As filed with the Securities and Exchange Commission on September 5, 2006

Registration No. 333-136743

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

 

 

BRISTOW GROUP INC.

(Exact name of registrant as specified in its charter)

 

 

 

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 registrant’s 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:

 

 

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

 

 

 

 

 

 

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.

 

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 5, 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. Caledonia Investments plc, one of our significant stockholders, intends to purchase 300,000 of these shares.

 

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 March 15, June 15, September 15 and December 15 of each year prior to September 15, 2009, and on September 15, 2009. The first dividend payment will be made on December 15, 2006, in the amount of $      per share of our mandatory convertible preferred stock, which reflects the time period from the date of issuance to December 15, 2006.

 

Each share of our mandatory convertible preferred stock has a liquidation preference of $50, plus accrued, cumulated and unpaid dividends. Each share of our mandatory convertible preferred stock will automatically convert on September 15, 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 September 15, 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 31, 2006 was $37.31 per share.

 

 

 

 

Investing in our mandatory convertible preferred stock involves risks. See “Risk Factors” beginning on page 14.

 

 

 

 

 

 

 

 

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.

 

 

 

 

Jefferies & Company

 

 

 

 

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.

 

PROSPECTUS SUMMARY

	•	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.
	•	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.
	•	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.
	•	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.
	•	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.
	•	Relocated Headquarters — We have relocated our corporate headquarters to Houston, Texas, bringing us nearer to the headquarters of many global offshore energy customers.
	•	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.

		Aircraft in Fleet																				Percentage of
		Helicopters																				Fiscal Year 2006
		Small				Medium				Large				Fixed Wing				Total				Revenues
Helicopter Services
North America			137				26				5				1				169				26	%
South and Central America			2				31				1				—				34				6	%
Europe			1				6				31				—				38				31	%
West Africa			11				32				2				6				51				14	%
Southeast Asia			2				5				9				—				16				8	%
Other International			—				8				9				3				20				4	%
EH Centralized Operations			—				—				5				—				5				2	%
Production Management																							9	%
Total			153				108				62				10				333				100	%
Aircraft not currently in fleet
On order			3				41				7				—				51
Under option			—				24				13				—				37

	•	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.
	•	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.
	•	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.

	•	We have a history of revenue and profit growth.  We have a history of consistent revenue growth, including 9% 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.

	•	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,” 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.

		Upon completion of this offering, we plan to exercise options to acquire additional aircraft, including the options for five large aircraft that expire on September 30, 2006 for a purchase price of approximately $98.8 million. Consistent with our desire to maintain a conservative use of leverage to fund growth, we are raising capital through the sale of equity securities in this offering. We have options to acquire an additional eight large aircraft and an additional 24 medium aircraft. Depending on market conditions, we may exercise these additional options to acquire aircraft or elect to expand our business through acquisition, including acquisitions under consideration or negotiation. These strategic decisions would require us to access additional sources of capital. Our decision to use equity, debt or a combination of the two would depend on our financial position and market conditions at that time, but we currently expect to use debt financing.

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. Caledonia Investments plc intends to purchase 300,000 of the shares offered hereby.

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		March 15, June 15, September 15 and December 15 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 December 15, 2006.

Redemption		Our mandatory convertible preferred stock is not redeemable, except that we may redeem our mandatory convertible preferred stock to the extent necessary for us to comply with any present or future requirements of the Federal Aviation Act. See “Description of Capital Stock — Certificate of Incorporation and Bylaws — Foreign Ownership.”

Mandatory Conversion Date		September 15, 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.
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 September 15, 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 September 15, 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

		September 15, 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 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 September 15, 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 September 15, 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 parity stock 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 parity stock having similar voting rights, 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 or any such parity 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 having similar voting rights, 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. The voting rights of our mandatory convertible preferred stock may be suspended to the extent necessary for us to comply with any present or future requirements of the Federal Aviation Act. See “Description of Capital Stock — Certificate of Incorporation and Bylaws — Foreign Ownership.”

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 $193.7 million. We intend to use the net proceeds from this offering for the following purposes:

		• to fund the $98.8 million purchase price for the acquisition of five large aircraft under options we intend to exercise that expire on September 30, 2006;

		• to fund a portion of the $349.4 million purchase price for the acquisition of additional large aircraft under options we may exercise; and

		• to fund a portion of the $394.5 million purchase price for the acquisition of aircraft on order as of June 30, 2006.

		Depending on the timing of such uses, we may use a portion of the net proceeds for working capital and other general corporate purposes, including acquisitions. 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 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 holder’s 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 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 (or failure to make adjustments) could result in a constructive dividend taxed to a holder of mandatory convertible preferred stock or common stock 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.”

		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

		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			$	352,697			$	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.

 

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:

 

 

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.

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. government’s 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

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 “Management’s 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 SEC’s 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 Committee’s 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

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 Committee’s 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 Committee’s 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

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, as we continue to focus on our compliance program, other situations involving foreign operations, similar to those matters disclosed to the SEC in February 2005 and described above, could arise that warrant further investigation and subsequent disclosures. As a result, new issues may be identified that may impact our financial statements and 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 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.

 

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 “Management’s 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 “Management’s 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:

 

 

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.”

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 “Management’s 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:

 

 

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 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 “Management’s 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.

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.

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.

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:

 

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 September 15, 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 subsidiary’s 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 as a result of adjustments (or failure to make adjustments) to the conversion rate of our mandatory convertible preferred stock.

 

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. In the event of such adjustments (or a failure to make adjustments), holders of mandatory convertible preferred stock or our common stock may, in certain circumstances, be deemed to have received a distribution subject to U.S. federal income tax as a dividend.

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:

 

 

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, our directors and executive officers and Caledonia Investments plc 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

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 mandatory convertible preferred stock and our common stock and cause owners of our mandatory convertible preferred stock and 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 our outstanding voting capital stock in excess of the Permitted Foreign Ownership Percentage owned by certain stockholders who are not citizens of the United States shall automatically be suspended. These voting rights will be suspended in reverse chronological order by date of registry until the number of voting shares held by persons that are not citizens of the United States is less than or equal to the Permitted Foreign Ownership Percentage. Our certificate of incorporation, as amended, further authorizes us to redeem any such suspended shares to the extent necessary for us to comply with any present or future requirements of the Federal Aviation Act. 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 mandatory convertible preferred stock and our common stock because holders may be unable to transfer our mandatory convertible preferred stock and our common stock to persons who are not citizens of the United States.

 

Moody’s Investors Service could downgrade our credit rating, which could adversely affect our liquidity, results of operations and growth opportunities.

 

Moody’s Investors Service has indicated that it will begin announcing new assessments and ratings for existing corporate speculative grade issuers on September 18, 2006 based on its new methodology for loss-given-default assessments and probability-of-default ratings. Moody’s has indicated that the new assessments and ratings will be announced on an industry-by-industry basis. In connection with this announcement, it is possible that Moody’s will change its current long-term credit rating for our company. Any downgrade in our credit rating could have an adverse effect on our financing costs and access to capital, which could adversely impact our liquidity and results of operations and growth opportunities.

 

 

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:

 

 

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 $193.7 million, after deducting underwriting discounts and commissions and our estimated offering expenses. The underwriters will not receive any discount or commission on the sale of the 300,000 shares of mandatory convertible preferred stock to Caledonia Investments plc.

 

We intend to use the net proceeds from this offering for the following purposes:

 

 

 

 

Pending such uses, we plan to invest the net proceeds of this offering in highly liquid, investment-grade securities. Depending on the timing of such uses, we may use a portion of the net proceeds for working capital and other general corporate purposes, including acquisitions.

 

For a discussion of our aircraft on order and under option, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity — Future Cash Requirements — Capital Commitments” and “Business — Aircraft Fleet Expansion.”

 

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,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.

 

 

 

 

 

You should read the data set forth below in conjunction with our consolidated financial statements and related notes and “Management’s 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.

 

 

 

 

 

Management’s 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:

 

 

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%,

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:

 

 

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,

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.

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 SEC’s 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 “Management’s 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:

 

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.