
|
|
|
6,709
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
17,634
|
|
|
|
6,413
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
163,929
|
|
|
|
161,697
|
|
Long-term debt, less current
maturities
|
|
|
247,662
|
|
|
|
255,667
|
|
Accrued pension liability
|
|
|
136,521
|
|
|
|
157,999
|
|
Other liabilities and deferred
credits
|
|
|
18,016
|
|
|
|
12,413
|
|
Deferred taxes
|
|
|
68,281
|
|
|
|
64,293
|
|
Minority interest
|
|
|
4,307
|
|
|
|
4,514
|
|
Commitments and contingencies
(Note 6)
|
|
|
|
|
|
|
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value,
authorized 35,000,000 shares:
|
|
|
|
|
|
|
|
|
outstanding 23,385,473 in 2006 and
23,314,708 in 2005 (exclusive of 1,281,050 treasury shares)
|
|
|
234
|
|
|
|
233
|
|
Additional paid-in capital
|
|
|
158,762
|
|
|
|
157,100
|
|
Retained earnings
|
|
|
447,524
|
|
|
|
389,715
|
|
Accumulated other comprehensive
loss
|
|
|
(68,823
|
)
|
|
|
(54,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
537,697
|
|
|
|
492,993
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,176,413
|
|
|
$
|
1,149,576
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-4
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
42,256
|
|
|
|
40,693
|
|
|
|
39,543
|
|
Deferred income taxes
|
|
|
1,488
|
|
|
|
7,025
|
|
|
|
12,546
|
|
Gain on asset dispositions
|
|
|
(102
|
)
|
|
|
(8,039
|
)
|
|
|
(3,943
|
)
|
Curtailment gain
|
|
|
|
|
|
|
|
|
|
|
(21,665
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
6,205
|
|
Equity in earnings from
unconsolidated affiliates under (over) dividends received
|
|
|
(337
|
)
|
|
|
9,802
|
|
|
|
(5,114
|
)
|
Minority interest in earnings
|
|
|
219
|
|
|
|
210
|
|
|
|
1,382
|
|
Increase (decrease) in cash
resulting from changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(34,718
|
)
|
|
|
(8,612
|
)
|
|
|
10,984
|
|
Inventories
|
|
|
(12,518
|
)
|
|
|
(5,127
|
)
|
|
|
(4,111
|
)
|
Prepaid expenses and other
|
|
|
(5,925
|
)
|
|
|
(724
|
)
|
|
|
5,232
|
|
Accounts payable
|
|
|
15,944
|
|
|
|
6,889
|
|
|
|
(5,156
|
)
|
Accrued liabilities
|
|
|
(34,784
|
)
|
|
|
11,334
|
|
|
|
(3,192
|
)
|
Other liabilities and deferred
credits
|
|
|
9,933
|
|
|
|
(657
|
)
|
|
|
795
|
|
Other
|
|
|
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
39,265
|
|
|
|
104,473
|
|
|
|
83,331
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(139,572
|
)
|
|
|
(78,089
|
)
|
|
|
(67,855
|
)
|
Assets purchased on behalf of
unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
(35,394
|
)
|
Proceeds from sale of assets to
unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
35,394
|
|
Proceeds from asset dispositions
|
|
|
85,392
|
|
|
|
41,722
|
|
|
|
6,854
|
|
Acquisition, net of cash received
|
|
|
|
|
|
|
(1,986
|
)
|
|
|
|
|
Investments
|
|
|
|
|
|
|
(8,186
|
)
|
|
|
(1,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(54,180
|
)
|
|
|
(46,539
|
)
|
|
|
(62,582
|
)
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
|
|
|
|
|
|
|
|
251,412
|
|
Repayment of debt and debt
redemption premiums
|
|
|
(4,070
|
)
|
|
|
(2,427
|
)
|
|
|
(233,627
|
)
|
Debt issuance costs
|
|
|
(2,564
|
)
|
|
|
|
|
|
|
(4,889
|
)
|
Partial prepayment of pull/call
obligation
|
|
|
(129
|
)
|
|
|
(86
|
)
|
|
|
(11,442
|
)
|
Repurchase of shares from minority
interest
|
|
|
|
|
|
|
(7,389
|
)
|
|
|
|
|
Issuance of common stock
|
|
|
1,369
|
|
|
|
12,665
|
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
(5,394
|
)
|
|
|
2,763
|
|
|
|
3,539
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
(3,649
|
)
|
|
|
64
|
|
|
|
4,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
(23,958
|
)
|
|
|
60,761
|
|
|
|
28,879
|
|
Cash and cash equivalents at
beginning of period
|
|
|
146,440
|
|
|
|
85,679
|
|
|
|
56,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
$
|
122,482
|
|
|
$
|
146,440
|
|
|
$
|
85,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of
non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-monetary exchange of assets
|
|
$
|
11,511
|
|
|
$
|
11,934
|
|
|
$
|
|
|
Capital expenditures funded by
short-term notes
|
|
$
|
3,179
|
|
|
$
|
|
|
|
$
|
|
|
Recapitalization of Hemisco funded
by note payable
|
|
$
|
4,380
|
|
|
$
|
|
|
|
$
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-5
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS INVESTMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except share amounts)
|
|
|
Common stock (shares, exclusive of
treasury shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of
fiscal year
|
|
|
23,314,708
|
|
|
|
22,631,221
|
|
|
|
22,510,921
|
|
Stock options exercised
|
|
|
70,765
|
|
|
|
683,487
|
|
|
|
120,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal
year
|
|
|
23,385,473
|
|
|
|
23,314,708
|
|
|
|
22,631,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.01 Par):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of
fiscal year
|
|
$
|
233
|
|
|
$
|
226
|
|
|
$
|
225
|
|
Stock options exercised
|
|
|
1
|
|
|
|
7
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal
year
|
|
$
|
234
|
|
|
$
|
233
|
|
|
$
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of
fiscal year
|
|
$
|
157,100
|
|
|
$
|
141,384
|
|
|
$
|
139,046
|
|
Stock options exercised
|
|
|
1,368
|
|
|
|
12,777
|
|
|
|
2,084
|
|
Tax benefit related to the
exercise of employee stock options
|
|
|
294
|
|
|
|
2,939
|
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal
year
|
|
$
|
158,762
|
|
|
$
|
157,100
|
|
|
$
|
141,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of
fiscal year
|
|
$
|
389,715
|
|
|
$
|
338,155
|
|
|
$
|
288,330
|
|
Net income
|
|
|
57,809
|
|
|
|
51,560
|
|
|
|
49,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal
year
|
|
$
|
447,524
|
|
|
$
|
389,715
|
|
|
$
|
338,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of
fiscal year
|
|
$
|
(54,055
|
)
|
|
$
|
(49,813
|
)
|
|
$
|
(77,395
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
|
(20,729
|
)
|
|
|
7,354
|
|
|
|
31,673
|
|
Pension liability adjustment(1)
|
|
|
5,961
|
|
|
|
(11,596
|
)
|
|
|
(4,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
(loss)
|
|
|
(14,768
|
)
|
|
|
(4,242
|
)
|
|
|
27,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal
year
|
|
$
|
(68,823
|
)
|
|
$
|
(54,055
|
)
|
|
$
|
(49,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
Other comprehensive income
(loss)(1)
|
|
|
(14,768
|
)
|
|
|
(4,242
|
)
|
|
|
27,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
43,041
|
|
|
$
|
47,318
|
|
|
$
|
77,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net of taxes of $(3.0) million, $4.8 million and
$2.2 million for the fiscal years ended March 31,
2006, 2005 and 2004, respectively. |
The accompanying notes are an integral part of these financial
statements.
F-6
BRISTOW
GROUP INC. AND SUBSIDIARIES
Note 1
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation On February 1,
2006, OL Sub, Inc., a wholly-owned subsidiary of Offshore
Logistics, Inc., merged into Offshore Logistics, Inc. In
conjunction with the merger, our name changed from Offshore
Logistics, Inc. to Bristow Group Inc. 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 a
leading provider of aviation services to the global offshore oil
and gas industry. With a fleet of 477 aircraft as of
March 31, 2006, 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. In addition, we
are a leading provider of production management services to oil
and gas companies operating in the U.S. Gulf of Mexico.
The consolidated financial statements include our accounts 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 below.
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 as income when received.
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, 2006 is referred to as fiscal year 2006.
Reclassifications were made to prior years financial
statements to reflect reserves for tax contingencies in Income
taxes payable and Other liabilities rather that Current deferred
taxes and Deferred taxes payable.
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 revenues and expenses 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 and other postretirement benefits;
|
|
|
|
Allowance for doubtful accounts;
|
|
|
|
Inventory reserve;
|
|
|
|
Insurance;
|
|
|
|
Contingent liabilities;
|
|
|
|
Goodwill impairment; and
|
|
|
|
Stock option and restricted stock unit valuation.
|
Cash and Cash Equivalents Our cash
equivalents include funds invested in highly-liquid debt
instruments with original maturities of 90 days or less.
F-7
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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, 2005 and 2004, we increased the
allowance account through charges to expense of
$1.6 million, $0.3 million and $0.4 million,
respectively, and decreased the allowance account for write-offs
and recoveries of specifically identified uncollectible accounts
by $2.9 million, $0.8 million and $1.4 million,
respectively. Additionally, during fiscal year 2006 we reduced
revenue for a reserve of $1.8 million against invoices
billed to our unconsolidated affiliate in Mexico, which have not
been recognized in our results. See Note 3 for a discussion
of receivables with unconsolidated affiliates.
Inventories Inventories are stated at the
lower of average cost or market and consist primarily of spare
parts. The valuation reserve related to obsolete and excess
inventory was $13.1 million and $10.4 million as of
March 31, 2006 and 2005, respectively. During fiscal years
2006 and 2004, we increased valuation reserves through charges
to expenses of $3.2 million and $0.5 million,
respectively, for excess and obsolete inventory. During fiscal
years 2006 and 2005, we decreased the valuation reserve for
write-offs of identified obsolete and excess inventory by
$0.5 million and $2.4 million, respectively.
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 process, primarily consisting of progress
payments on aircraft purchases and facility construction, of
$83.5 million and $32.7 million as of March 31,
2006 and 2005, 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 seven 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 on owned properties range
from 15 years 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 lease term (including any period where we
have options to renew if its 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 Goodwill represents the excess of
cost over fair value of assets of businesses acquired. Goodwill
and 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
estimable useful lives are amortized over their respective
estimated useful lives to their estimated residual values, and
reviewed for impairment.
We had goodwill of $12.9 million relating to our Helicopter
Services segment ($11.1 million and $1.8 million for
our North America and West Africa business units, respectively)
and $13.9 million relating to our Production Management
Services segment as of March 31, 2006. As of March 31,
2006 and 2005, 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.
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
F-8
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 Included in other assets as of
March 31, 2006 and 2005 is debt issuance costs of
$6.9 million and $5.2 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 litigation, personal injury claims and potential
tax assessments. Revisions to contingent liability reserves are
reflected in income in the period in which different facts or
information become known or circumstances change that effect our
previous assumptions with respect to the likelihood or amount of
loss. 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 and would be
recognized in the period the new information becomes known.
Proceeds from casualty insurance settlements in excess of the
carrying value of damaged assets are recognized in other income
(expense), net in the period that proof of loss documentation is
received or when we 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. 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
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.
Revenue from Production Management is recognized based on
contractual rates as the related services are performed.
Contracts are generally evergreen with a yearly review. Each
party has a thirty-day cancellation clause. The rates charged to
the customer are either monthly, based on services specified in
the contract, or hourly if outside the scope of the contract.
Typically hourly rates are charged for services provided beyond
the basic level contemplated in the contract. Services provided
include personnel and transportation. Any escalation in rates is
agreed to in writing by the customer. With respect to both
Helicopter Services and Production Management Services segments,
cost reimbursements from customers are recorded as revenue.
F-9
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
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 Deferred income taxes are provided for
by the asset and liability method. We do not provide
U.S. income tax on earnings of foreign subsidiaries that
are considered to be permanently reinvested outside of the U.S.
Foreign Currency Translation Bristow Aviation
Holdings, Ltd. (Bristow Aviation), our consolidated
affiliate, maintains its accounting records in its local
currency (British pounds sterling). Foreign currencies are
converted to U.S. dollars with the effect of the foreign
currency translation reflected as a component of
shareholders investment. Foreign currency transaction
gains or losses and translation of currency amounts not deemed
permanently reinvested are credited or charged to income and
such amounts are included in other income (expense). During
fiscal year 2006, the British pound to U.S. dollar exchange
rate ranged from a low of one British pound = U.S. $1.71 to
a high of one British pound = U.S. $1.92, with an average
of one British pound = U.S. $1.79 for the fiscal year. As
of March 31, 2006, the exchange rate was one British pound
= U.S. $1.74. During fiscal year 2005, the British pound to
U.S. dollar exchange rate ranged from a low of one British
pound = U.S. $1.75 to a high of one British pound =
U.S. $1.95, with an average of one British pound = U.S.
$1.85 for the fiscal year. As of March 31, 2005, the
exchange rate was one British pound = U.S. $1.89. During
fiscal year 2004, the British pound to U.S. dollar exchange
rate ranged from a low of one British pound = U.S. $1.55 to
a high of one British pound = U.S. $1.90, with an average
of one British pound = U.S. $1.70 for the fiscal year. As
of March 31, 2004, the exchange rate was one British pound
= U.S. $1.84.
Balance sheet information for fiscal year 2006 is presented
based on the conversion rate as of March 31, 2006, and
income statement information is presented based on the average
conversion rate for fiscal year 2006.
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 for services and parts
to foreign suppliers will be adversely affected by changes in
exchange rates. As of March 31, 2006 and 2005, we had no
forward exchange contracts outstanding. No gains or losses were
recognized in earnings on foreign currency hedging contracts
during fiscal years 2006, 2005 or 2004.
Financial instruments may be designated as a hedge at inception
where there is a direct relationship to the price risk
associated with the related service and parts. Hedge contracts
are recorded at cost and periodic adjustments to fair market
value are deferred and recorded as a component of equity in
Other Comprehensive Income. Settlements of hedge contracts are
recorded to costs 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.
F-10
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock-Based Compensation We account for our
stock-based employee compensation under the intrinsic-value
method. The following table illustrates the effect on net income
and earnings per share if we had applied the fair value method
to stock-based employee compensation. The pro forma data
presented below is not representative of the effects on reported
amounts for future years (in thousands, except per share amounts
and model assumptions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Net income, as reported
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
Stock-based employee compensation
expense included in reported net income, net of tax
|
|
|
476
|
|
|
|
275
|
|
|
|
|
|
Stock-based employee compensation
expense, net of tax
|
|
|
(1,758
|
)
|
|
|
(2,442
|
)
|
|
|
(1,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
$
|
56,527
|
|
|
$
|
49,393
|
|
|
$
|
48,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings, as reported
|
|
$
|
2.48
|
|
|
$
|
2.24
|
|
|
$
|
2.21
|
|
Stock-based employee compensation
expense, net of tax
|
|
|
(0.06
|
)
|
|
|
(0.10
|
)
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic earnings per share
|
|
$
|
2.42
|
|
|
$
|
2.14
|
|
|
$
|
2.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings, as reported
|
|
$
|
2.45
|
|
|
$
|
2.21
|
|
|
$
|
2.15
|
|
Stock-based employee compensation
expense, net of tax
|
|
|
(0.06
|
)
|
|
|
(0.10
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma diluted earnings per
share
|
|
$
|
2.39
|
|
|
$
|
2.11
|
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Black-Scholes option pricing model
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
|
3.9% - 4.8
|
%
|
|
|
3.3% - 3.9
|
%
|
|
|
3.1% - 3.3
|
%
|
Expected life (years)
|
|
|
4
|
|
|
|
5
|
|
|
|
5
|
|
Volatility
|
|
|
30
|
%
|
|
|
40
|
%
|
|
|
46
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
For fiscal year 2005, $0.4 million is included in
compensation costs related to the acceleration of the vesting
period for certain options granted under the plans.
Recent
Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 153, Exchange of
Nonmonetary Assets, effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after
June 15, 2005. This statement amends Accounting Principles
Board (APB) Opinion No. 29, Accounting
for Nonmonetary Transactions, to eliminate the similar
productive assets concept and replace it with the concept of
commercial substance. A nonmonetary exchange shall be measured
based on the fair value of the exchanged assets unless the
exchange lacks commercial substance. Commercial substance occurs
when the future cash flows of an entity are changed
significantly due to the nonmonetary exchange. The adoption of
SFAS No. 153 during fiscal year 2006 did not have a
significant impact on our financial statements.
In December 2004, the FASB issued SFAS No. 123R,
Share-Based Payment, which is a revision of
SFAS No. 123, Accounting for Stock Based
Compensation and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees.
SFAS No. 123R becomes effective for our fiscal year
F-11
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
beginning April 1, 2006 and will require us to expense
stock options and other share-based payments. We adopted
SFAS No. 123R on April 1, 2006 using the modified
prospective application as prescribed under
SFAS No. 123R, and its impact will be reflected in our
fiscal year 2007 results. Based on our unvested stock option
grants as of March 31, 2006, we estimate that the adoption
of this statement in fiscal year 2007 will reduce net income for
fiscal year 2007 by approximately $1.3 million, or
$.06 per diluted share. This effect is consistent with our
pro forma disclosure herein, except that estimated forfeitures
will be considered in the calculation of compensation expense
under SFAS No. 123R. Additionally, the actual effect
on net income and earnings per share will vary depending upon
the number of options granted and restricted stock units awarded
in subsequent periods compared to prior years. We estimate that
expense recorded related to restricted stock units, which was
already included in compensation expense prior to the adoption
of SFAS No. 123R, will further reduce net income for
fiscal year 2007 by approximately $1.7 million, or
$.07 per diluted share.
SFAS 123R also requires the benefits of tax deductions in
excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow. This
requirement will reduce net operating cash flows and increase
net financing cash flows in periods after adoption. While we
cannot estimate what those amounts will be in the future
(because they depend on, among other things, when employees
exercise stock options), the amount of operating cash flows
recognized in prior periods for such tax benefits were
$0.3 million, $2.9 million and $0.3 million in
fiscal years 2006, 2005 and 2004, respectively.
In December 2004, the FASB issued FASB Staff Position
(FSP)
No. 109-2,
Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs
Creation Act of 2004 to address the treatment of a special
one time incentive provided in the American Jobs Creation Act of
2004 (the Jobs Act) for companies to repatriate
foreign earnings. Signed into law on October 22, 2004, the
Jobs Act provides for a special one-time tax deduction equal to
85% of dividends received out of qualifying foreign earnings
that are paid in either a companys last tax year that
began before the enactment date, or the first tax year that
begins during the one-year period beginning on the enactment
date. The special deduction is subject to a number of
limitations and requirements, one of which is to adopt a
Domestic Reinvestment Plan (DRIP) to document
planned reinvestments of amounts equal to the foreign earnings
repatriated under the Jobs Act. In September 2005, we approved a
DRIP that provides for the repatriation of up to
$75 million of previously unremitted foreign earnings under
the Jobs Act. The favorable U.S. tax rate on such
repatriations under the Jobs Act applied to $41.5 million
of qualifying distributions received by us through
March 31, 2006. We have reflected the $4.0 million of
U.S. tax liability associated with the total repatriated
earnings in our provision for income taxes for fiscal year 2006.
In March 2005, the FASB issued Interpretation (FIN)
No. 47, Accounting for Conditional Asset Retirement
Obligations, an interpretation of SFAS No. 143,
Accounting for Asset Retirement Obligations. The
interpretation was effective for our fiscal year 2006.
FIN No. 47 provides clarification on conditional asset
retirement obligations and the fair value of such obligations as
referred to in SFAS No. 143. We have evaluated our
leased and owned properties for potential asset retirement
obligations under SFAS No. 143, as amended and
interpreted by FIN No. 47. Based on this review, we
identified obligations primarily related to the removal of fuel
storage tanks upon the abandonment or disposal of facilities.
The operation of fuel storage tanks is monitored on an ongoing
basis to prevent ground contamination and the cost of removing
such tanks is not significant. Based on our evaluation of such
obligations, such liabilities were deemed to be immaterial to
our financial position, results of operations or cash flows.
In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, which is a
replacement of APB Opinion No. 20, Accounting
Changes, and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements.
SFAS No. 154 becomes effective for our fiscal year
2007 and
F-12
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
provides guidance on the accounting for and reporting of
accounting changes and error corrections. SFAS No. 154
establishes the method of retrospective application as the
required method of reporting a change in accounting principle,
unless impracticable, or unless the new accounting principle
explicitly states transition requirements. We do not expect the
adoption of SFAS No. 154 to have a significant impact
on our financial statements, and we expect that in the future
there will be more instances of retrospective application of new
accounting principles to prior periods whereas previously such
applications were typically required to be reported as a
cumulative adjustment in the period in which the accounting
principle was adopted. With respect to reporting the correction
of an error in previously issued financial statements,
SFAS No. 154 carries forward without change the
guidance contained in APB Opinion No. 20 which requires the
correction to be reflected as a prior period adjustment.
Note 2
ACQUISITION
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. The acquisition included: (1) the
purchase of a 48.5% interest in Aviashelf, a Russian helicopter
company that owns five large twin-engine helicopters and holds a
Russian helicopter air operating certificate which is required
for the business to operate helicopters and fixed-wing aircraft
in Russia, and (2) a voting power of attorney (and in the
event such power of attorney expires or is revoked, a call
option to acquire the related shares for $3,200) over shares
representing a 1.6% interest in Aviashelf. In order to hold the
air operator certificate, Aviashelf must be majority owned by
Russian companies or Russian nationals; however, the agreements
were structured to give Bristow Aviation effective control of
the company through a majority voting interest. In addition,
under the provisions of the shareholders agreement,
Bristow Aviation has control over many decisions that would be
expected to be made in the ordinary course of business
(including entering into loans, commitments and material
transaction and incurring capital expenditures). Simultaneously,
through two newly formed 51%-owned companies, Bristow Aviation
purchased two large twin-engine helicopters and two fixed-wing
aircraft, for an aggregate purchase price of $10.7 million.
With respect to all three companies, Bristow Aviations
economic benefits in this venture are approximately 51%. In
addition, Bristow Aviation has a call/put option under which it
can acquire an additional 9% interest in the newly formed
companies and a 8.5% interest in Aviashelf (which includes the
1.6% of shares subject to the voting power of attorney) from
other shareholders for $450,000 before June 15, 2007 and
thereafter in accordance with a formula based on a defined
multiple of gross operating profit. Similarly, the same
shareholders have a put option exercisable from June 2010 for a
price equal to the greater of $450,000 or the same multiple of
gross operating profit. Bristow Aviation also charges the
entities $660,000 in management fees annually.
The acquisition was accounted for under the purchase method, and
we have consolidated the results of the Russian helicopter
company from the date of acquisition based on our combined
voting control and economic interest in the venture. The
acquisition was financed with $2.0 million of existing cash
and the assumption of $8.7 million in debt. Included in the
debt assumed was $1.8 million due to a company that is
affiliated with other shareholders of Aviashelf. The purchase
price was allocated to the assets and liabilities acquired based
upon estimated fair value. No goodwill was recorded. The pro
forma effect of operations of the acquisition when presented as
of the beginning of the periods presented was not material to
our consolidated statements of income.
F-13
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed at the date of
acquisition.
|
|
|
|
|
|
|
July 15, 2004
|
|
|
|
(In thousands)
|
|
|
Current assets
|
|
$
|
2,565
|
|
Property and equipment
|
|
|
11,932
|
|
Other assets
|
|
|
100
|
|
|
|
|
|
|
Total assets acquired
|
|
|
14,597
|
|
|
|
|
|
|
Current liabilities
|
|
|
(2,422
|
)
|
Long term debt
|
|
|
(7,757
|
)
|
Minority interest
|
|
|
(2,398
|
)
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(12,577
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
2,020
|
|
|
|
|
|
|
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, we have £91.0 million
(approximately $150 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 $356.6 million as
of March 31, 2006. No interest payments have been paid
through March 31, 2006.
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 our 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)
F-14
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
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, 2006) 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
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 prior 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. Changes in the balance for the
minority interest associated with Bristow Aviation are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Balance beginning of
fiscal year
|
|
$
|
2,130
|
|
|
$
|
9,385
|
|
|
$
|
16,555
|
|
Payments to minority interest
shareholders
|
|
|
(156
|
)
|
|
|
(7,501
|
)
|
|
|
(11,470
|
)
|
Minority interest expense
|
|
|
155
|
|
|
|
210
|
|
|
|
1,382
|
|
Currency translation
|
|
|
(325
|
)
|
|
|
36
|
|
|
|
2,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance end of fiscal
year
|
|
$
|
1,804
|
|
|
$
|
2,130
|
|
|
$
|
9,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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). Bristow Aviation used these
proceeds to redeem £8 million ($14.4 million) of
its ordinary share capital at par value on a pro rata basis from
all of its outstanding shareholders, including us. Caledonia
received management fees from Bristow Aviation that were payable
semi-annually in advance through June 2003.
Bristow Caribbean Ltd. Bristow Caribbean Ltd.
(Bristow Caribbean) is a joint venture in Trinidad,
in which we own a 40% interest with a local partner (60%
interest). Bristow Caribbean provides helicopter services to a
customer of ours in Trinidad. We control the significant
management decisions of this entity, including the payment of
dividends to our partner. Bristow Caribbean operates eleven
aircraft in Trinidad that it leases from us. We consolidate this
VIE as the primary beneficiary of the entity.
Bristow Helicopters Leasing Ltd. and Sakhalin Bristow Air
Services Ltd. Bristow Helicopters Leasing Ltd.
and Sakhalin Bristow Air Services Ltd. are joint ventures in the
U.K. whose primary purpose is to lease aircraft to a Russian
joint venture of ours (discussed below). We consolidate these
entities as we own 51% interests.
Aviashelf As discussed in Note 2, 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
F-15
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
51%-owned
companies described above, Bristow Aviation purchased two large
twin-engine helicopters and two fixed-wing aircraft. 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.
Bristow Helicopters Nigeria Ltd. and Pan African Airlines
Nigeria Bristow Helicopters Nigeria Ltd.
(BHN) and Pan African Airlines Nigeria
(PAAN) are joint ventures in Nigeria with local
partners, in which we own interests of 40% and 50%,
respectively. BHN and PAAN provide helicopter services to
customers in Nigeria. We control the significant management
decisions of these entities, including the payment of dividends
to our partners. We consolidate these VIEs as the primary
beneficiaries of the entities.
Heliair Leasing Limited Heliair Leasing
Limited (Heliair) is a Cayman Islands company that
owns two aircraft that it leases to Brilog Leasing Ltd., a
wholly-owned subsidiary of ours. Heliair purchased two aircraft
with proceeds from two limited recourse term loans with a U.K.
Bank. The term loans are secured by both aircraft and our
guarantee of the underlying lease obligations. In addition, we
have provided asset value guarantees totaling up to
$3.8 million, 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 are reflected
on our consolidated balance sheet, effectively consolidating the
VIE. See further discussion of the limited recourse notes in
Note 5.
Unconsolidated
Affiliates
We have investments in four unconsolidated affiliates that are
accounted for under the cost method as we are unable to exert
significant influence over their operations: Aeroleo Taxi Aereo
S.A. (Aeroleo); 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 Leasing 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.
Aeroleo We own a 50% interest in Aeroleo, a
Brazilian corporation. Aeroleo provides offshore helicopter
transportation services primarily to the Brazilian national oil
company and also serves other oil and gas companies. Aeroleo
owns one aircraft and leases eight aircraft from us and two
aircraft from HLA. Aeroleo is a VIE of which we are not the
primary beneficiary.
During the third quarter of 2006, we recorded an impairment
charge of $1.0 million to reduce the recorded value of our
investment in this joint venture. This impairment was deemed
appropriate as our management believes that the value of our
investment in this joint venture will no longer be fully
recovered as a result of negotiations to terminate our ownership
in the joint venture as discussed under Internal
Review in Note 6 below.
HC We own a 49% interest in Hemisco, a
Panamanian corporation, and Heliservicio, a Mexican corporation,
that provide onshore helicopter services to the Mexican Federal
Electric Commission and offshore helicopter transportation to
other companies on a contract and ad hoc basis. HC owns three
aircraft
F-16
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and leases eight aircraft from us, nine aircraft from RLR and
three aircraft from a third party to provide helicopter services
to its customers. HC is a VIE of which we are not the primary
beneficiary.
In order to improve the financial condition of Heliservicio, we
and our joint venture partner, Compania Controladora de
Servicios Aeronauticos, S.A de C.V (CCSA), completed
a recapitalization of Heliservicio on August 19, 2005. As a
result of this recapitalization, Heliservicios two
shareholders, the Company and CCSA, 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.
Since the conclusion of the contract with Petroleós
Mexicanos in February 2005, HC has experienced difficulties in
meeting its obligations to make lease rental payments to us and
RLR. During fiscal year 2006, we, along with RLR, made a
determination that because of the uncertainties as to
collectibility, lease revenues from HC would be recognized as
they were collected. For fiscal year 2006, $1.8 million of
amounts billed but not collected from HC have not been
recognized in our results, and our 49% share of equity in
earnings of RLR has been reduced by $2.3 million for
amounts billed but not collected from HC. During the fourth
fiscal quarter of 2006, we recognized revenue of
$3.9 million upon receipt of payment from HC.
We are continuing to evaluate certain actions to return
HCs operations to profitability, including reducing the
number of HCs aircraft to a lower level based on current
utilization, and we are actively seeking other markets in which
to redeploy the aircraft that are currently operating in Mexico
on an ad hoc basis. Although not anticipated or known at this
time, such actions could result in future losses.
PAS In Egypt, we operate through our 25%
interest in PAS, an Egyptian corporation. PAS provides
helicopter and fixed wing transportation to the oil and gas
industry. Additionally, spare fixed-wing capacity is chartered
to tourism operators. PAS owns 36 aircraft and leases two
aircraft from us.
FB Entities We own a 50% interest in 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 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 ($28.3 million) related to the
performance of this contract. Bristow Aviation has also
guaranteed repayment of up to £10 million
($17.4 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 650 employees.
In November 2004, Bristow Aviation sold certain of its contracts
in its technical services business and seven medium aircraft to
FBH. Bristow Aviation received proceeds of approximately
£7.9 million ($15.1 million) on this transaction
and recognized a gain of £1.1 million
($2.1 million) that is included in the consolidated
statement of income. Bristow Aviation and the other 50%
shareholder of FBH each contributed to FBH
£4.3 million ($8.2 million) to enable it to
consummate the transaction. This additional investment in FBH is
included in the consolidated statement of cash flows.
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.
F-17
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Norsk Helikopter AS We own a 49% interest in
Norsk, a Norwegian corporation that provides helicopter
transportation services in the Norwegian sector of the North
Sea. Norsk operated 11 aircraft, five of which are leased from
us.
During the first quarter of fiscal year 2006, Norsk completed
the acquisition of Lufttransport AS, a Norwegian company, and
its sister company Lufttransport AB, a Swedish company, which
collectively operate 28 aircraft and are engaged in providing
air ambulance services in Scandinavia. In addition, in fiscal
year 2006, Norsk committed to purchase three large aircraft. We
agreed to purchase one aircraft, and Norsk and the other equity
owner in that entity each agreed to purchase one of the two
other aircraft.
Rotorwing Leasing Resources, L.L.C. We own a
49% interest in RLR, a Louisiana limited liability company. RLR
owns six aircraft and leases three 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 $22.0 million remaining
outstanding and is secured by the six aircraft, which have a
cumulative carrying value of $28.8 million as of
March 31, 2006. The Company guaranteed 49% of the RLR Note
($15.6 million) and the other shareholder guaranteed the
remaining 51% of the RLR Note ($16.2 million). In addition,
the bank has a put option which the bank may exercise if the
aircraft are not returned to the United States 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 bank.
We simultaneously entered into a similar agreement with the
other RLR shareholder which requires that, in event of exercise
by the bank 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, 2006, a liability of $0.8 million
representing the fair value of this guarantee was reflected in
our consolidated balance sheet in other liabilities and deferred
credits. The fair value of the guarantee is being amortized over
the term of the RLR Note.
Our percentage ownership and investment balance for the
unconsolidated affiliates is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
March 31,
|
|
|
|
Ownership
|
|
|
2006
|
|
|
2005
|
|
|
Cost Method:
|
|
|
|
|
|
|
|
|
|
|
|
|
HC
|
|
|
49
|
%
|
|
$
|
7,017
|
|
|
$
|
2,637
|
|
PAS
|
|
|
25
|
%
|
|
|
6,286
|
|
|
|
6,286
|
|
Aeroleo
|
|
|
50
|
%(1)
|
|
|
|
|
|
|
1,040
|
|
Other
|
|
|
|
|
|
|
725
|
|
|
|
842
|
|
Equity Method:
|
|
|
|
|
|
|
|
|
|
|
|
|
RLR
|
|
|
49
|
%
|
|
|
1,911
|
|
|
|
4,655
|
|
HLA
|
|
|
50
|
%
|
|
|
150
|
|
|
|
150
|
|
Norsk
|
|
|
49
|
%
|
|
|
7,948
|
|
|
|
5,488
|
|
FB Entities
|
|
|
50
|
%
|
|
|
15,542
|
|
|
|
16,078
|
|
Other
|
|
|
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
39,912
|
|
|
$
|
37,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes a 30% interest in non-voting equity. |
F-18
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Dividends from entities accounted for on the cost method were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
HC
|
|
$
|
|
|
|
$
|
610
|
|
|
$
|
2,356
|
|
PAS
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
2,500
|
|
Aeroleo
|
|
|
|
|
|
|
250
|
|
|
|
|
|
Other
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,680
|
|
|
$
|
3,360
|
|
|
$
|
4,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Current assets
|
|
$
|
95,570
|
|
|
$
|
72,443
|
|
Non-current assets
|
|
|
309,036
|
|
|
|
208,406
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
404,606
|
|
|
$
|
280,849
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
68,604
|
|
|
$
|
37,846
|
|
Non-current liabilities
|
|
|
293,009
|
|
|
|
193,781
|
|
Equity
|
|
|
42,993
|
|
|
|
49,222
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
404,606
|
|
|
$
|
280,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
|
|
$
|
248,576
|
|
|
$
|
182,986
|
|
|
$
|
156,546
|
|
Gross profit
|
|
$
|
31,590
|
|
|
$
|
37,320
|
|
|
$
|
36,727
|
|
Net income
|
|
$
|
8,282
|
|
|
$
|
14,889
|
|
|
$
|
13,719
|
|
During fiscal years 2006, 2005 and 2004, revenue of
$56.2 million, $66.4 million and $74.4 million,
respectively, was recognized for leased aircraft and other
services provided by us to unconsolidated affiliates. As of
March 31, 2006 and 2005, $20.5 million and
$17.9 million, respectively, were due from unconsolidated
affiliates for services provided.
Note 4
PROPERTY AND EQUIPMENT
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 other
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.
During fiscal year 2005, we received proceeds of
$26.6 million primarily from the disposal of ten aircraft
and certain equipment, which resulted in a net gain of
$5.9 million. We also received proceeds of
F-19
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$15.1 million from the sale of seven aircraft and certain
contracts in one of our technical services subsidiaries to FBH
which resulted in a gain of $2.1 million.
Additionally, 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. The proceeds from the sale of the five used
aircraft, some surplus spares and short-term notes funded the
purchase of the two new aircraft. We took delivery of both of
these aircraft during fiscal year 2006. With respect to the
portion funded by the trade-in of the five used aircraft, this
transaction was accounted for as a non-monetary exchange of
similar productive assets and as such, no gain or loss was
recognized on the transaction. The two new aircraft were valued
at $18.7 million each, totaling $37.4 million.
During fiscal year 2004, we received proceeds of
$6.9 million primarily from the disposal of aircraft and
equipment, which resulted in a net gain of $3.9 million.
In May 2003, we entered into a purchase agreement with Bell
Helicopter for five new medium aircraft. The total purchase
price of the five aircraft was $30.1 million. In addition,
we purchased a sixth medium aircraft for $5.3 million.
These aircraft were purchased to meet the contract renewal
requirements of an existing customer of our unconsolidated
affiliate in Mexico, and replaced older aircraft being used on
the previous contract. On July 11, 2003, we sold these six
aircraft, at our cost, to a newly formed limited liability
company, RLR. The capital of RLR is owned 49% by us and 51% by
the same principal with whom we have other jointly owned
businesses operating in Mexico.
During fiscal year 2006 certain of our aircraft were
reclassified as held for sale and presented within prepaid
expense and other current assets on our consolidated balance
sheet. The cumulative carrying value of aircraft no longer
included within our property and equipment balances totaled
$3.1 million and impairment charges of $0.5 million
were recorded related to the reduction of the carrying values of
these aircraft to their fair values. As of March 31, 2006,
we had eight aircraft classified as held for sale included in
prepaid expense and other current assets for $2.6 million.
Note 5
DEBT
Debt as of March 31, 2006 and 2005 consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
61/8% Senior
Notes due 2013
|
|
$
|
230,000
|
|
|
$
|
230,000
|
|
Limited recourse term loans
|
|
|
20,023
|
|
|
|
21,116
|
|
Hemisco Helicopters International,
Inc. Note
|
|
|
4,380
|
|
|
|
|
|
Short-term advance from customer
|
|
|
1,400
|
|
|
|
3,400
|
|
Note to Sakhalin Aviation Services
Ltd.
|
|
|
647
|
|
|
|
641
|
|
Sakhalin Debt
|
|
|
5,667
|
|
|
|
6,923
|
|
Short-term notes
|
|
|
3,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
265,296
|
|
|
|
262,080
|
|
Less short-term borrowings and
current maturities of long-term debt
|
|
|
(17,634
|
)
|
|
|
(6,413
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
247,662
|
|
|
$
|
255,667
|
|
|
|
|
|
|
|
|
|
|
Senior Notes On June 20, 2003, we
completed a private placement of $230.0 million
61/8% Senior
Notes due 2013 (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
F-20
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 Senior Notes
are guaranteed by certain of our U.S. subsidiaries and are
redeemable at our option. A portion of the net proceeds from the
issuance and sale of these notes was used to redeem all of our
outstanding
77/8% Senior
Notes due 2008 and all of our outstanding 6% Convertible
Subordinated Notes due 2003. The remaining net proceeds from the
private placement were used for general corporate purposes. The
redemptions took place on July 29, 2003. We recorded a loss
on the extinguishment of debt of $6.2 million in fiscal
year 2004. Approximately $4.7 million of the loss pertains
to redemption premiums and $1.5 million pertains to
unamortized debt issuance costs relating to the redeemed debt.
We filed a registration statement on July 18, 2003, with
respect to an offer to exchange the notes for a new issue of
equivalent notes registered under the Securities Act of 1933.
The registration statement was declared effective on
August 4, 2003 and the exchange of notes was concluded on
September 4, 2003. The terms of the Senior Notes restrict
our payment of cash dividends to stockholders. In accordance
with the indenture to the Senior Notes, any payment or
re-financing of these notes prior to June 2011 is subject to a
prepayment premium.
Limited Recourse Term Loans These two limited
recourse term loans were created in connection with sale and
lease transactions for the two aircraft entered into with
Heliair in fiscal year 1999. The term loans are secured by both
aircraft and our guarantee of the underlying lease obligations.
In addition, we have provided asset value guarantees totaling up
to $3.8 million, payable at expiration of the leases
depending on the value received for the aircraft at the time of
disposition. As a result of these guarantees and the terms of
the underlying leases, for financial statement purposes, the
aircraft and associated term loans are reflected on our
consolidated balance sheet. The term loans provide for rates of
interest payable to the bank of 7.1% and 7.2%, quarterly
amortization payments totaling $0.7 million and balloon
payments of $9.8 million and $9.2 million in March
2007 and July 2007, respectively. See Note 3 for a
discussion of our relationship with Heliair.
Hemisco Helicopters International, Inc. As
discussed in Note 3 above, in order to improve the
financial condition of Heliservicio, we and our joint venture
partner, CCSA, completed a recapitalization of Heliservicio on
August 19, 2005. As a result of this
recapitalization, Heliservicios two shareholders, the
Company and CCSA, 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.
Short-term advance from a customer This
advance represents a reimbursement for value added taxes in
Kazakhstan paid by the Company, the obligation for which is
currently under dispute between us and the customer and the
taxing authority. The advance is non-interest bearing and will
be repaid to the customer as taxes are refunded to us by the
applicable governmental agency.
Note to Sakhalin Aviation Services Ltd.
(SASL) This note was assumed by us
in connection with the acquisition of a Russian helicopter
company which is further discussed in Note 2. SASL is the
former owner of the purchased company, and this amount
represents advances made to us by SASL. The advances are in the
form of a non-interest bearing note with no specific repayment
terms.
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. See Note 2 for further
discussion of the acquisition. Two promissory notes totaling
$1.4 million as of March 31, 2006 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
$0.7 million as of March 31, 2006, with an interest
rate of 6.5% and expiring in fiscal year 2008; a finance lease
on an aircraft totaling $3.0 million as of March 31,
2006, with an interest rate of 8.5% and expiring in fiscal year
2008 with a final termination payment of $2.4 million; and
two loan notes on packages of spare parts totaling
$0.6 million as of March 31, 2006, with interest rates
at 10% to 18% expiring in fiscal year 2007.
F-21
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Short-term notes 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 ($14.6 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
($11.4 million), leaving 2.7 million
($3.2 million) outstanding on these notes as of
March 31, 2006. This amount is included in short-term
borrowings and current maturities of long-term debt in our
consolidated balance sheet. In April 2006, we paid the remaining
balance due on these notes, thereby settling the obligation for
these aircraft with Eurocopter.
U.K. Facilities As of March 31, 2006,
Bristow Aviation had a £6.0 million
($10.4 million) facility for letters of credit, of which
£0.4 million ($0.7 million) was outstanding, and
a £1.0 million ($1.7 million) net overdraft
facility, of 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 a rate of 0.7% per annum. Borrowings under the
net overdraft facility are payable on 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 was scheduled to expire on
August 31, 2005, but has been extended to August 31,
2006. The facilities are guaranteed by certain of Bristow
Aviations subsidiaries and secured by several helicopter
mortgages and a negative pledge of Bristow Aviations
assets.
Revolving Credit Facility As of
March 31, 2006, we had a $30 million revolving credit
facility with a U.S. bank that expires on August 31,
2006. The facility is subject to a sublimit of
$10.0 million for the issuance of letters of credit. We
have no amounts drawn under this facility but did have
$3.2 million of letters of credit utilized which reduced
availability under the line as of March 31, 2006.
Borrowings bear interest at a rate equal to one month LIBOR plus
a spread ranging from 1.25% to 2.0%. The rate of the spread
depends on a financial covenant ratio under the credit facility.
Borrowings under this credit facility are unsecured and are
guaranteed by certain of our U.S. subsidiaries. The
agreement requires us to pay a quarterly commitment fee at an
annual rate of 0.20% on the average unused portion of the line.
Among other restrictions, the credit agreements and notes
contain covenants relating to liens, cash flow and interest
coverage (as defined in the agreements). At March 31, 2006,
we were in compliance with all covenants.
RLR Note As discussed in Note 3 above,
we guaranteed 49% of the RLR Note ($15.6 million). In
addition, we have given the bank a put option which the bank may
exercise if the aircraft are not returned to the
U.S. within 30 days of a default on the RLR Note.
New Credit Facilities We are in the process
of arranging new bank credit facilities with a group of lenders
to replace the $30 million Revolving Credit Facility
described above. The financing has not gone to the syndication
market yet, but we have selected an agent bank to lead the
syndication process and executed a commitment letter and term
sheet. We intend to seek a $100 million revolving credit
facility to be used primarily for borrowings and, as needed,
letters of credit, and a separate letter of credit facility in
the amount of $25 million (together, the
Facilities). The Facilities are expected to be
multi-year in term and secured by certain of our assets, with a
pricing grid based on our senior unsecured public debt ratings.
The financing is expected to close in June 2006 after filing of
these fiscal year 2006 financial statements.
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, 2006, surety bonds with an aggregate value of
39.9 million Mexican pesos ($3.6 million) were
outstanding.
Defaults Under Various Debt Agreements As of
June 30, 2005, we were in default of various financial
information reporting covenants of the $30 million
revolving credit facility, and had not provided
F-22
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
similar required information to other creditors. As a result of
the activities identified in the Internal Review discussed in
Note 6, we were not able to provide required financial
information within the required time period as specified in the
covenants. We obtained a waiver of this violation through
January 16, 2006 upon payment of a fee of $60,000. In
January 2006, the default was cured. Also, with regard to the
$230 million
61/8% Senior
Notes, on June 16, 2005, we received notice from the
trustee that we were in default of various financial reporting
covenants of the Senior Notes because we did not provide the
required financial reporting information within the required
time frame. On August 16, 2005, we completed a consent
solicitation with the holders of the Senior Notes to waive
defaults under and make amendments to the indenture in
consideration for which we paid an aggregate consent fee of
$2.6 million. In January 2006, the default was cured.
As of June 30, 2005, we were in default of various
financial information reporting covenants under the RLR Note for
not providing financial information for fiscal year 2005 when
due, and also for not providing similar information to other
creditors. This situation resulted from the activities
identified in the Internal Review discussed earlier which
prevented us from filing our financial report for fiscal year
2005 on time. The bank provided waivers through January 16,
2006 in exchange for payments totaling $78,000. In January 2006,
the defaults were cured.
Other Matters Aggregate annual maturities for
all debt for the next five fiscal years and thereafter are as
follows (in thousands):
|
|
|
|
|
Fiscal year ending March 31,
|
|
|
|
|
2007
|
|
$
|
17,634
|
(1)
|
2008
|
|
|
12,576
|
|
2009
|
|
|
404
|
|
2010
|
|
|
275
|
|
2011
|
|
|
27
|
|
Thereafter
|
|
|
234,380
|
|
|
|
|
|
|
|
|
$
|
265,296
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes short-term notes of $3.2 million and current
portion of long-term debt of $14.4 million. |
Interest paid in fiscal years 2006, 2005 and 2004 was
$15.6 million, $15.7 million and $16.8 million,
respectively. Capitalized interest was $2.4 million,
$1.3 million and $1.2 million in fiscal years 2006,
2005 and 2004, respectively.
The estimated fair value of our total debt as of March 31,
2006 and 2005 was $252.6 million and $255.2 million,
respectively, based on quoted market prices for the publicly
listed
61/8% Senior
Notes and the carrying value for all our other debt, which
approximates fair value.
Note 6
COMMITMENTS AND CONTINGENCIES
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 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%. 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, an early purchase option at
60 months (December 2010), and an early termination option
at 24 months (December 2007). The early purchase option
price for the nine aircraft at 60 months is approximately
$52 million in aggregate. There was a
F-23
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 provided
until the conclusion of the Unites States Securities and
Exchange Commission (SEC) investigation related to
the Internal Review. 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.
Aircraft Purchase Contracts We have entered
into several agreements to purchase new and used aircraft which
are reflected in the following table. As of March 31, 2006,
we had $382.7 million remaining to be paid in connection
with our aircraft purchase commitments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments as of May 31, 2006
|
|
|
|
Remaining to be Delivered
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010-2013
|
|
|
Total
|
|
|
Number of aircraft:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Medium
|
|
|
17
|
|
|
|
11
|
|
|
|
3
|
|
|
|
12
|
|
|
|
43
|
|
Large
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
11
|
|
|
|
3
|
|
|
|
12
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures
(in thousands)
|
|
$
|
240,805
|
|
|
$
|
66,843
|
|
|
$
|
23,244
|
|
|
$
|
88,513
|
|
|
$
|
419,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We also have options to purchase 24 additional medium and 13
additional large aircraft. As of March 31, 2006, the
options with respect to six of the aircraft are now subject to
availability. |
On May 19, 2006, we entered into an agreement to purchase
two large aircraft for approximately $36.7 million,
deliverable in early calendar year 2007. The agreement provides
us with the option to purchase up to thirteen additional large
aircraft. Of these options, five relate to aircraft deliverable
in the second quarter of fiscal year 2008, and the remaining
eight relate to aircraft deliverable in calendar year 2008. We
have also made an arrangement with the manufacturer pursuant to
which we may delay our existing purchase commitments for up to
$100 million of medium aircraft upon the exercise of the
first option.
In connection with an agreement to purchase three large aircraft
to be utilized and owned by Norsk, the Company, Norsk and the
other equity owner in Norsk each agreed to fund the purchase of
one of these three aircraft. One was delivered fiscal year 2006
and the remaining two are expected to be delivered in fiscal
year 2007. The one aircraft that we are purchasing is reflected
in the table above.
Operating Leases We have noncancelable
operating leases in connection with the lease of certain
equipment, land and facilities, including the lease with a
subsidiary of General Electric Capital Corporation discussed
above. Rental expense incurred under all operating leases,
except for those with terms of a month or less that were not
renewed, was $12.1 million in fiscal year 2006,
$9.8 million in fiscal year 2005, and
F-24
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$7.3 million in fiscal year 2004. As of March 31,
2006, 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,
2007
|
|
$
|
9,665
|
|
2008
|
|
|
8,941
|
|
2009
|
|
|
8,193
|
|
2010
|
|
|
7,976
|
|
2011
|
|
|
8,215
|
|
Thereafter
|
|
|
41,333
|
|
|
|
|
|
|
|
|
$
|
84,323
|
|
|
|
|
|
|
Collective Bargaining Agreement We employ
approximately 300 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 a wage increase for
the pilot group and improvements to several other benefit plans.
We do not believe that these increases will place us at a
competitive, financial or operational disadvantage.
We are currently involved in negotiations with the unions in
Nigeria and anticipate that we will increase certain benefits
for union personnel as a result of these negotiations. We do not
expect these benefit increases to have a material impact on our
results of operations.
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 will become more competitive if oil
and gas industry activity levels increase. In addition, 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 and 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, 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.
Restrictions on Foreign Ownership of Common
Stock Under the Federal Aviation Act, it is
unlawful to operate certain aircraft for hire within the United
States 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 United States and an operating
certificate may be granted only to a citizen of the United
States. For purposes of these requirements, a corporation is
deemed to be a citizen of the United States only if, among other
things, at least 75% of its voting interests are owned or
controlled by United States citizens. If persons other than
United States 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
United States. 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. 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, 2006,
approximately 1,404,000 shares of our Common Stock were
held by persons with foreign addresses. These shares represented
approximately 6.0% of our total outstanding common shares as of
March 31, 2006. Because a substantial portion of our Common
Stock is publicly traded, our foreign ownership may fluctuate on
each trading day.
F-25
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 such special
outside counsel to cover operations in other countries and other
issues. In connection with this review, special outside counsel
to the Audit Committee retained forensic accountants. As a
result of the findings of the Internal Review, our Annual Report
on
Form 10-K
for the year ended March 31, 2005 reflected our restated
financial statements.
The SEC then notified us that it had initiated an informal
inquiry and requested that we provide certain documents on a
voluntary basis. The SEC thereafter advised us that the inquiry
has become a formal investigation. We have responded to the
SECs requests for documents and intend to continue to do
so.
The Internal Review is complete. All known required restatements
were reflected in the financial statements included in our
fiscal year 2005 Annual Report, and no further restatements were
required in these fiscal year 2006 financial statements. As a
follow-up to
matters identified during the course of the Internal Review,
special counsel to the Audit Committee is completing certain
work, and may be called upon to undertake additional work in the
future to assist in responding to inquiries from the SEC, from
other governmental authorities or customers, or as
follow-up to
the previous work performed by such special counsel.
In October 2005, the Audit Committee reached certain conclusions
with respect to findings to date from the Internal Review. The
Audit Committee concluded that, over a considerable period of
time, (a) improper payments were made by, and on behalf of,
certain foreign affiliated entities directly or indirectly to
employees of the Nigerian government, (b) improper payments
were made by certain foreign affiliated entities to Nigerian
employees of certain customers with whom we have contracts,
(c) inadequate employee payroll declarations and, in
certain instances, tax payments were made by us or our
affiliated entities in certain jurisdictions,
(d) inadequate valuations for customs purposes may have
been declared in certain jurisdictions resulting in the
underpayment of import duties, and (e) an affiliated entity
in a South American country, with the assistance of our
personnel and two of our other affiliated entities, engaged in
transactions which appear to have assisted the South American
entity in the circumvention of currency transfer restrictions
and other regulations. In addition, as a result of the Internal
Review, the Audit Committee and management determined that there
were deficiencies in our books and records and internal controls
with respect to the foregoing and certain other activities.
Based on the Audit Committees findings and
recommendations, the Board of Directors has taken disciplinary
action with respect to our personnel who it determined bore
responsibility for these matters. The disciplinary actions
included termination or resignation of employment (including of
certain members of senior management), changes of job
responsibility, reductions in incentive compensation payments
and reprimands. One of our affiliates has also obtained the
resignation of certain of its personnel.
We have initiated remedial action, including initiating action
to correct underreporting of payroll tax, disclosing to certain
customers inappropriate payments made to customer personnel and
terminating certain agency, business and joint venture
relationships. We also have taken steps to reinforce our
commitment to conduct our business with integrity by creating an
internal corporate compliance function, instituting a new code
of business conduct (our new code of business conduct entitled
Code of Business Integrity is available on our
website,
http://www.bristowgroup.com),
and developing and implementing a training program for all
employees. In addition to the disciplinary actions referred to
above, we have also taken steps to strengthen our control
environment by hiring new key members of senior and financial
management, including persons with appropriate technical
accounting expertise, expanding our corporate finance group and
internal audit staff, realigning reporting lines within the
accounting function so that field accounting
F-26
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
reports directly to the corporate accounting function instead of
operations management, and improving the management of our tax
structure to comply with its intended design. Our compliance
program has also begun full operation, and clear corporate
policies have been established and communicated to our relevant
personnel related to employee expenses, delegation of authority,
revenue recognition and customer billings.
We have communicated the Audit Committees conclusions with
respect to the findings of the Internal Review to regulatory
authorities in some, but not all, of the jurisdictions in which
the relevant activities took place. We are in the process of
gathering and analyzing additional information related to these
matters, and expect to disclose the Audit Committees
conclusions to regulatory authorities in other jurisdictions
once this process has been completed. Such disclosure may result
in 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. To the extent that
violations of the law may have occurred in several countries in
which we operate, we do not yet know whether such violations can
be cured merely by the payment of fines or whether other actions
may be taken against us, including requiring us to curtail our
business operations in one or more such countries for a period
of time. In the event that we curtail our business operations in
any such country, we then may face difficulties exporting our
aircraft from such country. As of March 31, 2006, the book
values of our aircraft in Nigeria and the South American country
where certain improper activities took place were approximately
$115.9 million and $8.1 million, respectively.
We cannot predict the ultimate outcome of the SEC investigation,
nor can we predict whether other applicable U.S. and foreign
governmental authorities will initiate separate investigations.
The outcome of the SEC investigation and any related legal and
administrative proceedings could include the institution of
administrative, civil injunctive or criminal proceedings
involving us
and/or
current or former employees, officers
and/or
directors, the imposition of fines and other penalties, remedies
and/or
sanctions, modifications to business practices and compliance
programs
and/or
referral to other governmental agencies for other appropriate
actions. It is not possible to accurately predict at this time
when matters relating to the SEC investigation will be
completed, the final outcome of the SEC investigation, what if
any actions may be taken by the SEC or by other governmental
agencies in the U.S. or in foreign jurisdictions, or the
effect that such actions may have on our consolidated financial
statements. In addition, in view of the findings of the Internal
Review, we are likely to encounter difficulties in the future
conducting business in Nigeria and a South American country, and
with certain customers. It is also possible that certain of our
existing contracts may be cancelled (although none have been
cancelled as of the date of filing of these fiscal year 2006
financial statements) and 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 connection with its conclusions regarding payroll
declarations and tax payments, the Audit Committee determined on
November 23, 2005, following the recommendation of our
senior management, that there was a need to restate our
historical consolidated financial statements, including those
for the quarterly periods in fiscal year 2005. Such restatement
was reflected in our fiscal year 2005 Annual Report. As of
March 31, 2006, we have accrued an aggregate of
$20.1 million for the taxes, penalties and interest
attributable to underreported employee payroll. Operating income
for fiscal years 2006, 2005 and 2004 includes $4.3 million,
$3.8 million and $4.2 million, respectively,
attributable to this accrual. At this time, we cannot estimate
what additional payments, fines, penalties
and/or
litigation, and related expenses may be required in connection
with the matters identified as a result of the Internal Review,
the SEC investigation,
and/or any
other related regulatory investigation that may be instituted or
third-party litigation; however, such payments, fines, penalties
and/or
expenses could have a material adverse effect on our business,
financial condition and results of operations.
F-27
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As we continue to respond to the SEC investigation and other
governmental authorities and take other actions relating to
improper activities that have been identified in connection with
the Internal Review, there can be no assurance that
restatements, in addition to those reflected in our fiscal year
2005 Annual Report, will not be required or that our historical
financial statements included in these fiscal year 2006
financial statements will not change or require further
amendment. In addition, new issues may be identified that may
impact our financial statements and the scope of the
restatements described in the fiscal year 2005 Annual Report and
lead us to take other remedial actions or otherwise adversely
impact us.
During fiscal year 2005, we incurred approximately
$2.2 million in legal and other professional costs in
connection with the Internal Review. During fiscal year 2006, we
incurred an additional $10.5 million in legal and other
professional costs related to the Internal Review. We expect to
incur additional costs associated with the Internal Review,
which will be expensed as incurred and which could be
significant in the fiscal quarters in which they are recorded.
As a result of the disclosure and remediation of a number of
activities identified in the Internal Review, we are likely to
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
these agents may be significantly impacted.
We have commenced actions to disclose activities in Nigeria
identified in the Internal Review to affected customers, and one
or more of these customers may seek to cancel their contracts
with us. One of such customers already has commenced its own
investigation. Among other things, we have been advised that
such customer intends to exercise its rights to audit a specific
contract, as well as to review its other relations with us.
Although we have no indication as to what the final outcome of
the audit and review will be, it is possible that such customer
may seek to cancel one or more existing contracts if it believes
that they were improperly obtained or that we breached any of
their terms. Since our customers in Nigeria are affiliates of
major international petroleum companies with whom we do business
throughout the world, any actions which are taken by certain
customers could have a material adverse effect on our business,
financial position and results of operations, and these
customers may preclude us from bidding on future business with
them either locally or on a worldwide basis. In addition,
applicable governmental authorities may preclude us from bidding
on contracts to provide services in the countries where improper
activities took place.
In connection with the Internal Review, we also have terminated
our business relationship with certain agents and have taken
actions to terminate business relationships with other agents.
As described further below, in November 2005, one of the
terminated agents and his affiliated entity have commenced
litigation against two of our foreign affiliated entities
claiming damages of $16.3 million for breach of contract.
We may be required to indemnify certain of our agents to the
extent that regulatory authorities seek to hold them responsible
in connection with activities identified in the Internal Review.
In a South American country, where certain improper activities
took place, we are negotiating to terminate our ownership
interest in the joint venture that provides us with the local
ownership content necessary to meet local regulatory
requirements for operating in that country. We may not be
successful in our negotiations to terminate our ownership
interest in the joint venture, and the outcome of such
negotiations may negatively affect our ability to continue
leasing our aircraft to the joint venture or other unrelated
operating companies, to conduct other business in that country,
or to export our aircraft from that country. As discussed in
Note 3, we believe that it is unlikely that we will recover
the value of our investment in the joint venture and therefore,
we recorded an impairment charge of $1.0 million during
fiscal year 2006 to reduce the recorded value of our investment
in the joint venture. During fiscal years 2006 and 2005, we
derived approximately $8.0 million and $10.2 million,
respectively, of leasing and other
F-28
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
revenues from this joint venture, of which $4.0 million and
$3.2 million, respectively, was paid by us to a third party
for the use of the aircraft. In addition, during fiscal year
2005, approximately $0.3 million of dividend income was
derived from this joint venture.
Without a joint venture partner, we will be unable to maintain
an operating license and our future activities in that country
may be limited to leasing our aircraft to unrelated operating
companies. Our joint venture partners and agents are typically
influential members of the local business community and
instrumental in aiding us in obtaining contracts and managing
our affairs in the local country. As a result of terminating
these relationships, our ability to continue conducting business
in these countries where the improper activities took place may
be negatively affected.
Many of the improper actions identified in the Internal Review
resulted in decreasing the costs incurred by us in performing
our services. The remedial actions we are taking will result in
an increase in these costs and, if we cannot raise our prices
simultaneously and to the same extent as our increased costs,
our operating income will decrease.
In addition, we face legal actions relating to the 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.
Document Subpoena from U.S. Department of
Justice On June 15, 2005, we issued a press
release stating that one of our subsidiaries had received a
document subpoena from the Antitrust Division of the
U.S. Department of Justice (DOJ).
Contemporaneously, similar subpoenas were served on two of our
former executive officers. The subpoena relates to a grand jury
investigation of potential antitrust violations among providers
of helicopter transportation services in the U.S. Gulf of
Mexico. We are continuing to investigate this matter and are
providing the information that the DOJ has requested from us in
the investigation. The outcome of the DOJ investigation and any
related legal and administrative proceedings could include civil
injunctive or criminal proceedings, the imposition of fines and
other penalties, remedies
and/or
sanctions, referral to other governmental agencies,
and/or the
payment of damages in civil litigation. In connection with this
matter, we have incurred $2.6 million in legal and other
professional fees for fiscal year 2006. It is not possible to
predict accurately at this time when the government
investigation will be completed. Based on current information,
we cannot predict the outcome of such investigation or what, if
any, actions may be taken by the DOJ or other U.S. agencies
or authorities or the effect that they may have on us.
Environmental Contingencies The United States
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
F-29
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
removed from the National Priorities List in July 2001. 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 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.
Flight Accidents On August 18, 2005, one
of our helicopters operating in the U.S. Gulf of Mexico was
involved in an accident that resulted in two fatalities. The
cause of the accident is still under investigation by us and the
National Transportation Safety Board. Our liability in
connection with this accident is not likely to have a material
adverse effect on our business or financial condition. On
May 5, 2006, another one of our helicopters operating in
the U.S. Gulf of Mexico was involved in an accident. This
accident resulted in no fatalities, and the aircraft has been
recovered.
Hurricanes Katrina and Rita As a result of
Hurricanes Katrina and Rita, 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. Based on
estimates of the losses, discussions with our property insurers
and analysis of the terms of our property insurance policies, we
believe that it is probable that we will receive a total of
$2.8 million in insurance recoveries ($1.3 million has
been received thus far). Therefore, we recorded a
$0.2 million net gain ($2.8 million in probable
insurance recoveries offset by $2.6 million of involuntary
conversion losses) during fiscal year 2006 related to property
damage to these facilities. We reopened our Intracoastal City,
Louisiana, base in December 2005, our Venice, Louisiana, base in
March 2006 and our Creole, Louisiana, base in April 2006.
Aircraft Repurchase Commitments During
November 2002, we sold assets related to our activities in
Italy. As a result of the sale, we recognized a pre-tax loss on
the disposal of these assets during fiscal year 2003 of
$1.3 million. The loss represented the excess of the net
book value of the assets over the sales proceeds, plus the
accrual of certain future obligations totaling
$0.9 million. In connection with the initial sale, we also
agreed to acquire ownership of three aircraft used in the Italy
operations and currently leased from unrelated third parties at
future dates, and transfer ownership to the buyer. As part of
this arrangement, we agreed to exercise our purchase option at
the conclusion of each lease and to sell these aircraft to the
buyer for an aggregate sales price of 8.8 million
($11.4 million). During fiscal year 2005, leases with one
of the third parties were terminated and the sale to the buyer
closed on two of these aircraft, resulting in the recognition of
a $2.3 million gain. We have exercised the purchase option
on the remaining aircraft and expect the sale to be completed in
July 2006, resulting in a gain of approximately
$2.2 million.
Guarantees We have guaranteed the repayment
of up to £10 million ($17.4 million) of the debt
of FBS and $13.1 million of the debt of RLR, both
unconsolidated affiliates. See discussion of these commitments
in Note 3. As of March 31, 2006, we have recorded a
liability of $0.8 million representing the fair value of
the RLR guarantee, which is reflected in our consolidated
balance sheet in other liabilities and deferred credits.
Additionally, as discussed in Note 5, 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, 2006, surety bonds with an aggregate value of
39.9 million Mexican pesos ($3.6 million) were
outstanding.
The following table summarizes our commitments under these
guarantees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Expiration Per Period
|
|
|
|
|
Less Than
|
|
|
1-3
|
|
|
4-5
|
|
|
After
|
|
Total
|
|
|
1 year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
(In thousands)
|
|
|
$
|
34,118
|
|
|
$
|
3,646
|
|
|
$
|
13,079
|
|
|
$
|
17,393
|
|
|
$
|
|
|
F-30
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other Matters 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.
Note 7
RESTRUCTURING CHARGES
In October 2003, we announced that our U.K. affiliate, Bristow
Aviation, had begun a restructuring of its U.K. based
operations. The restructuring was designed to reduce costs and
promote operational efficiencies that would enable us to remain
competitive in the North Sea offshore helicopter market.
As part of the restructuring program, Bristow Aviation reduced
staffing levels by approximately 100 positions, or 11% of its
U.K. workforce, over a twelve-month period that ended on
December 31, 2004. For fiscal year 2005, Bristow Aviation
incurred approximately $0.6 million in severance costs that
are included in general and administrative expense in the
accompanying consolidated statement of income and are allocated
to Corporate. No such costs were incurred during fiscal year
2006. Bristow Aviation has incurred to date approximately
$4.0 million in severance costs and approximately
$0.6 million in other restructuring costs.
In November 2004, we sold certain contracts held by a technical
services subsidiary of ours to FBH. The remaining operations of
the subsidiary were downsized by ceasing to perform certain
services for third-parties that had generated poor financial
results for the previous two years. As a result of the
downsizing, we reduced staffing levels by an additional 80
positions in our EH Centralized Operations business unit
over a nine-month period ending on December 31, 2004. For
fiscal years 2006 and 2005, we incurred approximately
$0.3 million and $2.8 million, respectively, in
severance costs. Approximately $2.6 million and
$0.5 million of costs incurred to date are included in
Direct Cost and General and Administrative expense,
respectively, in the consolidated statement of income and have
been allocated to the Helicopter Services segment, specifically
to our EH Centralized Operations business unit.
F-31
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 8
TAXES
The components of deferred tax assets and liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Foreign tax credits
|
|
$
|
39,010
|
|
|
$
|
47,317
|
|
Accrued pension liability
|
|
|
74,445
|
|
|
|
86,156
|
|
Maintenance and repair
|
|
|
7,694
|
|
|
|
8,483
|
|
Deferred revenues
|
|
|
3,990
|
|
|
|
|
|
Other
|
|
|
11,952
|
|
|
|
15,313
|
|
Valuation allowance
|
|
|
(13,380
|
)
|
|
|
(14,252
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
123,711
|
|
|
|
143,017
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(153,859
|
)
|
|
|
(173,697
|
)
|
Inventories
|
|
|
(10,559
|
)
|
|
|
(11,333
|
)
|
Prepaid pension costs
|
|
|
(20,289
|
)
|
|
|
(18,661
|
)
|
Investments in unconsolidated
affiliates
|
|
|
(10,367
|
)
|
|
|
(9,613
|
)
|
Other
|
|
|
(1,943
|
)
|
|
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(197,017
|
)
|
|
|
(214,019
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(73,306
|
)
|
|
$
|
(71,002
|
)
|
|
|
|
|
|
|
|
|
|
Certain of the above components have changed due to fluctuations
in foreign currency exchange rates.
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, 2006 and 2005, 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
its 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, 2006 and 2005,
$22.5 million and $19.2 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.
F-32
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of March 31, 2006, 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)
|
|
|
|
|
2003
|
|
$
|
8,207
|
|
|
March 31, 2013
|
2004
|
|
|
5,298
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
Total carryover to fiscal year 2007
|
|
$
|
13,505
|
|
|
|
|
|
|
|
|
|
|
The components of income from continuing operations before
provision for income taxes and minority interest for fiscal
years 2006, 2005 and 2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
9,424
|
|
|
$
|
20,375
|
|
|
$
|
11,549
|
|
Foreign
|
|
|
65,211
|
|
|
|
53,230
|
|
|
|
59,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
74,635
|
|
|
$
|
73,605
|
|
|
$
|
70,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes for fiscal years 2006, 2005 and
2004 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
2,966
|
|
|
$
|
3,634
|
|
|
$
|
(2,467
|
)
|
Foreign
|
|
|
12,225
|
|
|
|
16,361
|
|
|
|
9,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,191
|
|
|
|
19,995
|
|
|
|
7,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(1,328
|
)
|
|
|
12,710
|
|
|
|
8,512
|
|
Foreign
|
|
|
3,616
|
|
|
|
(10,870
|
)
|
|
|
4,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,288
|
|
|
|
1,840
|
|
|
|
12,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in valuation
allowance
|
|
|
(872
|
)
|
|
|
|
|
|
|
(281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,607
|
|
|
$
|
21,835
|
|
|
$
|
19,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of U.S. Federal statutory and effective
income tax rates is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
|
2006
|
|
|
|
2005
|
|
|
|
2004
|
|
|
|
Statutory rate
|
|
|
35.0
|
|
%
|
|
|
35.0
|
|
%
|
|
|
35.0
|
|
%
|
Foreign earnings taxed at rates
other than the U.S. rate
|
|
|
5.1
|
|
%
|
|
|
3.3
|
|
%
|
|
|
(0.2
|
)
|
%
|
Foreign earnings permanently
reinvested abroad
|
|
|
(22.7
|
)
|
%
|
|
|
(8.8
|
)
|
%
|
|
|
(5.2
|
)
|
%
|
Foreign earnings repatriated at
reduced U.S. rate
|
|
|
5.3
|
|
%
|
|
|
|
|
%
|
|
|
|
|
%
|
Change in valuation allowance
|
|
|
(1.2
|
)
|
%
|
|
|
0.0
|
|
%
|
|
|
(0.4
|
)
|
%
|
State taxes provided
|
|
|
1.7
|
|
%
|
|
|
0.4
|
|
%
|
|
|
0.2
|
|
%
|
Other, net
|
|
|
(0.9
|
)
|
%
|
|
|
(0.2
|
)
|
%
|
|
|
(1.9
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
22.3
|
|
%
|
|
|
29.7
|
|
%
|
|
|
27.5
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
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 2002 have been closed, either through
settlement or expiration of the statute of limitations.
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. We believe that the
settlement of any such amounts would not have a significant
impact on our consolidated financial position, results of
operations
and/or
liquidity. In fiscal years 2006, 2005 and 2004, we reversed
$11.4 million, $3.7 million and $3.5 million,
respectively, of reserves for tax contingencies as a result of
the expiration of the related statutes of limitations.
Unremitted foreign earnings reinvested abroad upon which
U.S. income taxes have not been provided aggregated
approximately $35.1 million, $59.0 million and
$53.9 million at March 31, 2006, 2005 and 2004,
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 2006 related to these permanently 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 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 deduction is subject to a number of
limitations and requirements, one of which is to adopt a DRIP to
document planned reinvestments of amounts equal to the foreign
earnings repatriated under the Jobs Act. The favorable
U.S. tax treatment of repatriations under the Jobs Act
applies to qualifying distributions that we received through
March 31, 2006. In September 2005, our senior management
approved a DRIP, as required by the Jobs Act, documenting our
plan to repatriate up to a maximum of $75 million of
previously unremitted foreign earnings from our foreign
subsidiaries. Our Board of Directors subsequently approved the
plan in November 2005. Through March 31, 2006, we received
distributions intended to qualify under the Jobs Act totaling
$46.1 million from one of our foreign subsidiaries. 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
and does not reduce our effective income tax rate. The tax
benefit for fiscal years 2006, 2005 and 2004 totaled
approximately $0.3 million, $2.9 million and
$0.3 million, respectively.
Income taxes paid during fiscal years 2006, 2005 and 2004 were
$31.3 million, $21.6 million and $20.0 million,
respectively.
Note 9
EMPLOYEE BENEFIT PLANS
Savings and Retirement Plans We currently
have three qualified defined contribution plans, which cover
substantially all employees other than Bristow Aviation
employees.
The Offshore Logistics, Inc. Employee Savings and Retirement
Plan (OLG Plan) covers Corporate and Air Logistics
or AirLog employees. Under the OLG Plan, we match
each participants contributions up to 3% of the
employees compensation. In addition, under the OLG Plan,
we contribute an additional 3% of the employees
compensation at the end of each calendar year.
F-34
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Grasso Production Management, Inc. Thrift & Profit
Sharing Trust covers eligible Grasso Production Management, Inc.
employees. We match each participants contributions up to
3% of the employees compensation, plus a 50% match of
contributions up to an additional 2% of compensation.
The Turbo Engines, Inc., formerly Pueblo Airmotive, Inc., 401(k)
Plan covers Turbo Engines, Inc. employees. We match each
participants contributions up to 3% of the employees
compensation.
Bristow Helicopters (a wholly-owned subsidiary of Bristow
Aviation) has a defined benefit pension plan, which covered all
full-time employees of Bristow Aviation employed on or before
December 31, 1997. The plan is closed to future accrual and
any deficits are funded by contributions partly from employees
and partly from Bristow Helicopters. Members of the plan
contribute up to 11.5% of pensionable salary (as defined in the
plan) and can pay additional voluntary contributions to provide
additional benefits. The benefits are based on the
employees annualized average last three years
pensionable salaries. Plan assets are held in separate trustee
administered funds, which are primarily invested in equities and
bonds in the United Kingdom. This plan limits the rate of annual
increases in pensionable salary to the lesser of (a) annual
increases in a retail price index or (b) 5%.
In February 2004, Bristow Aviation amended the defined benefit
pension plan. The amendment, effective February 1, 2004,
essentially removed the defined benefit feature for a
participants future services and replaced it with a
defined contribution arrangement. This change to the plan
constituted a curtailment of benefits and,
accordingly, all previously deferred service gains related to
prior plan amendments were recognized in the statement of income
and totaled £11.9 million ($21.7 million) in
fiscal year 2004.
Under the new defined contribution feature, Bristow Helicopters
will contribute 5% of a participants non-variable salary
to a defined contribution section of the plan up until
December 31, 2004. The participant is required to
contribute a minimum of 5% of non-variable salary for Bristow
Helicopters to match the contribution. Beginning in January
2005, Bristow Helicopters contribution increased to a
maximum of 7% of a participants non-variable salary, and
in April 2006, the maximum employer contribution into the scheme
was increased to 7.35% for pilots.
Our contributions to the five defined contribution plans were
$7.2 million, $6.3 million and $19.8 million for
fiscal years 2006, 2005 and 2004, respectively.
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. Following the cessation of the defined benefit accruals
for retirement pensions effective February 1, 2004, any
such gains or losses are amortized over the average remaining
life expectancy of the plan members.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Projected benefit obligation (PBO)
at beginning of period
|
|
$
|
422,169
|
|
|
$
|
381,657
|
|
Service cost
|
|
|
280
|
|
|
|
288
|
|
Interest cost
|
|
|
21,326
|
|
|
|
20,721
|
|
Prior service costs
|
|
|
|
|
|
|
340
|
|
Actuarial loss
|
|
|
36,294
|
|
|
|
25,933
|
|
Benefit payments and expenses
|
|
|
(16,466
|
)
|
|
|
(17,569
|
)
|
Effect of exchange rate changes
|
|
|
(34,518
|
)
|
|
|
10,799
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation (PBO)
at end of period
|
|
$
|
429,085
|
|
|
$
|
422,169
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Market value of assets at
beginning of period
|
|
$
|
300,713
|
|
|
$
|
277,686
|
|
Actual return on assets
|
|
|
61,220
|
|
|
|
27,786
|
|
Employer contributions
|
|
|
9,539
|
|
|
|
5,101
|
|
Benefit payments and expenses
|
|
|
(16,466
|
)
|
|
|
(17,569
|
)
|
Effect of exchange rate changes
|
|
|
(25,235
|
)
|
|
|
7,709
|
|
|
|
|
|
|
|
|
|
|
Market value of assets at end of
period
|
|
$
|
329,771
|
|
|
$
|
300,713
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status:
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
(ABO)
|
|
$
|
429,085
|
|
|
$
|
422,169
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation (PBO)
|
|
$
|
429,085
|
|
|
$
|
422,169
|
|
Fair value of assets
|
|
|
(329,771
|
)
|
|
|
(300,713
|
)
|
|
|
|
|
|
|
|
|
|
PBO in excess of assets
|
|
|
99,314
|
|
|
|
121,456
|
|
Unrecognized actuarial losses
|
|
|
(136,521
|
)
|
|
|
(157,999
|
)
|
|
|
|
|
|
|
|
|
|
Prepaid pension cost
|
|
|
(37,207
|
)
|
|
|
(36,543
|
)
|
Adjustment to recognize minimum
liability
|
|
|
136,521
|
|
|
|
157,999
|
|
|
|
|
|
|
|
|
|
|
Net recognized pension liability
|
|
$
|
99,314
|
|
|
$
|
121,456
|
|
|
|
|
|
|
|
|
|
|
F-36
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Components of net periodic pension
cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost for benefits earned
during the period
|
|
$
|
280
|
|
|
$
|
288
|
|
|
$
|
5,251
|
|
Interest cost on PBO
|
|
|
21,326
|
|
|
|
20,721
|
|
|
|
17,781
|
|
Expected return on assets
|
|
|
(19,401
|
)
|
|
|
(19,243
|
)
|
|
|
(16,028
|
)
|
Prior service costs
|
|
|
|
|
|
|
340
|
|
|
|
|
|
Amortization of unrecognized plan
amendment effects
|
|
|
|
|
|
|
|
|
|
|
(1,827
|
)
|
Amortization of unrecognized
experience losses
|
|
|
3,649
|
|
|
|
3,403
|
|
|
|
9,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
5,854
|
|
|
|
5,509
|
|
|
|
14,398
|
|
Curtailment gain
|
|
|
|
|
|
|
|
|
|
|
(21,665
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension (benefit) cost
|
|
$
|
5,854
|
|
|
$
|
5,509
|
|
|
$
|
(7,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial assumptions used to develop these components were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Discount rate
|
|
|
4.95
|
%
|
|
|
5.45
|
%
|
|
|
5.50
|
%
|
Expected long-term rate of return
on assets
|
|
|
6.90
|
%
|
|
|
7.00
|
%
|
|
|
7.25
|
%
|
Rate of compensation increase
|
|
|
2.70
|
%
|
|
|
2.70
|
%
|
|
|
2.25
|
%
|
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 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) to ensure that the Scheme maintains the minimum level
of funding known as the Minimum Funding Requirement (the MFR) as
required by The Pensions Act 1995.
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.
F-37
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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, 2006
and 2005 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
|
|
|
Actual Allocation as of March 31,
|
|
Asset Category
|
|
Allocation
|
|
|
2006
|
|
|
2005
|
|
|
Equity securities
|
|
|
63.3
|
%
|
|
|
66.6
|
%
|
|
|
63.0
|
%
|
Debt securities
|
|
|
36.7
|
%
|
|
|
33.3
|
%
|
|
|
36.6
|
%
|
Other assets
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated future benefit payments over each of the next five
fiscal years from March 31, 2006 and in aggregate for the
following five fiscal years after fiscal year 2011, including
life assurance premiums, are as follows:
|
|
|
|
|
Projected Benefit Payments by the Plan for Fiscal Years
Ending March 31,
|
|
Payments
|
|
|
|
(In thousands)
|
|
|
2007
|
|
$
|
15,480
|
|
2008
|
|
|
15,828
|
|
2009
|
|
|
16,697
|
|
2010
|
|
|
17,393
|
|
2011
|
|
|
18,611
|
|
Aggregate 2012 2016
|
|
|
101,227
|
|
We expect to fund these payments with our cash contributions to
the plans, plan assets and earnings on plan assets. The current
best estimate of our cash contributions to the plans for the
year ending March 31, 2007 is $9.9 million.
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. Based on this statement, it is possible
that we will see an increase in the required level of our
contributions in future periods. We are not currently able to
estimate what this increased level of funding will be and what
impact it will have on our financial position in future periods.
Incentive and Stock Option Plans Under the
1994 Long-Term Management Incentive Plan, as amended (1994
Plan), a maximum of 2,900,000 shares of Common Stock,
or cash equivalents of Common Stock, were provided for awards to
officers and key employees.
Awards granted under the 1994 Plan may be 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. Incentive stock option prices cannot be less than
the fair market value of the Common Stock at the date of grant.
Non-qualified stock option prices cannot be less than 50% of the
fair market
F-38
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
value of the Common Stock at the date of grant. Stock option
prices are determined by our Board of Directors. This plan
expired in 2005 and is in effect only for options outstanding as
of March 31, 2005.
Under the 2004 Stock Incentive Plan (2004 Plan), a
maximum of 1,000,000 shares of Common Stock, or cash
equivalents of Common Stock, were provided for awards to
officers and key employees. Awards granted under the 2004 Plan
may be in the form of stock options, stock appreciation rights,
restricted stock, restricted stock units, 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. Stock option and
Free-Standing Stock Appreciation Right prices cannot be less
than the fair market value of the Common Stock at the date of
grant.
The 1991 Non-qualified Stock Option Plan for Non-employee
Directors, as amended, (1991 Director Plan)
provides for a maximum of 200,000 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
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 and is in effect only
for options outstanding at March 31, 2004.
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.
Under our stock option plans there are 1,666,548 shares of
Common Stock reserved for issuance as of March 31, 2006, of
which 852,785 shares are available for future grants.
A summary of our stock options as of March 31, 2006, 2005
and 2004 and changes during the periods ended on those dates is
presented below:
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Number
|
|
|
|
Exercise Price
|
|
|
of Shares
|
|
|
Balance as of March 31, 2003
|
|
$
|
17.39
|
|
|
|
904,800
|
|
Granted
|
|
|
20.97
|
|
|
|
351,500
|
|
Exercised
|
|
|
17.33
|
|
|
|
(120,300
|
)
|
Expired or cancelled
|
|
|
19.58
|
|
|
|
(24,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2004
|
|
|
18.48
|
|
|
|
1,112,000
|
|
Granted
|
|
|
26.25
|
|
|
|
409,500
|
|
Exercised
|
|
|
18.14
|
|
|
|
(683,487
|
)
|
Expired or cancelled
|
|
|
19.82
|
|
|
|
(6,500
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2005
|
|
|
22.59
|
|
|
|
831,513
|
|
Granted
|
|
|
30.87
|
|
|
|
192,015
|
|
Exercised
|
|
|
19.35
|
|
|
|
(70,765
|
)
|
Expired or cancelled
|
|
|
21.39
|
|
|
|
(139,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2006
|
|
|
24.90
|
|
|
|
813,763
|
|
|
|
|
|
|
|
|
|
|
F-39
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of March 31, 2006, 2005 and 2004, the number of options
exercisable under the stock option plans was 407,723, 358,901
and 672,833, respectively, and the weighted average exercise
price of those options was $23.03, $20.30 and $17.42,
respectively. Stock options granted to employees under the 1994
and 2004 Plans during fiscal years 2006, 2005 and 2004 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 Directors Plans vest after six months.
The following table summarizes information about stock options
outstanding as of March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Wgtd. Avg.
|
|
|
Wgtd. Avg.
|
|
|
|
|
|
Wgtd. Avg.
|
|
Range of
|
|
Number
|
|
|
Remaining
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Exercise Prices
|
|
Outstanding
|
|
|
Contr. Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$ 7.38 - $19.76
|
|
|
179,934
|
|
|
|
5.34
|
|
|
$
|
17.26
|
|
|
|
179,934
|
|
|
$
|
17.26
|
|
$21.15 - $29.82
|
|
|
465,229
|
|
|
|
8.34
|
|
|
|
24.81
|
|
|
|
118,123
|
|
|
|
22.16
|
|
$30.25 - $36.61
|
|
|
168,600
|
|
|
|
9.06
|
|
|
|
33.30
|
|
|
|
109,666
|
|
|
|
33.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
813,763
|
|
|
|
7.83
|
|
|
|
24.90
|
|
|
|
407,723
|
|
|
|
23.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of our restricted stock units as of March 31,
2006 and 2005 and changes during the periods ended on those
dates is presented below:
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Number of
|
|
|
|
Initial Market Value
|
|
|
Shares
|
|
|
Balance as of March 31, 2004
|
|
$
|
|
|
|
|
|
|
Granted
|
|
|
27.71
|
|
|
|
25,000
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2005
|
|
|
27.71
|
|
|
|
25,000
|
|
Granted
|
|
|
29.71
|
|
|
|
180,300
|
|
Forfeited
|
|
|
33.72
|
|
|
|
(7,100
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2006
|
|
|
29.32
|
|
|
|
198,200
|
|
|
|
|
|
|
|
|
|
|
The restricted stock units fully vest on the fifth anniversary
from the date of grant if the Cumulative Annual
Shareholder Return (as defined in the restricted stock
unit agreements) exceeds an annual average of 3% for the five
year period. Partial vesting occurs on the third or fourth
anniversary after the date of grant if the Cumulative Annual
Shareholder Return equals or exceeds 10%, with full vesting if
such amount equals or exceeds 15%.
We record compensation expense for the restricted stock units
based on an estimate of the expected vesting, which is
reassessed quarterly. Changes in such estimates may cause the
amount of expense recognized each period to fluctuate. We
recognized $0.6 million in employee stock-based
compensation expense related to restricted stock units during
fiscal year 2006.
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. Participants are permitted to receive
all or any part of their annual incentive bonus in the form of
shares of restricted stock in accordance with the terms of the
1994 Plan. The bonuses related to this plan were
$3.9 million, $2.7 million and $2.1 million for
fiscal years 2006, 2005 and 2004, respectively. There were no
shares of restricted stock outstanding as of March 31, 2006
related to the Annual Plan.
F-40
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. The assets of the
plan are held in a rabbi trust and are subject to our general
creditors. As of March 31, 2006, the amount held in trust
was $1.3 million.
Note 10
EARNINGS PER SHARE AND STOCKHOLDERS EQUITY
Basic earnings per common share were computed by dividing net
income by the weighted average number of shares of Common Stock
outstanding during the fiscal year. Diluted earnings per common
share for fiscal year 2004 were determined on the assumption
that the Convertible Subordinated Notes were converted on
April 1, 2003. Diluted earnings per share for fiscal years
2006 and 2005, respectively, excluded 100,235 and 45,712 stock
options at a weighted average exercise price of $33.70 and
$33.47, which were outstanding during the period but were
anti-dilutive. The following table sets forth the computation of
basic and diluted income from continuing operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Net income (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common
stockholders-basic
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
49,825
|
|
Interest and redemption premium on
convertible debt, net of taxes
|
|
|
|
|
|
|
|
|
|
|
1,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common
stockholders-diluted
|
|
$
|
57,809
|
|
|
$
|
51,560
|
|
|
$
|
51,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding-basic
|
|
|
23,341,315
|
|
|
|
23,040,565
|
|
|
|
22,545,183
|
|
Net effect of dilutive stock
options and restricted stock units based on treasury stock method
|
|
|
262,877
|
|
|
|
340,003
|
|
|
|
174,423
|
|
Assumed conversion of convertible
debt
|
|
|
|
|
|
|
|
|
|
|
1,293,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average of common shares
outstanding- diluted
|
|
|
23,604,192
|
|
|
|
23,380,568
|
|
|
|
24,012,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
2.48
|
|
|
$
|
2.24
|
|
|
$
|
2.21
|
|
Diluted earnings per share
|
|
$
|
2.45
|
|
|
$
|
2.21
|
|
|
$
|
2.15
|
|
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
F-41
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
The total number of authorized shares of Common Stock reserved
as of March 31, 2006 was 4,000,239. These shares are
reserved in connection with our stock-based compensation plans,
the Rights discussed above, and in conjunction with prior
acquisitions.
NOTE 11
SEGMENT INFORMATION
We operate principally in two business segments: Helicopter
Services and Production Management Services. Beginning in fiscal
year 2006, we conduct the operations of our Helicopter Services
segment through seven business units: North America, South and
Central America, Europe, West Africa, Southeast Asia, Other
International and Eastern Hemisphere (EH)
Centralized Operations.
Our EH Centralized Operations business unit is comprised of a
helicopter leasing subsidiary, our technical services business
and other non-flight services business in the Eastern Hemisphere
and corporate level expenses for our Eastern Hemisphere
businesses not allocated to any other business unit. 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. Previously, we
conducted these operations through four business units: North
America, North Sea, International and Technical Services.
We provide 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.
The change in business units reflects changes made in fiscal
year 2006 by our President and Chief Executive Officer (Bristow
Groups chief decision maker) and other senior management
to the way they manage and evaluate our results of operations.
Our management determined that in addition to evaluating our
results of operations based on the nature of our operations,
they would also manage and evaluate our results of operations
based on the geographic location of our operations and the
location of the management teams responsible for those
operations. Accordingly, we have modified our segment disclosure
to reflect the change in business units.
F-42
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following presents reportable segment information for the
fiscal years ended March 31, 2006, 2005 and 2004,
reconciled to consolidated totals, and prepared on the same
basis as our consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Segment gross revenue from
external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
202,415
|
|
|
$
|
156,224
|
|
|
$
|
152,988
|
|
South and Central America
|
|
|
42,869
|
|
|
|
52,597
|
|
|
|
51,665
|
|
Europe
|
|
|
239,397
|
|
|
|
221,261
|
|
|
|
207,229
|
|
West Africa
|
|
|
107,411
|
|
|
|
94,429
|
|
|
|
77,188
|
|
Southeast Asia
|
|
|
61,168
|
|
|
|
53,024
|
|
|
|
43,326
|
|
Other International
|
|
|
33,934
|
|
|
|
21,244
|
|
|
|
10,662
|
|
EH Centralized Operations
|
|
|
12,960
|
|
|
|
14,268
|
|
|
|
22,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
700,154
|
|
|
|
613,047
|
|
|
|
565,722
|
|
Production Management Services
|
|
|
68,093
|
|
|
|
58,915
|
|
|
|
49,750
|
|
Corporate
|
|
|
693
|
|
|
|
1,684
|
|
|
|
1,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment gross revenue
|
|
$
|
768,940
|
|
|
$
|
673,646
|
|
|
$
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment and intrasegment
gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
26,169
|
|
|
$
|
22,795
|
|
|
$
|
19,150
|
|
South and Central America
|
|
|
1,685
|
|
|
|
1,102
|
|
|
|
915
|
|
Europe
|
|
|
3,544
|
|
|
|
2,437
|
|
|
|
4,270
|
|
West Africa
|
|
|
|
|
|
|
3
|
|
|
|
17
|
|
Southeast Asia
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Other International
|
|
|
1,405
|
|
|
|
100
|
|
|
|
159
|
|
EH Centralized Operations
|
|
|
41,973
|
|
|
|
41,901
|
|
|
|
49,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
74,776
|
|
|
|
68,338
|
|
|
|
74,027
|
|
Production Management Services
|
|
|
77
|
|
|
|
67
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intersegment and
intrasegment gross revenue
|
|
$
|
74,853
|
|
|
$
|
68,405
|
|
|
$
|
74,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-43
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Consolidated gross revenue
reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
228,584
|
|
|
$
|
179,019
|
|
|
$
|
172,138
|
|
South and Central America
|
|
|
44,554
|
|
|
|
53,699
|
|
|
|
52,580
|
|
Europe
|
|
|
242,941
|
|
|
|
223,698
|
|
|
|
211,499
|
|
West Africa
|
|
|
107,411
|
|
|
|
94,432
|
|
|
|
77,205
|
|
Southeast Asia
|
|
|
61,168
|
|
|
|
53,024
|
|
|
|
43,329
|
|
Other International
|
|
|
35,339
|
|
|
|
21,344
|
|
|
|
10,821
|
|
EH Centralized Operations
|
|
|
54,933
|
|
|
|
56,169
|
|
|
|
72,177
|
|
Intrasegment eliminations
|
|
|
(65,876
|
)
|
|
|
(60,567
|
)
|
|
|
(67,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services(1)
|
|
|
709,054
|
|
|
|
620,818
|
|
|
|
572,465
|
|
Production Management Services(2)
|
|
|
68,170
|
|
|
|
58,982
|
|
|
|
49,815
|
|
Corporate
|
|
|
693
|
|
|
|
1,684
|
|
|
|
1,529
|
|
Intersegment eliminations
|
|
|
(8,977
|
)
|
|
|
(7,838
|
)
|
|
|
(6,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated gross revenue
|
|
$
|
768,940
|
|
|
$
|
673,646
|
|
|
$
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
(loss) reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
37,863
|
|
|
$
|
25,977
|
|
|
$
|
28,423
|
|
South and Central America
|
|
|
5,042
|
|
|
|
12,083
|
|
|
|
12,975
|
|
Europe
|
|
|
30,630
|
|
|
|
29,374
|
|
|
|
17,309
|
|
West Africa
|
|
|
5,632
|
|
|
|
5,891
|
|
|
|
1,101
|
|
Southeast Asia
|
|
|
4,800
|
|
|
|
4,002
|
|
|
|
2,386
|
|
Other International
|
|
|
7,549
|
|
|
|
2,879
|
|
|
|
1,724
|
|
EH Centralized Operations
|
|
|
437
|
|
|
|
(4,441
|
)
|
|
|
2,324
|
|
Curtailment gain allocated to
Helicopter Services(3)
|
|
|
|
|
|
|
|
|
|
|
20,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
91,953
|
|
|
|
75,765
|
|
|
|
86,607
|
|
Production Management Services
|
|
|
5,327
|
|
|
|
3,907
|
|
|
|
2,514
|
|
Gain on disposal of assets
|
|
|
102
|
|
|
|
8,039
|
|
|
|
3,943
|
|
Corporate
|
|
|
(23,587
|
)
|
|
|
(10,103
|
)
|
|
|
(5,639
|
)
|
Curtailment gain allocated to
Corporate(3)
|
|
|
|
|
|
|
|
|
|
|
1,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated operating income
|
|
$
|
73,795
|
|
|
$
|
77,608
|
|
|
$
|
88,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Capital expenditures:(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
109,826
|
|
|
$
|
52,273
|
|
|
$
|
57,451
|
|
South and Central America
|
|
|
36
|
|
|
|
65
|
|
|
|
171
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
West Africa
|
|
|
2,062
|
|
|
|
389
|
|
|
|
110
|
|
Southeast Asia
|
|
|
1,338
|
|
|
|
355
|
|
|
|
40
|
|
Other International
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
EH Centralized Operations
|
|
|
39,339
|
|
|
|
36,669
|
|
|
|
9,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
153,635
|
|
|
|
89,751
|
|
|
|
67,410
|
|
Production Management Services
|
|
|
107
|
|
|
|
168
|
|
|
|
436
|
|
Corporate
|
|
|
520
|
|
|
|
104
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
154,262
|
|
|
$
|
90,023
|
|
|
$
|
67,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
16,899
|
|
|
$
|
14,953
|
|
|
$
|
12,693
|
|
South and Central America
|
|
|
2,064
|
|
|
|
2,110
|
|
|
|
2,516
|
|
Europe
|
|
|
497
|
|
|
|
507
|
|
|
|
505
|
|
West Africa
|
|
|
1,707
|
|
|
|
1,132
|
|
|
|
1,114
|
|
Southeast Asia
|
|
|
341
|
|
|
|
294
|
|
|
|
231
|
|
Other International
|
|
|
1,936
|
|
|
|
1,478
|
|
|
|
666
|
|
EH Centralized Operations
|
|
|
18,521
|
|
|
|
19,917
|
|
|
|
21,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
41,965
|
|
|
|
40,391
|
|
|
|
39,178
|
|
Production Management Services
|
|
|
196
|
|
|
|
194
|
|
|
|
166
|
|
Corporate
|
|
|
95
|
|
|
|
108
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
42,256
|
|
|
$
|
40,693
|
|
|
$
|
39,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Identifiable assets:(4)
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
415,045
|
|
|
$
|
432,592
|
|
South and Central America
|
|
|
10,042
|
|
|
|
6,133
|
|
Europe
|
|
|
31,515
|
|
|
|
36,480
|
|
West Africa
|
|
|
8,918
|
|
|
|
6,046
|
|
Southeast Asia
|
|
|
13,657
|
|
|
|
13,346
|
|
Other International
|
|
|
28,125
|
|
|
|
27,140
|
|
EH Centralized Operations
|
|
|
520,524
|
|
|
|
531,065
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
1,027,826
|
|
|
|
1,052,802
|
|
Production Management Services
|
|
|
34,013
|
|
|
|
31,918
|
|
Corporate
|
|
|
114,574
|
|
|
|
64,856
|
|
|
|
|
|
|
|
|
|
|
Total identifiable assets
|
|
$
|
1,176,413
|
|
|
$
|
1,149,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes reimbursable revenue of $62.9 million,
$53.6 million and $52.2 million for fiscal years 2006,
2005 and 2004, respectively. |
|
(2) |
|
Includes reimbursable revenue of $17.3 million,
$11.1 million and $6.7 million for fiscal years 2006,
2005, and 2004, respectively. |
|
(3) |
|
See discussion of the curtailment in Note 9. |
|
(4) |
|
Information presented herein for our business units related to
capital expenditures, depreciation and amortization and
identifiable assets is based on the business unit that owns the
underlying assets. A significant portion of these assets are
leased from our EH Centralized Operations business unit to other
business units. Our operating revenue and operating expenses
associated with the operations of those assets is reflected in
the results for the business unit that operates the asset and
the intercompany lease revenue and expense eliminates in
consolidation. |
We attribute revenue to various countries based on the location
where Helicopter Services or Production Management 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
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
207,655
|
|
|
$
|
216,255
|
|
|
$
|
203,728
|
|
United Kingdom
|
|
|
265,408
|
|
|
|
223,075
|
|
|
|
211,468
|
|
Nigeria
|
|
|
101,388
|
|
|
|
94,215
|
|
|
|
76,683
|
|
Australia
|
|
|
50,654
|
|
|
|
43,143
|
|
|
|
32,072
|
|
Mexico
|
|
|
8,135
|
|
|
|
24,264
|
|
|
|
25,611
|
|
Other countries
|
|
|
135,700
|
|
|
|
72,694
|
|
|
|
67,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
768,940
|
|
|
$
|
673,646
|
|
|
$
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
148,128
|
|
|
$
|
179,835
|
|
United Kingdom
|
|
|
142,786
|
|
|
|
164,787
|
|
Nigeria
|
|
|
119,640
|
|
|
|
77,537
|
|
Australia
|
|
|
28,052
|
|
|
|
31,892
|
|
Mexico
|
|
|
25,135
|
|
|
|
31,166
|
|
Other countries
|
|
|
152,173
|
|
|
|
123,845
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
615,914
|
|
|
$
|
609,062
|
|
|
|
|
|
|
|
|
|
|
Goodwill related to Production Management Services was
$13.9 million as of March 31, 2006 and 2005. Goodwill
related to Helicopter Services was $12.9 million and
$12.8 million as of March 31, 2006 and 2005,
respectively. See a further breakout of goodwill by business
unit in Note 1.
During fiscal years 2006, 2005 and 2004, we conducted operations
in over 12 foreign countries as well as in the United States and
the United Kingdom. Due to the nature of our principal assets,
they are regularly and routinely moved between operating areas
(both domestic and foreign) to meet changes in market and
operating conditions. During fiscal years 2006, 2005 and 2004,
the aggregate activities of one international oil company
customer accounted for 10%, 11% and 11%, respectively, of
consolidated gross revenue. During fiscal year 2006, our top ten
customers accounted for 50% of our gross revenue.
Note 12
QUARTERLY FINANCIAL INFORMATION (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
June 30
|
|
September 30
|
|
December 31(1)(2)(3)
|
|
March 31(1)(2)(3)
|
|
|
(In thousands, except per share amounts)
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
180,937
|
|
|
$
|
194,405
|
|
|
$
|
192,267
|
|
|
$
|
201,331
|
|
Operating income
|
|
|
15,045
|
|
|
|
22,095
|
|
|
|
17,732
|
|
|
|
18,923
|
|
Net income
|
|
|
11,972
|
|
|
|
14,632
|
|
|
|
13,400
|
|
|
|
17,805
|
|
Basic earnings per share
|
|
|
0.51
|
|
|
|
0.63
|
|
|
|
0.57
|
|
|
|
0.76
|
|
Diluted earnings per share
|
|
|
0.51
|
|
|
|
0.62
|
|
|
|
0.57
|
|
|
|
0.75
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
160,401
|
|
|
$
|
170,627
|
|
|
$
|
172,167
|
|
|
$
|
170,451
|
|
Operating income
|
|
|
19,351
|
|
|
|
25,152
|
|
|
|
19,216
|
|
|
|
13,889
|
|
Net income
|
|
|
11,587
|
|
|
|
16,651
|
|
|
|
10,108
|
|
|
|
13,214
|
|
Basic earnings per share
|
|
|
0.51
|
|
|
|
0.73
|
|
|
|
0.43
|
|
|
|
0.57
|
|
Diluted earnings per share
|
|
|
0.51
|
|
|
|
0.71
|
|
|
|
0.43
|
|
|
|
0.56
|
|
|
|
|
(1) |
|
Our overall effective tax rate for the
year-to-date
period declined from 32.9% through the fiscal quarter ended
December 31, 2004 to 29.7% through the fiscal quarter ended
March 31, 2005 as a result of reversals of reserves for
income taxes during the fiscal quarter ended March 31,
2005. This decrease in tax rate resulted in a corresponding
increase in net income during the fiscal quarter ended
March 31, 2005. |
|
(2) |
|
Net income for the fourth quarters of fiscal years 2006 and 2005
includes dividend income received from an unconsolidated
affiliate of $2.5 million. |
|
(3) |
|
Net income for the fiscal quarters ended June 30,
September 30 and December 31, 2005, and March 31,
2006 included $2.8 million, $0.2 million,
$2.3 million and $0.1 million, respectively, of |
F-47
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
foreign currency transaction gains. Net income for the fiscal
quarters ended June 30, September 30 and
December 31, 2004, and March 31, 2005 included
$0.1 million, $0.3 million, $(2.6) million, and
$0.9 million, respectively, of foreign currency transaction
gains (losses). |
|
|
Note 13
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
|
In connection with the sale of our $230 million
61/8% Senior
Notes due 2013, certain of our wholly-owned subsidiaries (the
Guarantor Subsidiaries) jointly, severally and
unconditionally guaranteed the payment obligations under the
Senior 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 Bristow Group Inc.s other
subsidiaries (the Non-Guarantor Subsidiaries). On
March 31, 2004, Airlog International Ltd., one of Bristow
Group Inc.s wholly-owned subsidiaries exceeded the
threshold for the determination of a significant subsidiary as
defined in the $230 million
61/8% Senior
Note indenture. Therefore, this subsidiary executed a
Supplemental Indenture and its financial information is
reflected in Guarantor Subsidiaries in the accompanying
Supplemental Condensed Consolidating Balance Sheet as of
March 31, 2006 and 2005, and the Supplemental Condensed
Consolidating Statement of Income and Supplemental Condensed
Consolidating Statement of Cash Flows for the fiscal years ended
March 31, 2006 and 2005. 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. Certain reclassifications
were made to conform all of the financial information to the
financial presentation on a consolidated basis. The principal
eliminating entries eliminate investments in subsidiaries,
intercompany balances and intercompany revenues and expenses.
The allocation of the consolidated income tax provision was made
using the with and without allocation method.
F-48
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
|
|
|
$
|
295,582
|
|
|
$
|
472,666
|
|
|
$
|
|
|
|
$
|
768,940
|
|
Intercompany revenue
|
|
|
|
|
|
|
8,263
|
|
|
|
8,831
|
|
|
|
(17,094
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692
|
|
|
|
303,845
|
|
|
|
481,497
|
|
|
|
(17,094
|
)
|
|
|
768,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
16
|
|
|
|
222,780
|
|
|
|
368,247
|
|
|
|
|
|
|
|
591,043
|
|
Intercompany expenses
|
|
|
|
|
|
|
8,831
|
|
|
|
7,823
|
|
|
|
(16,654
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
95
|
|
|
|
17,755
|
|
|
|
24,406
|
|
|
|
|
|
|
|
42,256
|
|
General and administrative
|
|
|
24,168
|
|
|
|
15,027
|
|
|
|
23,193
|
|
|
|
(440
|
)
|
|
|
61,948
|
|
Loss (gain) on disposal of assets
|
|
|
4
|
|
|
|
(588
|
)
|
|
|
482
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,283
|
|
|
|
263,805
|
|
|
|
424,151
|
|
|
|
(17,094
|
)
|
|
|
695,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(23,591
|
)
|
|
|
40,040
|
|
|
|
57,346
|
|
|
|
|
|
|
|
73,795
|
|
Earnings (losses) from
unconsolidated affiliates, net
|
|
|
35,737
|
|
|
|
(2,534
|
)
|
|
|
9,500
|
|
|
|
(35,945
|
)
|
|
|
6,758
|
|
Interest income
|
|
|
54,920
|
|
|
|
203
|
|
|
|
4,244
|
|
|
|
(55,208
|
)
|
|
|
4,159
|
|
Interest expense
|
|
|
(14,597
|
)
|
|
|
(11
|
)
|
|
|
(55,289
|
)
|
|
|
55,208
|
|
|
|
(14,689
|
)
|
Other income (expense), net
|
|
|
(515
|
)
|
|
|
7
|
|
|
|
5,120
|
|
|
|
|
|
|
|
4,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
51,954
|
|
|
|
37,705
|
|
|
|
20,921
|
|
|
|
(35,945
|
)
|
|
|
74,635
|
|
Allocation of consolidated income
taxes
|
|
|
(6,010
|
)
|
|
|
2,397
|
|
|
|
20,220
|
|
|
|
|
|
|
|
16,607
|
|
Minority interest
|
|
|
(155
|
)
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
(219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,809
|
|
|
$
|
35,308
|
|
|
$
|
637
|
|
|
$
|
(35,945
|
)
|
|
$
|
57,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Balance Sheet
As of March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
74,601
|
|
|
$
|
1,363
|
|
|
$
|
46,518
|
|
|
$
|
|
|
|
$
|
122,482
|
|
Accounts receivable
|
|
|
23,627
|
|
|
|
57,332
|
|
|
|
112,277
|
|
|
|
(32,831
|
)
|
|
|
160,405
|
|
Inventories
|
|
|
|
|
|
|
71,061
|
|
|
|
76,799
|
|
|
|
|
|
|
|
147,860
|
|
Prepaid expenses and other
|
|
|
1,146
|
|
|
|
4,080
|
|
|
|
11,293
|
|
|
|
|
|
|
|
16,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
99,374
|
|
|
|
133,836
|
|
|
|
246,887
|
|
|
|
(32,831
|
)
|
|
|
447,266
|
|
Intercompany investment
|
|
|
266,510
|
|
|
|
1,046
|
|
|
|
|
|
|
|
(267,556
|
)
|
|
|
|
|
Investment in unconsolidated
affiliates
|
|
|
4,854
|
|
|
|
1,587
|
|
|
|
33,471
|
|
|
|
|
|
|
|
39,912
|
|
Intercompany notes receivable
|
|
|
547,552
|
|
|
|
|
|
|
|
13,954
|
|
|
|
(561,506
|
)
|
|
|
|
|
Property and equipment
at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
171
|
|
|
|
29,251
|
|
|
|
11,250
|
|
|
|
|
|
|
|
40,672
|
|
Aircraft and equipment
|
|
|
1,695
|
|
|
|
357,051
|
|
|
|
479,568
|
|
|
|
|
|
|
|
838,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,866
|
|
|
|
386,302
|
|
|
|
490,818
|
|
|
|
|
|
|
|
878,986
|
|
Less: Accumulated depreciation and
amortization
|
|
|
(1,349
|
)
|
|
|
(109,963
|
)
|
|
|
(151,760
|
)
|
|
|
|
|
|
|
(263,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
517
|
|
|
|
276,339
|
|
|
|
339,058
|
|
|
|
|
|
|
|
615,914
|
|
Goodwill
|
|
|
|
|
|
|
18,593
|
|
|
|
8,133
|
|
|
|
111
|
|
|
|
26,837
|
|
Other assets
|
|
|
8,808
|
|
|
|
176
|
|
|
|
37,500
|
|
|
|
|
|
|
|
46,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
927,615
|
|
|
$
|
431,577
|
|
|
$
|
679,003
|
|
|
$
|
(861,782
|
)
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
920
|
|
|
$
|
19,225
|
|
|
$
|
39,006
|
|
|
$
|
(9,437
|
)
|
|
$
|
49,714
|
|
Accrued liabilities
|
|
|
14,696
|
|
|
|
20,399
|
|
|
|
79,855
|
|
|
|
(23,394
|
)
|
|
|
91,556
|
|
Deferred taxes
|
|
|
(6,060
|
)
|
|
|
|
|
|
|
11,085
|
|
|
|
|
|
|
|
5,025
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
17,634
|
|
|
|
|
|
|
|
17,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
9,556
|
|
|
|
39,624
|
|
|
|
147,580
|
|
|
|
(32,831
|
)
|
|
|
163,929
|
|
Long-term debt, less current
maturities
|
|
|
234,381
|
|
|
|
|
|
|
|
13,281
|
|
|
|
|
|
|
|
247,662
|
|
Intercompany notes payable
|
|
|
14,658
|
|
|
|
74,525
|
|
|
|
472,323
|
|
|
|
(561,506
|
)
|
|
|
|
|
Other liabilities and deferred
credits
|
|
|
4,658
|
|
|
|
10,175
|
|
|
|
139,704
|
|
|
|
|
|
|
|
154,537
|
|
Deferred taxes
|
|
|
34,361
|
|
|
|
1,648
|
|
|
|
32,272
|
|
|
|
|
|
|
|
68,281
|
|
Minority interest
|
|
|
1,804
|
|
|
|
|
|
|
|
2,503
|
|
|
|
|
|
|
|
4,307
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
234
|
|
|
|
4,062
|
|
|
|
23,578
|
|
|
|
(27,640
|
)
|
|
|
234
|
|
Additional
paid-in-capital
|
|
|
158,761
|
|
|
|
51,170
|
|
|
|
13,477
|
|
|
|
(64,646
|
)
|
|
|
158,762
|
|
Retained earnings
|
|
|
447,524
|
|
|
|
250,373
|
|
|
|
(69,417
|
)
|
|
|
(180,956
|
)
|
|
|
447,524
|
|
Accumulated other comprehensive
income (loss)
|
|
|
21,678
|
|
|
|
|
|
|
|
(96,298
|
)
|
|
|
5,797
|
|
|
|
(68,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
628,197
|
|
|
|
305,605
|
|
|
|
(128,660
|
)
|
|
|
(267,445
|
)
|
|
|
537,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
927,615
|
|
|
$
|
431,577
|
|
|
$
|
679,003
|
|
|
$
|
(861,782
|
)
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-50
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
|
|
Acquisitions, net of cash received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
Repayment of debt and debt
redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(4,070
|
)
|
|
|
|
|
|
|
(4,070
|
)
|
Repayment of intercompany debt
|
|
|
(10,501
|
)
|
|
|
(4,600
|
)
|
|
|
(6,804
|
)
|
|
|
21,905
|
|
|
|
|
|
Debt issuance cost
|
|
|
(2,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,564
|
)
|
Partial prepayment of put/call
obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
(4,500
|
)
|
|
|
(62,646
|
)
|
|
|
67,146
|
|
|
|
|
|
Repurchase of shares from minority
interest
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(129
|
)
|
Issuance of common stock
|
|
|
1,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
8,866
|
|
|
|
(9,100
|
)
|
|
|
(73,520
|
)
|
|
|
68,360
|
|
|
|
(5,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes in
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-51
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Fiscal Year Ended March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
1,685
|
|
|
$
|
249,116
|
|
|
$
|
422,845
|
|
|
$
|
|
|
|
$
|
673,646
|
|
Intercompany revenue
|
|
|
|
|
|
|
6,185
|
|
|
|
4,301
|
|
|
|
(10,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,685
|
|
|
|
255,301
|
|
|
|
427,146
|
|
|
|
(10,486
|
)
|
|
|
673,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
50
|
|
|
|
188,969
|
|
|
|
329,120
|
|
|
|
|
|
|
|
518,139
|
|
Intercompany expenses
|
|
|
|
|
|
|
4,301
|
|
|
|
5,720
|
|
|
|
(10,021
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
108
|
|
|
|
15,357
|
|
|
|
25,228
|
|
|
|
|
|
|
|
40,693
|
|
General and administrative
|
|
|
11,628
|
|
|
|
12,239
|
|
|
|
21,843
|
|
|
|
(465
|
)
|
|
|
45,245
|
|
Gain on disposal of assets
|
|
|
|
|
|
|
(956
|
)
|
|
|
(7,083
|
)
|
|
|
|
|
|
|
(8,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,786
|
|
|
|
219,910
|
|
|
|
374,828
|
|
|
|
(10,486
|
)
|
|
|
596,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(10,101
|
)
|
|
|
35,391
|
|
|
|
52,318
|
|
|
|
|
|
|
|
77,608
|
|
Earnings from unconsolidated
affiliates, net
|
|
|
23,794
|
|
|
|
2,356
|
|
|
|
7,453
|
|
|
|
(24,003
|
)
|
|
|
9,600
|
|
Interest income
|
|
|
50,682
|
|
|
|
109
|
|
|
|
3,749
|
|
|
|
(51,352
|
)
|
|
|
3,188
|
|
Interest expense
|
|
|
(14,890
|
)
|
|
|
(241
|
)
|
|
|
(51,886
|
)
|
|
|
51,352
|
|
|
|
(15,665
|
)
|
Other income (expense), net
|
|
|
(29
|
)
|
|
|
9
|
|
|
|
(1,106
|
)
|
|
|
|
|
|
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
49,456
|
|
|
|
37,624
|
|
|
|
10,528
|
|
|
|
(24,003
|
)
|
|
|
73,605
|
|
Allocation of consolidated income
taxes
|
|
|
(2,314
|
)
|
|
|
5,518
|
|
|
|
18,631
|
|
|
|
|
|
|
|
21,835
|
|
Minority interest
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
51,560
|
|
|
$
|
32,106
|
|
|
$
|
(8,103
|
)
|
|
$
|
(24,003
|
)
|
|
$
|
51,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Balance Sheet
As of March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current
assets::
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,947
|
|
|
$
|
7,907
|
|
|
$
|
114,586
|
|
|
$
|
|
|
|
$
|
146,440
|
|
Accounts receivable
|
|
|
19,108
|
|
|
|
41,253
|
|
|
|
97,484
|
|
|
|
(24,006
|
)
|
|
|
133,839
|
|
Inventories
|
|
|
|
|
|
|
72,892
|
|
|
|
67,814
|
|
|
|
|
|
|
|
140,706
|
|
Prepaid expenses and other
|
|
|
470
|
|
|
|
2,529
|
|
|
|
8,460
|
|
|
|
|
|
|
|
11,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
43,525
|
|
|
|
124,581
|
|
|
|
288,344
|
|
|
|
(24,006
|
)
|
|
|
432,444
|
|
Intercompany investment
|
|
|
297,709
|
|
|
|
1,046
|
|
|
|
|
|
|
|
(298,755
|
)
|
|
|
|
|
Investment in unconsolidated
affiliates
|
|
|
683
|
|
|
|
4,121
|
|
|
|
32,372
|
|
|
|
|
|
|
|
37,176
|
|
Intercompany notes receivable
|
|
|
554,655
|
|
|
|
|
|
|
|
10,727
|
|
|
|
(565,382
|
)
|
|
|
|
|
Property and equipment
at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
135
|
|
|
|
23,466
|
|
|
|
8,942
|
|
|
|
|
|
|
|
32,543
|
|
Aircraft and equipment
|
|
|
1,426
|
|
|
|
327,214
|
|
|
|
498,391
|
|
|
|
|
|
|
|
827,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,561
|
|
|
|
350,680
|
|
|
|
507,333
|
|
|
|
|
|
|
|
859,574
|
|
Less: Accumulated depreciation and
amortization
|
|
|
(1,398
|
)
|
|
|
(100,549
|
)
|
|
|
(148,565
|
)
|
|
|
|
|
|
|
(250,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
|
|
250,131
|
|
|
|
358,768
|
|
|
|
|
|
|
|
609,062
|
|
Goodwill
|
|
|
|
|
|
|
18,593
|
|
|
|
8,105
|
|
|
|
111
|
|
|
|
26,809
|
|
Other assets
|
|
|
6,543
|
|
|
|
634
|
|
|
|
36,908
|
|
|
|
|
|
|
|
44,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
903,278
|
|
|
$
|
399,106
|
|
|
$
|
735,224
|
|
|
$
|
(888,032
|
)
|
|
$
|
1,149,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS INVESTMENT
|
Current
liabilities::
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
673
|
|
|
$
|
10,997
|
|
|
$
|
29,176
|
|
|
$
|
(5,206
|
)
|
|
$
|
35,640
|
|
Accrued liabilities
|
|
|
20,395
|
|
|
|
22,868
|
|
|
|
88,472
|
|
|
|
(18,800
|
)
|
|
|
112,935
|
|
Deferred taxes
|
|
|
(6,291
|
)
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
6,709
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
6,413
|
|
|
|
|
|
|
|
6,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
14,777
|
|
|
|
33,865
|
|
|
|
137,061
|
|
|
|
(24,006
|
)
|
|
|
161,697
|
|
Long-term debt, less current
maturities
|
|
|
230,000
|
|
|
|
|
|
|
|
25,667
|
|
|
|
|
|
|
|
255,667
|
|
Intercompany notes payable
|
|
|
10,246
|
|
|
|
86,103
|
|
|
|
469,033
|
|
|
|
(565,382
|
)
|
|
|
|
|
Other liabilities and deferred
credits
|
|
|
8,749
|
|
|
|
416
|
|
|
|
161,247
|
|
|
|
|
|
|
|
170,412
|
|
Deferred taxes
|
|
|
31,623
|
|
|
|
1,773
|
|
|
|
30,897
|
|
|
|
|
|
|
|
64,293
|
|
Minority interest
|
|
|
2,131
|
|
|
|
|
|
|
|
2,383
|
|
|
|
|
|
|
|
4,514
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
233
|
|
|
|
4,062
|
|
|
|
13,941
|
|
|
|
(18,003
|
)
|
|
|
233
|
|
Additional
paid-in-capital
|
|
|
157,100
|
|
|
|
51,169
|
|
|
|
13,477
|
|
|
|
(64,646
|
)
|
|
|
157,100
|
|
Retained earnings
|
|
|
389,715
|
|
|
|
221,718
|
|
|
|
(5,723
|
)
|
|
|
(215,995
|
)
|
|
|
389,715
|
|
Accumulated other comprehensive
income (loss)
|
|
|
58,704
|
|
|
|
|
|
|
|
(112,759
|
)
|
|
|
|
|
|
|
(54,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
605,752
|
|
|
|
276,949
|
|
|
|
(91,064
|
)
|
|
|
(298,644
|
)
|
|
|
492,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
903,278
|
|
|
$
|
399,106
|
|
|
$
|
735,224
|
|
|
$
|
(888,032
|
)
|
|
$
|
1,149,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net cash provided by (used in)
operating activities:
|
|
$
|
(2,863
|
)
|
|
$
|
49,935
|
|
|
$
|
78,662
|
|
|
$
|
(21,261
|
)
|
|
$
|
104,473
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(104
|
)
|
|
|
(52,196
|
)
|
|
|
(27,967
|
)
|
|
|
2,178
|
|
|
|
(78,089
|
)
|
Proceeds from asset dispositions
|
|
|
8,034
|
|
|
|
12,826
|
|
|
|
23,040
|
|
|
|
(2,178
|
)
|
|
|
41,722
|
|
Acquisitions, net of cash received
|
|
|
|
|
|
|
|
|
|
|
(1,986
|
)
|
|
|
|
|
|
|
(1,986
|
)
|
Investments
|
|
|
1,000
|
|
|
|
(1,150
|
)
|
|
|
(8,036
|
)
|
|
|
|
|
|
|
(8,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
8,930
|
|
|
|
(40,520
|
)
|
|
|
(14,949
|
)
|
|
|
|
|
|
|
(46,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
|
|
|
|
|
|
|
|
7,087
|
|
|
|
(7,087
|
)
|
|
|
|
|
Repayment of debt and debt
redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(2,427
|
)
|
|
|
|
|
|
|
(2,427
|
)
|
Repayment of intercompany debt
|
|
|
(18,416
|
)
|
|
|
(9,400
|
)
|
|
|
(532
|
)
|
|
|
28,348
|
|
|
|
|
|
Partial prepayment of put/call
obligation
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86
|
)
|
Repurchase of shares from minority
interest
|
|
|
(7,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,389
|
)
|
Issuance of common stock
|
|
|
12,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(13,226
|
)
|
|
|
(9,400
|
)
|
|
|
4,128
|
|
|
|
21,261
|
|
|
|
2,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes in
cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
(7,159
|
)
|
|
|
15
|
|
|
|
67,905
|
|
|
|
|
|
|
|
60,761
|
|
Cash and cash equivalents at
beginning of period
|
|
|
31,106
|
|
|
|
7,892
|
|
|
|
46,681
|
|
|
|
|
|
|
|
85,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
$
|
23,947
|
|
|
$
|
7,907
|
|
|
$
|
114,586
|
|
|
$
|
|
|
|
$
|
146,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Fiscal Year Ended March 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
1,530
|
|
|
$
|
196,213
|
|
|
$
|
419,258
|
|
|
$
|
|
|
|
$
|
617,001
|
|
Intercompany revenue
|
|
|
|
|
|
|
12,553
|
|
|
|
1,700
|
|
|
|
(14,253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,530
|
|
|
|
208,766
|
|
|
|
420,958
|
|
|
|
(14,253
|
)
|
|
|
617,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
61
|
|
|
|
153,244
|
|
|
|
322,144
|
|
|
|
|
|
|
|
475,449
|
|
Intercompany expenses
|
|
|
8
|
|
|
|
1,691
|
|
|
|
11,591
|
|
|
|
(13,290
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
200
|
|
|
|
12,709
|
|
|
|
26,634
|
|
|
|
|
|
|
|
39,543
|
|
General and administrative
|
|
|
6,900
|
|
|
|
10,395
|
|
|
|
22,560
|
|
|
|
(963
|
)
|
|
|
38,892
|
|
Gain on disposal of assets
|
|
|
|
|
|
|
(1,055
|
)
|
|
|
(2,888
|
)
|
|
|
|
|
|
|
(3,943
|
)
|
Curtailment gain
|
|
|
|
|
|
|
|
|
|
|
(21,665
|
)
|
|
|
|
|
|
|
(21,665
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,169
|
|
|
|
176,984
|
|
|
|
358,376
|
|
|
|
(14,253
|
)
|
|
|
528,276
|
|
Operating income (loss)
|
|
|
(5,639
|
)
|
|
|
31,782
|
|
|
|
62,582
|
|
|
|
|
|
|
|
88,725
|
|
Earnings from unconsolidated
affiliates, net
|
|
|
31,529
|
|
|
|
|
|
|
|
11,197
|
|
|
|
(31,687
|
)
|
|
|
11,039
|
|
Interest income
|
|
|
43,208
|
|
|
|
20
|
|
|
|
1,939
|
|
|
|
(43,478
|
)
|
|
|
1,689
|
|
Interest expense
|
|
|
(15,939
|
)
|
|
|
(60
|
)
|
|
|
(44,308
|
)
|
|
|
43,478
|
|
|
|
(16,829
|
)
|
Loss on extinguishment of debt
|
|
|
(6,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,205
|
)
|
Other expense, net
|
|
|
(976
|
)
|
|
|
(16
|
)
|
|
|
(6,818
|
)
|
|
|
|
|
|
|
(7,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
45,978
|
|
|
|
31,726
|
|
|
|
24,592
|
|
|
|
(31,687
|
)
|
|
|
70,609
|
|
Allocation of consolidated income
taxes
|
|
|
(5,229
|
)
|
|
|
1,834
|
|
|
|
22,797
|
|
|
|
|
|
|
|
19,402
|
|
Minority interest
|
|
|
(1,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
49,825
|
|
|
$
|
29,892
|
|
|
$
|
1,795
|
|
|
$
|
(31,687
|
)
|
|
$
|
49,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
BRISTOW
GROUP INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended March 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating
activities:
|
|
$
|
1,547
|
|
|
$
|
58,606
|
|
|
$
|
12,506
|
|
|
$
|
10,672
|
|
|
$
|
83,331
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(9
|
)
|
|
|
(57,813
|
)
|
|
|
(10,033
|
)
|
|
|
|
|
|
|
(67,855
|
)
|
Assets purchased on behalf of
unconsolidated affiliate
|
|
|
(17,869
|
)
|
|
|
(6,217
|
)
|
|
|
(11,308
|
)
|
|
|
|
|
|
|
(35,394
|
)
|
Acquisitions, net of cash received
|
|
|
17,869
|
|
|
|
6,217
|
|
|
|
11,308
|
|
|
|
|
|
|
|
35,394
|
|
Proceeds from asset dispositions
|
|
|
4
|
|
|
|
2,984
|
|
|
|
3,866
|
|
|
|
|
|
|
|
6,854
|
|
Investments
|
|
|
(2,953
|
)
|
|
|
|
|
|
|
1,372
|
|
|
|
|
|
|
|
(1,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(2,958
|
)
|
|
|
(54,829
|
)
|
|
|
(4,795
|
)
|
|
|
|
|
|
|
(62,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
262,270
|
|
|
|
|
|
|
|
3,592
|
|
|
|
(14,450
|
)
|
|
|
251,412
|
|
Repayment of debt and debt
redemption premiums
|
|
|
(231,289
|
)
|
|
|
|
|
|
|
(6,116
|
)
|
|
|
3,778
|
|
|
|
(233,627
|
)
|
Debt issuance costs
|
|
|
(4,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,889
|
)
|
Partial prepayment of put/call
obligation
|
|
|
(11,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,442
|
)
|
Issuance of common stock
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
16,735
|
|
|
|
|
|
|
|
(2,524
|
)
|
|
|
(10,672
|
)
|
|
|
3,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes in
cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
4,591
|
|
|
|
|
|
|
|
4,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
15,324
|
|
|
|
3,777
|
|
|
|
9,778
|
|
|
|
|
|
|
|
28,879
|
|
Cash and cash equivalents at
beginning of period
|
|
|
15,782
|
|
|
|
2,213
|
|
|
|
38,805
|
|
|
|
|
|
|
|
56,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
$
|
31,106
|
|
|
$
|
5,990
|
|
|
$
|
48,583
|
|
|
$
|
|
|
|
$
|
85,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Bristow Group Inc.:
We have reviewed the condensed consolidated balance sheet of
Bristow Group Inc. and subsidiaries as of June 30, 2006 and
the related condensed consolidated statements of income and cash
flows for the three-month periods ended June 30, 2006 and
2005. These condensed consolidated financial statements are the
responsibility of the Companys management.
We conducted our reviews in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the objective of
which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with U.S. generally accepted accounting
principles.
We have previously audited, in accordance with standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of Bristow Group Inc. and
subsidiaries as of March 31, 2006, and the related
consolidated statements of income, stockholders
investment, and cash flows for the year then ended (not
presented herein); and in our report dated June 8, 2006, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of
March 31, 2006 is fairly stated, in all material respects,
in relation to the consolidated balance sheet from which it has
been derived.
Houston, Texas
August 8, 2006
F-57
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Gross revenue:
|
|
|
|
|
|
|
|
|
Operating revenue from
non-affiliates
|
|
$
|
181,786
|
|
|
$
|
150,748
|
|
Operating revenue from affiliates
|
|
|
12,079
|
|
|
|
11,486
|
|
Reimbursable revenue from
non-affiliates
|
|
|
26,125
|
|
|
|
17,428
|
|
Reimbursable revenue from
affiliates
|
|
|
1,072
|
|
|
|
1,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221,062
|
|
|
|
180,937
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
138,470
|
|
|
|
122,552
|
|
Reimbursable expense
|
|
|
26,898
|
|
|
|
18,662
|
|
Depreciation and amortization
|
|
|
10,283
|
|
|
|
10,307
|
|
General and administrative
|
|
|
15,349
|
|
|
|
14,963
|
|
Gain on disposal of assets
|
|
|
(998
|
)
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
190,002
|
|
|
|
165,892
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
31,060
|
|
|
|
15,045
|
|
Earnings from unconsolidated
affiliates, net of losses
|
|
|
1,559
|
|
|
|
46
|
|
Interest income
|
|
|
1,290
|
|
|
|
1,032
|
|
Interest expense
|
|
|
(3,236
|
)
|
|
|
(3,708
|
)
|
Other income (expense), net
|
|
|
(4,785
|
)
|
|
|
2,783
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
25,888
|
|
|
|
15,198
|
|
Provision for income taxes
|
|
|
(8,543
|
)
|
|
|
(3,176
|
)
|
Minority interest
|
|
|
(116
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,229
|
|
|
$
|
11,972
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.74
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.73
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-58
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands)
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
109,634
|
|
|
$
|
122,482
|
|
Accounts receivable from
non-affiliates, net of allowance for doubtful accounts of
$4.2 million and $4.6 million, respectively
|
|
|
158,096
|
|
|
|
144,521
|
|
Accounts receivable from
affiliates, net of allowance for doubtful accounts of
$4.6 million and $4.6 million, respectively
|
|
|
16,862
|
|
|
|
15,884
|
|
Inventories
|
|
|
155,679
|
|
|
|
147,860
|
|
Prepaid expenses and other
|
|
|
17,215
|
|
|
|
16,519
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
457,486
|
|
|
|
447,266
|
|
Investment in unconsolidated
affiliates
|
|
|
40,668
|
|
|
|
39,912
|
|
Property and equipment
at cost:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
43,815
|
|
|
|
40,672
|
|
Aircraft and equipment
|
|
|
900,167
|
|
|
|
838,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
943,982
|
|
|
|
878,986
|
|
Less Accumulated
depreciation and amortization
|
|
|
(279,184
|
)
|
|
|
(263,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
664,798
|
|
|
|
615,914
|
|
Goodwill
|
|
|
26,807
|
|
|
|
26,837
|
|
Prepaid pension costs
|
|
|
40,576
|
|
|
|
37,207
|
|
Other assets
|
|
|
9,459
|
|
|
|
9,277
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,239,794
|
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
57,330
|
|
|
$
|
49,714
|
|
Accrued wages, benefits and
related taxes
|
|
|
44,960
|
|
|
|
45,958
|
|
Income taxes payable
|
|
|
10,851
|
|
|
|
6,537
|
|
Other accrued taxes
|
|
|
7,791
|
|
|
|
6,471
|
|
Deferred revenues
|
|
|
11,048
|
|
|
|
9,994
|
|
Other accrued liabilities
|
|
|
27,735
|
|
|
|
22,596
|
|
Deferred taxes
|
|
|
6,618
|
|
|
|
5,025
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
14,489
|
|
|
|
17,634
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
180,822
|
|
|
|
163,929
|
|
Long-term debt, less current
maturities
|
|
|
247,029
|
|
|
|
247,662
|
|
Accrued pension liabilities
|
|
|
145,116
|
|
|
|
136,521
|
|
Other liabilities and deferred
credits
|
|
|
17,511
|
|
|
|
18,016
|
|
Deferred taxes
|
|
|
69,245
|
|
|
|
68,281
|
|
Minority interest
|
|
|
4,349
|
|
|
|
4,307
|
|
Commitments and contingencies
(Note 4)
|
|
|
|
|
|
|
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value,
authorized 35,000,000 shares; outstanding: 23,430,097 as of
June 30 and 23,385,473 as of March 31 (exclusive of
1,281,050 treasury shares)
|
|
|
234
|
|
|
|
234
|
|
Additional paid-in capital
|
|
|
161,191
|
|
|
|
158,762
|
|
Retained earnings
|
|
|
464,753
|
|
|
|
447,524
|
|
Accumulated other comprehensive
loss
|
|
|
(50,456
|
)
|
|
|
(68,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
575,722
|
|
|
|
537,697
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,239,794
|
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-59
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,229
|
|
|
$
|
11,972
|
|
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
10,283
|
|
|
|
10,307
|
|
Deferred income taxes
|
|
|
1,407
|
|
|
|
(737
|
)
|
Gain on asset dispositions
|
|
|
(998
|
)
|
|
|
(592
|
)
|
Stock-based compensation expense
|
|
|
752
|
|
|
|
|
|
Equity in earnings from
unconsolidated affiliates under (over) dividends received
|
|
|
845
|
|
|
|
(46
|
)
|
Minority interest in earnings
|
|
|
116
|
|
|
|
50
|
|
Tax benefit related to exercise of
stock options
|
|
|
(303
|
)
|
|
|
|
|
Increase (decrease) in cash
resulting from changes in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(6,485
|
)
|
|
|
(27,430
|
)
|
Inventories
|
|
|
(3,273
|
)
|
|
|
(7,144
|
)
|
Prepaid expenses and other
|
|
|
(1,180
|
)
|
|
|
736
|
|
Accounts payable
|
|
|
5,847
|
|
|
|
3,522
|
|
Accrued liabilities
|
|
|
8,536
|
|
|
|
(567
|
)
|
Other liabilities and deferred
credits
|
|
|
(599
|
)
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
|
32,177
|
|
|
|
(9,775
|
)
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(46,882
|
)
|
|
|
(30,130
|
)
|
Proceeds from asset dispositions
|
|
|
2,556
|
|
|
|
2,394
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(44,326
|
)
|
|
|
(27,736
|
)
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Repayment of debt and debt
redemption premiums
|
|
|
(3,957
|
)
|
|
|
(798
|
)
|
Partial prepayment of put/call
obligation
|
|
|
(30
|
)
|
|
|
(34
|
)
|
Issuance of common stock
|
|
|
764
|
|
|
|
530
|
|
Tax benefit related to exercise of
stock options
|
|
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
(2,920
|
)
|
|
|
(302
|
)
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
2,221
|
|
|
|
(2,405
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
|
(12,848
|
)
|
|
|
(40,218
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
122,482
|
|
|
|
146,440
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
period
|
|
$
|
109,634
|
|
|
$
|
106,222
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest, net of interest
capitalized
|
|
$
|
6,357
|
|
|
$
|
6,943
|
|
Income taxes
|
|
$
|
2,562
|
|
|
$
|
1,711
|
|
The accompanying notes are an integral part of these financial
statements.
F-60
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1
|
BASIS OF
PRESENTATION, CONSOLIDATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
The following consolidated financial statements include the
accounts of Bristow Group Inc. and its consolidated entities
(Bristow Group, the Company,
we, us, or our) 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 in the
Notes to Consolidated Financial Statements included
in our Annual Report on
Form 10-K
for fiscal year 2006. 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 as income
when received.
Pursuant to the rules and regulations of the
U.S. Securities and Exchange Commission (SEC),
the information contained in the following condensed notes to
consolidated financial statements is condensed from that which
would appear in the annual consolidated financial statements;
accordingly, the consolidated financial statements included
herein should be read in conjunction with the consolidated
financial statements and related notes thereto contained in our
Annual Report on
Form 10-K
for fiscal year 2006 (fiscal year 2006 Financial
Statements). Operating results for the interim period
presented are not necessarily indicative of the results that may
be expected for the entire fiscal year.
The condensed consolidated financial statements included herein
are unaudited; however, they include all adjustments of a normal
recurring nature which, in the opinion of management, are
necessary for a fair presentation of the consolidated financial
position of the Company as of June 30, 2006, the
consolidated results of operations for the three months ended
June 30, 2006 and 2005, and the consolidated cash flows for
the three months ended June 30, 2006 and 2005.
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, 2007 is referred to as fiscal year 2007.
Foreign
Currency Translation
Foreign currency transaction 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
the foreign currency transaction gains and losses are included
with cumulative translation gains and losses and are reported in
stockholders investment as accumulated other comprehensive
gains or losses. Translation adjustments, which are reported in
accumulated other comprehensive gains or losses, are the result
of translating a foreign entitys financial statements from
its functional currency to U.S. dollars, our reporting
currency. 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 equity are presented
at their historical average exchange rates. The resulting
difference after applying the different exchange rates is the
cumulative translation adjustment. The functional currency of
Bristow Aviation Holdings, Ltd. (Bristow Aviation),
one of our consolidated subsidiaries, is the British pound
sterling.
As a result of the change in exchange rates during the three
months ended June 30, 2006, we recorded foreign currency
transaction losses of approximately $4.8 million, primarily
related to the British pound sterling, compared to foreign
currency transaction gains of approximately $2.8 million
during the three months ended June 30, 2005. These gains
and losses arose primarily as a result of
U.S. dollar-denominated
F-61
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
transactions entered into by Bristow Aviation whose functional
currency is the British pound sterling and included cash and
cash equivalents held in U.S. dollar-denominated accounts,
U.S. dollar denominated intercompany loans and revenues
from contracts which are settled in U.S. dollars. During
the three months ended June 30, 2006, the exchange rate (of
one British pound sterling into U.S. dollars) ranged from a
low of $1.74 to a high of $1.89, with an average of $1.83. As of
June 30, 2006, the exchange rate was $1.85. During the
three months ended June 30, 2005, the exchange rate ranged
from a low of $1.79 to a high of $1.92, with an average of
$1.86. As of March 31, 2006, the exchange rate was $1.74.
Beginning in July 2006, we reduced a portion of Bristow
Aviations U.S. dollar-denominated balances, and we
expect to take other actions in the near term to further
mitigate this foreign exchange exposure.
Recent
Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation (FIN)
No. 48, Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement
No. 109, which clarifies the accounting for
uncertainty in income taxes recognized in an enterprises
financial statements in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. FIN No. 48
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 No. 48 requires enterprises to
evaluate tax positions using a two-step process consisting of
recognition and measurement. The effects of a tax position will
be recognized in the period in which the enterprise determines
that it is more likely than not (defined as a more than 50%
likelihood) that a tax position will be sustained upon
examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position. A tax position that meets the more-likely-than-not
recognition threshold is measured as the largest amount of tax
benefit that is greater than 50% likely of being recognized upon
ultimate settlement. FIN No. 48 is effective for our
fiscal year beginning on April 1, 2007. We do not believe
that the adoption of this interpretation will have a material
impact on our consolidated results of operations, cash flows or
financial position upon adoption; however, we have not yet
completed our evaluation of the impact of FIN No. 48.
See Note 6 for discussion and disclosure made in connection
with the adoption of SFAS No. 123(R),
Share-Based Payment.
Note 2
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
HC Since the conclusion of the contract with
Petróleos Mexicanos (PEMEX) in February 2005,
our 49% owned unconsolidated affiliates, Hemisco Helicopters
International, Inc. (Hemisco) and Heliservicio
Campeche S.A. de C.V. (Heliservicio and
collectively, HC), experienced difficulties during
fiscal year 2006 in meeting their obligations to make lease
rental payments to us and to another one of our unconsolidated
affiliates, Rotorwing Leasing Resources, L.L.C.
(RLR). During fiscal year 2006, RLR and we made a
determination that because of the uncertainties as to
collectibility, lease revenues from HC would be recognized as
they were collected. As of June 30, 2006, $1.0 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 $2.6 million for
amounts billed but not collected from HC. During the three
months ended June 30, 2006, we recognized revenue of
$0.8 million upon receipt of payment from HC for amounts
billed in fiscal year 2006.
We have taken several actions to improve the financial condition
and profitability of HC, including relocating several aircraft
to other markets, restructuring our profit sharing arrangement
with our partner, and completing a recapitalization of
Heliservicio on August 19, 2005. We also are exploring
markets in which to redeploy aircraft that are currently
operating on an ad hoc basis in Mexico. In June 2006,
F-62
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Heliservicio was awarded a two-year contract by PEMEX. Under
this contract, Heliservicio will provide and operate three
medium helicopters in support of PEMEXs oil and gas
operations. 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.
Note 3
DEBT
Debt as of June 30, 2006 and March 31, 2006 consisted
of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
6 1/8% Senior
Notes due 2013
|
|
$
|
230,000
|
|
|
$
|
230,000
|
|
Limited recourse term loans
|
|
|
19,736
|
|
|
|
20,023
|
|
Hemisco Helicopters International,
Inc. Note
|
|
|
4,380
|
|
|
|
4,380
|
|
Short-term advance from customer
|
|
|
1,400
|
|
|
|
1,400
|
|
Note to Sakhalin Aviation Services
Ltd.
|
|
|
664
|
|
|
|
647
|
|
Sakhalin Debt
|
|
|
5,338
|
|
|
|
5,667
|
|
Short-term notes
|
|
|
|
|
|
|
3,179
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
261,518
|
|
|
|
265,296
|
|
Less short-term borrowings and
current maturities of long-term debt
|
|
|
(14,489
|
)
|
|
|
(17,634
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
247,029
|
|
|
$
|
247,662
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility As of June 30,
2006, we had a $30 million revolving credit facility with a
U.S. bank. Borrowings bear interest at a rate equal to
one-month LIBOR plus a spread ranging from 1.25% to 2.0%. We had
$3.2 million of outstanding letters of credit and no
borrowings under this facility as of June 30, 2006. This
facility was terminated in August 2006.
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 due 2013 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). The revolving credit facility
may be used for general corporate purposes, including working
capital and acquisitions. The letter of credit facility will be
used to issue letters of credit supporting or securing
performance of statutory obligations, surety or appeal bonds,
bid, performance 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 are 0.0% and 1.25%, respectively. Interest will be
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 subsidiaries.
F-63
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
U.K. Facilities As of June 30, 2006,
Bristow Aviation had a £6.0 million
($11.1 million) facility for letters of credit, of which
£0.4 million ($0.7 million) was outstanding, and
a £1.0 million ($1.8 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 is scheduled to
expire on August 31, 2006. The facilities are guaranteed by
certain of Bristow Aviations subsidiaries and secured by
several helicopter mortgages and a negative pledge of Bristow
Aviations assets.
Note 4
COMMITMENTS AND CONTINGENCIES
Aircraft Purchase Contracts As shown in the
table below, we expect to make additional capital expenditures
over the next seven fiscal years to increase the size of our
aircraft fleet. As of June 30, 2006, we had 51 aircraft on
order and options to acquire an additional 37 aircraft. The
additional aircraft on order are expected to provide incremental
fleet capacity, with only a small number of our existing
aircraft expected to be replaced with the new aircraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
|
March 31, 2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011-2013
|
|
|
Total
|
|
|
Commitments as of June 30,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Medium
|
|
|
15
|
|
|
|
11
|
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
41
|
|
Large
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
11
|
|
|
|
3
|
|
|
|
3
|
|
|
|
9
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures (in thousands)
|
|
$
|
211,248
|
|
|
$
|
71,519
|
|
|
$
|
23,245
|
|
|
$
|
24,491
|
|
|
$
|
64,022
|
|
|
$
|
394,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options as of June 30,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of aircraft:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium
|
|
|
|
|
|
|
1
|
|
|
|
6
|
|
|
|
6
|
|
|
|
11
|
|
|
|
24
|
|
Large
|
|
|
|
|
|
|
7
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
12
|
|
|
|
6
|
|
|
|
11
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related expenditures (in thousands)
|
|
$
|
37,861
|
|
|
$
|
178,275
|
|
|
$
|
102,600
|
|
|
$
|
48,292
|
|
|
$
|
81,191
|
|
|
$
|
448,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2006, options with respect to six of the
medium aircraft were included in the
2011-2013
period in the table above. However, we can accelerate the
delivery of these aircraft at our option to as early as
January 1, 2008, subject to the manufacturers
availability to fill customer orders at the time an option is
exercised. We have also made an arrangement with the
manufacturer pursuant to which we may delay our
F-64
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
existing purchase commitments for up to $100 million of
medium aircraft upon the exercise of options for an equal amount
of large aircraft.
In connection with an agreement to purchase three large aircraft
to be utilized and owned by Norsk Helikopter AS
(Norsk), our unconsolidated affiliate in Norway, the
Company, Norsk and the other equity owner in Norsk each agreed
to fund the purchase of one of these three aircraft. One was
delivered during fiscal year 2006, and the remaining two are
expected to be delivered in fiscal year 2007. The one aircraft
that we are purchasing is reflected in the table above.
Collective Bargaining Agreement We employ
approximately 300 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 a wage increase for
the pilot group and improvements to several other benefit plans.
We are currently involved in negotiations with the unions in
Nigeria and anticipate that we will increase certain benefits
for union personnel as a result of these negotiations. We do not
expect these benefit increases to have a material impact on our
results of operations.
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 will become more competitive if oil
and gas industry activity levels increase. In addition, 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 and 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, as a result of the disclosure and
remediation of activities identified in the Internal Review (see
below), we may have difficulty attracting and retaining
qualified personnel, and we may incur increased expenses.
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 such special
outside counsel to cover operations in other countries and other
issues (the Internal Review). In connection with
this review, special outside counsel to the Audit Committee
retained forensic accountants. As a result of the findings of
the Internal Review, our quarter ended December 31, 2004
and prior financial statements were restated. For further
information on the restatements, see our fiscal year 2005 Annual
Report.
The SEC then notified us that it had initiated an informal
inquiry and requested that we provide certain documents on a
voluntary basis. The SEC thereafter advised us that the inquiry
has become a formal investigation. We have responded to the
SECs requests for documents and intend to continue to do
so.
The Internal Review is complete. All known required restatements
were reflected in the financial statements included in our
fiscal year 2005 Annual Report, and no further restatements were
required in our fiscal year 2006 Annual Report or our financial
statements for the three months ended June 30, 2006
presented in this Quarterly Report. As a
follow-up to
matters identified during the course of the Internal Review,
special counsel to the Audit Committee may be called upon to
undertake additional work in the future to assist in responding
to inquiries from the SEC, from other governmental authorities
or customers, or as
follow-up to
the previous work performed by such special counsel.
F-65
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In October 2005, the Audit Committee reached certain conclusions
with respect to findings to date from the Internal Review. The
Audit Committee concluded that, over a considerable period of
time, (1) improper payments were made by, and on behalf of,
certain foreign affiliated entities directly or indirectly to
employees of the Nigerian government, (2) improper payments
were made by certain foreign affiliated entities to Nigerian
employees of certain customers with whom we have contracts,
(3) inadequate employee payroll declarations and, in
certain instances, tax payments were made by us or our
affiliated entities in certain jurisdictions,
(4) inadequate valuations for customs purposes may have
been declared in certain jurisdictions resulting in the
underpayment of import duties, and (5) an affiliated entity
in a South American country, with the assistance of our
personnel and two of our other affiliated entities, engaged in
transactions which appear to have assisted the South American
entity in the circumvention of currency transfer restrictions
and other regulations. In addition, as a result of the Internal
Review, the Audit Committee and management determined that there
were deficiencies in our books and records and internal controls
with respect to the foregoing and certain other activities.
Based on the Audit Committees findings and
recommendations, the Board of Directors has taken disciplinary
action with respect to our personnel who it determined bore
responsibility for these matters. The disciplinary actions
included termination or resignation of employment (including of
certain members of senior management), changes of job
responsibility, reductions in incentive compensation payments
and reprimands. One of our affiliates has also obtained the
resignation of certain of its personnel.
We have initiated remedial action, including initiating action
to correct underreporting of payroll tax, disclosing to certain
customers inappropriate payments made to customer personnel and
terminating certain agency, business and joint venture
relationships. We also have taken steps to reinforce our
commitment to conduct our business with integrity by creating an
internal corporate compliance function, instituting a new code
of business conduct, and developing and implementing a training
program for all employees. In addition to the disciplinary
actions referred to above, we have also taken steps to
strengthen our control environment by hiring new key members of
senior and financial management, including persons with
appropriate technical accounting expertise, expanding our
corporate finance group and internal audit staff, realigning
reporting lines within the accounting function so that field
accounting reports directly to the corporate accounting function
instead of operations management, and improving the management
of our tax structure to comply with its intended design. Our
compliance program has also begun full operation and clear
corporate policies have been established and communicated to our
relevant personnel related to employee expenses, delegation of
authority, revenue recognition and customer billings.
We have communicated the Audit Committees conclusions with
respect to the findings of the Internal Review to regulatory
authorities in some, but not all, of the jurisdictions in which
the relevant activities took place. We are in the process of
gathering and analyzing additional information related to these
matters, and expect to disclose the Audit Committees
conclusions to regulatory authorities in other jurisdictions
once this process has been completed. Such disclosure may result
in 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. To the extent that
violations of the law may have occurred in several countries in
which we operate, we do not yet know whether such violations can
be cured merely by the payment of fines or whether other actions
may be taken against us, including requiring us to curtail our
business operations in one or more such countries for a period
of time. In the event that we curtail our business operations in
any such country, we then may face difficulties exporting our
aircraft from such country. As of June 30, 2006, the book
values of our aircraft in Nigeria and the South American country
where certain improper activities took place were approximately
$118.3 million and $8.1 million, respectively.
F-66
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We cannot predict the ultimate outcome of the SEC investigation,
nor can we predict whether other applicable U.S. and foreign
governmental authorities will initiate separate investigations.
The outcome of the SEC investigation and any related legal and
administrative proceedings could include the institution of
administrative, civil injunctive or criminal proceedings
involving us
and/or
current or former employees, officers
and/or
directors, the imposition of fines and other penalties, remedies
and/or
sanctions, modifications to business practices and compliance
programs
and/or
referral to other governmental agencies for other appropriate
actions. It is not possible to accurately predict at this time
when matters relating to the SEC investigation will be
completed, the final outcome of the SEC investigation, what if
any actions may be taken by the SEC or by other governmental
agencies in the U.S. or in foreign jurisdictions, or the
effect that such actions may have on our consolidated financial
statements. In addition, in view of the findings of the Internal
Review, we may encounter difficulties in the future conducting
business in Nigeria and a South American country, and with
certain customers. It is also possible that certain of our
existing contracts may be cancelled (although none have been
cancelled as of the date of filing of this Quarterly Report) and
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 connection with its conclusions regarding payroll
declarations and tax payments, the Audit Committee determined on
November 23, 2005, following the recommendation of our
senior management, that there was a need to restate our quarter
ended December 31, 2004 and prior financial statements.
Such restatement was reflected in our fiscal year 2005 Annual
Report. As of June 30, 2006, we have accrued an aggregate
of $21.6 million for the taxes, penalties and interest
attributable to underreported employee payroll, which we expect
to begin paying during the quarter ending September 30,
2006. Operating income for three months ended June 30, 2005
included $0.9 million attributable to this accrual. No
additional amounts were incurred during the three months ended
June 30, 2006.
As we continue to respond to the SEC investigation and other
governmental authorities and take other actions relating to
improper activities that have been identified in connection with
the Internal Review, there can be no assurance that
restatements, in addition to those reflected in our fiscal year
2005 Annual Report, will not be required or that our historical
financial statements included in this Quarterly Report will not
change or require further amendment. In addition, new issues may
be identified that may impact our financial statements and the
scope of the restatements described in our fiscal year 2005
Annual Report and lead us to take other remedial actions or
otherwise adversely impact us.
During fiscal years 2005 and 2006 and the three months ended
June 30, 2006, we incurred approximately $2.2 million,
$10.5 million and $0.1 million, respectively, in legal
and other professional costs in connection with the Internal
Review. We expect to incur additional costs associated with the
Internal Review, which will be expensed as incurred and which
could be significant in the fiscal quarters in which they are
recorded.
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 these agents may
be significantly impacted.
We have disclosed the activities in Nigeria identified in the
Internal Review to affected customers, and one or more of these
customers may seek to cancel their contracts with us. One such
customer has conducted its own investigation and contract audit.
We have agreed with that customer on certain actions we will
take to address the findings of their audit, which in large part
are steps we have taken or had already planned to take. Since
our customers in Nigeria are affiliates of major international
petroleum companies with whom we do business throughout the
world, any actions which are taken by certain
F-67
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
customers could have a material adverse effect on our business,
financial position and results of operations, and these
customers may preclude us from bidding on future business with
them either locally or on a worldwide basis. In addition,
applicable governmental authorities may preclude us from bidding
on contracts to provide services in the countries where improper
activities took place.
In connection with the Internal Review, we also have terminated
our business relationship with certain agents and have taken
actions to terminate business relationships with other agents.
In November 2005, one of the terminated agents and his
affiliated entity have commenced litigation against two of our
foreign affiliated entities claiming damages of
$16.3 million for breach of contract.
We may be required to indemnify certain of our agents to the
extent that regulatory authorities seek to hold them responsible
in connection with activities identified in the Internal Review.
In a South American country, where certain improper activities
took place, we are negotiating to terminate our ownership
interest in the joint venture that provides us with the local
ownership content necessary to meet local regulatory
requirements for operating in that country. We may not be
successful in our negotiations to terminate our ownership
interest in the joint venture, and the outcome of such
negotiations may negatively affect our ability to continue
leasing our aircraft to the joint venture or other unrelated
operating companies, to conduct other business in that country,
or to export our aircraft and inventory from that country. We
recorded an impairment charge of $1.0 million during fiscal
year 2006 to reduce the recorded value of our investment in the
joint venture. During fiscal years 2006 and 2005 and the three
months ended June 30, 2006 and 2005, we derived
approximately $8.0 million, $10.2 million,
$2.0 million and $2.0 million, respectively, of
leasing and other revenues from this joint venture, of which
$4.0 million, $3.2 million, $0.9 million and
$1.3 million, respectively, was paid by us to a third party
for the use of the aircraft. In addition, during fiscal year
2005, approximately $0.3 million of dividend income was
derived from this joint venture. No dividend income was derived
from this joint venture during fiscal year 2006 or the three
months ended June 30, 2006.
Without a joint venture partner, we will be unable to maintain
an operating license and our future activities in that country
may be limited to leasing our aircraft to unrelated operating
companies. Our joint venture partners and agents are typically
influential members of the local business community and
instrumental in aiding us in obtaining contracts and managing
our affairs in the local country. As a result of terminating
these relationships, our ability to continue conducting business
in these countries where the improper activities took place may
be negatively affected.
Many of the improper actions identified in the Internal Review
resulted in decreasing the costs incurred by us in performing
our services. The remedial actions we are taking have resulted
in an increase in these costs and, if we cannot raise our prices
simultaneously and to the same extent as our increased costs,
our operating income will decrease.
In addition, we face legal actions relating to the 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.
Document Subpoena from U.S. Department of
Justice On June 15, 2005, we issued a press
release disclosing that one of our subsidiaries had received a
document subpoena from the Antitrust Division of the
U.S. Department of Justice (the DOJ). The
subpoena relates to a grand jury investigation of potential
antitrust violations among providers of helicopter
transportation services in the U.S. Gulf of Mexico. We
F-68
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
believe we have submitted to the DOJ substantially all documents
responsive to the subpoena. We will continue to provide
additional information in connection with the investigation as
required.
The period of time necessary to resolve the DOJ 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 investigation
and any related legal proceedings in other countries could
include civil injunctive or criminal proceedings involving the
Company or current or former officers, directors or employees of
the Company, the imposition of fines and other penalties,
remedies
and/or
sanctions, referral to other governmental agencies,
and/or the
payment of treble damages in civil litigation, any of which
could have a material adverse effect on our business, financial
condition and results of operations. The DOJ 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 and $0.6 million in legal and
other professional fees in fiscal year 2006 and the three months
ended June 30, 2006, respectively, and significant
expenditures may continue to be incurred in the future.
Environmental Contingencies The United States
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. 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, 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. Based on estimates of the losses,
discussions with our property insurers and analysis of the terms
of our property insurance policies, we believe that it is
probable that we will receive a total of $2.8 million in
insurance recoveries ($1.5 million has been received thus
far). 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.
Aircraft Repurchase Commitments During
November 2002, we sold assets related to our activities in
Italy. In connection with this sale, we also agreed to acquire
ownership of three aircraft used in the Italy operations and
currently leased from unrelated third parties at future dates,
and transfer ownership to the buyer. As part of this
arrangement, we agreed to exercise our purchase option at the
conclusion of each
F-69
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
lease and to sell these aircraft to the buyer for an aggregate
sales price of 8.8 million ($11.4 million).
During fiscal year 2005, leases with one of the third parties
were terminated and the sale to the buyer closed on two of these
aircraft, resulting in the recognition of a $2.3 million
gain. We have exercised the purchase option on the remaining
aircraft and we expect the sale to be completed during the three
months ending September 30, 2006, resulting in a gain of
approximately $2.2 million.
Guarantees We have guaranteed the repayment
of up to £10 million ($18.5 million) of the debt
of FBS and $13.1 million of the debt of RLR, both
unconsolidated affiliates. See discussion of these commitments
in Note 6 to our fiscal year 2006 Financial Statements. As
of June 30, 2006, we have recorded a liability of
$0.8 million representing the fair value of the RLR
guarantee, which is reflected in our consolidated balance sheet
in other liabilities and deferred credits. 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 June 30, 2006, surety bonds with an aggregate
value of 39.9 million Mexican pesos ($3.5 million)
were outstanding.
The following table summarizes our commitments under these
guarantees as of June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Expiration Per Period
|
|
|
Remainder
|
|
|
|
|
|
Fiscal Year
|
|
|
of Fiscal
|
|
Fiscal Years
|
|
Fiscal Years
|
|
2012 and
|
Total
|
|
Year 2007
|
|
2008-2009
|
|
2010-2011
|
|
Thereafter
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
$
|
35,063
|
|
|
$
|
3,496
|
|
|
$
|
13,079
|
|
|
$
|
|
|
|
$
|
18,488
|
|
Other Matters Although infrequent, flight
accidents have occurred in the past, and substantially all of
the related losses and liability claims have been covered by
insurance. 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.
Note 5
TAXES
Our effective income tax rates from continuing operations were
33.0% and 20.9% for the three months ended June 30, 2006
and 2005, respectively. The significant variance between the
U.S. federal statutory rate and the effective rate for the
three months ended June 30, 2005 was due primarily to the
impact of the reversals of reserves for tax contingencies of
$2.9 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. During the
three months ended June 30, 2006, we had net reversals of
reserves for estimated tax exposures of $0.8 million.
Reversals of reserves at a level similar to that for the three
months ended June 30, 2006 are expected to occur in each of
the remaining quarterly periods of fiscal year 2007. Our
effective tax rate was also impacted 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.
F-70
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 6
EMPLOYEE BENEFIT PLANS
Pension
Plans
The following table provides a detail of the components of net
periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Service cost for benefits earned
during the period
|
|
$
|
63
|
|
|
$
|
57
|
|
Interest cost on pension benefit
obligation
|
|
|
5,484
|
|
|
|
4,367
|
|
Expected return on assets
|
|
|
(5,674
|
)
|
|
|
(3,973
|
)
|
Amortization of unrecognized
experience losses
|
|
|
879
|
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
752
|
|
|
$
|
1,198
|
|
|
|
|
|
|
|
|
|
|
The current estimate of our cash contributions to the pension
plans for fiscal year 2007 is $9.9 million,
$0.9 million of which was paid during the three months
ended June 30, 2006.
Stock-Based
Compensation
We have a number of incentive and stock option plans, which are
described in Note 9 to our fiscal year 2006 Financial
Statements.
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
will not restate our prior period results. SFAS 123(R)
supersedes and revises guidance in ABP 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.
As a result of adopting SFAS No. 123(R) on
April 1, 2006, our income before provision for income taxes
and minority interest and net income for the three months ended
June 30, 2006 were $0.4 million and $0.3 million
lower, respectively, than if we had continued to account for
stock-based compensation under APB No. 25. Basic and
diluted earnings per share for the three months ended
June 30, 2006 would have
F-71
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
been $0.75 and $0.74, respectively, if we had not adopted
SFAS No. 123(R), compared to reported basic and
diluted earnings per share of $0.74 and $0.73, respectively.
Total share-based compensation expense, which includes stock
options and restricted stock units, was $0.8 million for
the three months ended June 30, 2006 compared to less than
$0.1 million for the three months ended June 30, 2005.
Stock-based compensation expense has been allocated to our
various business units.
Stock Options We use a Black-Scholes option
pricing model to estimate the fair value of share-based awards
under SFAS No. 123(R), which is the same valuation
technique we previously used for pro forma disclosures under
SFAS No. 123. 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. Previously, we accounted for
forfeitures as they occurred under the pro forma disclosure
provisions of SFAS No. 123 for periods prior to
April 1, 2006.
The following table shows our assumptions used to compute the
stock-based compensation expense for stock option grants issued
during the three months ended March 31, 2006.
|
|
|
|
|
Risk free interest rate
|
|
|
5.0% 5.2
|
%
|
Expected life (years)
|
|
|
4
|
|
Volatility
|
|
|
34
|
%
|
Dividend yield
|
|
|
|
|
The weighted average grant date fair value of options granted
during the three months ended June 30, 2006 was
$12.07 per option. Unrecognized stock-based compensation
expense related to nonvested stock options was approximately
$3.5 million as of June 30, 2006, relating to a total
of 433,895 unvested stock options under our stock option plans.
We expect to recognize this stock-based compensation expense
over a weighted average period of approximately 1.87 years.
The total fair value of options vested during the three months
ended June 30, 2006 was approximately $0.6 million.
Options issued under our stock option plans had vesting terms
ranging from six months to three years. Options issued under
these plans expire ten years from the date of grant, except for
options issued to non-employee directors which expire from three
months to one year following the date when the individual
F-72
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ceases to be a director (based on the reason thereof). The
following is a summary of stock option activity for the three
months ended June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of March 31, 2006
|
|
|
813,763
|
|
|
$
|
24.90
|
|
|
|
7.83
|
|
|
$
|
9,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
147,000
|
|
|
|
35.02
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(44,624
|
)
|
|
|
17.12
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(16,075
|
)
|
|
|
28.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2006
|
|
|
900,064
|
|
|
$
|
26.88
|
|
|
|
8.10
|
|
|
$
|
8,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of June 30,
2006
|
|
|
466,169
|
|
|
$
|
24.16
|
|
|
|
7.26
|
|
|
$
|
5,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value, determined as of the date of
exercise, of options exercised for the three months ended
June 30, 2006 and 2005 was $0.9 million and
$0.3 million, respectively. We received $0.8 million
and $0.5 million in cash from option exercises for the
three months ended June 30, 2006 and 2005, respectively.
The total tax benefit attributable to options exercised during
the three months ended June 30, 2006 and 2005 was
$0.3 million and $0.1 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 of $0.3 million as reported on our
condensed consolidated statement of cash flows in financing
activities for the three months ended June 30, 2006
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.
Restricted Stock Units We record compensation
expense for restricted stock units based on an estimate of the
expected vesting, which is tied to the future performance of our
stock over certain time periods under the terms of the award
agreements. The estimated vesting period is reassessed
quarterly. Changes in such estimates may cause the amount of
expense recognized each period to fluctuate. Compensation
expense related to awards of restricted stock units was
recognized before the adoption of SFAS No. 123(R) and
totaled $0.3 million and less than $0.1 million for
the three months ended June 30, 2006 and 2005, respectively.
The following is a summary of non-vested restricted stock units
as of June 30, 2006 and changes during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
Value
|
|
|
|
Units
|
|
|
Per Unit
|
|
|
Non-vested as of March 31,
2006
|
|
|
198,200
|
|
|
$
|
29.32
|
|
Granted
|
|
|
195,680
|
|
|
|
35.03
|
|
Forfeited
|
|
|
(4,240
|
)
|
|
|
30.90
|
|
|
|
|
|
|
|
|
|
|
Non-vested as of June 30, 2006
|
|
|
389,640
|
|
|
|
32.16
|
|
|
|
|
|
|
|
|
|
|
F-73
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Unrecognized stock-based compensation expense related to
non-vested restricted stock units was approximately
$11.1 million as of June 30, 2006, relating to a total
of 389,640 unvested restricted stock units. We expect to
recognize this stock-based compensation expense over a weighted
average period of approximately 4.68 years.
Prior Period Pro Forma Presentation The
following table illustrates the effect on net income and
earnings per share for the three months ended June 30, 2005
as if we had applied the fair value method to measure
stock-based compensation, as required under the disclosure
provisions of SFAS No. 123:
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
June 30, 2005
|
|
|
|
(In thousands,
|
|
|
|
except per
|
|
|
|
share
|
|
|
|
amounts)
|
|
|
Net income, as reported
|
|
$
|
11,972
|
|
Stock-based employee compensation
expense included in reported net income, net of tax
|
|
|
30
|
|
Stock-based employee compensation
expense, net of tax
|
|
|
(546
|
)
|
|
|
|
|
|
Pro forma net income
|
|
$
|
11,456
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
Earnings, as reported
|
|
$
|
0.51
|
|
Stock-based employee compensation
expense, net of tax
|
|
|
(0.02
|
)
|
|
|
|
|
|
Pro forma basic earnings per share
|
|
$
|
0.49
|
|
|
|
|
|
|
Diluted earnings:
|
|
|
|
|
Earnings, as reported
|
|
$
|
0.51
|
|
Stock-based employee compensation
expense, net of tax
|
|
|
(0.02
|
)
|
|
|
|
|
|
Pro forma diluted earnings per
share
|
|
$
|
0.49
|
|
|
|
|
|
|
Black-Scholes option pricing model
assumptions:
|
|
|
|
|
Risk free interest rate
|
|
|
3.3%-3.9
|
%
|
Expected life (years)
|
|
|
5
|
|
Volatility
|
|
|
40
|
%
|
Dividend yield
|
|
|
|
|
Note 7
EARNINGS PER SHARE
Basic earnings per common share was computed by dividing net
income by the weighted average number of shares of Common Stock
outstanding during the period. Diluted earnings per common share
for the three months ended June 30, 2006 excluded options
to purchase 176,880 shares at a weighted average exercise
price of $31.77, which were outstanding during the period but
were anti-dilutive. Diluted earnings per share for the three
months ended June 30, 2005 excluded options to purchase
89,000 shares at a
F-74
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
weighted average exercise price of $33.69, which were
outstanding during the period but were anti-dilutive. The
following table sets forth the computation of basic and diluted
net income per share.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Net income (in thousands):
|
|
|
|
|
|
|
|
|
Income available to common
stockholders basic and diluted
|
|
$
|
17,229
|
|
|
$
|
11,972
|
|
|
|
|
|
|
|
|
|
|
Shares:
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding basic
|
|
|
23,393,010
|
|
|
|
23,319,677
|
|
Net effect of dilutive stock
options and restricted stock units based on the treasury stock
method
|
|
|
114,498
|
|
|
|
262,734
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding diluted
|
|
|
23,507,508
|
|
|
|
23,582,411
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.74
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.73
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
Note 8
SEGMENT INFORMATION
We operate principally in two business segments: Helicopter
Services and Production Management Services. We conduct the
operations of our Helicopter Services segment through seven
business units: North America, South and Central America,
Europe, West Africa, Southeast Asia, Other International and
Eastern Hemisphere (EH) Centralized Operations. We
provide 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. The following shows reportable segment
information for the three months ended June 30, 2006 and
2005, reconciled to consolidated totals, and prepared on the
same basis as our condensed consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Segment gross revenue from
external customers:
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
59,072
|
|
|
$
|
46,686
|
|
South and Central America
|
|
|
13,012
|
|
|
|
9,587
|
|
Europe
|
|
|
70,006
|
|
|
|
58,244
|
|
West Africa
|
|
|
31,736
|
|
|
|
25,909
|
|
Southeast Asia
|
|
|
17,041
|
|
|
|
13,808
|
|
Other International
|
|
|
8,954
|
|
|
|
7,223
|
|
EH Centralized Operations
|
|
|
3,601
|
|
|
|
2,514
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
203,422
|
|
|
|
163,971
|
|
Production Management Services
|
|
|
17,665
|
|
|
|
16,950
|
|
Corporate
|
|
|
(25
|
)
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Total segment gross revenue
|
|
$
|
221,062
|
|
|
$
|
180,937
|
|
|
|
|
|
|
|
|
|
|
F-75
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Intersegment and intrasegment
gross revenue:
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
7,728
|
|
|
$
|
5,763
|
|
South and Central America
|
|
|
225
|
|
|
|
450
|
|
Europe
|
|
|
1,387
|
|
|
|
935
|
|
West Africa
|
|
|
|
|
|
|
|
|
Southeast Asia
|
|
|
|
|
|
|
|
|
Other International
|
|
|
|
|
|
|
365
|
|
EH Centralized Operations
|
|
|
10,804
|
|
|
|
9,893
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
20,144
|
|
|
|
17,406
|
|
Production Management Services
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Total intersegment and
intrasegment gross revenue
|
|
$
|
20,163
|
|
|
$
|
17,425
|
|
|
|
|
|
|
|
|
|
|
Consolidated gross revenue
reconciliation:
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
66,800
|
|
|
$
|
52,449
|
|
South and Central America
|
|
|
13,237
|
|
|
|
10,037
|
|
Europe
|
|
|
71,393
|
|
|
|
59,179
|
|
West Africa
|
|
|
31,736
|
|
|
|
25,909
|
|
Southeast Asia
|
|
|
17,041
|
|
|
|
13,808
|
|
Other International
|
|
|
8,954
|
|
|
|
7,588
|
|
EH Centralized Operations
|
|
|
14,405
|
|
|
|
12,407
|
|
Intrasegment eliminations
|
|
|
(17,298
|
)
|
|
|
(15,462
|
)
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services(1)
|
|
|
206,268
|
|
|
|
165,915
|
|
Production Management Services(2)
|
|
|
17,684
|
|
|
|
16,969
|
|
Corporate
|
|
|
(25
|
)
|
|
|
16
|
|
Intersegment eliminations
|
|
|
(2,865
|
)
|
|
|
(1,963
|
)
|
|
|
|
|
|
|
|
|
|
Total consolidated gross revenue
|
|
$
|
221,062
|
|
|
$
|
180,937
|
|
|
|
|
|
|
|
|
|
|
F-76
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Consolidated operating income
(loss) reconciliation:
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
11,095
|
|
|
$
|
9,783
|
|
South and Central America
|
|
|
3,622
|
|
|
|
412
|
|
Europe
|
|
|
9,036
|
|
|
|
6,920
|
|
West Africa
|
|
|
2,408
|
|
|
|
2,071
|
|
Southeast Asia
|
|
|
1,089
|
|
|
|
707
|
|
Other International
|
|
|
1,106
|
|
|
|
1,227
|
|
EH Centralized Operations
|
|
|
5,460
|
|
|
|
(1,286
|
)
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
33,816
|
|
|
|
19,834
|
|
Production Management Services
|
|
|
1,413
|
|
|
|
1,320
|
|
Gain on disposal of assets
|
|
|
998
|
|
|
|
592
|
|
Corporate
|
|
|
(5,167
|
)
|
|
|
(6,701
|
)
|
|
|
|
|
|
|
|
|
|
Total consolidated operating income
|
|
$
|
31,060
|
|
|
$
|
15,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Identifiable assets:(3)
|
|
|
|
|
|
|
|
|
Helicopter Services:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
427,365
|
|
|
$
|
415,045
|
|
South and Central America
|
|
|
10,160
|
|
|
|
10,042
|
|
Europe
|
|
|
36,499
|
|
|
|
31,515
|
|
West Africa
|
|
|
7,885
|
|
|
|
8,918
|
|
Southeast Asia
|
|
|
15,530
|
|
|
|
13,657
|
|
Other International
|
|
|
30,569
|
|
|
|
28,125
|
|
EH Centralized Operations
|
|
|
564,877
|
|
|
|
520,524
|
|
|
|
|
|
|
|
|
|
|
Total Helicopter Services
|
|
|
1,092,885
|
|
|
|
1,027,826
|
|
Production Management Services
|
|
|
33,074
|
|
|
|
34,013
|
|
Corporate
|
|
|
113,835
|
|
|
|
114,574
|
|
|
|
|
|
|
|
|
|
|
Total identifiable assets
|
|
$
|
1,239,794
|
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes reimbursable revenue of $23.3 million and
$14.1 million for the three months ended June 30, 2006
and 2005, respectively. |
|
(2) |
|
Includes reimbursable revenue of $3.9 million and
$4.6 million for the three months ended June 30, 2006
and 2005, respectively. |
|
(3) |
|
Information presented herein for our business units related to
identifiable assets is based on the business unit that owns the
underlying assets. A significant portion of these assets are
leased from our North America and EH Centralized Operations
business units to other business units. Our operating revenue
and operating expenses associated with the operations of those
assets is reflected in the results for the business unit that
operates the assets, and the intercompany lease revenue and
expense eliminates in consolidation. |
F-77
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 9
COMPREHENSIVE INCOME
Comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Net income
|
|
$
|
17,229
|
|
|
$
|
11,972
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
18,367
|
|
|
|
(13,832
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
35,596
|
|
|
$
|
(1,860
|
)
|
|
|
|
|
|
|
|
|
|
During the three months ended June 30, 2006, the
U.S. dollar weakened against the British pound sterling
resulting in significant translation gains recorded as a
component of stockholders investment as of June 30,
2006. During the three months ended June 30, 2005, the
U.S. dollar strengthened against the British pound sterling
resulting in significant translation losses recorded as a
component of stockholders investment as of June 30,
2005. See discussion of foreign currency translation in
Note 1.
Note 10
SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL
INFORMATION
In connection with the sale of the Senior Notes, certain of our
wholly-owned subsidiaries (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 revenues and expenses.
The allocation of the consolidated income tax provision was made
using the with and without allocation method.
F-78
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Three
Months Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
(25
|
)
|
|
$
|
84,449
|
|
|
$
|
136,638
|
|
|
$
|
|
|
|
$
|
221,062
|
|
Intercompany revenue
|
|
|
|
|
|
|
2,926
|
|
|
|
2,365
|
|
|
|
(5,291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
87,375
|
|
|
|
139,003
|
|
|
|
(5,291
|
)
|
|
|
221,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
67
|
|
|
|
62,327
|
|
|
|
102,974
|
|
|
|
|
|
|
|
165,368
|
|
Intercompany expenses
|
|
|
|
|
|
|
2,365
|
|
|
|
2,876
|
|
|
|
(5,241
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
26
|
|
|
|
4,250
|
|
|
|
6,007
|
|
|
|
|
|
|
|
10,283
|
|
General and administrative
|
|
|
5,049
|
|
|
|
4,366
|
|
|
|
5,984
|
|
|
|
(50
|
)
|
|
|
15,349
|
|
Gain on disposal of assets
|
|
|
|
|
|
|
(136
|
)
|
|
|
(862
|
)
|
|
|
|
|
|
|
(998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,142
|
|
|
|
73,172
|
|
|
|
116,979
|
|
|
|
(5,291
|
)
|
|
|
190,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(5,167
|
)
|
|
|
14,203
|
|
|
|
22,024
|
|
|
|
|
|
|
|
31,060
|
|
Earnings (losses) from
unconsolidated affiliates, net
|
|
|
11,870
|
|
|
|
(272
|
)
|
|
|
1,885
|
|
|
|
(11,924
|
)
|
|
|
1,559
|
|
Interest income
|
|
|
14,630
|
|
|
|
60
|
|
|
|
877
|
|
|
|
(14,277
|
)
|
|
|
1,290
|
|
Interest expense
|
|
|
(3,283
|
)
|
|
|
|
|
|
|
(14,230
|
)
|
|
|
14,277
|
|
|
|
(3,236
|
)
|
Other income (expense), net
|
|
|
(89
|
)
|
|
|
(77
|
)
|
|
|
(4,619
|
)
|
|
|
|
|
|
|
(4,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
17,961
|
|
|
|
13,914
|
|
|
|
5,937
|
|
|
|
(11,924
|
)
|
|
|
25,888
|
|
Allocation of consolidated income
taxes
|
|
|
(693
|
)
|
|
|
(1,369
|
)
|
|
|
(6,481
|
)
|
|
|
|
|
|
|
(8,543
|
)
|
Minority interest
|
|
|
(39
|
)
|
|
|
|
|
|
|
(77
|
)
|
|
|
|
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
17,229
|
|
|
$
|
12,545
|
|
|
$
|
(621
|
)
|
|
$
|
(11,924
|
)
|
|
$
|
17,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Income
Three Months Ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
$
|
16
|
|
|
$
|
71,575
|
|
|
$
|
109,346
|
|
|
$
|
|
|
|
$
|
180,937
|
|
Intercompany revenue
|
|
|
|
|
|
|
1,590
|
|
|
|
1,121
|
|
|
|
(2,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
73,165
|
|
|
|
110,467
|
|
|
|
(2,711
|
)
|
|
|
180,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost
|
|
|
8
|
|
|
|
53,057
|
|
|
|
88,149
|
|
|
|
|
|
|
|
141,214
|
|
Intercompany expenses
|
|
|
|
|
|
|
1,122
|
|
|
|
1,479
|
|
|
|
(2,601
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
17
|
|
|
|
4,207
|
|
|
|
6,083
|
|
|
|
|
|
|
|
10,307
|
|
General and administrative
|
|
|
6,692
|
|
|
|
2,978
|
|
|
|
5,403
|
|
|
|
(110
|
)
|
|
|
14,963
|
|
Loss (gain) on disposal of assets
|
|
|
6
|
|
|
|
(9
|
)
|
|
|
(589
|
)
|
|
|
|
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,723
|
|
|
|
61,355
|
|
|
|
100,525
|
|
|
|
(2,711
|
)
|
|
|
165,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(6,707
|
)
|
|
|
11,810
|
|
|
|
9,942
|
|
|
|
|
|
|
|
15,045
|
|
Earnings (losses) from
unconsolidated affiliates, net
|
|
|
6,831
|
|
|
|
(810
|
)
|
|
|
909
|
|
|
|
(6,884
|
)
|
|
|
46
|
|
Interest income
|
|
|
13,534
|
|
|
|
44
|
|
|
|
1,127
|
|
|
|
(13,673
|
)
|
|
|
1,032
|
|
Interest expense
|
|
|
(3,668
|
)
|
|
|
(1
|
)
|
|
|
(13,712
|
)
|
|
|
13,673
|
|
|
|
(3,708
|
)
|
Other income (expense), net
|
|
|
(347
|
)
|
|
|
(8
|
)
|
|
|
3,138
|
|
|
|
|
|
|
|
2,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes and minority interest
|
|
|
9,643
|
|
|
|
11,035
|
|
|
|
1,404
|
|
|
|
(6,884
|
)
|
|
|
15,198
|
|
Allocation of consolidated income
taxes
|
|
|
2,370
|
|
|
|
(1,241
|
)
|
|
|
(4,305
|
)
|
|
|
|
|
|
|
(3,176
|
)
|
Minority interest
|
|
|
(41
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,972
|
|
|
$
|
9,794
|
|
|
$
|
(2,910
|
)
|
|
$
|
(6,884
|
)
|
|
$
|
11,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-80
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Balance Sheet
As of June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
41,171
|
|
|
$
|
1,428
|
|
|
$
|
67,035
|
|
|
$
|
|
|
|
$
|
109,634
|
|
Accounts receivable
|
|
|
25,088
|
|
|
|
68,098
|
|
|
|
117,935
|
|
|
|
(36,163
|
)
|
|
|
174,958
|
|
Inventories
|
|
|
|
|
|
|
71,865
|
|
|
|
83,814
|
|
|
|
|
|
|
|
155,679
|
|
Prepaid expenses and other
|
|
|
824
|
|
|
|
3,575
|
|
|
|
12,816
|
|
|
|
|
|
|
|
17,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
67,083
|
|
|
|
144,966
|
|
|
|
281,600
|
|
|
|
(36,163
|
)
|
|
|
457,486
|
|
Intercompany investment
|
|
|
278,435
|
|
|
|
1,046
|
|
|
|
|
|
|
|
(279,481
|
)
|
|
|
|
|
Investment in unconsolidated
affiliates
|
|
|
4,801
|
|
|
|
1,315
|
|
|
|
34,552
|
|
|
|
|
|
|
|
40,668
|
|
Intercompany notes receivable
|
|
|
620,783
|
|
|
|
|
|
|
|
18,453
|
|
|
|
(639,236
|
)
|
|
|
|
|
Property and equipment
at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
220
|
|
|
|
31,320
|
|
|
|
12,275
|
|
|
|
|
|
|
|
43,815
|
|
Aircraft and equipment
|
|
|
1,874
|
|
|
|
394,392
|
|
|
|
503,901
|
|
|
|
|
|
|
|
900,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,094
|
|
|
|
425,712
|
|
|
|
516,176
|
|
|
|
|
|
|
|
943,982
|
|
Less: Accumulated depreciation and
amortization
|
|
|
(1,373
|
)
|
|
|
(113,552
|
)
|
|
|
(164,259
|
)
|
|
|
|
|
|
|
(279,184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
721
|
|
|
|
312,160
|
|
|
|
351,917
|
|
|
|
|
|
|
|
664,798
|
|
Goodwill
|
|
|
|
|
|
|
18,594
|
|
|
|
8,102
|
|
|
|
111
|
|
|
|
26,807
|
|
Other assets
|
|
|
9,117
|
|
|
|
65
|
|
|
|
40,853
|
|
|
|
|
|
|
|
50,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
980,940
|
|
|
$
|
478,146
|
|
|
$
|
735,477
|
|
|
$
|
(954,769
|
)
|
|
$
|
1,239,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,012
|
|
|
$
|
19,776
|
|
|
$
|
47,443
|
|
|
$
|
(10,901
|
)
|
|
$
|
57,330
|
|
Accrued liabilities
|
|
|
12,338
|
|
|
|
21,329
|
|
|
|
93,980
|
|
|
|
(25,262
|
)
|
|
|
102,385
|
|
Deferred taxes
|
|
|
(5,733
|
)
|
|
|
|
|
|
|
12,351
|
|
|
|
|
|
|
|
6,618
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
14,489
|
|
|
|
|
|
|
|
14,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,617
|
|
|
|
41,105
|
|
|
|
168,263
|
|
|
|
(36,163
|
)
|
|
|
180,822
|
|
Long-term debt, less current
maturities
|
|
|
234,380
|
|
|
|
|
|
|
|
12,649
|
|
|
|
|
|
|
|
247,029
|
|
Intercompany notes payable
|
|
|
19,966
|
|
|
|
107,106
|
|
|
|
512,164
|
|
|
|
(639,236
|
)
|
|
|
|
|
Other liabilities and deferred
credits
|
|
|
4,396
|
|
|
|
9,964
|
|
|
|
148,267
|
|
|
|
|
|
|
|
162,627
|
|
Deferred taxes
|
|
|
34,515
|
|
|
|
1,821
|
|
|
|
32,909
|
|
|
|
|
|
|
|
69,245
|
|
Minority interest
|
|
|
1,920
|
|
|
|
|
|
|
|
2,429
|
|
|
|
|
|
|
|
4,349
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
234
|
|
|
|
4,062
|
|
|
|
23,578
|
|
|
|
(27,640
|
)
|
|
|
234
|
|
Additional
paid-in-capital
|
|
|
161,191
|
|
|
|
51,170
|
|
|
|
13,476
|
|
|
|
(64,646
|
)
|
|
|
161,191
|
|
Retained earnings
|
|
|
464,753
|
|
|
|
262,918
|
|
|
|
(70,038
|
)
|
|
|
(192,880
|
)
|
|
|
464,753
|
|
Accumulated other comprehensive
income (loss)
|
|
|
51,968
|
|
|
|
|
|
|
|
(108,220
|
)
|
|
|
5,796
|
|
|
|
(50,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
678,146
|
|
|
|
318,150
|
|
|
|
(141,204
|
)
|
|
|
(279,370
|
)
|
|
|
575,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
980,940
|
|
|
$
|
478,146
|
|
|
$
|
735,477
|
|
|
$
|
(954,769
|
)
|
|
$
|
1,239,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-81
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Balance Sheet
As of March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
74,601
|
|
|
$
|
1,363
|
|
|
$
|
46,518
|
|
|
$
|
|
|
|
$
|
122,482
|
|
Accounts receivable
|
|
|
23,627
|
|
|
|
57,332
|
|
|
|
112,277
|
|
|
|
(32,831
|
)
|
|
|
160,405
|
|
Inventories
|
|
|
|
|
|
|
71,061
|
|
|
|
76,799
|
|
|
|
|
|
|
|
147,860
|
|
Prepaid expenses and other
|
|
|
1,146
|
|
|
|
4,080
|
|
|
|
11,293
|
|
|
|
|
|
|
|
16,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
99,374
|
|
|
|
133,836
|
|
|
|
246,887
|
|
|
|
(32,831
|
)
|
|
|
447,266
|
|
Intercompany investment
|
|
|
266,510
|
|
|
|
1,046
|
|
|
|
|
|
|
|
(267,556
|
)
|
|
|
|
|
Investment in unconsolidated
affiliates
|
|
|
4,854
|
|
|
|
1,587
|
|
|
|
33,471
|
|
|
|
|
|
|
|
39,912
|
|
Intercompany notes receivable
|
|
|
547,552
|
|
|
|
|
|
|
|
13,954
|
|
|
|
(561,506
|
)
|
|
|
|
|
Property and equipment
at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
171
|
|
|
|
29,251
|
|
|
|
11,250
|
|
|
|
|
|
|
|
40,672
|
|
Aircraft and equipment
|
|
|
1,695
|
|
|
|
357,051
|
|
|
|
479,568
|
|
|
|
|
|
|
|
838,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,866
|
|
|
|
386,302
|
|
|
|
490,818
|
|
|
|
|
|
|
|
878,986
|
|
Less: Accumulated depreciation and
amortization
|
|
|
(1,349
|
)
|
|
|
(109,963
|
)
|
|
|
(151,760
|
)
|
|
|
|
|
|
|
(263,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
517
|
|
|
|
276,339
|
|
|
|
339,058
|
|
|
|
|
|
|
|
615,914
|
|
Goodwill
|
|
|
|
|
|
|
18,593
|
|
|
|
8,133
|
|
|
|
111
|
|
|
|
26,837
|
|
Other assets
|
|
|
8,808
|
|
|
|
176
|
|
|
|
37,500
|
|
|
|
|
|
|
|
46,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
927,615
|
|
|
$
|
431,577
|
|
|
$
|
679,003
|
|
|
$
|
(861,782
|
)
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS INVESTMENT
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
920
|
|
|
$
|
19,225
|
|
|
$
|
39,006
|
|
|
$
|
(9,437
|
)
|
|
$
|
49,714
|
|
Accrued liabilities
|
|
|
14,696
|
|
|
|
20,399
|
|
|
|
79,855
|
|
|
|
(23,394
|
)
|
|
|
91,556
|
|
Deferred taxes
|
|
|
(6,060
|
)
|
|
|
|
|
|
|
11,085
|
|
|
|
|
|
|
|
5,025
|
|
Short-term borrowings and current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
17,634
|
|
|
|
|
|
|
|
17,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
9,556
|
|
|
|
39,624
|
|
|
|
147,580
|
|
|
|
(32,831
|
)
|
|
|
163,929
|
|
Long-term debt, less current
maturities
|
|
|
234,381
|
|
|
|
|
|
|
|
13,281
|
|
|
|
|
|
|
|
247,662
|
|
Intercompany notes payable
|
|
|
14,658
|
|
|
|
74,525
|
|
|
|
472,323
|
|
|
|
(561,506
|
)
|
|
|
|
|
Other liabilities and deferred
credits
|
|
|
4,658
|
|
|
|
10,175
|
|
|
|
139,704
|
|
|
|
|
|
|
|
154,537
|
|
Deferred taxes
|
|
|
34,361
|
|
|
|
1,648
|
|
|
|
32,272
|
|
|
|
|
|
|
|
68,281
|
|
Minority interest
|
|
|
1,804
|
|
|
|
|
|
|
|
2,503
|
|
|
|
|
|
|
|
4,307
|
|
Stockholders investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
234
|
|
|
|
4,062
|
|
|
|
23,578
|
|
|
|
(27,640
|
)
|
|
|
234
|
|
Additional
paid-in-capital
|
|
|
158,762
|
|
|
|
51,170
|
|
|
|
13,476
|
|
|
|
(64,646
|
)
|
|
|
158,762
|
|
Retained earnings
|
|
|
447,524
|
|
|
|
250,373
|
|
|
|
(69,417
|
)
|
|
|
(180,956
|
)
|
|
|
447,524
|
|
Accumulated other comprehensive
income (loss)
|
|
|
21,677
|
|
|
|
|
|
|
|
(96,297
|
)
|
|
|
5,797
|
|
|
|
(68,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
628,197
|
|
|
|
305,605
|
|
|
|
(128,660
|
)
|
|
|
(267,445
|
)
|
|
|
537,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
927,615
|
|
|
$
|
431,577
|
|
|
$
|
679,003
|
|
|
$
|
(861,782
|
)
|
|
$
|
1,176,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-82
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Cash Flows
Three Months Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net cash provided by (used in)
operating activities
|
|
$
|
(39,344
|
)
|
|
$
|
40,613
|
|
|
$
|
19,933
|
|
|
$
|
10,975
|
|
|
$
|
32,177
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(228
|
)
|
|
|
(42,248
|
)
|
|
|
(4,406
|
)
|
|
|
|
|
|
|
(46,882
|
)
|
Proceeds from asset dispositions
|
|
|
|
|
|
|
1,700
|
|
|
|
856
|
|
|
|
|
|
|
|
2,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(228
|
)
|
|
|
(40,548
|
)
|
|
|
(3,550
|
)
|
|
|
|
|
|
|
(44,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
5,000
|
|
|
|
|
|
|
|
7,195
|
|
|
|
(12,195
|
)
|
|
|
|
|
Repayment of debt and debt
redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(3,957
|
)
|
|
|
|
|
|
|
(3,957
|
)
|
Repayment of intercompany debt
|
|
|
|
|
|
|
|
|
|
|
(1,220
|
)
|
|
|
1,220
|
|
|
|
|
|
Partial prepayment of put/call
obligation
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
Issuance of common stock
|
|
|
764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
764
|
|
Tax benefit related to exercise of
stock options
|
|
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
6,037
|
|
|
|
|
|
|
|
2,018
|
|
|
|
(10,975
|
)
|
|
|
(2,920
|
)
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
105
|
|
|
|
|
|
|
|
2,116
|
|
|
|
|
|
|
|
2,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
(33,430
|
)
|
|
|
65
|
|
|
|
20,517
|
|
|
|
|
|
|
|
(12,848
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
74,601
|
|
|
|
1,363
|
|
|
|
46,518
|
|
|
|
|
|
|
|
122,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
$
|
41,171
|
|
|
$
|
1,428
|
|
|
$
|
67,035
|
|
|
$
|
|
|
|
$
|
109,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-83
BRISTOW
GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Condensed Consolidating Statement of Cash Flows
Three Months Ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Only
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
$
|
(13,035
|
)
|
|
$
|
25,830
|
|
|
$
|
(15,357
|
)
|
|
$
|
(7,213
|
)
|
|
$
|
(9,775
|
)
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(4
|
)
|
|
|
(22,544
|
)
|
|
|
(7,582
|
)
|
|
|
|
|
|
|
(30,130
|
)
|
Proceeds from asset dispositions
|
|
|
68
|
|
|
|
502
|
|
|
|
1,824
|
|
|
|
|
|
|
|
2,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
64
|
|
|
|
(22,042
|
)
|
|
|
(5,758
|
)
|
|
|
|
|
|
|
(27,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt and debt
redemption premiums
|
|
|
|
|
|
|
|
|
|
|
(798
|
)
|
|
|
|
|
|
|
(798
|
)
|
Repayment of intercompany debt
|
|
|
(1
|
)
|
|
|
(3,700
|
)
|
|
|
(12
|
)
|
|
|
3,713
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
(3,500
|
)
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
Partial prepayment of put/call
obligation
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
Issuance of common stock
|
|
|
530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
495
|
|
|
|
(7,200
|
)
|
|
|
(810
|
)
|
|
|
7,213
|
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(2,405
|
)
|
|
|
|
|
|
|
(2,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
|
(12,476
|
)
|
|
|
(3,412
|
)
|
|
|
(24,330
|
)
|
|
|
|
|
|
|
(40,218
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
23,947
|
|
|
|
7,907
|
|
|
|
114,586
|
|
|
|
|
|
|
|
146,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
$
|
11,471
|
|
|
$
|
4,495
|
|
|
$
|
90,256
|
|
|
$
|
|
|
|
$
|
106,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-84
4,000,000 Shares
Bristow
Group Inc.
%
Mandatory Convertible Preferred Stock
PROSPECTUS
,
2006
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 13.
|
Other
Expenses Of Issuance And Distribution
|
The following table sets forth all expenses, other than
underwriting discounts and commissions, payable by the
registrant in connection with the registration of the common
stock.
|
|
|
|
|
SEC registration fee
|
|
$
|
24,610
|
|
NASD filing fee
|
|
|
23,500
|
|
NYSE filing fee
|
|
|
*
|
|
Legal fees and expenses
|
|
|
*
|
|
Accounting fees and expenses
|
|
|
*
|
|
Printing expenses
|
|
|
*
|
|
Transfer agent fees
|
|
|
*
|
|
Miscellaneous
|
|
|
*
|
|
|
|
|
|
|
Total
|
|
$
|
*
|
|
|
|
|
|
|
|
|
|
* |
|
To be completed by amendment. |
|
|
Item 14.
|
Indemnification
of Directors and Officers.
|
Delaware law permits a corporation to adopt a provision in its
certificate of incorporation eliminating or limiting the
personal liability of a director, but not an officer in his or
her capacity as such, to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except that such provision shall not eliminate or limit the
liability of a director for (1) any breach of the
directors duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (3) liability under section 174 of the Delaware
General Corporation Law (the DGCL) for unlawful
payment of dividends or stock purchases or redemptions or
(4) any transaction from which the director derived an
improper personal benefit. Our certificate of incorporation
provides that, to the fullest extent of Delaware law, none of
our directors will be liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director.
Under Delaware law, a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any
type of proceeding, other than an action by or in the right of
the corporation, because he or she is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation a director, officer,
employee or agent of another corporation or other entity,
against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred in connection with such proceeding if: (1) he or
she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation and (2) with respect to any criminal
proceeding, he or she had no reasonable cause to believe that
his or her conduct was unlawful. A corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit brought
by or in the right of the corporation because he or she is or
was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or
other entity, against expenses, including attorneys fees,
actually and reasonably incurred in connection with such action
or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification
will be made if the person is found liable to the corporation
unless, in such a case, the court determines the person is
nonetheless entitled to indemnification for such expenses. A
corporation must also indemnify a present or former director or
officer who has been successful on the merits or otherwise in
defense of any proceeding, or in defense of any claim, issue or
matter therein, against expenses, including attorneys
fees, actually and reasonably incurred by him or her. Expenses,
including attorneys fees, incurred by a director or
officer, or any employees or agents as deemed appropriate by the
board of directors, in defending civil or criminal proceedings
may be paid by the corporation in advance of the final
disposition of such proceedings upon receipt of an undertaking
by or on behalf of such director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the corporation. The
Delaware law regarding indemnification and the advancement of
expenses is not exclusive of
II-1
any other rights a person may be entitled to under any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise.
Under the DGCL, the termination of any proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that a person did not act in good faith and in a
manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
Our certificate of incorporation and bylaws authorize
indemnification of any person entitled to indemnity under law to
the full extent permitted by law.
Delaware law also provides that a corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or other
entity, against any liability asserted against and incurred by
such person, whether or not the corporation would have the power
to indemnify such person against such liability. We will
maintain, at our expense, an insurance policy that insures our
officers and directors, subject to customary exclusions and
deductions, against specified liabilities that may be incurred
in those capacities. In addition, 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.
|
|
Item 15.
|
Recent
Sales of Unregistered Securities.
|
In August 2005, we issued two short-term promissory notes
to Eurocopter which totaled 12.1 million
($14.6 million). These notes were issued to provide
security for two of our used aircraft which we committed to
provide to Eurocopter pursuant to a purchase agreement entered
into in January 2004. Our obligations under these notes have
been discharged. These notes were issued in reliance upon the
exemptions from registration afforded by Section 4(2) of
the Securities Act
and/or
Regulation D thereunder. No underwriters were involved in
the transactions described above.
|
|
Item 16.
|
Exhibits
and Financial Statement Schedules
|
(A) Exhibits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference to
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
|
|
Exhibits
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
(1)
|
|
Form of Underwriting Agreement*
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Articles of Incorporation and
By-laws
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Delaware Certificate
of Incorporation dated December 2, 1987
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(1)
|
|
|
(2) Agreement and Plan
of Merger dated
December 29, 1987
|
|
0-5232
|
|
10-K
|
|
June 1990
|
|
|
3
|
(11)
|
|
|
(3) Certificate of
Merger dated December 2, 1987
|
|
0-5232
|
|
10-K
|
|
June 1990
|
|
|
3
|
(3)
|
|
|
(4) Certificate of
Correction of Certificate of Merger dated January 20, 1988
|
|
0-5232
|
|
10-K
|
|
June 1990
|
|
|
3
|
(4)
|
|
|
(5) Certificate of
Amendment of Certificate of Incorporation dated
November 30, 1989
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(2)
|
|
|
(6) Certificate of
Amendment of Certificate of Incorporation dated December 9,
1992
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(3)
|
|
|
(7) Rights Agreement and
Form of Rights Certificate
|
|
0-5232
|
|
8-A
|
|
February 1996
|
|
|
4
|
|
|
|
(8) Amended and Restated
By-laws
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(4)
|
|
|
(9) Certificate of
Designation of Series A Junior Participating Preferred Stock
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(5)
|
|
|
(10) First Amendment to Rights
Agreement
|
|
0-5232
|
|
8-A/A
|
|
May 1997
|
|
|
5
|
|
|
|
(11) Second Amendment to
Rights Agreement
|
|
0-5232
|
|
8-A/A
|
|
January 2003
|
|
|
4.3
|
|
II-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference to
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
|
|
Exhibits
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
|
|
(12) Third Amendment to Rights
Agreement, dated as of February 28, 2006, between Bristow
Group Inc. and Mellon Investor Services LLC
|
|
000-05232
|
|
8-A/A
|
|
March 2, 2006
|
|
|
4.2
|
|
|
|
(13) Certificate of Ownership
and Merger Merging OL Sub, Inc. into Offshore Logistics, Inc.,
effective February 1, 2006
|
|
001-31617
|
|
8-K
|
|
February 6, 2003
|
|
|
3.1
|
|
|
|
(14) Form of certificate of
designation establishing the mandatory convertible preferred
stock*
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
Instruments defining the rights of
security holders, including indentures
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Registration Rights
Agreement dated December 19, 1996, between the Company and
Caledonia Industrial and Services Limited
|
|
0-5232
|
|
10-Q
|
|
December 1996
|
|
|
4
|
(3)
|
|
|
(2) Indenture, dated as
of June 20, 2003, among the Company, the Guarantors named
therein and U.S. Bank National Association, as Trustee
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.1
|
|
|
|
(3) Registration Rights
Agreement, dated as of June 20, 2003, among the Company and
Credit Suisse First Boston LLC, Deutsche Bank Securities Inc.,
Robert W. Baird & Co. Incorporated, Howard Weil, A
Division of Legg Mason Wood Walker, Inc., Jefferies &
Company, Inc., and Johnson Rice & Company L.L.C.
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.2
|
|
|
|
(4) Form of 144A Global
Note representing $228,170,000 Principal Amount of
61/8% Senior
Notes due 2013
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.3
|
|
|
|
(5) Form of
Regulation S Global Note representing $1,830,000 Principal
Amount of
61/8% Senior
Notes
due 2013
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.4
|
|
|
|
(6) Supplemental
Indenture, dated as of June 30, 2004, among the Company,
the Guarantors named therein and U.S. Bank National
Association as Trustee
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
4.1
|
|
|
|
(7) Supplemental
Indenture dated as of August 16, 2005, among the Company,
as issuer, the Guarantors listed on the signature page, as
guarantors, and U.S. Bank National Association as Trustee
relating to the Companys
61/8% Senior
Notes due 2013
|
|
001-31617
|
|
8-K
|
|
August 22, 2005
|
|
|
4
|
(1)
|
(5)
|
|
Opinion of Baker Botts L.L.P.
regarding validity of the securities*
|
|
|
|
|
|
|
|
|
|
|
(8)
|
|
Opinion of Baker Botts L.L.P.
regarding tax matters*
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
Material Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Executive Welfare
Benefit Agreement, similar agreement omitted pursuant to
Instruction 2 to Item 601 of
Regulation S-K**
|
|
33-9596
|
|
S-4
|
|
December 1986
|
|
|
10
|
(ww)
|
|
|
(2) Executive Welfare
Benefit Agreement, similar agreements are omitted pursuant to
Instruction 2 to Item 601 of
Regulation S-K**
|
|
33-9596
|
|
S-4
|
|
December 1986
|
|
|
10
|
(xx)
|
|
|
(3) Agreement and Plan
of Merger dated as of June 1, 1994, as amended
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(1)
|
|
|
(4) Shareholders
Agreement dated as of June 1, 1994
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(2)
|
|
|
(5) Proposed Form of
Non-competition Agreement with Individual Shareholders
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(3)
|
|
|
(6) Proposed Form of
Joint Venture Agreement
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(4)
|
|
|
(7) Offshore Logistics,
Inc. 1994 Long-Term Management Incentive Plan**
|
|
33-87450
|
|
S-8
|
|
December 1994
|
|
|
84
|
|
|
|
(8) Offshore Logistics,
Inc. Annual Incentive Compensation Plan**
|
|
0-5232
|
|
10-K
|
|
June 1995
|
|
|
10
|
(20)
|
|
|
(9) Indemnity Agreement,
similar agreements with other directors of the Company are
omitted pursuant to Instruction 2 to Item 601 of
Regulation S-K
|
|
0-5232
|
|
10-K
|
|
March 1997
|
|
|
10
|
(14)
|
|
|
(10) Master Agreement dated
December 12, 1996
|
|
0-5232
|
|
8-K
|
|
December 1996
|
|
|
2
|
(1)
|
II-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference to
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
|
|
Exhibits
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
|
|
(11) Supplemental Letter
Agreement dated December 19, 1996 to the Master Agreement
|
|
5-34191
|
|
13-D
|
|
April 1997
|
|
|
2
|
|
|
|
(12) Change of Control
Agreement between the Company and George M. Small. Substantially
identical contracts with five other officers are omitted
pursuant to Item 601 of
Regulation S-K
Instructions.**
|
|
0-5232
|
|
10-Q
|
|
September 1997
|
|
|
10
|
(1)
|
|
|
(13) Offshore Logistics, Inc.
1994 Long-Term Management Incentive Plan, as amended**
|
|
0-5232
|
|
10-K
|
|
March 1999
|
|
|
10
|
(15)
|
|
|
(14) Agreement between Pilots
Represented by Office and Professional Employees International
Union, AFL-CIO and Offshore Logistics, Inc.
|
|
0-5232
|
|
10-K
|
|
March 1999
|
|
|
10
|
(16)
|
|
|
(15) Offshore Logistics, Inc.
1991 Non-qualified Stock Option Plan for Non-employee Directors,
as amended.**
|
|
33-50946
|
|
S-8
|
|
August 1992
|
|
|
4.1
|
|
|
|
(16) Agreement with Louis F.
Crane dated October 18, 2001, executed January 7,
2002.**
|
|
0-5232
|
|
10-K
|
|
March 2002
|
|
|
10
|
(17)
|
|
|
(17) Offshore Logistics, Inc.
1994 Long-Term Management Incentive Plan, as amended.**
|
|
333-100017
|
|
S-8
|
|
September 2002
|
|
|
4.12
|
|
|
|
(18) Continuing Employment and
Separation Agreement with Hans J. Albert dated October 1,
2002**
|
|
001-31617
|
|
10-K
|
|
March 2003
|
|
|
10
|
(16)
|
|
|
(19) Offshore Logistics, Inc.
Deferred Compensation Plan**
|
|
001-31617
|
|
10-K
|
|
March 2004
|
|
|
10
|
(18)
|
|
|
(20) Offshore Logistics, Inc.
2003 Nonqualified Stock Option Plan for Non-employee Directors**
|
|
333-115473
|
|
S-8
|
|
May 13, 2004
|
|
|
4
|
(12)
|
|
|
(21) Agreement with Keith
Chanter dated January 13, 2004**
|
|
001-31617
|
|
10-K
|
|
March 2004
|
|
|
10
|
(20)
|
|
|
(22) Retirement Agreement with
George Small dated April 26, 2004**
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
10
|
(1)
|
|
|
(23) Employment Agreement with
William E. Chiles dated June 21, 2004**
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
10
|
(2)
|
|
|
(24) Change of Control
Employment Agreement with William E. Chiles dated June 21,
2004
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
10
|
(3)
|
|
|
(25) Offshore Logistics, Inc.
2004 Stock Incentive Plan**
|
|
001-31617
|
|
10-Q
|
|
September 2004
|
|
|
10
|
(1)
|
|
|
(26) Separation Agreement
between Bristow Aviation Holdings, Ltd. and Keith Chanter dated
September 1, 2004
|
|
001-31617
|
|
8-K
|
|
September 2004
|
|
|
10
|
(1)
|
|
|
(27) Employment Agreement with
Richard Burman dated October 15, 2004**
|
|
001-31617
|
|
10-K
|
|
March 2005
|
|
|
10
|
(27)
|
|
|
(28) Agreement between Pilots
Represented by Office and Professional Employees International
Union, AFL-CIO and Offshore Logistics, Inc.**
|
|
001-31617
|
|
10-K
|
|
March 2005
|
|
|
10
|
(28)
|
|
|
(29) New Helicopter Sales
Agreement dated December 19, 2002 between the Company and
Sikorsky Aircraft Corporation (Sikorsky Agreement)
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(1)
|
|
|
(30) Amendment Number 1
to Sikorsky Agreement dated February 14, 2003
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(2)
|
|
|
(31) Amendment Number 2 to
Sikorsky Agreement dated April 1, 2003
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(3)
|
|
|
(32) Amendment Number 3
to Sikorsky Agreement dated January 22, 2004
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(4)
|
|
|
(33) Amendment Number 4 to
Sikorsky Agreement dated March 5, 2004
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(5)
|
|
|
(34) Amendment Number 5 to
Sikorsky Agreement dated July 13, 2004
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(6)
|
|
|
(35) Amendment Number 6 to
Sikorsky Agreement dated October 11, 2004
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(7)
|
|
|
(36) Amendment Number 7 to
Sikorsky Agreement dated January 5, 2005
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(8)
|
II-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference to
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
|
|
Exhibits
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
|
|
(37) Amendment Number 8 to
Sikorsky Agreement dated May 5, 2005
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(9)
|
|
|
(38) Amendment Number 9 to
Sikorsky Agreement dated June 14, 2005
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(10)
|
|
|
(39) Employment Agreement with
Brian C. Voegele dated June 1, 2005.**
|
|
001-31617
|
|
8-K
|
|
July 12, 2005
|
|
|
10
|
(1)
|
|
|
(40) Form of Stock Option
Agreement.**
|
|
001-31617
|
|
8-K/A
|
|
February 2, 2006
|
|
|
10
|
(2)
|
|
|
(41) Form of Restricted Stock
Agreement.**
|
|
001-31617
|
|
8-K/A
|
|
February 2, 2006
|
|
|
10
|
(3)
|
|
|
(42) Employment Agreement
effective as of June 1, 2005 between the Company and
Michael R. Suldo.**
|
|
001-31617
|
|
8-K
|
|
February 8, 2006
|
|
|
10
|
(1)
|
|
|
(43) Form of Aircraft Lease
agreement between CFS Air, LLC and Air Logistics, L.L.C. (a
Schedule I has been filed as part of this exhibit setting
forth certain terms omitted from the Form of Aircraft Lease
Agreement)
|
|
001-31617
|
|
10-Q
|
|
December 2005
|
|
|
10
|
(2)
|
|
|
(44) Employment Agreement with
Perry L. Elders dated February 16, 2006.**
|
|
001-31617
|
|
8-K
|
|
February 17, 2006
|
|
|
10
|
(1)
|
|
|
(45) Amendment to Employment
Agreement between the Company and Michael R. Suldo dated
March 8, 2006.**
|
|
001-31617
|
|
8-K
|
|
March 13, 2006
|
|
|
10
|
(1)
|
|
|
(46) Employment Agreement with
Randall A. Stafford dated May 22, 2006.**
|
|
001-31617
|
|
8-K
|
|
May 25, 2006
|
|
|
10
|
(1)
|
|
|
(47) Amended and restated
Employment Agreement between the Company and William E. Chiles
dated June 5, 2006.**
|
|
001-31617
|
|
8-K
|
|
June 8, 2006
|
|
|
10
|
(1)
|
|
|
(48) Amended and restated
Employment Agreement between the Company and Mark Duncan dated
June 5, 2006.**
|
|
001-31617
|
|
8-K
|
|
June 8, 2006
|
|
|
10
|
(2)
|
|
|
(49) S-92
New Helicopter Sales Agreement dated as of May 19, 2006
between the Company and Sikorsky Aircraft Corporation
|
|
001-31617
|
|
10-Q
|
|
June 2006
|
|
|
10
|
(1)
|
|
|
(50) Revolving Credit
Agreement dated August 3, 2006
|
|
001-31617
|
|
8-K
|
|
August 9, 2006
|
|
|
10
|
(1)
|
|
|
(51) Letter of Credit Facility
Agreement dated August 3, 2006
|
|
001-31617
|
|
8-K
|
|
August 9, 2006
|
|
|
10
|
(2)
|
|
|
(52) Bristow Group Inc. Fiscal
Year 2007 Annual Incentive Compensation Plan
|
|
001-31617
|
|
8-K
|
|
August 17, 2006
|
|
|
10
|
(1)
|
(12) Computation of Ratio of
Earnings to Fixed Charges and Preferred Dividends***
|
|
|
|
|
|
|
|
|
|
|
(15) Letter from KPMG LLP
regarding unaudited interim information***
|
|
|
|
|
|
|
|
|
|
|
(21) Subsidiaries of the
Registrant
|
|
001-31617
|
|
10-K
|
|
March 2006
|
|
|
21
|
|
(23) Consent of Independent
Registered Public Accounting Firm***
|
|
|
|
|
|
|
|
|
|
|
(24) Powers of Attorney***
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
To be filed by amendment. |
|
** |
|
Compensatory Plan or Arrangement. |
|
*** |
|
Furnished herewith. |
Agreements with respect to certain of the registrants
long-term debt are not filed as Exhibits hereto inasmuch as the
debt authorized under any such Agreement does not exceed 10% of
the registrants total assets. The registrant agrees to
furnish a copy of each such Agreement to the SEC upon request.
(B) Financial Statement Schedules:
Financial statement schedules are omitted because they are not
required or the required information is shown in our
consolidated financial statements and the notes thereto.
II-5
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that
in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification is against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended,
the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on the
18th day of August 2006.
BRISTOW GROUP INC.
|
|
|
|
By:
|
/s/ Perry
L. Elders
Name: Perry
L. Elders
Title: Executive Vice President
|
and Chief Financial Officer
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons
in the listed capacities on August 18, 2006:
|
|
|
|
|
Name
|
|
Title
|
|
|
|
/s/ William
E. Chiles
William
E. Chiles
|
|
President, Chief Executive Officer
Director
(Principal Executive Officer)
|
|
|
|
/s/ Perry
L. Elders
Perry
L. Elders
|
|
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
|
|
|
|
/s/ Elizabeth
D. Brumley
Elizabeth
D. Brumley
|
|
Vice President, Chief Accounting
Officer and Controller
(Principal Accounting Officer)
|
|
|
|
*
Thomas
N. Amonett
|
|
Director
|
|
|
|
*
Charles
F. Bolden, Jr.
|
|
Director
|
|
|
|
*
Peter
N. Buckley
|
|
Director
|
|
|
|
*
Stephen
J. Cannon
|
|
Director
|
|
|
|
*
Jonathan
H. Cartwright
|
|
Director
|
|
|
|
*
Michael
A. Flick
|
|
Director
|
|
|
|
*
Thomas
C. Knudson
|
|
Director
|
|
|
|
*
Ken
C. Tamblyn
|
|
Director
|
II-7
|
|
|
|
|
Name
|
|
Title
|
*
Robert
W. Waldrup
|
|
Director
|
|
|
|
|
|
*By:
|
|
/s/ Randall
A. Stafford
Randall
A. Stafford(Attorney-in-Fact)
|
|
|
II-8
INDEX TO
EXHIBITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
Exhibits
|
|
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
(1)
|
|
Form of Underwriting Agreement*
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Articles of Incorporation and
By-laws
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Delaware Certificate
of Incorporation dated December 2, 1987
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(1)
|
|
|
(2) Agreement and Plan
of Merger dated December 29, 1987
|
|
0-5232
|
|
10-K
|
|
June 1990
|
|
|
3
|
(11)
|
|
|
(3) Certificate of
Merger dated December 2, 1987
|
|
0-5232
|
|
10-K
|
|
June 1990
|
|
|
3
|
(3)
|
|
|
(4) Certificate of
Correction of Certificate of Merger dated January 20, 1988
|
|
0-5232
|
|
10-K
|
|
June 1990
|
|
|
3
|
(4)
|
|
|
(5) Certificate of
Amendment of Certificate of Incorporation dated
November 30, 1989
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(2)
|
|
|
(6) Certificate of
Amendment of Certificate of Incorporation dated December 9,
1992
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(3)
|
|
|
(8) Rights Agreement and
Form of Rights Certificate
|
|
0-5232
|
|
8-A
|
|
February 1996
|
|
|
4
|
|
|
|
(9) Amended and Restated
By-laws
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(4)
|
|
|
(10) Certificate of
Designation of Series A Junior Participating Preferred Stock
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
3
|
(5)
|
|
|
(10) First Amendment to Rights
Agreement
|
|
0-5232
|
|
8-A/A
|
|
May 1997
|
|
|
5
|
|
|
|
(11) Second Amendment to
Rights Agreement
|
|
0-5232
|
|
8-A/A
|
|
January 2003
|
|
|
4.3
|
|
|
|
(12) Third Amendment to Rights
Agreement, dated as of February 28, 2006, between Bristow
Group Inc. and Mellon Investor Services LLC
000-05232
|
|
|
|
8-A/A
|
|
March 2, 2006
|
|
|
4.2
|
|
|
|
(13) Certificate of Ownership
and Merger Merging OL Sub, Inc. into Offshore Logistics, Inc.,
effective February 1, 2006
|
|
001-31617
|
|
8-K
|
|
February 6, 2003
|
|
|
3.1
|
|
|
|
(14) Form of certificate of
designation establishing the mandatory convertible preferred
stock*
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
Instruments defining the rights of
security holders, including indentures
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Registration Rights
Agreement dated December 19, 1996, between the Company and
Caledonia Industrial and Services Limited
|
|
0-5232
|
|
10-Q
|
|
December 1996
|
|
|
4
|
(3)
|
|
|
(2) Indenture, dated as
of June 20, 2003, among the Company, the Guarantors named
therein and U.S. Bank National Association, as Trustee
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.1
|
|
|
|
(3) Registration Rights
Agreement, dated as of June 20, 2003, among the Company and
Credit Suisse First Boston LLC, Deutsche Bank Securities Inc.,
Robert W. Baird & Co. Incorporated, Howard Weil, A
Division of Legg Mason Wood Walker, Inc., Jefferies &
Company, Inc., and Johnson Rice & Company L.L.C.
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.2
|
|
|
|
(4) Form of 144A Global
Note representing $228,170,000 Principal Amount of
61/8% Senior
Notes due 2013
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.3
|
|
|
|
(5) Form of
Regulation S Global Note representing $1,830,000 Principal
Amount of
61/8% Senior
Notes due 2013
|
|
333-107148
|
|
S-4
|
|
July 18, 2003
|
|
|
4.4
|
|
|
|
(6) Supplemental
Indenture, dated as of June 30, 2004, among the Company,
the Guarantors named therein and U.S. Bank National
Association as Trustee
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
4.1
|
|
|
|
(7) Supplemental
Indenture dated as of August 16, 2005, among the Company,
as issuer, the Guarantors listed on the signature page, as
guarantors, and U.S. Bank National Association as Trustee
relating to the Companys
61/8% Senior
Notes due 2013.
|
|
001-31617
|
|
8-K
|
|
August 22, 2005
|
|
|
4
|
(1)
|
(5)
|
|
Opinion of Baker Botts L.L.P.
regarding validity of the securities*
|
|
|
|
|
|
|
|
|
|
|
(8)
|
|
Opinion of Baker Botts L.L.P.
regarding tax matters*
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
Material Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Executive Welfare
Benefit Agreement, similar agreement omitted pursuant to
Instruction 2 to Item 601 of
Regulation S-K**
|
|
33-9596
|
|
S-4
|
|
December 1986
|
|
|
10
|
(ww)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
Exhibits
|
|
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
|
|
(3) Executive Welfare
Benefit Agreement, similar agreements are omitted pursuant to
Instruction 2 to Item 601 of
Regulation S-K**
|
|
33-9596
|
|
S-4
|
|
December 1986
|
|
|
10
|
(xx)
|
|
|
(4) Agreement and Plan
of Merger dated as of June 1, 1994, as amended
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(1)
|
|
|
(5) Shareholders
Agreement dated as of June 1, 1994
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(2)
|
|
|
(6) Proposed Form of
Non-competition Agreement with Individual Shareholders
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(3)
|
|
|
(7) Proposed Form of
Joint Venture Agreement
|
|
33-79968
|
|
S-4
|
|
August 1994
|
|
|
2
|
(4)
|
|
|
(8) Offshore Logistics,
Inc. 1994 Long-Term Management Incentive Plan**
|
|
33-87450
|
|
S-8
|
|
December 1994
|
|
|
84
|
|
|
|
(9) Offshore Logistics,
Inc. Annual Incentive Compensation Plan**
|
|
0-5232
|
|
10-K
|
|
June 1995
|
|
|
10
|
(20)
|
|
|
(10) Indemnity Agreement,
similar agreements with other directors of the Company are
omitted pursuant to Instruction 2 to Item 601 of
Regulation S-K
|
|
0-5232
|
|
10-K
|
|
March 1997
|
|
|
10
|
(14)
|
|
|
(11) Master Agreement dated
December 12, 1996
|
|
0-5232
|
|
8-K
|
|
December 1996
|
|
|
2
|
(1)
|
|
|
(12) Supplemental Letter
Agreement dated December 19, 1996 to the Master Agreement
|
|
5-34191
|
|
13-D
|
|
April 1997
|
|
|
2
|
|
|
|
(13) Change of Control
Agreement between the Company and George M. Small. Substantially
identical contracts with five other officers are omitted
pursuant to Item 601 of
Regulation S-K
Instructions.**
|
|
0-5232
|
|
10-Q
|
|
September 1997
|
|
|
10
|
(1)
|
|
|
(13) Offshore Logistics, Inc.
1994 Long-Term Management Incentive Plan, as amended**
|
|
0-5232
|
|
10-K
|
|
March 1999
|
|
|
10
|
(15)
|
|
|
(14) Agreement between Pilots
Represented by Office and Professional Employees International
Union, AFL-CIO and Offshore Logistics, Inc.
|
|
0-5232
|
|
10-K
|
|
March 1999
|
|
|
10
|
(16)
|
|
|
(15) Offshore Logistics, Inc.
1991 Non-qualified Stock Option Plan for Non-employee Directors,
as amended.**
|
|
33-50946
|
|
S-8
|
|
August 1992
|
|
|
4.1
|
|
|
|
(16) Agreement with Louis F.
Crane dated October 18, 2001, executed January 7,
2002.**
|
|
0-5232
|
|
10-K
|
|
March 2002
|
|
|
10
|
(17)
|
|
|
(17) Offshore Logistics, Inc.
1994 Long-Term Management Incentive Plan, as amended.**
|
|
333-100017
|
|
S-8
|
|
September 2002
|
|
|
4.12
|
|
|
|
(18) Continuing Employment and
Separation Agreement with Hans J. Albert dated October 1,
2002**
|
|
001-31617
|
|
10-K
|
|
March 2003
|
|
|
10
|
(16)
|
|
|
(19) Offshore Logistics, Inc.
Deferred Compensation Plan**
|
|
001-31617
|
|
10-K
|
|
March 2004
|
|
|
10
|
(18)
|
|
|
(20) Offshore Logistics, Inc.
2003 Nonqualified Stock Option Plan for Non-employee Directors**
|
|
333-115473
|
|
S-8
|
|
May 13, 2004
|
|
|
4
|
(12)
|
|
|
(21) Agreement with Keith
Chanter dated January 13, 2004**
|
|
001-31617
|
|
10-K
|
|
March 2004
|
|
|
10
|
(20)
|
|
|
(22) Retirement Agreement with
George Small dated April 26, 2004**
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
10
|
(1)
|
|
|
(23) Employment Agreement with
William E. Chiles dated June 21, 2004**
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
10
|
(2)
|
|
|
(24) Change of Control
Employment Agreement with William E. Chiles dated June 21,
2004
|
|
001-31617
|
|
10-Q
|
|
June 2004
|
|
|
10
|
(3)
|
|
|
(25) Offshore Logistics, Inc.
2004 Stock Incentive Plan**
|
|
001-31617
|
|
10-Q
|
|
September 2004
|
|
|
10
|
(1)
|
|
|
(26) Separation Agreement
between Bristow Aviation Holdings, Ltd. and Keith Chanter dated
September 1, 2004
|
|
001-31617
|
|
8-K
|
|
September 2004
|
|
|
10
|
(1)
|
|
|
(27) Employment Agreement with
Richard Burman dated October 15, 2004**
|
|
001-31617
|
|
10-K
|
|
March 2005
|
|
|
10
|
(27)
|
|
|
(28) Agreement between Pilots
Represented by Office and Professional Employees International
Union, AFL-CIO and Offshore Logistics, Inc.**
|
|
001-31617
|
|
10-K
|
|
March 2005
|
|
|
10
|
(28)
|
|
|
(29) New Helicopter Sales
Agreement dated December 19, 2002 between the Company and
Sikorsky Aircraft Corporation (Sikorsky Agreement).
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(1)
|
|
|
(30) Amendment Number 1
to Sikorsky Agreement dated February 14, 2003.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registration
|
|
|
|
|
|
|
|
|
|
|
|
or File
|
|
Form or
|
|
Report
|
|
Exhibit
|
|
Exhibits
|
|
|
|
Number
|
|
Report
|
|
Date
|
|
Number
|
|
|
|
|
(31) Amendment Number 2 to
Sikorsky Agreement dated April 1, 2003.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(3)
|
|
|
(32) Amendment Number 3
to Sikorsky Agreement dated January 22, 2004.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(4)
|
|
|
(33) Amendment Number 4 to
Sikorsky Agreement dated March 5, 2004.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(5)
|
|
|
(34) Amendment Number 5 to
Sikorsky Agreement dated July 13, 2004.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(6)
|
|
|
(35) Amendment Number 6 to
Sikorsky Agreement dated October 11, 2004.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(7)
|
|
|
(36) Amendment Number 7 to
Sikorsky Agreement dated January 5, 2005.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(8)
|
|
|
(37) Amendment Number 8 to
Sikorsky Agreement dated May 5, 2005.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(9)
|
|
|
(38) Amendment Number 9 to
Sikorsky Agreement dated June 14, 2005.
|
|
001-31617
|
|
10-Q
|
|
June 2005
|
|
|
10
|
(10)
|
|
|
(39) Employment Agreement with
Brian C. Voegele dated June 1, 2005.**
|
|
001-31617
|
|
8-K
|
|
July 12, 2005
|
|
|
10
|
(1)
|
|
|
(40) Form of Stock Option
Agreement.**
|
|
001-31617
|
|
8-K/A
|
|
February 2, 2006
|
|
|
10
|
(2)
|
|
|
(41) Form of Restricted Stock
Agreement.**
|
|
001-31617
|
|
8-K/A
|
|
February 2, 2006
|
|
|
10
|
(3)
|
|
|
(42) Employment Agreement
effective as of June 1, 2005 between the Company and
Michael R. Suldo.**
|
|
001-31617
|
|
8-K
|
|
February 8, 2006
|
|
|
10
|
(1)
|
|
|
(43) Form of Aircraft Lease
agreement between CFS Air, LLC and Air Logistics, L.L.C. (a
Schedule I has been filed as part of this exhibit setting
forth certain terms omitted from the Form of Aircraft Lease
Agreement).
|
|
001-31617
|
|
10-Q
|
|
December 2005
|
|
|
10
|
(2)
|
|
|
(44) Employment Agreement with
Perry L. Elders dated February 16, 2006.**
|
|
001-31617
|
|
8-K
|
|
February 17, 2006
|
|
|
10
|
(1)
|
|
|
(45) Amendment to Employment
Agreement between the Company and Michael R. Suldo dated
March 8, 2006.**
|
|
001-31617
|
|
8-K
|
|
March 13, 2006
|
|
|
10
|
(1)
|
|
|
(46) Employment Agreement with
Randall A. Stafford dated May 22, 2006.**
|
|
001-31617
|
|
8-K
|
|
May 25, 2006
|
|
|
10
|
(1)
|
|
|
(47) Amended and restated
Employment Agreement between the Company and William E. Chiles
dated June 5, 2006.**
|
|
001-31617
|
|
8-K
|
|
June 8, 2006
|
|
|
10
|
(1)
|
|
|
(48) Amended and restated
Employment Agreement between the Company and Mark Duncan dated
June 5, 2006.**
|
|
001-31617
|
|
8-K
|
|
June 8, 2006
|
|
|
10
|
(2)
|
|
|
(49) S-92
New Helicopter Sales Agreement dated as of May 19, 2006
between the Company and Sikorsky Aircraft Corporation
|
|
001-31617
|
|
10-Q
|
|
June 2006
|
|
|
10
|
(1)
|
|
|
(50) Revolving Credit
Agreement dated August 3, 2006
|
|
001-31617
|
|
8-K
|
|
August 9, 2006
|
|
|
10
|
(1)
|
|
|
(51) Letter of Credit Facility
Agreement dated August 3, 2006
|
|
001-31617
|
|
8-K
|
|
August 9, 2006
|
|
|
10
|
(2)
|
|
|
(52) Bristow Group Inc. Fiscal
Year 2007 Annual Incentive Compensation Plan
|
|
001-31617
|
|
8-K
|
|
August 17, 2006
|
|
|
10
|
(1)
|
(12) Computation of Ratio of
Earnings to Fixed Charges and Preferred Dividends***
|
|
|
|
|
|
|
|
|
|
|
(15) Letter from KPMG LLP
regarding unaudited interim information***
|
|
|
|
|
|
|
|
|
|
|
(21) Subsidiaries of the
Registrant
|
|
001-31617
|
|
10-K
|
|
March 2006
|
|
|
21
|
|
(23) Consent of Independent
Registered Public Accounting Firm***
|
|
|
|
|
|
|
|
|
|
|
(24) Powers of Attorney***
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
To be filed by amendment. |
|
** |
|
Compensatory Plan or Arrangement. |
|
*** |
|
Furnished herewith. |
Agreements with respect to certain of the registrants
long-term debt are not filed as Exhibits hereto inasmuch as the
debt authorized under any such Agreement does not exceed 10% of
the registrants total assets. The registrant agrees to
furnish a copy of each such Agreement to the Securities and
Exchange Commission upon request.