Filed Pursuant to Rule 424(b)(5)

Registration No. 333-151519

  

CALCULATION OF REGISTRATION FEE

 

 

(1) Includes 615,000 additional shares that the Underwriters have the option to purchase.

 

(2) The registration fee is calculated in accordance with Rule 457(r) of the Securities Act of 1933, as amended.

 

PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 9, 2008

 

4,100,000 Shares

 

 

Bristow Group Inc.

 

Common Stock

 

 

We are offering 4,100,000 shares of our common stock. Our common stock is listed on the New York Stock Exchange under the symbol “BRS”. The closing price of our common stock on the New York Stock Exchange on June 11, 2008 was $46.87 per share.

 

We have entered into a separate underwriting agreement under which a group of underwriters have agreed to purchase $100 million in convertible notes ($115 million if the underwriters exercise their over-allotment option in full). The closing of the convertible notes offering is subject to customary closing conditions and is expected to be concurrent with the closing of this offering. The closing of the two offerings are not conditioned on each other. Additionally, we have entered into an agreement with Caledonia Investments plc (“Caledonia”), one of our largest shareholders, for the sale of 281,900 shares of our common stock at the offering price in a private placement (the “Caledonia Private Placement”). Closing of the Caledonia Private Placement is subject to customary closing conditions, including regulatory clearance, and the closing of this offering.

 

Investing in our common stock involves risks. See “Risk Factors” on page S-11.

 

 

The underwriters have a 30-day option to purchase a maximum of 615,000 additional shares of our common stock.

 

Delivery of the shares of our common stock will be made on or about June 17, 2008.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the related prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

 

 

The date of this prospectus supplement is June 11, 2008.

 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

PROSPECTUS

 

 

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus or any free writing prospectus prepared by us or on our behalf. We have not authorized anyone to provide you with additional or different information. We are not making an offer to sell shares of our common stock in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of this document or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects may have changed since these dates.

 

We provide information to you about this offering of shares of our common stock in two separate documents that are bound together: (1) this prospectus supplement, which describes the specific details regarding this offering, and (2) the accompanying prospectus, which provides general information, some of which may not apply to this offering. Generally, when we refer to this “prospectus,” we are referring to both documents combined. If information in this prospectus supplement is inconsistent with the accompanying prospectus, you should rely on this prospectus supplement.

 

You should carefully read this prospectus supplement and the accompanying prospectus, including the information incorporated by reference in the prospectus, before you invest. These documents contain information you should consider when making your investment decision.

 

SUMMARY

		Number of Aircraft																								Percentage of
		Helicopters																Fixed								Revenue for
		Small(1)				Medium				Large				Training				Wing				Total				Fiscal Year 2008
North America			121				30				4				—				1				156				23	%
South and Central America			4				28				1				—				—				33				6	%
Europe			1				10				38				—				—				49				36	%
West Africa			12				28				3				—				7				50				17	%
Southeast Asia			3				11				13				—				—				27				11	%
Other International			—				11				9				—				2				22				5	%
EH Centralized Operations			—				—				—				—				—				—				1	%
Bristow Academy			—				—				—				68				1				69				1	%
Total, consolidated affiliates(2)			141				118				68				68				11				406				100	%
Unconsolidated affiliates(3)			55				56				8				—				23				142
Total			196				174				76				68				34				548
Aircraft not currently in fleet:(4)
On order			—				9				16				10				—				35
Under option			—				33				17				—				—				50

(1)		We have been disposing of our smaller aircraft in the U.S. Gulf of Mexico and are currently exploring alternatives for accelerating the disposition of approximately 50 of such aircraft within the next eighteen months. Any such aircraft dispositions will be subject to obtaining terms acceptable to us and other factors which may affect the timing or completion of the disposition.
(2)		Includes 4 aircraft held for sale.
(3)		The 142 aircraft operated by our unconsolidated affiliates are in addition to those aircraft leased from us.
(4)		All of these aircraft are attributed to our consolidated affiliates.

	•	We have a history of consistent revenue and Adjusted EBITDA growth.  We have a history of consistent revenue growth, including 17.6% compounded annual growth rate over the past three fiscal years. Our growth has translated into increases in Adjusted EBITDA (as defined under “Summary Historical Financial Information”) of 19.3% compounded annually over the past three fiscal years. Our revenues are driven primarily by offshore, production-related operating expenses, which over the last twelve years have been relatively stable and upward trending, including during a downturn in the energy industry. Worldwide there are more than 8,800 production platforms and 660 rigs. The ongoing nature of production work makes it less volatile than exploration and development work, which is more reactive to changes or expected changes in commodity prices. Accordingly, we have experienced less volatility in demand than other sectors of the energy services industry. In addition, most of our contracts provide that the customer will reimburse us for cost increases associated with the contract, including fuel cost increases. Lastly, our pricing structure, consisting of a fixed monthly reservation fee plus additional fees for each hour flown, fixes a percentage of our revenue stream in the short-term, stabilizing the impact of short-term fluctuations in flight hours by customers.
	•	We have a global footprint.  We operate in 20 countries including the U.S. and U.K. and have the largest fleet of helicopters serving the offshore energy market in the world. We have the largest fleet in each of Nigeria, Australia and the U.S. Gulf of Mexico and also have a strong market position in the North Sea and other key markets. This global footprint allows us to provide our offshore energy customers with consistent, high-quality service, reduces our exposure to any one market and provides us with flexibility in deploying our aircraft to the most attractive markets.
	•	We have a record of safe operations and operate a modern, well-maintained fleet.  We have a record of safe operations, including fewer accidents per 100,000 flight hours over the past five years than the industry average for the U.S. Gulf of Mexico and the North Sea. We continuously maintain and improve the quality of the equipment that we operate and apply state-of-the-art safety technologies across our global organization. Our size and our strong safety record allow us access to the substantial amount and type of insurance coverage required by our customers. As of March 31, 2008, the average age of the helicopters in our consolidated fleet was approximately 13 years. The average age of our fleet has been reduced with the addition of 36 new aircraft in the fiscal year ended March 31, 2008.
	•	We have strong, long-term relationships with our customers.  We have strong, long-term relationships with our customers, which include major, independent, international and national energy companies. Our relationships with these companies involve information sharing regarding future aircraft requirements and coordination of our respective operations. Our close customer relationships have allowed us to expand our helicopter fleet capacity based on identifiable specific projects that require new aircraft.
	•	We have a strong pilot training program.  We have a strong pilot training program through Bristow Academy. We anticipate a long-term demand for skilled pilots in the rotorwing aviation services business. This view is based upon internal analysis of our existing pilots compared to anticipated future requirements to meet growing demand in the offshore energy services and other sectors. We believe that our ability to train new pilots provides us with a strategic advantage over our competitors.
	•	We have an experienced management team.  Our management team has extensive experience in the energy services industry and helicopter services sector. We train each of these managers on our corporate values, including safety, quality, integrity and profitability, and their performance is evaluated using key performance indicators which directly link to those values. Our senior management team is composed of eight executives who have an average of over 28 years of relevant experience.
	•	We have the financial flexibility to pursue growth.  As adjusted for this offering and as further adjusted for the concurrent offering discussed below, our balance-sheet debt as a percentage of total capital was 34% and 38%, respectively, at March 31, 2008. We also do not have a significant amount of off-balance sheet obligations. (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Cash Requirements — Contractual Obligations, Commercial Commitments and Off Balance Sheet Arrangements”). Under our syndicated secured credit facilities entered into in August 2006 (“Credit Facilities”), we have an undrawn $100 million

		revolving credit facility and $24.6 million available under a $25 million letter of credit facility as of the date of this prospectus supplement. We believe that this capital structure provides us with the financial flexibility to pursue opportunities to grow our business, including through the aircraft fleet investment program described above and potential strategic acquisitions.

	•	Grow our business.  We plan to continue to grow our business globally and increase our revenue, profitability and fleet capacity. We have a footprint in most major oil and gas producing regions of the world, and we have the opportunity to expand and deepen our presence in many of these markets. We anticipate this growth will result primarily from the deployment of new aircraft into markets where we expect they will be most profitably employed, as well as by executing opportunistic acquisitions. Through our relationships with our existing customers, we are aware of future business opportunities in a broad range of the markets we currently serve that would require capital expenditures of roughly double our current $590 million capital expenditure budget plus the amount of proceeds from this offering and the concurrent offering described below. Our acquisition-related growth may include increasing our role and participation with existing unconsolidated affiliates and may include increasing our position in existing markets or expanding into new markets.

	•	Strategically position our company as the preferred provider of helicopter services.  We position our company as the preferred provider of helicopter services by maintaining strong relationships with our customers and providing safe and high-quality service. We focus on maintaining relationships with our customers’ field operations and corporate management. We believe that this focus helps us better anticipate customer needs and provide our customers with the right aircraft in the right place at the right time, which in turn allows us to better manage our existing fleet and capital investment program. We also leverage our close relationships with our customers to establish mutually beneficial operating practices and safety standards worldwide. By applying standard operating and safety practices across our global operations, we are able to provide our customers with consistent, high-quality service in each of their areas of operation. By better understanding our customers’ needs and by virtue of our global operations and safety standards, we have effectively competed against other helicopter service providers based on aircraft availability, customer service, safety and reliability, and not just price.

	•	Integrate our global operations.  We are an integrated global operator, and we intend to continue to identify and implement further opportunities to integrate our global organization. In the past several years, we have changed our senior management team, integrated our operations among previously independently managed businesses, created a global flight and maintenance standards group, improved our global asset allocation and made other changes in our corporate operations. We anticipate that these improvements and further integration opportunities will result in revenue growth, and may also generate cost savings.

	•	the convertible notes will mature on June 15, 2038, and will be redeemable by us on or after June 15, 2015 at 100% of the principal amount plus accrued and unpaid interest;
	•	holders of the convertible notes will be entitled require us to repurchase some or all of their convertible notes for cash on June 15, 2015, 2020, 2025, 2030 and 2035, or in the event of certain change of control transactions, at 100% of the principal amount plus accrued and unpaid interest; and
	•	the notes will be convertible, under specified circumstances, using a net share settlement process, under which, upon conversion of a note, the holder will generally receive cash up to the principal amount of the note and shares of our common stock with respect to the note’s conversion value in excess of the principal amount.

Common stock offered by us		4,100,000 shares
Common stock to be outstanding after the offering		28,190,026 shares(1)
Use of proceeds		We estimate that our net proceeds from the sale of the shares offered by us, after deducting estimated expenses and underwriting discounts and commissions, will be approximately $183.2 million. We intend to use the net proceeds from this offering, together with the estimated aggregate net proceeds of $96.6 million from our concurrent convertible notes offering, as well as the proceeds from the Caledonia Private Placement, to purchase additional aircraft. If we do not complete the concurrent convertible notes offering, the funds available to purchase additional aircraft will be reduced. We plan to order additional aircraft from time to time following completion of this offering and expect to pay the purchase price for additional aircraft at various dates during fiscal years 2009 to 2013. Pending such use, we plan to invest the net proceeds of this offering in highly liquid, investment-grade or better securities. Depending on our ability to obtain such aircraft orders and the timing of such use, we may use a portion of the net proceeds for working

		capital and other general corporate purposes, including acquisitions.
		There is no assurance that our concurrent offering of convertible notes or the Caledonia Private Placement will be completed or, if completed, that they will be completed for the amounts or the pricing contemplated.
Over-allotment option		We have granted the underwriters a 30-day option to purchase a maximum of 615,000 additional shares of our common stock at the initial public offering price to cover over-allotments.
NYSE symbol		“BRS”

(1)

The number of shares of common stock that will be outstanding after the offering is based on the number of outstanding shares as of June 6, 2008, as reported by our transfer agent, plus shares of common stock on account of restricted stock awarded to officers and other employees under our long term incentive plans (our “incentive plans”) that are subject to vesting. As of June 6, 2008, there were 211,674 shares of common stock outstanding on account of restricted stock awards that remain subject to vesting.

		Fiscal Year Ended March 31,
		2004(1)				2005(2)				2006(3)				2007(4)				2008(5)
		(In thousands, except per share amounts and number of aircraft)
Statement of Operations Data:(6)
Total gross revenue(7)		$	574,124			$	622,637			$	709,901			$	843,595			$	1,012,764
Direct cost(7)		$	437,672			$	473,818			$	540,310			$	634,302			$	726,433
Operating income		$	86,194			$	73,695			$	68,467			$	111,128			$	148,748
Earnings from unconsolidated affiliates, net			11,039				9,600				6,758				11,423				12,978
Interest income			1,684				3,144				4,046				8,716				12,725
Interest expense			(16,829	)			(15,665	)			(14,689	)			(10,940	)			(23,779	)
Loss on extinguishment of debt			(6,205	)			—				—				—				—
Other income (expense), net			(7,811	)			(1,136	)			4,615				(8,998	)			1,585
Provision for income taxes			(18,476	)			(20,407	)			(14,668	)			(38,781	)			(44,526	)
Minority interest			(1,382	)			(210	)			(219	)			(1,200	)			83
Income from continuing operations			48,214				49,021				54,310				71,348				107,814
Income (loss) from discontinued operations			1,611				2,539				3,499				2,824				(3,822	)
Net income		$	49,825			$	51,560			$	57,809			$	74,172			$	103,992
Diluted earnings per common share:
Earnings from continuing operations		$	2.08			$	2.10			$	2.30			$	2.64			$	3.53
Earnings (loss) from discontinued operations			0.07				0.11				0.15				0.10				(0.12	)
Net earnings		$	2.15			$	2.21			$	2.45			$	2.74			$	3.41
Balance Sheet Data:(6)
Total cash and cash equivalents		$	85,679			$	146,440			$	122,482			$	184,188				290,050
Working capital			235,691				270,747				283,337				368,006				541,422
Total assets			1,046,828				1,149,576				1,176,413				1,505,803				1,977,355
Total debt			255,534				262,080				265,296				259,082				606,218
Stockholders’ investment			429,952				492,993				537,697				871,657				967,441
Statement of Cash Flows Data:
Net cash provided by operating activities		$	83,331			$	104,473			$	39,265			$	104,430			$	87,557
Net cash used in investing activities			(62,582	)			(46,539	)			(54,180	)			(264,335	)			(310,145	)
Net cash provided by (used in) financing activities			3,539				2,763				(5,394	)			215,682				328,860
Other Financial Data:
Adjusted EBITDA(8)		$	128,072			$	140,009			$	131,856			$	170,470			$	237,830
Capital expenditures			(67,855	)			(90,023	)			(139,572	)			(304,776	)			(338,003	)
Aircraft in fleet			332				320				331				345				406
Average revenue per aircraft		$	1,729			$	1,946			$	2,145			$	2,445			$	2,494

(1)		Results for fiscal year 2004 include $21.7 million ($15.7 million, net of tax) of curtailment gain relating to the pension plan, $7.9 million ($5.7 million, net of tax) of foreign currency transaction losses and a $6.2 million in loss on extinguishment of debt related to notes redeemed in that fiscal year.

(2)		Results for fiscal year 2005 include $2.2 million ($1.4 million, net of tax) in costs associated with the Internal Review (as defined in “Risk Factors — Risks Relating to Our Internal Review and Governmental Investigations”), a $3.7 million reduction in our provision for income taxes resulting from the resolution of tax contingencies and $1.3 million ($0.9 million, net of tax) of foreign currency transaction losses.
(3)		Results for fiscal year 2006 include $10.5 million ($6.8 million, net of tax) in costs associated with the Internal Review, $2.6 million ($1.7 million, net of tax) in costs associated with the DOJ antitrust investigation, $1.0 million in an impairment charge to reduce the value of our investment in a Brazilian joint venture as we expected at that time that our investment would not be recoverable, a $11.4 million reduction in our provision for income taxes resulting from the resolution of tax contingencies and $5.4 million ($3.5 million, net of tax) of foreign currency transaction gains.
(4)		Results for fiscal year 2007 include $3.1 million ($2.0 million, net of tax) in costs associated with the Internal Review, $1.9 million ($1.3 million, net of tax) in costs associated with the DOJ antitrust investigation, $2.5 million ($1.6 million, net of tax) in a gain realized on the sale of our investment in a Brazilian joint venture for which we had recorded an impairment charge in fiscal year 2006 as we expected at that time that our investment would not be recoverable, $2.5 million of additional tax expense resulting from the sale of Turbo Engines, Inc. (“Turbo”) in November 2006 and $9.8 million ($6.3 million, net of tax) of foreign currency transaction losses. Diluted earnings per share for fiscal year 2007 was also impacted by our issuance of 5.50% mandatory convertible preferred stock (“Preferred Stock”) in September and October 2006, which resulted in a reduction of $0.30 per share.
(5)		Results for fiscal year 2008 include $1.0 million ($0.7 million, net of tax) in a reversal of costs accrued for the Internal Review as we settled the SEC investigation, $1.3 million ($0.8 million, net of tax) in costs associated with the DOJ investigations, $10.7 million ($7.0 million, net of tax) in net interest incurred on the 71/2% Senior Notes issued in June and November 2007 and $1.5 million ($1.0 million, net of tax) of foreign currency transaction gains. Diluted earnings per share for fiscal year 2008 was also impacted by our issuance of Preferred Stock in September and October 2006, which resulted in a reduction of $0.96 per share. Additionally, fiscal year 2008 includes the significant items as discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Overview of Operating Results — Fiscal Year 2008 Compared to Fiscal Year 2007” included elsewhere in this prospectus supplement.
(6)		Amounts reflect our Grasso Production Management business (“Grasso”) as discontinued operations. Grasso was sold on November 2, 2007.
(7)		Gross revenue includes reimbursable revenue of $94.0 million, $86.2 million, $62.9 million, $53.6 million and $52.2 million for fiscal years 2008, 2007, 2006, 2005 and 2004, respectively. Direct cost includes reimbursable expense of $91.1 million, $85.9 million, $61.9 million, $52.9 million and $52.2 million for fiscal years 2008, 2007, 2006, 2005 and 2004, respectively.
(8)		Adjusted EBITDA means earnings before interest expense, taxes, depreciation and amortization, loss on extinguishment of debt and non-cash compensation adjusted for non-cash components of net income (minority interest in earnings and equity in earnings from unconsolidated affiliates (over) under dividends received). Adjusted EBITDA is not a measure of financial performance or liquidity under U.S. generally accepted accounting principles (“GAAP”). Accordingly, it should not be considered as a substitute for net income, operating income, net cash provided by operating activities or any other operating or liquidity measure prepared in accordance with GAAP. Additionally, our Adjusted EBITDA computation may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA provides additional information regarding our ability to meet our future debt service, capital expenditures and working capital requirements. While we believe that Adjusted EBITDA may provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital requirements, certain functional or legal requirements of our business may require us to use our available funds for other purposes.

		Fiscal Year Ended March 31,
		2004				2005				2006				2007				2008
		(In thousands)
Adjusted EBITDA		$	128,072			$	140,009			$	131,856			$	170,470			$	237,830
Cash items (deducted from) added to Adjusted EBITDA:
Current income tax			(7,059	)			(19,995	)			(15,191	)			(20,383	)			(36,917	)
Interest expense			(16,829	)			(15,665	)			(14,689	)			(10,940	)			(23,784	)
Losses (gains) on asset dispositions			(3,943	)			(8,039	)			(102	)			(10,618	)			(9,393	)
Gain on disposal of discontinued operations			—				—				—				—				(1,019	)
Loss on extinguishment of debt			(6,205	)			—				—				—				—
Increase (decrease) in cash from:
Accounts receivable			10,984				(8,612	)			(34,718	)			(1,428	)			(32,600	)
Inventories			(4,111	)			(5,127	)			(12,518	)			(10,225	)			(18,969	)
Prepaid expenses and other			5,232				(724	)			(5,925	)			(6,634	)			(18,249	)
Accounts payable			(5,156	)			6,889				15,944				(10,688	)			7,019
Accrued liabilities			(3,192	)			11,090				(35,397	)			5,771				(36,766	)
Other liabilities and deferred credits			795				(538	)			9,933				(811	)			17,725
Other non-cash items			(15,257	)			5,185				72				(84	)			2,680
Net cash provided by operating activities		$	83,331			$	104,473			$	39,265			$	104,430			$	87,557

 

If you purchase shares of our common stock, you will take on financial risk. Before buying shares of our common stock in this offering, you should carefully consider the risks relating to an investment in the shares of our common stock described below, as well as other information contained in this prospectus supplement and the accompanying prospectus. Additionally, you should carefully consider the risks to our business described in the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. These risks could result in the loss of all or part of your investment.

 

Risks Relating to Our Customers and Contracts

 

The demand for our services is substantially dependent on the level of offshore oil and gas exploration, development and production activity.

 

We provide helicopter services to companies engaged in offshore oil and gas exploration, development and production activities. As a result, demand for our services, as well as our revenue and our profitability, are substantially dependent on the worldwide levels of activity in offshore oil and gas exploration, development and production. These activity levels are principally affected by trends in, and expectations regarding, oil and gas prices, as well as the capital expenditure budgets of oil and gas companies. We cannot predict future exploration, development and production activity or oil and gas price movements. Historically, the prices for oil and gas and activity levels have been volatile and are subject to factors beyond our control, such as:

 

 

The implementation by our customers of cost-saving measures could reduce the demand for our services.

 

Oil and gas companies are continually seeking to implement measures aimed at greater cost savings. As part of these measures, these companies are attempting to improve cost efficiencies with respect to helicopter transportation services. For example, these companies may reduce staffing levels on both old and new installations by using new technology to permit unmanned installations and may reduce the frequency of transportation of employees by increasing the length of shifts offshore. In addition, these companies could initiate their own helicopter or other alternative transportation methods. The continued implementation of these kinds of measures could reduce the demand for helicopter services and have a material adverse effect on our business, financial condition and results of operations.

 

Our industry is highly competitive and cyclical, with intense price competition.

 

Our industry has historically been cyclical and is affected by the volatility of oil and gas price levels. There have been periods of high demand for our services, followed by periods of low demand for our services. Changes in commodity prices can have a dramatic effect on demand for our services, and periods of low activity intensify price competition in the industry and often result in our aircraft being idle for long periods of time.

We depend on a small number of large offshore energy industry customers for a significant portion of our revenue.

 

We derive a significant amount of our revenue from a small number of national oil companies and major and independent oil and gas companies. Our loss of one of these significant customers, if not offset by sales to new or other existing customers, could have a material adverse effect on our business, financial condition and results of operations. Additionally, a change in policy by national oil companies could adversely affect us. See “Business — Customers and Contracts” included elsewhere in this prospectus supplement.

 

Our contracts generally can be terminated or downsized by our customers without penalty.

 

Many of our fixed-term contracts contain provisions permitting early termination by the customer for any reason and generally without penalty, and with limited notice requirements. In addition, many of our contracts permit our customers to decrease the number of aircraft under contract with a corresponding decrease in the fixed monthly payments without penalty. As a result, you should not place undue reliance on our customer contracts or the terms of those contracts.

 

We may not be able to obtain customer contracts with acceptable terms covering some of our new helicopters, and some of our new helicopters may replace existing helicopters already under contract, which could adversely affect the utilization of our existing fleet.

 

We have ordered, and have options for, a substantial number of new helicopters. Many of our new helicopters may not be covered by customer contracts when they are placed into service, and we cannot assure you as to when we will be able to utilize these new helicopters or on what terms. To the extent our helicopters are covered by a customer contract when they are placed into service, many of these contracts are for a short term, requiring us to seek renewals more frequently. Alternatively, we expect that some of our customers may request new helicopters in lieu of our existing helicopters, which could adversely affect the utilization of our existing fleet.

 

Risks Relating to Our Internal Review and Governmental Investigations

 

The DOJ investigation relating to the Internal Review, any proceedings related to the Internal Review including proceedings in other countries and the consequences of the activities identified in the Internal Review could result in civil or criminal proceedings, the imposition of fines and penalties, the commencement of third-party litigation, the incurrence of expenses, the loss of business and other adverse effects on our company.

 

In February 2005, we voluntarily advised the staff of the United States Securities and Exchange Commission (“SEC”) that the Audit Committee of our board of directors had engaged special outside counsel to undertake a review of certain payments made by two of our affiliated entities in a foreign country. The review of these payments, which initially focused on Foreign Corrupt Practices Act matters, was subsequently expanded by the Audit Committee to cover operations in other countries and other issues (the “Internal Review”). As a result of the findings of the Internal Review (which was completed in late 2005), our quarter ended December 31, 2004 and prior financial statements were restated. We also provided the SEC with documentation resulting from the Internal Review which eventually resulted in a formal SEC investigation. In September 2007, we consented to the issuance of an administrative cease-and-desist order by the SEC, in final settlement of the SEC investigation. The SEC did not impose any fine or other monetary sanction upon us. Without admitting or denying the SEC’s findings, we consented to be ordered not to engage in future violations of certain provisions of the federal securities laws involving improper foreign payments, internal controls and books and records. For further information on the restatements, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2005.

 

Following the previously disclosed settlement with the SEC regarding improper payments made by foreign affiliates of the company in Nigeria, our outside counsel was contacted by the DOJ and was asked to provide certain information regarding the Audit Committee’s related Internal Review. We previously provided disclosure regarding the Internal Review in our Annual Report on Form 10-K for the fiscal year ended March 31, 2005. We have entered into an agreement with the DOJ that tolls the statute of limitations relating to these matters. We intend to continue to be responsive to the DOJ’s requests. At this time, it is not possible to predict what the outcome of the DOJ’s investigation into these matters will be for us.

As a result of the disclosure and remediation of a number of activities identified in the Internal Review, we may encounter difficulties conducting business in certain foreign countries and retaining and attracting additional business with certain customers. We cannot predict the extent of these difficulties; however, our ability to continue conducting business in these countries and with these customers and through agents may be significantly impacted. We could still face legal and administrative proceedings, the institution of administrative, civil injunctive or criminal proceedings involving us and/or current or former employees, officers and/or directors who are within the jurisdictions of such authorities, the imposition of fines and other penalties, remedies and/or sanctions, including precluding us from participating in business operations in their countries. It is also possible that we may become subject to claims by third parties, possibly resulting in litigation. The matters identified in the Internal Review and their effects could have a material adverse effect on our business, financial condition and results of operations.

 

In addition, we face legal actions relating to remedial actions which we have taken as a result of the Internal Review, and may face further legal action of this type in the future. In November 2005, two of our consolidated foreign affiliates were named in a lawsuit filed with the High Court of Lagos State, Nigeria by Mr. Benneth Osita Onwubalili and his affiliated company, Kensit Nigeria Limited, which allegedly acted as agents of our affiliates in Nigeria. The claimants allege that an agreement between the parties was terminated without justification and seek damages of $16.3 million. We have responded to this claim and are continuing to investigate this matter.

 

As we continue to operate our compliance program, other situations involving foreign operations, similar to those matters disclosed to the SEC in February 2005 and described above, could arise that warrant further investigation and subsequent disclosures. As a result, new issues may be identified that may impact our financial statements and lead us to take other remedial actions or otherwise adversely impact us.

 

During fiscal years 2006 and 2007, we incurred approximately $10.5 million and $3.1 million in professional fees related to the Internal Review and related matters. During fiscal year 2008, we reversed $1.0 million of previously accrued settlement costs due to the fact that we settled the SEC investigation and incurred $0.6 million for legal fees related to the DOJ investigation relating to the Internal Review.

 

The disclosure and remediation of activities identified in the Internal Review could result in the loss of business relationships and adversely affect our business.

 

As a result of the disclosure and remediation of a number of activities identified in the Internal Review, we may encounter difficulties conducting business in certain foreign countries and retaining and attracting additional business with certain customers. We cannot predict the extent of these difficulties; however, our ability to continue conducting business in these countries and with these customers and through agents may be significantly impacted. In addition, applicable governmental authorities may preclude us from bidding on contracts to provide services in the countries where improper activities took place.

 

The DOJ antitrust investigation or any related proceedings in other countries could result in criminal proceedings and the imposition of fines and penalties, the commencement of third-party litigation, the incurrence of expenses, the loss of business and other adverse effects on our company.

 

In June 2005, one of our subsidiaries received a document subpoena from the DOJ. The subpoena related to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the U.S. Gulf of Mexico. The subpoena focused on activities during the period from January 1, 2000 to June 13, 2005. We believe we have submitted to the DOJ substantially all documents responsive to the subpoena. We have had discussions with the DOJ and provided documents related to our operations in the U.S. as well as internationally. We intend to continue to provide additional information as required by the DOJ in connection with the investigation. There is no assurance that, after review of any information furnished by us or by third parties, the DOJ will not ultimately conclude that violations of U.S. antitrust laws have occurred. The period of time necessary to resolve the DOJ antitrust investigation is uncertain, and this matter could require significant management and financial resources that could otherwise be devoted to the operation of our business.

 

The outcome of the DOJ antitrust investigation and any related legal proceedings in other countries could include civil injunctive or criminal proceedings involving us or our current or former officers, directors or employees, the imposition of fines and other penalties, remedies and/or sanctions, including potential

disbarments, and referrals to other governmental agencies. In addition, in cases where anti-competitive conduct is found by the government, there is a greater likelihood for civil litigation to be brought by third parties seeking recovery. Any such civil litigation could have serious consequences for our company, including the costs of the litigation and potential orders to pay restitution or other damages or penalties, including potentially treble damages, to any parties that were determined to be injured as a result of any impermissible anti-competitive conduct. Any of these adverse consequences could have a material adverse effect on our business, financial condition and results of operations. The DOJ antitrust investigation, any related proceedings in other countries and any third-party litigation, as well as any negative outcome that may result from the investigation, proceedings or litigation, could also negatively impact our relationships with customers and our ability to generate revenue.

 

In connection with this matter, we incurred $2.6 million, $1.9 million and $0.7 million in legal and other professional fees in fiscal years 2006, 2007 and 2008, respectively, and significant expenditures may continue to be incurred in the future.

 

Risks Relating to Our Business

 

We are highly dependent upon the level of activity in the U.S. Gulf of Mexico and the North Sea.

 

In fiscal years 2006, 2007, and 2008 approximately 55%, 55% and 53%, respectively, of our gross revenue was derived from helicopter services provided to customers operating in the U.S. Gulf of Mexico and the North Sea. The U.S. Gulf of Mexico and the North Sea are mature exploration and production regions that have experienced substantial seismic survey and exploration activity for many years. Because a large number of oil and gas prospects in these regions have already been drilled, additional prospects of sufficient size and quality could be more difficult to identify. In addition, the U.S. 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 the U.S. Gulf of Mexico or the North Sea materially declines, our business, financial condition and results of operations could be materially and adversely affected. We cannot predict the levels of activity in these areas.

 

Our future growth depends on the level of international oil and gas activity and our ability to operate outside of the U.S. Gulf of Mexico and the North Sea.

 

Our future growth will depend significantly on our ability to expand into international markets outside of the U.S. Gulf of Mexico and the North Sea. Expansion of our business depends on our ability to operate in these regions.

 

Expansion of our business outside of the U.S. Gulf of Mexico and the North Sea may be adversely affected by:

 

 

We cannot predict the restrictions or requirements that may be imposed in the countries in which we operate. If we are unable to continue to operate or retain contracts in markets outside of the U.S. Gulf of Mexico and the North Sea, our future business, financial condition and results of operations may be adversely affected, and our operations outside of the U.S. Gulf of Mexico and the North Sea may not grow.

 

In order to grow our business, we may require additional capital in the future, which may not be available to us.

 

Our business is capital intensive, and to the extent we do not generate sufficient cash from operations, we will need to raise additional funds through public or private debt or equity financings to execute our growth strategy. Adequate sources of capital funding may not be available when needed, or may not be available on favorable terms. If we raise additional funds by issuing equity or certain types of convertible debt securities, dilution to the holdings of existing stockholders may result. If funding is insufficient at any time in the future, we may be unable to acquire additional aircraft, take advantage of business opportunities or respond to

competitive pressures, any of which could harm our business. See discussion of our capital commitments in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Cash Requirements” included elsewhere in this prospectus supplement.

 

Our operations outside of the U.S. Gulf of Mexico and the North Sea are subject to additional risks.

 

During fiscal years 2006, 2007 and 2008, approximately 45%, 45% and 47%, respectively, of our gross revenue was attributable to helicopter services provided to oil and gas customers operating outside of the U.S. Gulf of Mexico and the North Sea. Operations in most of these areas are subject to various risks inherent in conducting business in international locations, including:

 

 

For example, there has been continuing unrest in Nigeria, where we derived 15%, 16% and 17% of our gross revenue in fiscal years 2006, 2007 and 2008, respectively. This unrest adversely affected our results of operations in Nigeria in fiscal year 2007, and any future unrest in Nigeria or our other operating regions could adversely affect our business, financial condition and results of operations in those periods. We cannot predict whether any of these events will continue to occur in the future in Nigeria or occur in the future elsewhere.

 

Foreign exchange risks and controls may affect our financial position and results of operations.

 

Through our operations outside the U.S., we are exposed to currency fluctuations and exchange rate risks. The majority of both our revenue and expenses from our Europe business unit is denominated in British pound sterling. Our foreign exchange rate risk is even greater when our revenue is denominated in a currency different from that associated with the corresponding expenses. In addition, some of our contracts provide for payment in currencies other than British pound sterling or U.S. dollars. We attempt to minimize our exposure to foreign exchange rate risk by contracting the majority of our services, other than in our Europe business unit, in U.S. dollars. As a result, a strong U.S. dollar may increase the local cost of our services that are provided under U.S. dollar-denominated contracts, which may reduce the demand for our services in foreign countries. Generally, we do not enter into hedging transactions to protect against foreign exchange risks related to our gross revenue.

 

Because we maintain our financial statements in U.S. dollars, our financial results are vulnerable to fluctuations in the exchange rate between the U.S. dollar and foreign currencies, such as the British pound sterling. In preparing our financial statements, we must convert all non-U.S. dollar currencies to U.S. dollars. The effect of foreign currency translation is reflected in a component of stockholders’ investment, while foreign currency transaction gains or losses and translation of currency amounts not deemed permanently reinvested are credited or charged to income and reflected in other income (expense). In the past three fiscal years, our stockholders’ investment has decreased by as much as $20.7 million and increased by as much as $27.1 million, as a result of translation adjustments. In addition, during this period our results of operations have included foreign currency gains or losses ranging from a loss of $9.8 million to a gain of $5.4 million. Changes in exchange rates could cause significant changes in our financial position and results of operations in the future.

 

We operate in countries with foreign exchange controls including Brazil, Egypt, India, Kazakhstan, Malaysia, Nigeria, Russia and Turkmenistan. These controls may limit our ability to repatriate funds from our international operations and unconsolidated affiliates or otherwise convert local currencies into U.S. dollars. These limitations could adversely affect our ability to access cash from these operations.

See further discussion of foreign exchange risks and controls under Item 7A. “Quantitative and Qualitative Disclosure About Market Risk” included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, incorporated herein by reference.

 

We operate in many international areas through entities that we do not control.

 

We conduct many of our international operations through entities in which we have a minority investment or through strategic alliances with foreign partners. For example, we have acquired interests in, and in some cases have lease and service agreements with, entities that operate aircraft in Egypt, Mexico, Norway, the U.K., Kazakhstan and Turkmenistan. We provide engineering and administrative support to certain of these entities. We derive significant amounts of lease revenue, service revenue and dividend income from these entities. In fiscal years 2006, 2007 and 2008, we received approximately $56.2 million, $54.1 million and $56.5 million, respectively, of revenue from the provision of aircraft and other services to unconsolidated affiliates. Because we do not own a majority or maintain voting control of our unconsolidated affiliates, we do not have the ability to control their policies, management or affairs. The interests of persons who control these entities or partners may differ from ours, and may cause such entities to take actions that are not in our best interest. If we are unable to maintain our relationships with our partners in these entities, we could lose our ability to operate in these areas, potentially resulting in a material adverse effect on our business, financial condition and results of operations.

 

Labor problems could adversely affect us.

 

Approximately 330 pilots in our North America business unit and approximately 2,200 of our employees in the U.K., Nigeria and Australia (collectively, about 69% of our employees) are represented under collective bargaining or union agreements. Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement. In addition, many of the employees of our affiliates are represented by collective bargaining agreements. Any disputes over the terms of these agreements or our potential inability to negotiate acceptable contracts with the unions that represent our employees under these agreements could result in strikes, work stoppages or other slowdowns by the affected workers.

 

If our unionized workers engage in a strike, work stoppage or other slowdown, other employees elect to become unionized, existing labor agreements are renegotiated, or future labor agreements contain terms that are unfavorable to us, we could experience a disruption of our operations or higher ongoing labor costs which could adversely affect our business, financial condition and results of operations.

 

See “Business — Employees” included elsewhere in this prospectus supplement for further discussion on the status of collective bargaining or union agreements.

 

Our failure to attract and retain qualified personnel could have an adverse effect on us.

 

Our ability to attract and retain qualified pilots, mechanics and other highly-trained personnel is an important factor in determining our future success. For example, many of our customers require pilots with very high levels of flight experience. The market for these experienced and highly-trained personnel is competitive and may become more competitive. Accordingly, we cannot assure you that we will be successful in our efforts to attract and retain such personnel. Some of our pilots, mechanics and other personnel, as well as those of our competitors, are members of the U.S. or U.K. military reserves who have been, or could be, called to active duty. If significant numbers of such personnel are called to active duty, it would reduce the supply of such workers and likely increase our labor costs. Additionally, our fleet capacity expansion program will require us to retain additional pilots, mechanics and other flight-related personnel. Finally, as a result of the disclosure and remediation of activities identified in the Internal Review, we may have difficulty attracting and retaining qualified personnel, and we may incur increased expenses. Our failure to attract and retain qualified personnel could have a material adverse effect on our current business and our growth strategy.

 

Helicopter operations involve risks that may not be covered by our insurance or may increase our operating costs.

 

The operation of helicopters inherently involves a degree of risk. Hazards such as harsh weather and marine conditions, mechanical failures, crashes and collisions are inherent in our business and may result in

personal injury, loss of life, damage to property and equipment and suspension or reduction of operations. Our aircraft have been involved in accidents in the past, some of which have included loss of life and property damage. We may experience similar accidents in the future.

 

We attempt to protect ourselves against these losses and damage by carrying insurance, including hull and liability, general liability, workers’ compensation, and property and casualty insurance. Our insurance coverage is subject to deductibles and maximum coverage amounts, and we do not carry insurance against all types of losses, including business interruption. We cannot assure you that our existing coverage will be sufficient to protect against all losses, that we will be able to maintain our existing coverage in the future or that the premiums will not increase substantially. In addition, future terrorist activity, risks of war, accidents or other events could increase our insurance premiums. The loss of our liability insurance coverage, inadequate coverage from our liability insurance or substantial increases in future premiums could have a material adverse effect on our business, financial condition and results of operations.

 

We are subject to government regulation that limits foreign ownership of aircraft companies.

 

We are subject to governmental regulation that limits foreign ownership of aircraft companies. Based on regulations in various markets in which we operate, our aircraft may be subject to deregistration and we may lose our ability to operate within these countries if certain levels of local ownership are not maintained. Deregistration of our aircraft for any reason, including foreign ownership in excess of permitted levels, would have a material adverse effect on our ability to conduct operations within these markets. We cannot assure you that there will be no changes in aviation laws, regulations or administrative requirements or the interpretations thereof, that could restrict or prohibit our ability to operate in certain regions. Any such restriction or prohibition on our ability to operate may have a material adverse effect on our business, financial condition and results of operations.

 

See further discussion in “Business — Government Regulation” included elsewhere in this prospectus supplement.

 

Actions taken by agencies empowered to enforce governmental regulations could increase our costs and reduce our ability to operate successfully.

 

Our operations are regulated by governmental agencies in the various jurisdictions in which we operate. These agencies have jurisdiction over many aspects of our business, including personnel, aircraft and ground facilities. Statutes and regulations in these jurisdictions also subject us to various certification and reporting requirements and inspections regarding safety, training and general regulatory compliance. Other statutes and regulations in these jurisdictions regulate the offshore operations of our customers. The agencies empowered to enforce these statutes and regulations may suspend, curtail or require us to modify our operations. A suspension or substantial curtailment of our operations for any prolonged period, and any substantial modification of our current operations, may have a material adverse effect on our business, financial condition and results of operations. See further discussion in “Business — Government Regulation” and “Business — Environmental” included elsewhere in this prospectus supplement.

 

We face substantial competition.

 

The helicopter business is highly competitive. Chartering of helicopters is usually done on the basis of competitive bidding among those providers having the necessary equipment, operational experience and resources. Factors that affect competition in our industry include price, reliability, safety, professional reputation, availability, equipment and quality of service.

 

In our North America business unit, we face competition from a number of providers, including one U.S. competitor with a comparable number of helicopters servicing the U.S. Gulf of Mexico. We have two significant competitors in the North Sea and one significant competitor in Nigeria.

 

Certain of our customers have the capability to perform their own helicopter operations should they elect to do so, which has a limiting effect on our rates. The loss of a significant number of our customers or termination of a significant number of our contracts could have a material adverse effect on our business, financial condition and results of operations.

As a result of significant competition, we must continue to provide safe and efficient service or we will lose market share, which could have a material adverse effect on our business, financial condition and results of operations. The loss of a significant number of our customers or termination of a significant number of our contracts could have a material adverse effect on our business, financial condition and results of operations.

 

See further discussion in “Business — Competition” included elsewhere in this prospectus supplement.

 

Our operations are subject to weather-related and seasonal fluctuations.

 

Generally, our operations can be impaired by harsh weather conditions. Poor visibility, high wind, heavy precipitation and sand storms can affect the operation of helicopters and result in a reduced number of flight hours. A significant portion of our operating revenue is dependent on actual flight hours, and a substantial portion of our direct cost is fixed. Thus, prolonged periods of harsh weather can have a material adverse effect on our business, financial condition and results of operations.

 

In the Gulf of Mexico, the months of December through March have more days of harsh weather conditions than the other months of the year. Heavy fog during those months often limits visibility. In addition, in the Gulf of Mexico, June through November is tropical storm and hurricane season. When a tropical storm or hurricane is about to enter or begins developing in the Gulf of Mexico, flight activity may increase because of evacuations of offshore workers. However, during a tropical storm or hurricane, we are unable to operate in the area of the storm. In addition, as a significant portion of our facilities are located along the coast of the U.S. Gulf of Mexico, tropical storms and hurricanes may cause substantial damage to our property in these locations, including helicopters. Additionally, we incur costs in evacuating our aircraft, personnel and equipment prior to tropical storms and hurricanes.

 

The fall and winter months have fewer hours of daylight, particularly in the North Sea and Alaska. While some of our aircraft are equipped to fly at night, we generally do not do so. In addition, drilling activity in the North Sea and Alaska is lower during the winter months than the rest of the year. Anticipation of harsh weather during this period causes many oil companies to limit activity during the winter months. Consequently, flight hours are generally lower during these periods, typically resulting in a reduction in operating revenue during those months. Accordingly, our reduced ability to operate in harsh weather conditions and darkness may have a material adverse effect on our business, financial condition and results of operations.

 

The Harmattan, a dry and dusty West African trade wind, blows between the end of November and the middle of March. The heavy amount of dust in the air can severely limit visibility and block the sun for several days, comparable to a heavy fog. We are unable to operate aircraft during these harsh conditions. Consequently, flight hours may be lower during these periods resulting in reduced operating revenue which may have a material adverse impact on our business, financial condition and results of operations.

 

Environmental regulations and liabilities may increase our costs and adversely affect us.

 

Our operations are subject to U.S. federal, state and local, and foreign environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage, recycling and disposal of toxic and hazardous wastes. The nature of the business of operating and maintaining helicopters requires that we use, store and dispose of materials that are subject to environmental regulation. Environmental laws and regulations change frequently, which makes it impossible for us to predict their cost or impact on our future operations. Liabilities associated with environmental matters could have a material adverse effect on our business, financial condition and results of operations. We could be exposed to strict, joint and several liability for cleanup costs, natural resource damages and other damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. Additionally, any failure by us to comply with applicable environmental laws and regulations may result in governmental authorities taking action against our business that could adversely impact our operations and financial condition, including the:

 

 

For additional information see “Business — Environmental” included elsewhere in this prospectus supplement and Item 3. “Legal Proceedings” included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, incorporated herein by reference.

 

Our dependence on a small number of helicopter manufacturers and the limited availability of aircraft poses a significant risk to our business and prospects, including our ability to execute our growth strategy.

 

We contract with a small number of manufacturers for most of our aircraft expansion and replacement needs. If any of these manufacturers faced production delays due to, for example, natural disasters, labor strikes or availability of skilled labor, we may experience a significant delay in the delivery of previously ordered aircraft. Currently, helicopter manufacturers are indicating very limited availability for large- and medium-sized aircraft during the next two years, and we have limited alternative sources of new aircraft. As a result, we may not be able to obtain orders for additional aircraft with acceptable pricing, delivery dates or other terms. Delivery delays or our inability to obtain acceptable aircraft orders would adversely affect our revenue and profitability and could jeopardize our ability to meet the demands of our customers and execute our growth strategy. Additionally, lack of availability of new aircraft resulting from a backlog in orders has resulted in an increase in prices for certain types of used helicopters.

 

A shortfall in availability of aircraft components and parts required for maintenance and repairs of our aircraft and supplier cost increases could adversely affect us.

 

In connection with the required routine maintenance and repairs performed on our aircraft in order for them to stay fully operational and available for use in our operations, we rely on a few key vendors for the supply and overhaul of components fitted to our aircraft. Currently those vendors are working at or near full capacity supporting the aircraft production lines and the maintenance requirements of the aircraft operators who are also operating at near capacity in certain industries, including operators such as us who support the energy industry. These vendors are therefore experiencing backlogs in manufacturing schedules and some parts are in limited supply from time to time. Lead times for ordering certain critical components are extending into longer time periods, and this could have an adverse impact upon our ability to maintain and repair our aircraft. To the extent that these suppliers also supply parts for aircraft used by the U.S. military, parts delivery for our aircraft may be delayed during periods in which there are high levels of military operations. Our inability to perform timely maintenance and repairs can result in our aircraft being underutilized which could have an adverse impact on our operating results. Furthermore, our operations in remote locations, where delivery of these components and parts could take a significant period of time, may also impact our ability to maintain and repair our aircraft. While every effort is made to mitigate such impact, this may pose a risk to our operating results. Additionally, supplier cost increases for critical aircraft components and parts also pose a risk to our operating results. Cost increases are passed through to our customers through rate increases where possible, including as a component of contract escalation charges. However, as certain of our contracts are long-term in nature, cost increases may not be adjusted in our contract rates until the contracts are up for renewal.

 

Risks Related to Our Level of Indebtedness

 

Our substantial indebtedness could adversely affect our financial condition and impair our ability to fulfill our obligations under our indebtedness.

 

We have, and following the completion of the concurrent convertible notes offering, we will have, substantial debt and substantial debt service requirements. As of March 31, 2008 and as adjusted to give effect to this and the concurrent convertible notes offering we had approximately $606.2 million and $706.2 million, respectively, of outstanding indebtedness.

 

Our level of indebtedness may have important consequences to our business and to you, including:

 

 

 

If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. We cannot assure you that any such refinancing would be possible or that any additional financing could be obtained. Our inability to obtain such refinancing or financing may have a material adverse effect on us.

 

Despite our and our subsidiaries’ current levels of indebtedness, we may incur substantially more debt, which could further exacerbate the risks associated with our substantial indebtedness.

 

Although the agreements governing our Credit Facilities and the indentures governing our 61/8% Senior Notes due 2013 (the “61/8% Senior Notes”) and the 71/2% Senior Notes due 2017 (the “71/2% Senior Notes” and, together with the 61/8% Senior Notes, the “Senior Notes”) contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and we could incur substantial additional indebtedness. In addition to amounts that we may borrow under our Credit Facilities, the indentures governing the Senior Notes also allow us to borrow significant amounts of money from other sources. Also, these restrictions do not prevent us from incurring obligations that do not constitute “indebtedness” as defined in the relevant agreement. If we incur additional indebtedness, the related risks that we now face could intensify.

 

To service our indebtedness we will continue to require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.

 

Our ability to make scheduled payments of principal or interest with respect to our indebtedness will depend on our ability to generate cash and on our financial results. Our ability to generate cash depends on the demand for our services, which is subject to levels of activity in offshore oil and gas exploration, development and production, general economic conditions, and financial, competitive, regulatory and other factors affecting our operations, many of which are beyond our control. We cannot assure you that our operations will generate sufficient cash flow or that future borrowings will be available to us under our Credit Facilities or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

 

Restrictive covenants in our debt agreements may restrict the manner in which we can operate our business.

 

Our Credit Facilities and the indentures governing our Senior Notes limit, among other things, our ability and the ability of our restricted subsidiaries to:

 

 

 

If we fail to comply with these covenants, we would be in default under our Credit Facilities and the indentures governing our Senior Notes, and the principal and accrued interest on our Senior Notes and our other outstanding indebtedness may become due and payable. In addition, our Credit Facilities contain, and our future indebtedness agreements may contain, additional affirmative and negative covenants. For additional information see Note 5 to the Consolidated Financial Statements included elsewhere in this prospectus supplement.

 

As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be considered beneficial to us. Our Credit Facilities also require, and our future credit facilities may require, us to maintain specified financial ratios and satisfy certain financial condition tests. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those tests. The breach of any of these covenants could result in a default under our Credit Facilities. Upon the occurrence of an event of default under our existing or future credit facilities, the lenders could elect to declare all amounts outstanding under such credit facilities, including accrued interest or other obligations, to be immediately due and payable. There can be no assurance that our assets would be sufficient to repay in full that indebtedness and our other indebtedness.

 

The instruments governing certain of our indebtedness, including our Credit Facilities and the indentures governing our Senior Notes, contain cross-default provisions. Under these provisions, a default under one instrument governing our indebtedness may constitute a default under our other instruments of indebtedness that contain cross-default provisions.

 

Risks Related to this Offering and our Common Stock

 

The price of our common stock may be volatile, which may make it difficult for you to resell the common stock when you want or at prices you find attractive.

 

The market price of our common stock could be subject to significant fluctuations. This may make it difficult for you to resell the common 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 or issuances of common stock, including any issuance of common stock upon conversion of our Preferred Stock in September 2009 or the convertible notes, may dilute the ownership interest of existing stockholders. Such dilution may adversely affect the trading price of our common stock.

 

We may issue equity securities in the future for a number of reasons, including to finance our operations and business strategy, to acquire assets or companies, to adjust our ratio of debt to equity, or in connection with our incentive and stock option plans. Any issuance of equity securities after this offering, including the issuance of shares, if any, upon conversion of our Preferred Stock and the convertible notes we are offering in the concurrent offering, could dilute the interests of our existing stockholders, and could substantially affect the trading price of our common stock.

 

In addition, the price of our common stock could also be affected by possible sales of our common stock by investors who view the convertible notes as a more attractive means of equity participation in our company and by hedging or arbitrage trading activity that may develop involving our common stock.

 

We may issue preferred stock with rights senior to our common stock.

 

Our restated certificate of incorporation authorizes the issuance of shares of preferred stock without stockholder approval. The shares may have dividend, voting, liquidation and other rights and preferences that are senior to the rights of our common stock. In addition, such shares of preferred stock may be convertible into shares of our common stock. Conversion of shares of our preferred stock into shares of our common stock may dilute the value of our common stock, which may adversely affect the value of your shares of common stock. The rights and preferences of any class or series of preferred stock issued by us would be established by our board of directors in its sole discretion.

 

Our stockholder rights plan, provisions in our charter documents or Delaware law may inhibit a takeover, which could adversely affect the value of our common stock.

 

Our stockholder rights plan, our restated certificate of incorporation, our amended and restated bylaws and Delaware corporate law contain provisions that could delay or prevent a change of control or changes in our management that a stockholder might consider favorable. These provisions will apply even if the offer may be considered beneficial by some of our stockholders. If a chance of control or change in management is delayed or prevented, the market price of our common stock could decline. Please read “Description of Capital Stock” included on page 4 of the accompanying prospectus for a description of these provisions.

 

We limit foreign ownership of our company, which could reduce the price of our common stock and cause owners of our common stock who are not U.S. persons to lose their voting rights.

 

Our restated certificate of incorporation provides that persons or entities that are not “citizens of the United States” (as defined in the Federal Aviation Act of 1958) shall not collectively own or control more than 25% of the voting power of our outstanding capital stock (the “Permitted Foreign Ownership Percentage”) and that, if at any time persons that are not citizens of the United States nevertheless collectively own or control more than the Permitted Foreign Ownership Percentage, the voting rights of our outstanding voting capital stock in excess of the Permitted Foreign Ownership Percentage owned by certain stockholders who are not citizens of the United States shall automatically be suspended. These voting rights will be suspended in reverse chronological order by date of registry until the number of voting shares held by persons that are not citizens of the United States is less than or equal to the Permitted Foreign Ownership Percentage. Our restated certificate of incorporation further authorizes us to redeem any such suspended shares to the extent necessary for us to comply with any present or future requirements of the Federal Aviation Act. Shares held by persons who are not citizens of the United States may lose their associated voting rights and be redeemed as a result of these provisions. These restrictions may also have an adverse impact on the liquidity or market value of our common stock because holders may be unable to transfer our common stock to persons who are not citizens of the United States.

 

We have no plans to pay regular dividends on our common stock.

 

We do not intend to declare or pay regular dividends on our common stock in the foreseeable future. Instead, we generally intend to invest any future earnings in our business. Subject to Delaware law, our board of directors will determine the payment of future dividends on our common stock, if any, and the amount of

any dividends in light of any applicable contractual restrictions limiting our ability to pay dividends, our earnings and cash flows, our capital requirements, our financial condition, and other factors our board of directors deems relevant. Our Senior Notes and Credit Facilities restrict our payment of cash dividends or other distributions to stockholders. Accordingly, you may have to sell some or all of the common stock you hold in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell such common stock and may lose the entire amount of your investment.

 

This prospectus supplement and the accompanying prospectus contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21 E of the Securities Exchange Act of 1934. Forward-looking statements are statements about our future business, strategy, operations, capabilities and results; use of proceeds; financial projections; plans and objectives of our management; expected actions by us and by third parties, including our customers, competitors, vendors and regulators; and other matters. Some of the forward-looking statements can be identified by the use of words such as “believes”, “belief”, “expects”, “plans”, “anticipates”, “intends”, “projects”, “estimates”, “may”, “might”, “would”, “could” or other similar words; however, all statements in this prospectus, other than statements of historical fact or historical financial results are forward-looking statements.

 

Our forward-looking statements reflect our views and assumptions on the date we are filing this prospectus regarding future events and operating performance. We believe that they are reasonable, but they involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Accordingly, you should not put undue reliance on any forward-looking statements. Factors that could cause our forward-looking statements to be incorrect and actual events or our actual results to differ from those that are anticipated include all of the following:

 

 

All forward-looking statements in this prospectus are qualified by these cautionary statements and are only made as of the date of this prospectus. We do not undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

We estimate that the net proceeds from this offering will be approximately $183.2 million ($210.7 million if the underwriters exercise their option to purchase additional stock in full). We intend to use the net proceeds from this offering, together with the estimated aggregate net proceeds of $96.6 million from our concurrent convertible notes offering ($111.2 million if the underwriters exercise their option to purchase additional notes in full), as well as the proceeds from the Caledonia Private Placement, to purchase additional aircraft. If we do not complete the concurrent convertible notes offering or the Caledonia Private Placement, the funds available to purchase additional aircraft will be reduced. We plan to order additional aircraft from time to time following completion of this offering and expect to pay the purchase price for additional aircraft at various dates during fiscal years 2009 to 2013. Pending such use, we plan to invest the net proceeds of this offering in highly liquid, investment-grade or better securities. Depending on our ability to obtain such aircraft orders and the timing of such use, we may use a portion of the net proceeds for working capital and other general corporate purposes, including acquisitions.

There is no assurance that our concurrent offering of convertible notes or the Caledonia Private Placement will be completed or, if completed, that they will be completed for the amounts or the pricing contemplated. The completion of the concurrent convertible notes offering and this offering are not conditioned on each other. The Caledonia Private Placement is conditioned on the closing of this offering.

 

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 and Capital Resources — Future Cash Requirements” and “Business — Fleet Capacity Expansion.”

 

Our common stock is listed on the NYSE under the symbol “BRS.” Prior to becoming listed on the NYSE in 2003, our common stock had been quoted on the NASDAQ National Market system since 1984.

 

The following table shows the range of closing prices for our common stock during each quarter of our last two fiscal years and the first quarter fiscal year 2009 through June 11, 2008.

 

 

On June 11, 2008, the last reported sale price of our common stock on the NYSE was $46.87 per share. As of May 15, 2008, there were 639 holders of record of our common stock.

 

We have not paid dividends on our common stock since January 1984. We do not intend to declare or pay regular dividends on our common stock in the foreseeable future. Instead, we generally intend to invest any future earnings in our business. Subject to Delaware law, our board of directors will determine the payment of future dividends on our common stock, if any, and the amount of any dividends in light of:

 

 

In addition, the terms of our Senior Notes and Credit Facilities restrict our ability to pay cash dividends and other distributions to stockholders.

 

The following table sets forth our consolidated cash and capitalization as of March 31, 2008 on a historical basis and as adjusted to give effect to this offering and as further adjusted to give effect to our concurrent convertible notes offering, in each case together with the application of the estimated net proceeds from the offerings, but without giving effect to the Caledonia Private Placement. You should read this table in conjunction with the information set forth under “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes included elsewhere in this prospectus supplement.

 

 

 

 

 

The following selected financial data as of and for each of the five years ended March 31, 2008 is derived from our audited consolidated financial statements. You should read the following information in conjunction with the other information contained in our consolidated financial statements, including the notes thereto, that are set forth elsewhere in this prospectus supplement.

 

 

 

 

 

The following table reconciles Adjusted EBITDA to net cash provided by operating activities for the periods presented:

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with “Special Note Regarding Forward-Looking Statements,” “Risk Factors” and our Consolidated Financial Statements for fiscal years 2006, 2007 and 2008, and the related notes thereto, all of which are included elsewhere in this prospectus supplement.

 

Executive Overview

 

This Executive Overview only includes what management considers to be the most important information and analysis for evaluating our financial condition and operating performance. It provides the context for the discussion and analysis of the financial statements which follow and does not disclose every item bearing on our financial condition and operating performance.

 

See discussion of our business and the operations within our Helicopter Services Segment under “Business — Overview” included elsewhere in this prospectus supplement.

 

Our Strategy

 

Our goal is to advance our position as the leading helicopter services provider to the offshore energy industry. We intend to employ the following strategies to achieve this goal:

 

 

Consistent with our desire to maintain a conservative use of leverage to fund growth, we raised $222.6 million of capital through the sale of our Preferred Stock completed in September and October 2006. Additionally, we raised $344.7 million through the sale of 71/2% Senior Notes completed in June and November 2007. As of March 31, 2008, we had commitments to purchase 16 large, 9 medium and 10 training

aircraft and options to purchase an additional 17 large and 33 medium aircraft. Depending on market conditions, we expect to exercise some or all of these options to purchase aircraft and may elect to expand our business through the purchase of other aircraft not currently under option and acquisition or investment in other helicopter operations, including acquisitions currently under consideration.

 

As part of our global fleet management program, prior to an aircraft coming off of a customer contract we evaluate our alternatives for use of the aircraft, including factors such as the cost and timing of future major maintenance, potential contracts in existing or other markets and potential sale of the aircraft.

 

Market Outlook

 

We are currently experiencing significant demand for our helicopter services. Based on our current contract level and discussions with our customers about their needs for aircraft related to their oil and gas production and exploration plans, we anticipate the demand for helicopter services will continue at a very high level for the near term. In addition, this high level of demand has allowed us to increase the rates we charge for our services over the past several years.

 

We expect to see growth in demand for additional helicopter services, particularly in North and South America, West Africa and Southeast Asia. We also expect that the relative importance of our other business units will continue to increase as oil and gas producers increasingly focus on prospects outside of North America and the North Sea. This growth will provide us with opportunities to add new aircraft to our fleet, as well as opportunities to redeploy aircraft into markets that will sustain higher rates for our services. Currently, helicopter manufacturers are indicating very limited supply availability for medium and large aircraft during the next two to three years. We expect that this tightness in aircraft availability from the manufacturers and the lack of suitable aircraft in the secondary market, coupled with the increase in demand for helicopter services, will result in upward pressure on the rates we charge for our services. We believe that our recent aircraft acquisitions and commitments position us to benefit from the current market conditions and to deploy new aircraft on order or under option at these favorable rates and contract terms.

Overview of Operating Results

 

The following table presents our operating results and other income statement information for the applicable periods:

 

 

Fiscal Year 2008 Compared to Fiscal Year 2007

 

Our gross revenue increased to $1.0 billion for fiscal year 2008 from $843.6 million for fiscal year 2007, an increase of 20.1%. The increase in gross revenue is due primarily to improvements in our Europe, West Africa, Southeast Asia and South and Central America business units as a result of increases in rates for helicopter services, increased demand for helicopter services from our existing customers and the addition of new aircraft, as well as the impact of the acquisitions of the Bristow Academy entities which generated $14.8 million in revenue in fiscal year 2008. Our operating expense increased to $864.0 million for fiscal year 2008 from $732.5 million for fiscal year 2007, an increase of 18.0%. The increase primarily resulted from higher costs associated with higher activity levels, maintenance costs, and salaries and benefits (associated with the addition of personnel and salary increases), across a majority of our business units, as well as the impact of the acquisitions of the Bristow Academy entities which incurred $15.6 million in expense in fiscal year 2008. Primarily as a result of the improvement in rates, our operating income and operating margin for fiscal year 2008 increased to $148.7 million and 14.7%, respectively, compared to $111.1 million and 13.2%, respectively, for fiscal year 2007. Fiscal year 2008 included the following significant items:

 

 

 

 

For further discussion of these items, see discussion of our business units under “— Business Unit Operating Results — Fiscal Year 2008 Compared to Fiscal Year 2007” included elsewhere in this prospectus supplement.

 

Income from continuing operations for fiscal year 2008 of $107.8 million represents a $36.5 million increase from fiscal year 2007. This increase was driven by the improvement in operating income discussed above and foreign currency exchange gains of $1.5 million in fiscal year 2008 compared to foreign currency exchange losses of $9.8 million in fiscal year 2007, partially offset by an increase in interest expense and our provision for income taxes (which resulted from an increase in pre-tax earnings, partially offset by the tax items discussed above).

 

Fiscal Year 2007 Compared to Fiscal Year 2006

 

Our gross revenue increased to $843.6 million for fiscal year 2007 from $709.9 million for fiscal year 2006, an increase of 18.8%. The increase in gross revenue relates to an increase in gross revenue across all of our business units, most significantly for North America (primarily resulting from increases in rates for certain contracts and an increase in utilization of our small aircraft in this market), Europe (primarily resulting from new aircraft added to the market during fiscal year 2006) and West Africa (primarily resulting from an increase in rates under certain contracts and three new contracts). The increase in gross revenue was also attributable to an increase in out-of-pocket expenses rebilled to our customers (reimbursable revenue) of $23.2 million. Our operating expense increased to $732.5 million for fiscal year 2007 from $641.4 million for fiscal year 2006, an increase of 14.2%. Operating expense increased as a result of the increase in operating activity and the increase in out-of-pocket expense associated with reimbursable revenue, but also as a result of a higher level of maintenance activity on our aircraft and compensation costs driven by higher labor rates and additional personnel. These additional operating expense items resulted in a decline in operating income for our North America business unit and a decline in operating margin for our North America and Europe business units. However, improved margins for most of our other business units and significant gains on asset dispositions in fiscal year 2007 (compared to only a small gain on asset dispositions in fiscal year 2006) resulted in increases in our operating income and operating margin to $111.1 million and 13.2%, respectively, for fiscal year 2007 from $68.5 million and 9.6%, respectively, for fiscal year 2006.

 

Income from continuing operations for fiscal year 2007 of $71.3 million represents a $17.0 million increase from fiscal year 2006. This increase in income was driven by the increase in operating income discussed above, increased earnings from unconsolidated affiliates, an increase in interest income and a decrease in interest expense, which was partially offset by foreign exchange losses of $9.8 million in fiscal year 2007 compared to foreign exchange gains of $5.4 million in fiscal year 2006, and an increase in the provision for income taxes due to the additional tax expense related to the Turbo asset sale (see “— Business Unit Operating Results — Fiscal Year 2007 Compared to Fiscal Year 2006 — North America” below), the increase in income during fiscal year 2007 and from an increase in the overall effective tax rate.

Business Unit Operating Results

 

The following tables set forth certain operating information for the eight business units comprising our Helicopter Services segment. Intercompany lease revenue and expense are eliminated from our segment reporting, and depreciation expense of aircraft is presented in the segment that operates the aircraft.