10-K 1 form10k-05202010.htm FORM 10-K ANNUAL REPORT form10k-05202010.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
Form 10-K
 
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended March 31, 2010
   
 
OR
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________to______________
 
Commission File Number 001-31617
 
Bristow Group Inc.
(Exact name of registrant as specified in its charter)
Delaware
72-0679819
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification Number)
   
2000 W.  Sam Houston Pkwy. S.,
77042
Suite 1700
(Zip Code)
Houston, Texas
 
(Address of principal executive offices)
 
Registrant’s telephone number, including area code: (713) 267-7600
 
Securities registered pursuant to Section 12(b) of the Act:
 
           Title of each Class
         Name of each exchange on which registered
                Common Stock ($.01 par value)
            New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:  NONE
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
                                                                                                               YES þ NO o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
                                                                                                                      YES o NO þ
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES o NO o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
       
Large accelerated filer    þ
Accelerated filer   o
Non-accelerated filer  o
Smaller reporting company  o
   
 (Do not check if a smaller
reporting company)
 
                                                                                 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
                                                                                                               YES o NO þ
 
The aggregate market value of the voting Common Stock held by non-affiliates of the registrant, based upon the closing price on the New York Stock Exchange, as of September 30, 2009 was $993,160,457.
 
The number of shares outstanding of the registrant’s Common Stock as of May 14, 2010 was 35,940,321.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Certain portions of the Registrant’s Definitive Proxy Statement, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the Registrant’s fiscal year, are incorporated by reference under Part III of this Form 10-K.

BRISTOW GROUP INC.
INDEX—FORM 10-K

 
 
Page
     
 
1
 
       
 
1
 
       
 
PART I
   
       
Business 
3
 
       
Risk Factors 
13
 
       
Unresolved Staff Comments 
24
 
       
Properties 
25
 
       
Legal Proceedings 
25
 
       
Reserved 
26
 
       
 
PART II
   
       
Market for the Registrant’s Common Equity and Related Stockholder Matters 
27
 
       
Selected Financial Data 
28
 
       
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
 
       
Quantitative and Qualitative Disclosures about Market Risk 
57
 
       
Consolidated Financial Statements and Supplementary Data 
61
 
       
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
121
 
       
Controls and Procedures 
121
 
       
Other Information 
123
 
       
 
PART III
   
       
Directors, Executive Officers and Corporate Governance 
123
 
       
Executive Compensation 
123
 
       
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
123
 
       
Certain Relationships and Related Transactions, and Director Independence 
123
 
       
Principal Accounting Fees and Services 
123
 
       
 
PART IV
   
       
Exhibits, Financial Statement Schedules 
124
 
       
130
 

BRISTOW GROUP INC.
ANNUAL REPORT (FORM 10-K)

 
This Annual Report on Form 10-K is filed by Bristow Group Inc., which we refer to as Bristow Group or the Company.
 
We use the pronouns “we,” “our” and “us” and the term “Bristow Group” to refer collectively to Bristow Group and its consolidated subsidiaries and affiliates, unless the context indicates otherwise.  We also own interests in other entities that we do not consolidate for financial reporting purposes, which we refer to as unconsolidated affiliates, unless the context indicates otherwise.  Bristow Group, Bristow Aviation Holdings Limited (“Bristow Aviation”), its consolidated subsidiaries and affiliates, and the unconsolidated affiliates are each separate corporations, limited liability companies or other legal entities, and our use of the terms “we,” “our” and “us” does not suggest that we have abandoned their separate identities or the legal protections given to them as separate legal entities.  Our fiscal year ends March 31, and we refer to fiscal years based on the end of such period.  Therefore, the fiscal year ended March 31, 2010 is referred to as “fiscal year 2010.”
 
We are a Delaware corporation incorporated in 1969.  Our executive offices are located at 2000 W. Sam Houston Pkwy S., Suite 1700, Houston, Texas 77042.  Our telephone number is (713) 267-7600.
 
Our website address is http://www.bristowgroup.com.  We make our website content available for information purposes only.  It should not be relied upon for investment purposes, nor is it incorporated by reference in this Annual Report.  All of our periodic report filings with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) for fiscal periods ended on or after December 15, 2002 are made available, free of charge, through our website, including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to these reports.  These reports are available through our website as soon as reasonably practicable after we electronically file or furnish such material to the SEC.  In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or on their Internet website located at http://www.sec.gov.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
 
 
This Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of 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, 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 Annual Report, 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 Annual Report regarding future events and operating performance.  We believe that they are reasonable, but they involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements.  Accordingly, you should not put undue reliance on any forward-looking statements.  Factors that could cause our forward-looking statements to be incorrect and actual events or our actual results to differ from those that are anticipated include all of the following:
 
·  
the risks and uncertainties described below under Item 1A. “Risk Factors”;
 
·  
the level of activity in the oil and natural gas industry is lower than anticipated;
 
·  
production-related activities become more sensitive to variances in commodity prices;
 
·  
the major oil companies do not continue to expand internationally;
 


·  
market conditions are weaker than anticipated;
 
·  
we are unable to acquire additional aircraft due to limited availability or unable to exercise aircraft purchase options;
 
·  
we are unable to obtain financing or we are unable to draw on our credit facilities;
 
·  
we are not able to re-deploy our aircraft to regions with greater demand;
 
·  
we do not achieve the anticipated benefit of our fleet capacity expansion program; and
 
·  
the outcomes of the U.S. Department of Justice (“DOJ”) investigations, which are ongoing, have a greater than anticipated financial or business impact.
 
All forward-looking statements in this Annual Report are qualified by these cautionary statements and are only made as of the date of this Annual Report.  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.
 


 
PART I
 
Overview
 
We are a leading provider of helicopter services to the worldwide offshore energy industry and one of two helicopter service providers to the offshore energy industry with global operations.  We have significant operations in most major offshore oil and gas producing regions of the world, including the North Sea, the U.S. Gulf of Mexico, Nigeria, Australia and Latin America, and we generated 80% of our revenues from international operations in fiscal year 2010.  We have a long history in the helicopter services industry through Bristow Helicopters Ltd. and Offshore Logistics, Inc., having been founded in 1955 and 1969, respectively.
 
We conduct our business in one segment:  Helicopter Services.  The Helicopter Services segment operations are conducted primarily through five business units:
 
·  
North America
 
·  
Europe
 
·  
West Africa
 
·  
Australia
 
·  
Other International
 
We provide helicopter services to a broad base of major integrated, national and independent oil and gas companies. Our customers charter our helicopters primarily to transport personnel from onshore bases to offshore drilling rigs, platforms and other installations.  To a lesser extent, customers also charter our helicopters to transport time-sensitive equipment to these offshore locations.  Helicopters are generally classified as small (four to eight passengers), medium (12 to 16 passengers) and large (18 to 25 passengers), each of which serves a different transportation need of the offshore energy industry.  Medium and large helicopters, which can fly in a wider variety of operating conditions and over longer distances and carry larger payloads than small helicopters, are most commonly used for crew changes on large offshore production facilities and drilling rigs.  With their ability to carry greater payloads, travel greater distances and move at higher speeds, medium and large helicopters have historically been preferred in international markets, where the offshore facilities tend to be larger, the drilling locations tend to be more remote and the onshore infrastructure tends to be more limited.  Demand for medium and large helicopters is driven by drilling, development and production activity levels in deepwater locations throughout the world, as the medium and large aircraft are able to travel to these deepwater locations.  Additionally, some local governmental regulations in certain international markets require us to operate twin-engine medium and large aircraft in those markets.  A recent move to deeper water drilling in the U.S. Gulf of Mexico has created more demand for medium and large helicopters domestically.  Small helicopters are generally used for daytime flights on shorter routes and to reach production facilities that cannot accommodate medium and large helicopters.  Our small helicopters operate primarily in the shallow waters of the U.S. Gulf of Mexico and Nigeria.  Worldwide there are more than 8,700 production platforms and 500 offshore rigs.
 
We are able to deploy our aircraft to the regions with the greatest demand, subject to the satisfaction of local governmental regulations.  There are also additional markets for helicopter services beyond the offshore energy industry, including agricultural support, air medical, tourism, firefighting, corporate transportation, traffic monitoring, police and military.  The existence of these alternative markets enables us to better manage our helicopter fleet by providing potential purchasers for older aircraft and for our excess aircraft during times of reduced demand in the offshore energy industry.
 
Most countries in which we operate limit foreign ownership of aviation companies.  To comply with these regulations and yet expand internationally, we have formed or acquired interests in a number of foreign helicopter operations.  These investments typically combine a local ownership interest with our experience in providing helicopter services to the offshore energy industry.  These arrangements have allowed us to expand operations while diversifying the risks and reducing the capital outlays associated with independent expansion.  We lease some of our aircraft to a number of unconsolidated affiliates which in turn provide helicopter services to customers.
 
In addition to our primary Helicopter Services operations, we also operate a training business unit, Bristow Academy, and provide technical services to customers in the U.S. and U.K. See “— Bristow  Academy” and “— Technical Services”  below for further discussion of these operations.
 


Since fiscal year 2006, we have made strategic investments and acquisitions including investment in new generations of aircraft that are in heavy demand by our customers, expansion or increased investments in new markets, such as our acquisition of a 42.5% ownership interest in Líder Aviação Holding S.A. (“Líder”), acquisition of the remaining 51% interest of Bristow Norway and acquisition of Bristow Academy in order to ensure a source for new talented pilots.
 
Beginning in fiscal year 2009, the global financial markets experienced severe disruption and a worldwide economic downturn occurred.  As a result, during fiscal year 2009 and continuing in fiscal year 2010 we saw a decline in demand for helicopter services, primarily in the exploration and development sector, with more limited declines in the production sector.  In response to the market downturn, in fiscal year 2009, we implemented cost savings initiatives including carefully evaluating and prioritizing capital expenditures, freezing management salaries and reviewing staffing levels and compensation structure while continuing to meet customers’ needs and maintaining operational safety.  In fiscal year 2010, we announced plans to make key changes in our organizational structure to continue to improve operations and financial performance.
 
Since the beginning of fiscal year 2007, we have been able to raise $1.0 billion of capital in a mix of debt and equity with both public and private financings, generate gross proceeds of $101.6 million through the divestiture of non-core businesses, including the sale of Grasso Production Management (“Grasso”), Turbo Engines, Inc. (“Turbo”) and 53 small aircraft and related assets operating in the U.S. Gulf of Mexico and generate proceeds of $167.8 million through the sale of other aircraft to the helicopter aftermarket.  Concurrently, we have invested over $1.4 billion in capital expenditures to grow our business.
 
We expect to incur additional capital expenditures over the next several years to replace certain of our aircraft and upgrade strategic base facilities.  Our capital commitments in future periods related to fleet renewal are discussed under Item 7. “Management’s Discussion and Analysis of Financial Condition — Liquidity and Capital Resources — Future Cash Requirements” included elsewhere in this Annual Report and are detailed in the table provided in that section.
 
Consistent with our growth strategy, we regularly engage in discussions with potential sellers and strategic partners regarding the possible purchase of assets, pursuit of joint ventures or other expansion opportunities that increase our position in existing markets or facilitate expansion into new markets.  These potential expansion opportunities consist of both smaller transactions as well as larger transactions that could have a material impact on our financial position, cash flow and operating results.  We cannot predict the likelihood of completing, or the timing of, any such transactions.
 


As of March 31, 2010, the aircraft in our fleet, the aircraft which we expect to take delivery of in the future and the aircraft which we have the option to acquire were as follows:

 
Number of Aircraft
           
 
Consolidated Affiliates
 
Unconsolidated
Affiliates
           
Type
 
In Fleet
 
On
Order(1)
   
Under
Option(2)
   
In Fleet
 
Maximum Passenger
Capacity
 
Speed
(MPH)(3)
 
 
Engine
Small Helicopters:
                               
Bell 206L Series
 
37
 
   
   
8
 
6
 
115
 
Turbine
Bell 206B
 
2
 
   
   
2
 
4
 
100
 
Turbine
Bell 407
 
46
 
   
   
1
 
6
 
132
 
Turbine
BK-117
 
1
 
   
   
 
7
 
160
 
Twin Turbine
BO-105
 
2
 
   
   
 
4
 
125
 
Twin Turbine
EC135
 
6
 
   
   
3
 
6
 
143
 
Twin Turbine
Agusta 109
 
 
   
   
3
 
8
 
177
 
Twin Turbine
AS 350BB
 
 
   
   
36
 
4
 
161
 
Turbine
   
94
 
   
   
53
           
Medium Helicopters:
                               
Bell 212
 
3
 
   
   
23
 
12
 
115
 
Twin Turbine
Bell 412
 
41
 
   
   
46
 
13
 
125
 
Twin Turbine
EC155
 
10
 
   
   
 
13
 
167
 
Twin Turbine
Sikorsky S-76
 
73
 
   
6
   
36
 
12
 
145
 
Twin Turbine
EC175
 
 
   
12
   
 
16
 
161
 
Twin Turbine
AW 139
 
3
 
4
   
8
   
4
 
16
 
166
 
Twin Turbine
   
130
 
4
   
26
   
109
           
Large Helicopters:
                               
AS332L Super Puma
 
31
 
   
   
 
18
 
144
 
Twin Turbine
Bell 214ST
 
3
 
   
   
 
18
 
144
 
Twin Turbine
Sikorsky S-61
 
5
 
   
   
 
18
 
132
 
Twin Turbine
Sikorsky S-92
 
22
 
2
   
13
   
1
 
19
 
158
 
Twin Turbine
Mil Mi-8
 
7
 
   
   
1
 
20
 
138
 
Twin Turbine
EC225
 
13
 
3
   
   
 
25
 
167
 
Twin Turbine
   
81
 
5
   
13
   
2
           
Training Aircraft:
                               
Robinson R22
 
15
 
   
   
 
2
 
92
 
Piston
Robinson R44
 
1
 
   
   
 
4
 
130
 
Piston
Sikorsky 300CB/CBi
 
52
 
   
   
 
2
 
92
 
Piston
Bell 206B
 
9
 
   
   
 
4
 
100
 
Turbine
AS 355
 
3
 
   
   
 
5
 
138
 
Twin Turbine
Fixed wing
 
1
 
   
   
           
   
81
 
   
   
           
Fixed wing
 
4
 
   
   
40
           
Total
 
390
 
9
   
39
   
204
           
____________

(1)
Of the aircraft on order, six are expected to be delivered during fiscal year 2011.  Two of the aircraft on order are already under signed customer contracts.  For additional information, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity — Future Capital Requirements” included elsewhere in this Annual Report.
   
(2)
Represents aircraft which we have the option to acquire.  If the options are exercised, the agreements provide that aircraft would be delivered over fiscal years 2011 through 2015.  For additional information, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity — Future Capital Requirements” included elsewhere in this Annual Report.
   
(3)
Represents the approximate normal cruise speed flying at gross weight and at sea level under standard operating conditions.
 
 
The following table shows the distribution of our consolidated revenue for fiscal year 2010 and aircraft as of March 31, 2010 among our business units.
 
 
Consolidated Revenue for Fiscal Year 2010
 
Aircraft in Consolidated Fleet
         
   
Helicopters
                 
   
Small
 
Medium
 
Large
 
Training
 
Fixed   Wing
 
Total
(1)
Unconsolidated Affiliates (2)
 
Total
North America
16
 %
 
75
 
29
 
7
 
 
1
 
112
 
   
112
Europe
39
 %
 
 
11
 
39
 
 
 
50
 
63
   
113
West Africa
19
 %
 
12
 
34
 
5
 
 
3
 
54
 
   
54
Australia
11
 %
 
2
 
10
 
18
 
 
 
30
 
   
30
Other International
12
 %
 
5
 
46
 
12
 
 
 
63
 
141
   
204
Bristow Academy and Technical Services
3
 %
 
 
 
 
81
 
 
81
 
   
81
Total
100
 %
 
94
 
130
 
81
 
81
 
4
 
390
 
204
   
594
___________

(1)
Includes 15 aircraft held for sale.
   
(2)
The 204 aircraft operated by our unconsolidated affiliates do not include those aircraft leased from us.
 
North America
 
We operate our North America business unit from seven operating facilities in the U.S. Gulf of Mexico and three operating facilities in Alaska.  We are one of the largest suppliers of helicopter services in the U.S. Gulf of Mexico.  Our customer base in this business unit consists of mostly international, independent and major integrated oil and gas companies.  The U.S. Gulf of Mexico is a major offshore oil and gas producing region with approximately 3,500 production platforms and 80 drilling rigs.  The shallow water platforms are typically unmanned and are serviced by small aircraft.  The deepwater platforms are serviced by medium and large aircraft.  Among our strengths in this region, in addition to our ten operating facilities, are our advanced flight-following systems and our widespread and strategically located offshore fuel stations.  Operations in the U.S. Gulf of Mexico are subject to seasonality as the months of December through March typically have more days of harsh weather conditions than the other months of the year.  Additionally, during the months of June through November, tropical storms and hurricanes may reduce activity as we are unable to operate in the area of the storm.  Our principal work in Alaska utilizes five aircraft that provide daily support to the Trans-Alaska pipeline, along with providing small and medium twin engine contract and charter service to exploration, development and production activities on the North Slope and in the Cook Inlet.  Operations in Alaska are subject to seasonality as fall and winter months have fewer hours of daylight and we generally do not fly at night.  Additionally, anticipation of harsh weather conditions causes oil and gas exploration and production companies to limit their activities during the winter months.
 
Europe
 
We operate our Europe business unit from three bases in the U.K., one base in Holland and three bases in Norway.  Our Europe operations are managed out of our facilities in Aberdeen, Scotland.  Based on the number of aircraft operating, we are the second largest provider of helicopter services in the North Sea, where there are harsh weather conditions and geographically concentrated offshore facilities.  The offshore facilities in the Northern North Sea and Norwegian North Sea are large and require frequent crew change flight services.  In the Southern North Sea the facilities are generally smaller with some unmanned platforms requiring shuttle operations to up-man in the morning and down-man in the evening.  We deploy the majority of the large aircraft in our consolidated fleet in this region.  Our customer base in this business unit consists primarily of major integrated and independent oil and gas companies.  In addition to our oil and gas helicopter services, we are a civil supplier of search and rescue services to the Netherlands Oil and Gas Exploration and Production Association.  Our Europe operations are subject to seasonality as drilling activity is lower during the winter months due to harsh weather and shorter days.
 


West Africa
 
As of March 31, 2010, all of our aircraft in our West Africa business unit operate in Nigeria, where we are the largest provider of helicopter services to the oil and gas industry.  We deploy a combination of small, medium and large aircraft in Nigeria and service a customer base comprised mostly of major integrated oil and gas companies.  We have ten operational bases, with the largest bases located in Escravos, Warri, Port Harcourt and Lagos. The marketplace for our services had historically been concentrated predominantly in the oil rich swamp and shallow waters of the Niger Delta area.  More recently we have been undertaking work further offshore in support of deepwater exploration.  Operations in West Africa are subject to seasonality as the Harmattan, a dry and dusty trade wind, blows between the end of November and the middle of March.  At times when the heavy amount of dust in the air severely limits visibility, we are unable to operate.
 
Australia
 
We are the largest provider of helicopter services to the oil and gas industry in Australia, where we have eight bases located in Western Australia, two in Victoria and one in Queensland.  These operations are managed from our Australian head office facility in Perth, Western Australia.  Our operating bases are located in the vicinity of the major oil and gas exploration and production fields in the North West Shelf, Browse and Carnarvon basins of Western Australia and the Bass Straits in Victoria, where our fleet provides helicopter services solely to offshore oil and gas operators.  We also provide airport management services on Barrow Island in Western Australia. Our client base in Australia consists primarily of major integrated oil and gas companies.  We also provide engineering support to the Republic of Singapore Air Force’s fleet of helicopters at their base in Oakey, Queensland.
 
Other International
 
We currently conduct our Other International operations in Brazil, Egypt, India, Malaysia, Mexico, Russia, Trinidad, and Turkmenistan.  As of March 31, 2010, we and our unconsolidated affiliates operated a mixture of small, medium, and large aircraft in these markets.  While we have a diverse customer base in this business unit, a large majority of revenue is generated from monthly fixed charges for production related work.  We have a total of 204 aircraft in this business unit, including 141 aircraft of unconsolidated affiliates.  The following is a description of operations in our Other International business unit as of March 31, 2010.
 
·  
Brazil – We own a 42.5% interest Líder, the largest provider of helicopter and executive aviation services in Brazil, which we acquired on May 26, 2009.  Líder has helicopter base locations in Macae, Rio de Janiero, Sao Tome, Urucu and Vitória as well as other fixed wing base locations.  We lease three new medium aircraft to Líder.  Additionally, we currently provide dry lease and technical support to two Brazilian operators.
 
·  
Egypt – We own a 25% interest in Petroleum Air Services (“PAS”), an Egyptian corporation which provides helicopter and fixed wing transportation to the offshore energy industry.  Additionally, spare fixed-wing capacity is chartered to tourism operators.  PAS owns 44 aircraft and operates from multiple locations.  The remaining 75% interest in PAS is owned by Egyptian General Petroleum Corporation.
 
·  
India – We dry lease two aircraft to an Indian helicopter operator and operate from two locations.
 
·  
Malaysia – We lease four aircraft to MHS Aviation Berhad which are operated from bases in Kerteh and Bintulu and provide services to international oil and gas companies.  In addition, we have a Technical Services Agreement with MHS Aviation Berhad under which we provide a number of supervisory engineers and other technical services as required.
 
·  
Mexico – We are one of the largest providers of helicopter services in Mexico through our joint venture, and we conduct diverse operations ranging from offshore crew transfers to seismic support.  We own a 24% interest in Heliservicio Campeche S.A. de C.V. (“Heliservicio”), which provides onshore helicopter services to the Mexican Federal Electric Commission and offshore helicopter transportation to Petróleos Mexicanos (“PEMEX”) and other companies on a contract and ad hoc basis.  Heliservicio owns one aircraft, leases 24 aircraft from us and leases 14 aircraft from other parties to provide helicopter services to its customers.  Heliservicio services customers primarily from bases located in Mexico City, Cuidad del Carmen, Poza Rica, Tampico, Dos Bocas and Vera Cruz.
 


·  
Russia – We operate seven large aircraft from three locations on Sakhalin Island, where we provide helicopter services to international and domestic oil and gas companies.
 
·  
Trinidad – We own a 40% interest in Bristow Caribbean Limited (“BCL”), a joint venture in Trinidad with a local partner that holds the remaining 60% interest.  BCL has eight medium aircraft that are used to service our customers who are primarily engaged in oil and gas activities.    We have one base located at Trinidad’s airport at the Port of Spain.
 
·  
Turkmenistan – We operate two aircraft through our 51% interest in Turkmenistan Helicopters Limited (“THL”), a Turkmenistan corporation.  THL provides helicopter services to an international oil and gas company from a single location.
 
Bristow Academy
 
Bristow Academy is a leading provider of helicopter training services with over 20 years of operating history and training facilities in Titusville, Florida; Concord, California; New Iberia, Louisiana and Gloucestershire, England. Bristow Academy trains students from around the world to become helicopter pilots and is approved to provide helicopter flight training at the commercial pilot and flight instructor level by both the U.S. Federal Aviation Administration (“FAA”) and the European Joint Aviation Authority (“JAA”).  Our ab initio (“beginning”) flight training program typically lasts nine to twelve months and culminates with a student completing approximately 200 hours of flight instruction, passing written and flight exams and obtaining a commercial pilot license with instrument rating and flight instructor qualifications.  Later, with 500 to 1,000 hours of flight experience, these students then become qualified for offshore flight operations and have the opportunity to join Bristow’s Helicopter Services operations.  Alternatively, graduates of Bristow Academy may pursue aviation careers in any number of flight services sectors.  Currently, Bristow Academy has approximately 325 students enrolled in flight training.  Our facilities in Gloucestershire, England conduct JAA approved multi-engine instrument flight training.  Additionally, Bristow has historically provided continuing education to its own staff of pilots and aircraft maintenance personnel worldwide.  Bristow Academy operates 81 aircraft (including 55 owned and 26 leased aircraft) and employs approximately 200 people, including 72 primary flight instructors.  Bristow Academy also conducts a military training program. Revenue for military training contracts generated approximately 40% of Bristow Academy’s revenue for fiscal year 2010.
 
Technical Services
 
Our technical services portion of the business provides helicopter repair services from facilities located in New Iberia, Louisiana; Redhill, England and Aberdeen, Scotland.  While most of this work is performed on our own aircraft, some of these services are performed for third parties and unconsolidated affiliates.
 
For additional information about our business units, see Note 12 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.  For a description of certain risks affecting our business and operations, see Item 1A. “Risk Factors” included elsewhere in this Annual Report.
 
Customers and Contracts
 
The principal customers for our Helicopter Services are major integrated, national and independent oil and gas companies.  During fiscal years 2010, 2009 and 2008, the Shell Companies accounted for 12%, 18% and 21%, respectively, of our gross revenue.  During fiscal years 2010 and 2009, the Chevron Companies accounted for 12% and 10% of our gross revenue.  No other customer accounted for 10% or more of our gross revenue during those periods.  During fiscal year 2010, our top ten customers accounted for 52% of our gross revenue.
 
Our helicopter contracts are generally based on a two-tier rate structure consisting of a daily or monthly fixed fee plus additional fees for each hour flown.  We also provide services to customers on an “ad hoc” basis, which usually entails a shorter notice period and shorter duration.  Our charges for ad hoc services are generally based on an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown.  Generally, our ad hoc services have a higher margin than our other helicopter contracts due to supply and demand dynamics.  In addition, our standard rate structure is based on fuel costs remaining at or below a predetermined threshold.  Fuel costs in excess of this threshold are generally reimbursed by the customer.  Cost reimbursements from customers are recorded as reimbursable revenue in our consolidated statements of income.
 


Generally, our helicopter contracts are cancelable by the customer with a notice period ranging from 30 to 180 days.  In the North America business unit, we generally enter into short-term contracts for twelve months or less.  Outside of North America, contracts are longer term, which is generally between two and five years.  These long term contracts generally include escalation provisions allowing annual rate increases, which may be based on a fixed dollar or percentage increase, an increase in an agreed index or our increased costs, which we negotiate to pass along to customers.
 
Competition
 
The helicopter transportation business is highly competitive throughout the world.  We directly compete against multiple providers in almost all of our regions of operation.  We have several significant competitors in the U.S. Gulf of Mexico, two significant competitors in the North Sea, one significant competitor in each of Nigeria and Australia and a number of smaller local competitors in other markets.  We believe that it is difficult for additional significant competitors to enter our industry because it requires considerable capital investment, working capital, a complex system of onshore and offshore bases, personnel and operating experience.  However, these requirements can be overcome with the appropriate level of customer support and commitment.  In addition, while not the predominant practice, certain of our customers and potential customers in the offshore energy industry perform their own helicopter services on a limited basis.
 
Generally, our customers renew or extend existing contracts without employing a competitive bid process. In some situations, customers charter helicopters on the basis of competitive bidding.  Contracts are generally awarded based on a number of factors, including price, quality of service, operational experience, record of safety, quality and type of equipment, customer relationship and professional reputation.  Incumbent operators typically have a competitive advantage in the bidding process based on their relationship with the customer, knowledge of the site characteristics and existing facilities to support the operations.  Because certain of our customers in the offshore energy industry have the capability to perform their own helicopter services, our ability to increase charter rates may be limited under certain circumstances.
 
Safety, Industry Hazards and Insurance
 
Hazards, such as severe weather and mechanical failures, are inherent in the transportation industry and may result in the loss of equipment and revenue.  It is possible personal injuries and fatalities may occur.  We believe our air accident rate per 100,000 flight hours, which has historically been less than the reported global oil and gas production helicopter average data, indicates that we have consistently performed better than the industry average with respect to safety.  In fiscal year 2010, we had no accidents that resulted in a fatality, although an unconsolidated affiliate suffered an accident that resulted in two fatalities during the period.  We had two air accidents within our consolidated operations in fiscal year 2010 resulting in minor injuries; one in our West Africa operations and one at a Bristow Academy facility.
 
Our well established global safety program is called ‘Target Zero’, as our safety vision is to have zero accidents, zero harm to people, and zero harm to the environment.  The key components are to increase the level of safety reporting by the frontline employees, increase accountability for addressing identified hazards by the operational managers and provide for independent auditing of the operational safety programs.
 
We maintain hull and liability insurance which generally insures us against damage to our aircraft and the related liabilities which may be incurred as a result.  It is also our policy to carry insurance for, or require our customers to indemnify us against, war risk and expropriation and confiscation of the aircraft we use in certain of our international operations.  We also carry various other liability and property insurance, including workers’ compensation, general liability, employers’ liability, auto liability, and property and casualty coverage.  We believe that our insurance program is adequate to cover any claims ultimately incurred related to property damage and liability events.
 
Employees
 
 
As of March 31, 2010, we employed 3,410 employees.  Many of our employees are represented under collective bargaining agreements.  Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement.  We believe that our relations with our employees are generally satisfactory.
 


 
The following table sets forth our employee groups and status of the collective bargaining agreements:
 
Employee Group
 
Representatives
 
Status of Agreement
 
Approximate Number of Employees Covered
by Agreement as of
March 31, 2010
North America Pilots
 
 
Office and Professional Employees International Union (“OPEIU”)
 
 
Agreement (ratified October 31, 2008); Effective October 4, 2008 and amendable April 1, 2011
 
 
290
             
U.K. Pilots
 
British Airline Pilots Association (“BALPA”)
 
Representation agreement ongoing with agreed upon labor rates through August 31, 2011
 
220
             
U.K. Engineers and Staff
 
Unite
 
Representation agreement ongoing with agreed upon labor rates through June 30, 2011
 
520
             
Nigeria Junior and Senior Staff
 
National Union of Air Transport Employees; Air Transport Services Senior Staff Association of Nigeria
 
No formal agreement was reached in 2009; presently negotiating agreement for 2010 with effort to close 2009 at the same time
 
170
             
Nigeria Pilots and Engineers
 
Nigerian Association of Airline Pilots and Engineers
 
No formal agreement was reached in 2009; presently negotiating agreement for 2010 with effort to close 2009 at the same time
 
100
             
Australia Pilots
 
Australian Federation of Air Pilots
 
Agreement expires June 30, 2010; Negotiations are ongoing for a new agreement
 
100
             
Australia Engineers and BDI Tradesmen and Staff
 
Australian Licensed Aircraft Engineers Association (“ALAEA”), Australian Manufacturing Union (“AMWU”) and elected employee representatives
 
Individual contracts expired or are due to expire; Negotiations are ongoing for a new agreement
 
160
 
 
 
             
Bristow Norway Engineers
 
Norsk Helikopteransattes Forbund (“NU of HE”)
 
 
Agreements expire March 31, 2012 (National) and December 31, 2010 (Local)
 
70
 
 
             
Bristow Norway Pilots
 
Norsk Flygerforbund (“NALPA”), new union (“PARAT”) effective
April 1, 2010
 
Collective agreement expired March 31, 2010; negotiations underway
 
100
 
Governmental Regulation
 
United States
 
As a commercial operator of aircraft, our U.S. operations are subject to regulations under the Federal Aviation Act of 1958, as amended, and other laws.  We carry persons and property in our helicopters under an Air Taxi Certificate granted by the FAA.  The FAA regulates our U.S. flight operations and, in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of our operations.  The National Transportation Safety Board is authorized to investigate aircraft accidents and to recommend improved safety standards. Our U.S. operations are also subject to the Federal Communications Act of 1934 because we use radio facilities in our operations.
 
Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the U.S. unless such aircraft are registered with the FAA and the FAA has issued an operating certificate to the operator.  As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft are owned or controlled by one or more citizens of the U.S. and an operating certificate may be granted only to a citizen of the U.S.  For purposes of these requirements, a corporation is deemed to be a citizen of the U.S. only if at least 75% of its voting interests are owned or controlled by U.S. citizens, the president of the company is a U.S. citizen, two-thirds or more of the directors are U.S. citizens and the company is under the actual control of U.S. citizens.  If persons other than U.S. citizens should come to own or control more than 25% of our voting interest or if any of the other requirements are not met, we have been advised that our aircraft may be subject to deregistration under the Federal Aviation Act, and we may lose our ability to operate within the U.S.  Deregistration of our aircraft for any reason, including foreign ownership in excess of permitted levels, would have a material adverse effect on our ability to conduct operations within our North America business unit. Therefore, our organizational documents currently provide for the automatic suspension of voting rights of shares of our outstanding voting capital stock owned or controlled by non-U.S. citizens, and our right to redeem those shares, to the extent necessary to comply with these requirements.  As of March 31, 2010, approximately 2,656,000 shares of our common stock, par value $.01 per share (“Common Stock”), were held of record by persons with foreign addresses. These shares represented approximately 7% of our total outstanding Common Stock as of March 31, 2010.  Our foreign ownership may fluctuate on each trading day because a substantial portion of our Common Stock and our 3%  convertible Senior Notes due 2038 (“3% Convertible Senior Notes”) is publicly traded.
 
United Kingdom
 
Our operations in the U.K. are subject to the Civil Aviation Act 1982 and other similar English and European statutes and regulations. We carry persons and property in our helicopters pursuant to an operating license issued by the Civil Aviation Authority (“CAA”).  The holder of an operating license must meet the ownership and control requirements of Council Regulation 2407/92.  To operate under this license, the company through which we conduct operations in the U.K., Bristow Helicopters Ltd., must be owned directly or through majority ownership by European Union nationals, and must at all times be effectively controlled by them.  To comply with these restrictions, we own only 49% of the ordinary shares of Bristow Aviation, the entity that owns Bristow Helicopters Ltd.  In addition, we have a put/call agreement with the other two stockholders of Bristow Aviation which grants us the right to buy all of their Bristow Aviation ordinary shares (and grants them the right to require us to buy all of their shares).  Under English law, to maintain Bristow Helicopter Ltd.’s operating license, we would be required to find a qualified European Union owner to acquire any of the Bristow Aviation shares that we have the right or obligation to acquire under the put/call agreement.  In addition to our equity investment in Bristow Aviation, we own deferred stock, essentially a subordinated class of stock with no voting rights, and hold subordinated debt issued by Bristow Aviation.
 
The CAA regulates our U.K. flight operations and exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of those operations.  The CAA often imposes improved safety standards.  Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the U.K. unless such aircraft are approved by the CAA.  Changes in U.K. or European Union statutes or regulations, administrative requirements or their interpretation may have a material adverse effect on our business or financial condition or on our ability to continue operations in these areas.
 


Other
 
Our operations in areas other than the U.S. and the U.K. also are subject to local governmental regulations that may limit foreign ownership of aviation companies.  Because of these local regulations, we conduct some of our operations through entities in which citizens of such countries own a majority interest and we hold only a noncontrolling interest, or under contracts which provide that we operate assets for the local companies and conduct their flight operations.  Such contracts are used for our operations in Russia and Turkmenistan.  Changes in local laws, regulations or administrative requirements or their interpretation may have a material adverse effect on our business or financial condition or on our ability to continue operations in these areas.
 
Environmental
 
Our operations are subject to laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment.  If we fail to comply with these environmental laws and regulations, administrative, civil and criminal penalties may be imposed, and we may become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders.  We may also be subject to civil claims arising out of a pollution event.  These laws and regulations may expose us to strict, joint and several liability for the conduct of or conditions caused by others or for our own acts even though these actions were in compliance with all applicable laws at the time they were performed.  To date, such laws and regulations have not had a material adverse effect on our business, results of operations or financial condition.
 
Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the offshore energy industry, which in turn could adversely affect us.  The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment, and thus there can be no assurance as to the effect of such regulation on our operations or on the operations of our customers.  We try to anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the costs of such compliance.  We do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on our business, financial position or results of operations.  We cannot assure, however, that future events, such as changes in existing laws, the promulgation of new laws, or the development or discovery of new facts or conditions will not cause us to incur significant costs.  Below is a discussion of the material U.S. environmental laws and regulations that relate to our business.  We believe that we are in substantial compliance with all of these environmental laws and regulations.
 
Under the Comprehensive Environmental Response, Compensation and Liability Act, referred to as CERCLA or the Superfund law, and related state laws and regulations, strict, joint and several liability can be imposed without regard to fault or the legality of the original conduct on certain classes of persons that contributed to the release of a hazardous substance into the environment.  These persons include the owner and operator of a contaminated site where a hazardous substance release occurred and any company that transported, disposed of or arranged for the transport or disposal of hazardous substances, even from inactive operations or closed facilities, that have been released into the environment.  In addition, neighboring landowners or other third parties may file claims for personal injury, property damage and recovery of response cost.  We currently own, lease, or operate properties and facilities that, in some cases, have been used for industrial activities for many years.  Hazardous substances, wastes, or hydrocarbons may have been released on or under the properties owned or leased by us, or on or under other locations where such substances have been taken for disposal. In addition, some of these properties have been operated by third parties or by previous owners whose treatment and disposal or release of hazardous substances, wastes, or hydrocarbons was not under our control.  These properties and the substances disposed or released on them may be subject to CERCLA and analogous state statutes.  Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial activities to prevent future contamination.  These laws and regulations may also expose us to liability for our acts that were in compliance with applicable laws at the time the acts were performed.  We have been named as a potentially responsible party in connection with certain sites. See further discussion under Item 3. “Legal Proceedings” included elsewhere in this Annual Report.
 


In addition, since our operations generate wastes, including some hazardous wastes, we may be subject to the provisions of the Resource, Conservation and Recovery Act, or RCRA, and analogous state laws that limit the approved methods of disposal for some types of hazardous and nonhazardous wastes and require owners and operators of facilities that treat, store or dispose of hazardous waste and to clean up releases of hazardous waste constituents into the environment associated with their operations.  Some wastes handled by us in our field service activities that currently are exempt from treatment as hazardous wastes may in the future be designated as “hazardous wastes” under RCRA or other applicable statutes.  If this were to occur, we would become subject to more rigorous and costly operating and disposal requirements.
 
The Federal Water Pollution Control Act, also known as the Clean Water Act, and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into state waters or waters of the U.S.  The discharge of pollutants into jurisdictional waters is prohibited unless the discharge is permitted by the U.S. Environmental Protection Agency, also referred to as the EPA, or applicable state agencies.  Some of our properties and operations require permits for discharges of wastewater and/or stormwater, and we have a system in place for securing and maintaining these permits.  In addition, the Oil Pollution Act of 1990 imposes a variety of requirements on responsible parties related to the prevention of oil spills and liability for damages, including natural resource damages, resulting from such spills in the waters of the U.S.  A responsible party includes the owner or operator of a facility.  The Clean Water Act and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the Oil Pollution Act, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.
 
Some of our operations also result in emissions of regulated air pollutants.  The Federal Clean Air Act and analogous state laws require permits for facilities that have the potential to emit substances into the atmosphere that could adversely affect environmental quality.  Failure to obtain a permit or to comply with permit requirements could result in the imposition of substantial administrative, civil and even criminal penalties.
 
Our facilities and operations are also governed by laws and regulations relating to worker health and workplace safety, including the Federal Occupational Safety and Health Act, or OSHA.  We believe that appropriate precautions are taken to protect our employees and others from harmful exposure to potentially hazardous materials handled and managed at our facilities, and that we operate in substantial compliance with all OSHA or similar regulations.
 
Our operations outside of the U.S. are subject to similar foreign governmental controls relating to protection of the environment.  We believe that, to date, our operations outside of the U.S. have been in substantial compliance with existing requirements of these foreign governmental bodies and that such compliance has not had a material adverse effect on our operations.  There is no assurance, however, that future expenditures to maintain compliance will not become material.
 
 
If you hold our securities or are considering an investment in our securities, you should carefully consider the following risks, together with the other information contained in this Annual Report.
 
Risks Relating to Our Customers and Contracts
 
The demand for our services is substantially dependent on the level of offshore oil and gas exploration, development and production activity.
 
We provide helicopter services to companies engaged in offshore oil and gas exploration, development and production activities.  As a result, demand for our services, as well as our revenue and our profitability, are substantially dependent on the worldwide levels of activity in offshore oil and gas exploration, development and production.  These activity levels are principally affected by trends in, and expectations regarding, oil and gas prices, as well as the capital expenditure budgets of oil and gas companies.  We cannot predict future exploration, development and production activity or oil and gas price movements.  Historically, the prices for oil and gas and activity levels have been volatile and are subject to factors beyond our control, such as:
 
·  
the supply of and demand for oil and gas and market expectations for such supply and demand;
 


·  
actions of the Organization of Petroleum Exporting Countries and other oil producing countries to control prices or change production levels;
 
·  
general economic conditions, both worldwide and in particular regions;
 
·  
governmental regulation;
 
·  
the price and availability of alternative fuels;
 
·  
weather conditions, including the impact of hurricanes and other weather-related phenomena;
 
·  
advances in exploration, development and production technology;
 
·  
the policies of various governments regarding exploration and development of their oil and gas reserves; and
 
·  
the worldwide political environment, including the war in Iraq, uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in the Middle East or the other geographic areas in which we operate (including, but not limited to, Nigeria), or further acts of terrorism in the U.S. or elsewhere.
 
The implementation by our customers of cost-saving measures could reduce the demand for our services.
 
Oil and gas companies are continually seeking to implement measures aimed at greater cost savings, including efforts 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 transportation alternatives.  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.  The recent global financial crisis and economic downturn could lead our customers to implement greater cost saving measures.
 
Our industry is highly competitive and cyclical, with intense price 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, quality of service, operational experience, record of safety, quality and type of equipment, customer relationship and professional reputation.
 
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.
 
In the U.S. Gulf of Mexico, we face competition from a number of providers.  We have two significant competitors in the North Sea, one significant competitor in both Nigeria and Australia and a number of smaller local competitors in other markets.  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.
 
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 due to the loss of a significant number of our customers or termination of a significant number of our contracts.  See further discussion in Item 1. “Business — Competition” included elsewhere in this Annual Report.
 
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 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.
 


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, 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 the 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 us.
 
In February 2005, we voluntarily advised the staff of the SEC that the Audit Committee of our board of directors had engaged special outside counsel to undertake a review of certain payments made by two of our affiliated entities in a foreign country.  The review of these payments, which initially focused on Foreign Corrupt Practices Act matters, was subsequently expanded by the Audit Committee to cover operations in other countries and other issues (the “Internal Review”).  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 on 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.
 
Following the settlement with the SEC, our outside counsel was contacted by the DOJ and was asked to provide certain information regarding the Internal Review.  We entered into an agreement with the DOJ that tolled the statute of limitations relating to these matters until the end of December 2009.  We have been and intend to continue to be responsive to the DOJ’s requests.  At this time, it is not possible to predict the outcome of the DOJ’s investigation into these matters.
 
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 such countries, relating to disclosure and remedial actions taken in connection with the Internal Review.  It is also possible that we may become subject to claims by third parties, possibly resulting in litigation.  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 responded to this claim in early 2006.  There has been minimal activity on this claim since then.  We may face further legal action of this type in the future.  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.
 

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.
 
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 us.
 
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.  One class action lawsuit has already been filed against the Company.  For further details see Item 3. Legal Proceedings included elsewhere in this Annual Report.  Any such civil litigation could have serious consequences for us, 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.
 
Risks Relating to Our Business
 
We are highly dependent upon the level of activity in the North Sea and to a lesser extent the U.S. Gulf of Mexico, which are mature exploration and production regions.
 
In fiscal years 2010, 2009 and 2008 approximately 54%, 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 undergone substantial seismic survey and exploration activity for many years.  Because a large number of oil and gas properties in these regions have already been drilled, additional prospects of sufficient size and quality could be more difficult to identify.  Generally, the production from these drilled oil and gas properties is declining.  In the future, production may decline to the point that such properties are no longer economic to operate, in which case, our services with respect to such properties will no longer be needed.  Oil and gas companies may not identify sufficient additional drilling sites to replace those that become depleted.  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 operations in the U.S. Gulf of Mexico could be adversely impacted by the recent drilling rig accident and resulting oil spill.
 
On Thursday, April 22, 2010, a deepwater Gulf of Mexico drilling rig, Deepwater Horizon, that was engaged in drilling operations, sank after an apparent blowout and fire.  Although attempts are being made to seal the well, hydrocarbons have been leaking and the spill area continues to grow.  We have substantial operations in the U.S Gulf of Mexico serving oil and gas companies that may be threatened by the oil spill.  If conditions continue to deteriorate, the oil and gas companies we serve may be forced to suspend operations, and our customers may elect to reduce the number of aircraft on contract.
 
At this time, we cannot predict the full impact of the incident and resulting spill on oil and gas exploration or production operations in the U.S. Gulf of Mexico.  In addition, we cannot predict how government agencies will respond to the incident or whether changes in laws and regulations concerning operations in the U.S. Gulf of Mexico, including the ability to obtain drilling permits, will result in reduced activity in this market.  A significant reduction in oil and gas exploration and production activity in the U.S. Gulf of Mexico could result in reduced demand for our services in this market, resulting in reduced cash flows and profitability.
 
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 other regions.
 
Expansion of our business outside of the U.S. Gulf of Mexico and the North Sea may be adversely affected by:
 
·  
local regulations restricting foreign ownership of helicopter operators;
 
·  
requirements to award contracts to local operators; and
 
·  
the number and location of new drilling concessions granted by foreign governments.
 
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 Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Cash Requirements” included elsewhere in this Annual Report.
 
Our operations in certain markets are subject to additional risks.
 
During fiscal years 2010, 2009 and 2008, approximately 30%, 30% and 29%, respectively, of our gross revenue was attributable to helicopter services provided to customers operating in the West Africa and Other International business units.  Operations in most of these areas are subject to various risks inherent in conducting business in international locations, including:
 
·  
political, social and economic instability, including risks of war, general strikes and civil disturbances;
 
·  
physical and economic retribution directed at U.S. companies and personnel;
 


·  
governmental actions that restrict payments or the movement of funds or result in the deprivation of contract rights;
 
·  
the taking of property without fair compensation; and
 
·  
the lack of well-developed legal systems in some countries that could make it difficult for us to enforce our contractual rights.
 
For example, there has been continuing political and social unrest in Nigeria, where we derived 19%, 17% and 17% of our gross revenue in fiscal years 2010, 2009 and 2008, respectively.  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 Nigeria or occur elsewhere in the future.
 
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 foreign currency fluctuations and exchange rate risks.  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, Australian dollar, euro, Nigerian naira and Norwegian kroner.  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), net.  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, 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 elsewhere in this Annual Report.
 
Labor problems could adversely affect us.
 
Certain of our employees in the U.S., U.K., Norway, Nigeria and Australia (collectively, about 51% of our employees) are represented under collective bargaining or union 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.  Periodically, certain groups of our employees who are not covered under a collective bargaining agreement consider entering into such an agreement.
 
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 Item 1. “Business — Employees” included elsewhere in this Annual Report 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 renewal program may require us to retain additional pilots, mechanics and other flight-related personnel.  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,  may increase our operating costs and are subject to weather-related and seasonal fluctuations.
 
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.
 
Generally, our operations can be impaired by harsh weather conditions.  Poor visibility, high wind, heavy precipitation, sand storms and volcanic ash 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 effect on our business, financial condition and results of operations.
 


We operate in many international areas through entities that we do not control and are subject to government regulation that limits foreign ownership of aircraft companies.
 
We conduct many of our international operations through entities in which we have a noncontrolling 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 Brazil, Egypt, Mexico, the U.K., Russia and Turkmenistan.  We provide engineering and administrative support to certain of these entities.  We derive significant amounts of lease revenue, service revenue, equity earnings and dividend income from these entities.  In fiscal years 2010, 2009 and 2008, we received approximately $65.5 million, $70.1 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 interest 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.
 
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 Item 1. “Business — Government Regulation” included elsewhere in this Annual Report.
 
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 Item 1. “Business — Government Regulation” and “Business — Environmental” included elsewhere in this Annual Report.
 
Future legislation that may eliminate certain U.S. federal income tax deductions currently available could have an adverse effect on our financial position, results of operations and cash flows as well as  impact our customers’ activity levels and demand for our services.
 
U.S. President Barack Obama recently announced a broad outline of his administration’s proposals to modify certain aspects of the rules governing the U.S. taxation of certain non-U.S. subsidiaries.  Many details of the various proposals remain unknown at this time and any legislation enacting such proposed modifications would require Congressional approval.  However, changes to the U.S. tax law related to taxation of non-U.S. subsidiaries could increase our effective tax rate and adversely affect our financial position, results of operations and cash flows.  Additionally, the Obama administration’s proposed federal budget for fiscal year 2011 would repeal many tax incentives and deductions that are currently available to oil and natural gas exploration and production companies, and any such change could materially and adversely affect our customers’ activity levels and spending for our services which would have a material adverse effect on our business, financial condition and results of operations.
 
A number of tax provisions have expired for our fiscal year ending after March 31, 2010.  While there are several legislative proposals to extend multiple expiring provisions, there is no certainty regarding which provisions will be extended,  the effective date of the extension or the changes that may be made to extension provisions prior to their being enacted into law.   The provisions not extended could have a significant impact on our financial results.
 


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:
 
·  
issuance of administrative, civil and criminal penalties;
 
·  
denial or revocation of permits or other authorizations;
 
·  
imposition of limitations on our operations; and
 
·  
performance of site investigatory, remedial or other corrective actions.
 
For additional information see Item 1. “Business — Environmental” and Item 3. “Legal Proceedings” included elsewhere in this Annual Report.
 
Regulation of greenhouse gases and climate change could have a negative impact on our business.
 
The U.S. Congress is considering legislation to mandate reductions of greenhouse gas emissions and certain states have already implemented, or are in the process of implementing, similar legislation.  Additionally, the U.S. Supreme Court has held in its decisions that carbon dioxide can be regulated as an “air pollutant” under the Clean Air Act, which could result in future regulations even if the U.S. Congress does not adopt new legislation regarding emissions.  At this time, it is not possible to predict how legislation or new federal or state government mandates regarding the emission of greenhouse gases could impact our business; however, any such future laws or regulations could require us or our customers to devote potentially material amounts of capital or other resources in order to comply with such regulations.  These expenditures could have a material adverse effect on our business, financial condition and results of operations.  In addition to potential impacts on our business directly or indirectly resulting from climate-change legislation or regulations, our business also could be negatively affected by climate-change related physical changes or changes in weather patterns.  Increased severe weather patterns could affect the operation of helicopters and result in a reduced number of flight hours which may have a material adverse effect on our business, financial condition and results of operation.
 
Our dependence on a small number of helicopter manufacturers 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.  During these periods, 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 could result 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.  Before the worldwide economic downturn began, those vendors were working at or near full capacity supporting the aircraft production lines and the maintenance requirements of the aircraft operators who were also operating at or near capacity in certain industries, including operators such as us who support the energy industry. Such conditions can result in backlogs in manufacturing schedules and some parts being in limited supply from time to time, which 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 Financial Markets
 
Worldwide financial market difficulties and worldwide economic downturns could have a material adverse effect on our revenue, profitability and financial position.
 
The recent worldwide financial market crisis reduced the availability of liquidity and credit to fund the continuation and expansion of industrial business operations worldwide.  The shortage of liquidity and credit combined with substantial losses in worldwide equity markets led to an extended worldwide economic recession.  A slowdown in economic activity caused by a recession could reduce worldwide demand for energy and result in an extended period of lower oil and natural gas prices.  Crude oil prices have declined from record levels in July 2008 of approximately $145 per barrel to approximately $70 per barrel in May 2010 and natural gas prices have also experienced sharp declines.  Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and natural gas prices.  The reduction in oil and natural gas prices has depressed the immediate levels of activity of oil and gas companies which in turn has reduced demand for our services.  Perceptions of longer-term lower oil and natural gas prices by oil and gas companies can similarly further reduce or defer major expenditures given the long-term nature of many large-scale development projects.  Lower levels of activity can result in a corresponding decline in the demand for our services, which could have a material adverse effect on our revenue and profitability.  Additionally, these factors may adversely impact our statement of financial position if they are determined to cause impairment of our goodwill, intangible assets, long-lived assets or assets held for sale.  Financial market difficulties could also adversely affect the ability of suppliers to meet scheduled delivery dates for our new aircraft and other aircraft parts.
 
Global financial market instability could impact our business and financial condition.
 
Financial market instability in the global financial system could have an impact on our business and our financial condition. We may face significant challenges if conditions in the financial markets are poor.  Our ability to access the capital markets may be severely restricted at a time when we would like, or need, to access such markets, which could have an impact on our growth plans or on our flexibility to react to changing economic and business conditions.  The financial market instability could have an impact on the lenders under our credit facilities or on our customers, causing them to fail to meet their obligations to us.  Furthermore, many of our customers rely on access to the credit markets to finance their oil and natural gas expenditures, which has been curtailed.
 


Risks Related to Our Level of Indebtedness
 
Our level of indebtedness could adversely affect our financial condition and impair our ability to fulfill our obligations under our indebtedness.
 
We have a substantial amount of debt and significant debt service requirements. As of March 31, 2010, we had approximately $716.6 million of outstanding indebtedness.
 
Our level of indebtedness may have important consequences to our business and to you, including:
 
·  
impairing our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes;
 
·  
requiring us to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which reduces the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes or to repurchase our notes upon a change of control;
 
·  
subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including our borrowings under our syndicated senior secured credit facilities, which consist of a $100 million revolving credit facility (with a subfacility of $25 million for letters of credit) and a $25 million letter of credit facility (our “Credit Facilities”);
 
·  
increasing the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and
 
·  
limiting our ability to adjust to rapidly changing market conditions, reducing our ability to withstand competitive pressures and making us more vulnerable to a downturn in general economic conditions or our business than our competitors with less debt.
 
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 level of indebtedness.
 
We had $100 million of availability for borrowings under our Credit Facilities as of March 31, 2010, subject to our maintenance of financial covenants and other conditions. Although the agreements governing our Credit Facilities and the indentures governing our 6⅛% Senior Notes due 2013 (the “6⅛% Senior Notes”) and the 7½% Senior Notes due 2017 (the “7½% 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 6⅛% Senior Notes and the 7½% 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, the ability of our affiliates to generate and distribute cash flows, 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 the 6⅛% Senior Notes and the 7½% Senior Notes limit, among other things, our ability and the ability of our restricted subsidiaries to:
 
·  
borrow money or issue guarantees;
 
·  
pay dividends, redeem capital stock or make other restricted payments;
 
·  
incur liens to secure indebtedness;
 
·  
make certain investments;
 
·  
sell certain assets;
 
·  
enter into transactions with our affiliates; or
 
·  
merge with another person or sell substantially all of our assets.
 
If we fail to comply with these covenants, we would be in default under our Credit Facilities and the indentures governing the 6⅛% Senior Notes and the 7½% Senior Notes, and the principal and accrued interest on our 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.
 
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 the 6⅛% Senior Notes, the 7½% Senior Notes and the 3% Convertible 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.
 
 
In late March 2010, we received comments from the SEC on our fiscal year 2009 Annual Report on Form 10-K.  We responded to the SEC’s comments on April 28, 2010.  On May 10, 2010, we received a response from the SEC asking for further clarification on the accounting for the acquisition of Bristow Norway.  We have not yet replied to the SEC related to this matter; however, as discussed in Note 2 in the "Notes to Consolidated Financial Statements"  included elsewhere in this Annual Report we have made corrections to our accounting for the acquisition of Bristow Norway as of March 31, 2010 to address questions raised by the SEC.
 
As of the date of this Annual Report on Form 10-K, we have not formally resolved this comment with the SEC.  Consequently, we treat the SEC’s comments described above as unresolved for the purposes of this Item 1B.
 

 
The number and types of aircraft we operate are described in Item 1. “Business — Overview” above. In addition, we lease various office and operating facilities worldwide, including facilities at the Acadiana Regional Airport in New Iberia, Louisiana, at the Redhill Aerodrome near London, England, at the Aberdeen Airport, Scotland, along the U.S. Gulf of Mexico and numerous residential locations near our operating bases in the U.K., Norway, Australia, Russia, Nigeria and Trinidad primarily for housing pilots and staff supporting those areas of operation.  We lease office space in a building in Houston, Texas, which we use as our Corporate and Other International business unit headquarters.  Additionally, we have multiple properties in Titusville, Florida, where the largest campus of our Bristow Academy business unit is located.  These facilities are generally suitable for our operations and can be replaced with other available facilities if necessary.
 
Additional information about our properties can be found in Note 8 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report (under the captions “Aircraft Purchase Contracts” and “Operating Leases”).  A detail of our long-lived assets by geographic area as of March 31, 2010 and 2009 can be found in Note 12 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.
 
 
Internal Review
 
In February 2005, we voluntarily advised the staff of the SEC that the Audit Committee of our board of directors had engaged special outside counsel to undertake a review of certain payments made by two of our affiliated entities in a foreign country.  The review of these payments, which initially focused on Foreign Corrupt Practices Act matters, was subsequently expanded by the Audit Committee to cover operations in other countries and other issues (the “Internal Review”).  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 on 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.  Following the settlement with the SEC, our outside counsel was contacted by the DOJ and was asked to provide certain information regarding the Internal Review.  We entered into an agreement with the DOJ that tolled the statute of limitations relating to these matters until the end of December 2009. We have been and intend to continue to be responsive to the DOJ’s requests. At this time, it is not possible to predict the outcome of the DOJ’s investigation into these matters.
 
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 responded to this claim in early 2006.  There has been minimal activity on this claim since then.
 
Document Subpoena Relating to DOJ Antitrust Investigation
 
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 us, 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.
 
Environmental Contingencies
 
The EPA has in the past notified us that we are a potential responsible party, or PRP, at four former waste disposal facilities that are on the National Priorities List of contaminated sites.  Under CERCLA, persons who are identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites.  We were identified by the EPA as a PRP at the Western Sand and Gravel Superfund site in Rhode Island in 1984, at the Sheridan Disposal Services Superfund site in Waller County, Texas in 1989, at the Gulf Coast Vacuum Services Superfund site near Abbeville, Louisiana in 1989, and at the Operating Industries, Inc. Superfund site in Monterey Park, California in 2003.  We have not received any correspondence from the EPA with respect to the Western Sand and Gravel Superfund site since February 1991, nor with respect to the Sheridan Disposal Services Superfund site since 1989.  Remedial activities at the Gulf Coast Vacuum Services Superfund site were completed in September 1999, and the site was removed from the National Priorities List in July 2001.  The EPA has submitted a de minimus settlement offer to us in March 2010 which we have accepted.  Following finalization of the settlement, we will be released from liability in connection with this site.  Although we have not yet obtained a formal release of liability from the EPA with respect to any of the sites, we believe that our potential liability in connection with these sites is not likely to have a material adverse effect on our business, financial condition or results of operations.
 
Civil Class Action Lawsuit
 
On June 12, 2009, the case of Superior Offshore International, Inc. v. Bristow Group Inc., et al, Case No. 1:09-cv-00438, was filed in the U.S. District Court for the District of Delaware.  The purported class action complaint, which also names other providers of offshore helicopter services in the Gulf of Mexico as defendants, alleges violations of Section 1 of the Sherman Act.  Among other things, the complaint alleges that the defendants unlawfully conspired to raise and maintain the price of offshore helicopter services between January 1, 2001 and December 31, 2005.  The plaintiff seeks to represent a purported class of direct purchasers of offshore helicopter services and is asking for, among other things, unspecified treble monetary damages and injunctive relief.  We intend to defend against this lawsuit vigorously.  As this lawsuit is in its initial stage, we are currently unable to determine whether it could have a material effect on our business, financial condition or results of operations.
 
Other Matters
 
Although infrequent, aircraft accidents have occurred in the past, and the related losses and liability claims have been covered by insurance subject to a deductible.  We are a defendant in certain claims and litigation arising out of operations in the normal course of business.  In the opinion of management, uninsured losses, if any, will not be material to our financial position, results of operations or cash flows.
 
 
 
PART II
 
 
Our Common Stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “BRS.” The following table shows the range of closing prices for our Common Stock during each quarter of our last two fiscal years.
 
 
Fiscal Year Ended March 31,
 
2010
 
2009
 
High
 
Low
 
High
 
Low
First Quarter 
$
34.15
 
$
21.44
 
$
58.03
 
$
45.71
Second Quarter
 
33.97
   
26.99
   
49.22
   
33.84
Third Quarter
 
38.96
   
28.69
   
33.23
   
17.08
Fourth Quarter
 
40.22
   
33.25
   
28.80
   
16.91
 
On May 14, 2010, the last reported sale price of our Common Stock on the NYSE was $36.47 per share.  As of May 14, 2010, there were 621 holders of record of our Common Stock.
 
The following graph compares the cumulative 5-year total shareholder return on our Common Stock relative to the cumulative total returns of the S&P 500 index and the PHLX Oil Service Sector index.  The graph assumes that the value of the investment in our Common Stock and in each of the indices (including reinvestment of dividends) was $100 on March 31, 2005 and tracks it through March 31, 2010.
 
 

 
   
March 31,
2005
March 31,
2006
March 31,
2007
March 31,
2008
March 31,
2009
March 31,
2010
               
Bristow Group Inc.
 
100.00
  92.74
109.39
161.07
64.32
113.24
S&P 500
 
100.00
111.73
124.95
118.60
73.43
109.97
PHLX Oil Service Sector
100.00
160.17
165.16
215.41
93.68
154.37
 
We have not paid dividends on our Common Stock since January 1984.  We do not intend to declare or pay regular dividends on our Common Stock in the foreseeable future.  Instead, we generally intend to invest any future earnings in our business.  Subject to Delaware law, our board of directors will determine the payment of future dividends on our Common Stock, if any, and the amount of any dividends in light of:
 
·  
any applicable contractual restrictions limiting our ability to pay dividends;
 
·  
our earnings and cash flows;
 
·  
our capital requirements;
 
·  
our financial condition; and
 
·  
other factors our board of directors deems relevant.
 
In addition, the terms of our the 6⅛% Senior Notes, the 7½% Senior Notes and Credit Facilities restrict our payment of cash dividends and other distributions to stockholders.  For descriptions of our 6⅛% Senior Notes, 7½% Senior Notes and Credit Facilities, see Note 5 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.
 
Please refer to Item 11 of this Annual Report for information concerning securities authorized under our equity compensation plans.
 
 
The following table contains our selected historical consolidated financial data.  You should read this table along with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the related notes thereto, all of which are included elsewhere in this Annual Report.
 
   
Fiscal Year Ended March 31,
 
   
2010 (1)
 
2009 (2)
 
2008 (3)
 
2007 (4)
 
2006 (5)
 
   
(In thousands, except per share data)
 
                                 
Statement of Income Data:  (6)
                               
Gross revenue (7)
 
$
1,167,756
 
$
1,133,803
 
$
1,012,764
 
$
843,595
 
$
709,901
 
Income available to common stockholders (7)
   
112,014
   
123,203
   
107,814
   
71,348
   
54,310
 
Income (loss) from discontinued operations
   
   
(246
)
 
(3,822
)
 
2,824
   
3,499
 
Net income attributable to Bristow Group
 
$
112,014
 
$
122,957
 
$
103,992
 
$
74,172
 
$
57,809
 
Basic earnings per common share: (6)
                               
Earnings from continuing operations (7)
 
$
3.23
 
$
3.96
 
$
4.00
 
$
2.75
 
$
2.33
 
Earnings (loss) from discontinued operations
   
   
   
(0.16
)
 
0.12
   
0.15
 
Net earnings
 
$
3.23
 
$
3.96
 
$
3.84
 
$
2.87
 
$
2.48
 
                                 
Diluted earnings per common share: (6)
                               
Earnings from continuing operations (7)
 
$
3.10
 
$
3.57
 
$
3.53
 
$
2.64
 
$
2.30
 
Earnings (loss) from discontinued operations
   
   
(0.01
)
 
(0.12
)
 
0.10
   
0.15
 
Net earnings
 
$
3.10
 
$
3.56
 
$
3.41
 
$
2.74
 
$
2.45
 
 

 
   
March 31,
 
   
2010
 
2009
 
2008
 
2007
 
2006
 
   
(In thousands)
 
Balance Sheet Data: (6)
                               
Total assets
 
$
2,494,620
 
$
2,334,571
 
$
1,977,355
 
$
1,505,803
 
$
1,176,413
 
Long-term obligations  (8)
   
728,163
   
723,913
   
606,218
   
259,082
   
265,296
 
_________

(1)
Results for fiscal year 2010 include the significant items discussed under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Overview of Operating Results — Fiscal Year 2010 Compared to Fiscal Year 2009” included elsewhere in this Annual Report.
 
(2)
Results for fiscal year 2009 include the significant items discussed under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Overview of Operating Results — Fiscal Year 2010 Compared to Fiscal Year 2009” included elsewhere in this Annual Report.

(3)
Results for fiscal year 2008 include the significant items discussed under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Overview of Operating Results — Fiscal Year 2009 Compared to Fiscal Year 2008” included elsewhere in this Annual Report.
 
(4)
Results for fiscal year 2007 include $3.1 million ($2.0 million, net of tax) in costs associated with the Internal Review, $1.9 million ($1.3 million, net of tax) in costs associated with the DOJ antitrust investigation, $2.5 million ($1.6 million, net of tax) in a gain realized on the sale of our investment in a Brazilian joint venture for which we had recorded an impairment charge in fiscal year 2006, as we expected at that time that our investment would not be recoverable, $2.5 million of additional tax expense resulting from the sale of Turbo in November 2006 and $9.8 million ($6.3 million, net of tax) of foreign currency transaction losses.  Diluted earnings per share for fiscal year 2007 was also impacted by our issuance of Preferred Stock in September and October 2006, which resulted in a reduction of $0.30 per share.
 
(5)
Results for fiscal year 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.

(6)
Results of operations and financial position of companies that we have acquired have been included beginning on the respective dates of acquisition and include Bristow Academy (April 2007), Vortex Helicopters, Inc. (“Vortex”) (November 2007), Rotorwing Leasing Resources, L.L.C. (“RLR”) (April 2008), Bristow Norway (October 2008), and Severn Aviation (December 2008).  Amounts also include our recent investment in Líder (May 2009).
   
(7)
Excludes amounts related to Grasso Production Management, which are classified as discontinued operations as discussed in Note 2 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.
   
(8)
Includes long-term debt, current maturities of long-term debt and a capital lease obligation.
 
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with “Forward-Looking Statements,” Item 1A. “Risk Factors” and our Consolidated Financial Statements for fiscal years 2010, 2009 and 2008, and the related notes thereto, all of which are included elsewhere in this Annual Report.
 
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 impacting our financial condition and operating performance.
 
See discussion of our business and the operations within our Helicopter Services Segment under Part I. Item 1. “Business — Overview” included elsewhere in this Annual Report.
 


Our Strategy
 
Our goal is to advance our position as a leading helicopter services provider to the offshore energy industry.  We intend to employ the following strategies to achieve this goal:
 
·
Grow our business.  We plan to continue to grow our business globally and increase our revenue and profitability, subject to managing through cyclical downturns in the energy industry.  We have a footprint in most major oil and gas producing regions of the world, and we expect to 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 and investments.  Through our relationships with our existing customers, we are aware of future business opportunities in the markets we currently serve that would allow us to grow through fleet additions.  Our acquisition-related growth may include increasing our role and participation with existing unconsolidated affiliates or investing in new companies, and may include increasing our position in existing markets or expanding into new markets.
 
·
 
Be the preferred provider of helicopter services.  We position our business 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 seek 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.  We have 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 and field operations.
 
Market Outlook
 
Our core business is providing helicopter services to the worldwide oil and gas industry.  Our customers’ operating expenditures in the production sector are the principal source of our revenue, while their exploration and development capital expenditures provide a lesser portion of our revenue.  Our customers typically base their capital expenditure budgets on their long-term commodity price expectations and not exclusively on the current spot price.  In 2009, the credit, equity and commodity markets were volatile causing many of our oil and gas company customers to reduce capital spending plans and defer projects.  Thus far in 2010, oil prices have stabilized around $70 per barrel.  We believe that the continued stability of oil prices may lead to confidence among our customers and increased capital expenditure budgets, and we are already seeing some larger projects moving ahead that were previously on hold.
 
While we are cautiously optimistic that the economic conditions will continue to recover, we continue to seek ways to reduce costs and work with our customers to improve the efficiency of their operations.  Our global operations and critical mass of helicopters provide us with diversity of geographic and customer focus to help mitigate risks associated with a single market or customer and allows us to respond to increased demand in certain markets through redeployment of assets.
 
Although some of the global demand for our services has softened, the fundamental long-term challenge for our industry is the limited availability of new aircraft and the need throughout the industry to retire many of the older aircraft in the worldwide fleet.  Currently manufacturers have some available aircraft; however, there are some constraints on supply of new large aircraft.  The aftermarket for sales of our older aircraft has also softened and sale prices have declined, reflecting fewer buyers with available capital.
 
We continue to expect to grow our business through the delivery of aircraft on order and potentially through acquisitions and investments, subject to managing through cyclical downturns in the energy industry.  Additionally, during fiscal year 2010, we invested in Brazil, an emerging market and potential growth area, through our acquisition of a 42.5% interest in Líder.  See Note 2 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.
 


On Thursday, April 22, 2010, a deepwater U.S. Gulf of Mexico drilling rig, Deepwater Horizon, that was engaged in drilling operations, sank after an apparent blowout and fire.  Although attempts are being made to seal the well, hydrocarbons have been leaking and the spill area continues to grow.  If conditions continue to deteriorate, the oil and gas companies we serve in the U. S. Gulf of Mexico may be forced to suspend operations, and our customers may elect to reduce the number of aircraft on contract.  At this time, we cannot predict the full impact of the incident and resulting spill on oil and gas exploration or production operations in the U.S. Gulf of Mexico.  In addition, we cannot predict how government agencies will respond to the incident or whether changes in laws and regulations concerning operations in the U.S. Gulf of Mexico, including the ability to obtain drilling permits, will result in reduced activity in this market.
 
We expect that our cash on deposit as of March 31, 2010 of $77.8 million, cash flow from operations and proceeds from aircraft sales, as well as the $100 million borrowing capacity under our revolving credit facility, will be sufficient to satisfy our capital commitments, including our remaining aircraft purchase commitments of $124.9 million as of March 31, 2010.  We plan to continue to be disciplined in our capital commitment program.  Therefore, we do not foresee an immediate need to raise capital through new financings.  However, we are currently experiencing an active bid market for new helicopter contract work for customers and our view on capital needs may change based on the success of bids in the marketplace.
 
We conduct business in various foreign countries, and as such, our cash flows and earnings are subject to fluctuations and related risks from changes in foreign currency exchange rates.  Throughout fiscal year 2010, our primary foreign currency exposure has related to the euro, the British pound sterling and the Australian dollar.  The value of each of these currencies has strengthened relative to the U.S. dollar causing an increase in our operating income during the fiscal year 2010.  For additional details, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” included elsewhere in this Annual Report.
 


Overview of Operating Results
 
The following table presents our operating results and other income statement information for the applicable periods:
 
   
Fiscal Years Ended
March 31,
   
Favorable
 
   
2010
   
2009
   
(Unfavorable)
 
   
 (In thousands, except per share
amounts, percentages and flight hours)
 
Gross revenue:
                               
Operating revenue
 
$
1,061,091
   
$
1,028,964
   
$
32,127
     
3.1
 %
Reimbursable revenue
   
106,665
     
104,839
     
1,826
     
1.7
 %
Total gross revenue
   
1,167,756
     
1,133,803
     
33,953
     
3.0
 %
Operating expense:
                               
Direct cost
   
717,178
     
718,375
     
1,197
     
0.2
 %
Reimbursable expense
   
105,853
     
102,987
     
(2,866
)
   
(2.8
)%
Depreciation and amortization
   
74,684
     
65,514
     
(9,170
)
   
(14.0
)%
General and administrative
   
119,701
     
103,656
     
(16,045
)
   
(15.5
)%
     
1,017,416
     
990,532
     
(26,884
)
   
(2.7
)%
Gain on GOM Asset Sale (1)
   
     
36,216
     
(36,216
)
   
(100.0
)%
Gain on disposal of other assets (2)
   
18,665
     
9,089
     
9,576
     
105.4
 %
Earnings from unconsolidated
affiliates, net of losses(2)
   
11,852
     
13,224
     
(1,372
)
   
(10.4
)%
                                 
Operating income
   
180,857
     
201,800
     
(20,943
)
   
(10.4
)%
Interest income (expense), net
   
(41,400
)
   
(29,145
)
   
(12,255
)
   
(42.0
)%
Other income (expense), net
   
3,036
     
3,368
     
(332
)
   
(9.9
)%
Income from continuing operations before provision for income taxes
   
142,493
     
176,023
     
(33,530
)
   
(19.0
)%
Provision for income taxes
   
(28,998
)
   
(50,493
)
   
21,495
     
42.6
 %
                                 
Net income from continuing operations
   
113,495
     
125,530
     
(12,035
)
   
(9.6
)%
Loss from discontinued operations
   
     
(246
)
   
246
     
100.0
 %
Net income
   
113,495
     
125,284
     
(11,789
)
   
(9.4
)%
Net income attributable to noncontrolling interests
   
(1,481
)
   
(2,327
)
   
846
     
36.4
 %
Net income attributable to Bristow Group
 
$
112,014
   
$
122,957
   
$
(10,943
)
   
(8.9
)%
                                 
Diluted earnings per common share from continuing operations
 
$
3.10
   
$
3.57
   
$
(0.47
)
   
(13.2
)%
Operating margin (3)
   
15.5
%
   
17.8
%
   
(2.3
)%
 
 
(12.9
)%
EBITDA (4)
   $
259,589
     $
276,686
   
$
(17,097
)
   
(6.2
)%
Flight hours (5)
   
225,699
     
278,140
     
(52,441
)
   
(18.9
)%



 
   
Fiscal Years Ended
March 31,
   
Favorable
 
   
2009
   
2008
   
(Unfavorable)
 
   
(In thousands, except per share
amounts, percentages and flight hours)
 
Gross revenue:
                               
Operating revenue
 
$
1,028,964
   
$
918,735
   
$
110,229
     
12.0
 %
Reimbursable revenue
   
104,839
     
94,029
     
10,810
     
11.5
 %
Total gross revenue
   
1,133,803
     
1,012,764
     
121,039
     
12.0
 %
Operating expense:
                               
Direct cost
   
718,375
     
635,327
     
(83,048
)
   
(13.1
)%
Reimbursable expense
   
102,987
     
91,106
     
(11,881
)
   
(13.0
)%
Depreciation and amortization
   
65,514
     
54,140
     
(11,374
)
   
(21.0
)%
General and administrative
   
103,656
     
92,833
     
(10,823
)
   
(11.7
)%
     
990,532
     
873,406
     
(117,126
)
   
(13.4
)%
Gain on GOM Asset Sale (1)
   
36,216
     
     
36,216
     
100.0
 %
Gain on disposal of other assets (2)
   
9,089
     
9,390
     
(301
)
   
(3.2
)%
Earnings from unconsolidated
affiliates, net of losses (2)
   
13,224
     
12,978
     
246
     
1.9
 %
                                 
Operating income
   
201,800
     
161,726
     
40,074
     
24.8
 %
Interest income (expense), net
   
(29,145
)
   
(11,054
)
   
(18,091
)
   
(163.7
)%
Other income (expense), net
   
3,368
     
1,585
     
1,783
     
112.5
 %
Income from continuing operations before provision for income taxes
   
176,023
     
152,257
     
23,766
     
15.6
 %
Provision for income taxes
   
(50,493
)
   
(44,526
)
   
(5,967
)
   
(13.4
)%
Net income from continuing operations
   
125,530
     
107,731
     
17,799
     
16.5
 %
Loss from discontinued operations
   
(246
)
   
(3,822
)
   
3,576
     
93.6
 %
Net income
   
125,284
     
103,909
     
21,375
     
20.6
 %
Net income attributable to noncontrolling interests
   
(2,327
)
   
83
     
(2,410
)
   
*
 
Net income attributable to Bristow Group
 
$
122,957
   
$
103,992
   
$
18,965
     
18.2
 %
                                 
Diluted earnings per common share from continuing operations
 
$
3.57
   
$
3.53
   
$
0.04
     
1.1
 %
Operating margin (3)
   
17.8
%
   
16.0
%
   
1.8
  %
 
 
11.3
 %
EBITDA (4)
 
$
276,686
   
$
230,176
   
$
46,510
     
20.2
 %
Flight hours (5)
   
278,140
     
295,513
     
(17,373
)
   
(5.9
)%
_________
* percentage change not meaningful
 
(1)
On October 30, 2008, we sold 53 small aircraft and related assets operating in the U.S. Gulf of Mexico for $65 million (the “GOM Asset Sale”).  For further details, see Note 2 in “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.
   
(2)
The gain on disposal of other assets and gain on GOM asset sale which were previously included within operating expense have been reclassified in this Annual Report to be included as a separate line below operating expense, but still within operating income.  Earnings from unconsolidated affiliates, net of losses, which were previously included in non-operating income have been reclassified in this Annual Report to be included within operating income.  Amounts presented for the fiscal years 2009 and 2008 have been revised to conform to Current Period presentation.  See Note 1 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report for further discussion of these changes in presentation.
   
(3)
Operating margin is calculated as operating income divided by gross revenue.

 
   
(4)
Earnings before Income Taxes, Depreciation and Amortization (“EBITDA”) is a measure that has not been prepared in accordance with generally accepted accounting policies (“GAAP”) and has not been audited or reviewed by our independent auditors.  EBITDA is therefore considered a non-GAAP financial measure.  Management believes EBITDA provides meaningful supplemental information regarding our operating results because it excludes amounts that management does not consider part of operating results when assessing and measuring the operational and financial performance of the organization. A description of adjustments and a reconciliation to net income from continuing operations, the most comparable GAAP financial measure to EBITDA is as follows:

 
Fiscal Year Ended March 31,
 
 
2010
   
2009
   
2008
 
 
(In thousands)
 
Net income from continuing operations
$
113,495
   
$
125,530
   
$
107,731
 
Provision for income taxes
 
28,998
     
50,493
     
44,526
 
Interest expense
 
42,412
     
35,149
     
23,779
 
Depreciation and amortization
 
74,684
     
65,514
     
54,140
 
EBITDA
$
259,589
   
$
276,686
   
$
230,176
 

   
(5)
Excludes flight hours from Bristow Academy and unconsolidated affiliates.
 
Fiscal Year 2010 Compared to Fiscal Year 2009
 
The increase in gross revenue is primarily due to our October 31, 2008 acquisition of the 51% interest in Bristow Norway that we did not previously own and increased rates charged to customers.  The acquisition of Bristow Norway increased revenue by $83.7 million from fiscal year 2009 to fiscal year 2010.  These increases were partially offset by decreases in revenue in North America resulting from the GOM Asset Sale and lower demand for services in that market, a decrease in fuel costs rebilled to our customers and the unfavorable impact of $19.1 million from changes in exchange rates, primarily on revenue for our Europe business unit.
 
Excluding the impact of the special items listed below, operating income, operating margin and EBITDA would have been $181.5 million, 15.5% and $259.6 million, respectively, in fiscal year 2010 and $160.8 million, 14.2% and $234.7 million, respectively, in fiscal year 2009, representing an improvement for each of these items.  This improvement was primarily driven by results in West Africa and Australia and an increase in gain on disposal of other assets of $9.6 million, partially offset by lower operating results in certain other business units, primarily North America and Other International, as well as increased general and administrative expenses.
 
Excluding the impact of the special items listed below, net income from continuing operations and diluted earnings per common share from continuing operations would have been $110.6 million and $3.02, respectively, for fiscal year 2010 and $98.3 million and $2.78, respectively, for fiscal year 2009.  In addition to the items affecting operating income discussed above, the improvement over fiscal year 2009 resulted from a $21.5 million decrease in our provision for income taxes, partially offset by a $12.3 million increase in interest expense, net.  See further discussion in “– Business Unit Operating Results – Fiscal Year 2010 Compared to Fiscal Year 2009 – Taxes” and in “– Business Unit Operating Results – Fiscal Year 2010 Compared to Fiscal Year 2009 – Interest Expense, Net.”
 
Fiscal year 2010 included the following special items:
 
·  
An allowance recorded for accounts receivable due from our unconsolidated affiliate in Mexico, which we have determined are not probable of collection, which decreased operating income and EBITDA by $3.6 million, net income from continuing operations by $2.3 million and diluted earnings per share by $0.06.
 
·  
A reduction in a bad debt allowance on accounts receivable due from a customer in Kazakhstan, which increased operating income and EBITDA by $2.5 million, net income from continuing operations by $1.6 million and diluted earnings per share by $0.04.

 
·  
A reduction in depreciation expense recorded during the three months ended March 31, 2010 for errors in calculation of depreciation on certain aircraft in prior fiscal years, which increased operating income by $3.3 million, net income from continuing operations by $2.9 million and diluted earnings per share by $0.08.  This item had no impact on EBITDA.
 
·  
A reversal of accruals recorded in prior fiscal years for employee taxes and tax penalties in Australia which increased operating income and EBITDA by $2.0 million, net income from continuing operations by $1.3 million and diluted earnings per share by $0.04.
 
·  
Compensation costs associated with the departure of three of the Company’s officers, which decreased operating income and EBITDA by $4.9 million, net income from continuing operations by $3.2 million and diluted earnings per share by $0.09.
 
·  
Hedging gains resulting from to the termination of forward contracts on euro-denominated aircraft purchase commitments, which increased EBITDA by $3.9 million, net income from continuing operations by $2.6 million and diluted earnings per share by $0.07.  This item had no impact on operating income.
 
Fiscal year 2009 included the following special items:
 
·  
The Gain on GOM Asset Sale, which increased operating income and EBITDA by $36.2 million, net income from continuing operations by $23.4 million and diluted earnings per share by $0.68.
 
·  
The impact of expense recorded during fiscal year 2009 in Australia related to local tax matters, increases in compensation costs retroactive to prior fiscal years and one time costs associated with introducing new aircraft into this market and moving aircraft within this market, which decreased operating income and EBITDA by $4.1 million, net income from continuing operations by $2.9 million and diluted earnings per share by $0.08.
 
·  
A reduction in maintenance expense associated with a credit resulting from the renegotiation of a “power by the hour” contract for aircraft maintenance with a third party provider, which increased operating income and EBITDA by $6.8 million, net income from continuing operations by $4.8 million and diluted earnings per share by $0.14.
 
·  
The impact of hurricanes in the U.S. Gulf of Mexico, part of our North America business unit, causing a decrease in flight revenue and increase in costs, which decreased operating income by $2.4 million, EBITDA by $2.8 million, net income from continuing operations by $1.8 million and diluted earnings per share by $0.05.
 
·  
The April 2008 restructuring of our ownership interests in affiliates in Mexico, part of our Other International business unit, which increased operating income by $4.4 million, EBITDA by $5.9 million, net income from continuing operations by $3.7 million and diluted earnings per share by $0.11.
 
For further discussion of these items, see discussion of our business units under “— Business Unit Operating Results — Fiscal Year 2010 Compared to Fiscal Year 2009” included elsewhere in this Annual Report.
 
Additionally, our results for fiscal year 2010 were favorably impacted by changes in exchange rates versus fiscal year 2009, which resulted in an increase in operating income of $7.4 million, net income from continuing operations of $2.6 million and diluted earnings per share of $0.07.
 
Our results for fiscal years 2010 and 2009 are discussed herein excluding the special items detailed above as management believes these are important metrics for evaluating our operating performance, and it provides investors with additional information regarding our operating performance that is not directly available in a GAAP presentation.  These metrics are useful to investors as they eliminate items that are not a function of our current operating performance and affect our GAAP results regardless of performance.  In addition, certain of these items may vary significantly from period to period and may have a disproportionate effect in a given period, which may affect the comparability of the results.  As non-GAAP measures, these metrics should not be viewed as an alternative to our GAAP financial statements, but should be read as a supplement to, and in conjunction with, our GAAP financial statements.
 
 
A reconciliation of our operating income, EBITDA, net income from continuing operations and diluted earnings per share from continuing operations as reported to the calculations of each of these items excluding the special items described above is as follows:
 
 
Fiscal Year Ended
 
 
March 31, 2010
 
 
Operating Income
 
EBITDA
 
Net Income from Continuing Operations
 
Earnings
Per
Share from Continuing Operations
 
 
(In thousands, except per share amounts)
 
As reported
$
180,857
 
$
259,589
 
$
113,495
 
$
3.10
 
Adjust for special items
 
683
   
(3
)
 
(2,900
)
 
(0.08
)
Excluding special items
$
181,540
 
$
259,586
 
$
110,595
 
$
3.02
 

 
Fiscal Year Ended
 
 
March 31, 2009
 
 
Operating Income
 
EBITDA
 
Net Income from Continuing Operations
 
Earnings
Per
Share from Continuing Operations
 
 
(In thousands, except per share amounts)
 
As reported
$
201,800
 
$
276,686
 
$
125,530
 
$
3.57
 
Adjust for special items
 
(40,974
)
 
(41,986
)
 
(27,213
)
 
(0.79
)
Excluding special items
$
160,826
 
$
234,700
 
$
98,317
 
$
2.78
 
 
Fiscal Year 2009 Compared to Fiscal Year 2008
 
The increase in gross revenue is due primarily to the acquisitions of Bristow Norway and RLR which generated $52.1 million and $14.9 million, respectively, in additional revenue in fiscal year 2009, as well as the addition of new aircraft and contracts and the impact of improvements in our Europe, West Africa, Australia and Other International business units as a result of increases in rates for helicopter services.
 
Excluding the impact of the special items listed above for fiscal year 2009 and below for fiscal year 2008, operating income, operating margin and EBITDA would have been $160.8 million, 14.2% and $234.7 million, respectively, in fiscal year 2009 and $160.3 million, 15.8% and $228.8 million, respectively, in fiscal year 2008, representing no substantial year-over-year change in results.
 
Excluding the impact of the special items listed above for fiscal year 2009 and below for fiscal year 2008, net income from continuing operations and diluted earnings per common share from continuing operations would have been $98.3 million and $2.78, respectively, for fiscal year 2009 and $100.8 million and $3.31, respectively, in fiscal year 2008.  Diluted earnings per share for fiscal years 2009 and 2008 reflect the assumed conversion of our Preferred Stock and added approximately 6.5 million shares of Common Stock to our weighted-average share count in both fiscal years.  Primarily as a result of our June 2008 public offering and private placement of Common Stock, the weighted-average share count rose by 13% in fiscal year 2009 compared to fiscal year 2008, which resulted in the decrease in diluted earnings per share from fiscal year 2008 to fiscal year 2009 despite little change in net income from continuing operations.
 
Fiscal year 2008 included the following special items:
 
·  
Costs in our Other International business unit related to a claim by a former agent, whom we terminated in connection with the Internal Review, which decreased operating income and EBITDA by $5.0 million, net income from continuing operations by $3.3 million and diluted earnings per share by $0.11.
 
·  
Retirement related expenses for two of our corporate officers, which decreased operating income and EBITDA by $1.9 million, net income from continuing operations by $1.2 million and diluted earnings per share by $0.04.

 
·  
Tax items that increased operating income and EBITDA by $8.3 million, net income from continuing operations by $11.4 million and diluted earnings per share by $0.37.  These tax items included:
 
-  
A reversal of accruals for sales tax contingency and employee taxes in West Africa of $5.4 million and $1.3 million, respectively, and a reversal of accruals for employee taxes in Europe of $1.6 million, which are included in direct cost in our consolidated statement of income.
 
-  
A $6.0 million reduction in our provision for income taxes resulting from a benefit of $2.5 million associated with the reduction in the corporate income tax rate in the U.K. and a benefit of $3.5 million associated with an internal reorganization completed during fiscal year 2008.
 
For further discussion of these items, see discussion of our business units under “— Business Unit Operating Results — Fiscal Year 2009 Compared to Fiscal Year 2008” included elsewhere in this Annual Report.
 
Additionally, our results for fiscal year 2009 were unfavorably impacted by changes in exchange rates versus fiscal year 2008, which resulted in a decrease in operating income of $12.0 million, net income from continuing operations of $9.2 million and diluted earnings per share of $0.27.
 
A reconciliation of our operating income, EBITDA, net income from continuing operations and diluted earnings per share from continuing operations as reported to the calculations of each of these items excluding the special items described above for fiscal year 2008 is as follows:
 
 
Fiscal Year Ended
 
 
March 31, 2008
 
 
Operating Income
 
EBITDA
 
Net Income from Continuing Operations
 
 
Earnings
Per
Share from Continuing Operations
 
 
(In thousands, except per share amounts)
 
As reported
$
161,726
 
$
230,176
 
$
107,731
 
$
3.53
 
Adjust for special items
 
(1,400
)
 
(1,400
)
 
(6,900
)
 
(0.22
)
Excluding special items
$
160,326
 
$
228,776
 
$
100,831
 
$
3.31
 
 
Business Unit Operating Results
 
The following tables set forth certain operating information for the 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.
 
Amounts presented below for fiscal years 2009 and 2008 have been revised to conform to current period presentations and include the following changes:
 
·  
Beginning on April 1, 2009, there was no longer a Southeast Asia business unit.  Australia is now a separate business unit and Malaysia, China and Vietnam are now included in the Other International business unit.
 
·  
As discussed in Note 1 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report, earnings from unconsolidated affiliates, net of losses, which were previously included in non-operating income have been reclassified to be included within operating income and have been allocated to our business units herein.

 
·  
Beginning on January 1, 2010, the U.S. Gulf of Mexico and Arctic business units were combined into the North America business unit.  Additionally, there are no longer Latin America, Western Hemisphere (“WH”) Centralized Operations and Eastern Hemisphere (“EH”) Centralized Operations business units.  The Latin America business unit is now included in the Other International business unit.  The Bristow Academy business unit and the technical services business previously included with the WH Centralized Operations and EH Centralized Operations business units are now aggregated for reporting purposes in Corporate and Other.  The remainder of the costs within WH Centralized Operations and EH Centralized Operations are included in Corporate and Other for reporting purposes or have been allocated to our other business units to the extent these operations support those business units.
 
Fiscal Year 2010 Compared to Fiscal Year 2009
 
Set forth below is a discussion of operations of our business units.  Our consolidated results are discussed under “Results of Operations” above.
 
North America
 
   
Fiscal Year Ended
March 31,
   
Favorable
 
   
2010
   
2009
   
(Unfavorable)
 
   
(In thousands, except percentages and flight hours)
 
Gross revenue
 
$
189,730
   
$
239,426
   
$
(49,696
)
   
(20.8
)%
Operating expense
 
$
178,075
   
$
210,367
   
$
32,292
     
15.4
 %
Operating margin
   
6.1
%
   
12.1
%
   
(6.0
)%
 
 
(49.6
)%
Flight hours
   
79,345
     
125,980
     
(46,635
)
   
(37.0
)%
 
The decrease in flight hours, gross revenue and operating expense is primarily due to the GOM Asset Sale as well as an overall decline in the demand for aircraft in this market resulting from decreased drilling activity.  The GOM Asset Sale resulted in a decrease in revenue and flight hours of $24.8 million and 29,875, respectively.  Additionally, both revenue and operating expense decreased as a result of a decrease in fuel costs, which are generally recovered from our customers, due to a combination of a decrease in fuel price and lower flight hours.  Operating margin has deteriorated due to the decline in demand in this market discussed above.
 
We added four new large S-92 aircraft to the U.S. Gulf of Mexico market during fiscal year 2009, which will allow us to meet the requirements of offshore customers operating in deeper water.  We have also introduced the AW139 medium helicopter to our fleet and took delivery of additional medium S-76 C++s.  Although we expect the U.S. Gulf of Mexico to be a challenging market in fiscal year 2011, larger equipment that is capable of carrying more passengers longer distances is expected to generate higher revenues and profit margins.
 
As discussed under “– Executive Overview – Market Outlook” above, the recent incident where a drilling rig in the U.S. Gulf of Mexico sank and the resulting oil spill could have an impact on our operations in this market and on the ability of our customers to operate in deep water.
 
Europe
 
   
Fiscal Year Ended
March 31,
   
Favorable
   
   
2010
   
2009
   
(Unfavorable)
   
   
(In thousands, except percentages and flight hours)
   
Gross revenue
 
$
452,998
   
$
402,858
   
$
50,140
     
12.2
 %
Operating expense
 
$
384,771
   
$
334,445
   
$
(50,326
)
   
(15.0
)%
Earnings from unconsolidated affiliates, net
 
$
8,826
   
$
9,204
   
$
(378
)
   
(4.1
)%
Operating margin
   
17.0
%
   
19.3
%
   
(2.3
)%
 
 
(11.9
)%
Flight hours
   
54,537
     
47,493
     
7,044
     
14.8
 %
 
Gross revenue and flight hours for Europe increased primarily as a result of: a full year of results from Bristow Norway which we began consolidating effective October 31, 2008, which resulted in an increase of $83.7 million and 9,558 hours, respectively; ad hoc flying in the North Sea; and an increase in out-of-pocket costs rebilled to our customers (reimbursable revenue).  The impact of these improvements was partially offset by the unfavorable impact of changes in exchange rates and a lower level of contractual escalation billings in fiscal year 2010.
 
Operating expense for Europe increased primarily due to the consolidation of Bristow Norway ($71.5 million).  The increase in operating expense was partially offset by reduced operating expense resulting from the impact of changes in exchange rates.  Additionally, operating expense decreased in fiscal year 2010 as a result of correcting prior period errors ($3.3 million) relating to depreciation expense.  Earnings from unconsolidated affiliates includes earnings from our equity investment in FBS Limited, FB Heliservices Limited and FB Leasing Limited, which did not change significantly from fiscal year 2009 to fiscal year 2010.  Operating margin decreased due to the unfavorable impact of exchange rates as well as the inclusion of Bristow Norway for a full year as Bristow Norway has a lower operating margin than the rest of the Europe business unit.
 
West Africa
 
   
Fiscal Year Ended
March 31,
   
Favorable
   
   
2010
   
2009
   
(Unfavorable)
   
   
(In thousands, except percentages and flight hours)
   
Gross revenue
 
$
219,212
   
$
192,427
   
$
26,785
     
13.9
 %
Operating expense
 
$
156,802
   
$
151,006
   
$
(5,796
)
   
(3.8
)%
Operating margin
   
28.5
%
   
21.5
%
   
7.0
%
   
32.6
 %
Flight hours
   
35,142
     
39,027
     
(3,885
)
   
(10.0
)%
 
Flight hours for West Africa decreased as a result of a decrease in demand for aircraft in this market by certain existing customers, partially offset by the addition of new contracts and ad hoc work.  Despite the decrease in flight hours, gross revenue increased due to rate escalations under existing contracts and higher rates earned on new contracts and on ad hoc flying.
 
The increase in operating expense was primarily a result of increases in salaries and benefits, maintenance and insurance expense.  Also, during fiscal year 2010 we recorded a charge of $1.8 million to reduce the carrying value of obsolete inventory.  The increase in operating expense was partially offset by a favorable impact from changes in exchange rates.  Excluding the impact of changes in exchange rates, the operating margin for West Africa was 23.1% in fiscal year 2010, which was slightly improved over fiscal year 2009 due to rate escalations under existing contracts and higher rates earned on new contracts and ad hoc work.
 
We experience periodic disruption to our operations in Nigeria related to civil unrest and violence.  During August 2009, the unions representing our national staff in Nigeria were on strike, but have since returned to work while discussions are ongoing.  These factors have made and are expected to continue to make our operating results from Nigeria unpredictable.
 
Australia
 
   
Fiscal Year Ended
March 31,
 
Favorable
 
   
2010
   
2009
 
(Unfavorable)
 
   
(In thousands, except percentages and flight hours)
 
Gross revenue
 
$
130,698
   
$
113,801
   
$
16,897
     
14.8
 %
Operating expense
 
$
100,324
   
$
107,043
   
$
6,719
     
6.3
%
Operating margin
   
23.2
%
   
5.9
%
   
17.3
%
   
293.2
 %
Flight hours
   
12,302
     
15,087
     
(2,785
)
   
(18.5
)%
 
Flight hours for Australia decreased due to a decrease in activity in this market since fiscal year 2009.  Despite the decrease in flight hours, gross revenue increased due to a shift to larger aircraft on contract, some of which are new aircraft earning higher rates, a favorable impact from changes in exchange rates and an increase in reimbursable revenue.
 

Operating expense decreased primarily due to decreased activity and cost reduction initiatives including decreases in maintenance, fuel and travel expenses.  Operating expense was also decreased as a result of the reversal of costs previously accrued in fiscal year 2009 for tax items as favorable rulings were obtained from the tax authorities on these matters during fiscal year 2010.  During fiscal year 2009, we incurred salary, maintenance and other costs on aircraft that were not fully operational as a result of delays in planned contracts, unscheduled maintenance and re-positioning of aircraft.  Operating margin improved due to both an increase in aircraft on contract, some of which are new aircraft earning higher rates, and the decrease in costs discussed above.
 
Other International
 
   
Fiscal Year Ended
March 31,
 
Favorable
 
   
2010
   
2009
 
(Unfavorable)
 
   
(In thousands, except percentages and flight hours)
 
Gross revenue
 
$
135,426
   
$
147,395
   
$
(11,969
)
   
(8.1
)%
Operating expense
 
$
112,480
   
$
111,642
   
$
(838
)
   
(0.8
)%
Earnings from unconsolidated affiliates, net
 
$
3,026
   
  $
4,073
   
$
(1,047
)
   
(25.7
)%
Operating margin
   
19.2
%
   
27.0
%
   
(7.8
)%
   
(28.9
)%
Flight hours
   
44,373
     
50,553
     
(6,180
)
   
(12.2
)%
 
Flight hours and gross revenue decreased primarily due to our exit from Mauritania, Kazakhstan, Peru and Colombia and decreased activity in Trinidad, partially offset by an increase in activity in Libya (due to a new contract), Mexico (due to an increase in rates and activity) and Brazil (due to aircraft maintenance support provided on aircraft in Brazil).
 
Operating expense increased due an increase to the bad debt allowance of $4.6 million in Mexico and the inclusion in fiscal year 2009 of $1.2 million in escalation charges to a customer in Russia, partially offset by increases in Brazil (due to $2.3 million of earnings generated from our investment in Líder in fiscal year 2010), Kazakhstan (due to a reversal of $2.5 million of bad debt expense) and Libya (due to a new contract).  Earnings from unconsolidated affiliates, net of losses, decreased as fiscal year 2010 included earnings of $2.3 million from our investment in Líder on May 26, 2009 while fiscal year 2009 included $3.6 million in equity earnings due to collection of past due receivables by RLR (see discussion in Note 3 in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report).  Earnings from unconsolidated affiliates in Mexico and Egypt were not substantially changed from fiscal year 2009 to fiscal year 2010.  Equity in earnings from our investment in Líder included $1.7 million attributable to foreign currency transaction gains.
 
In January 2010, we acquired an additional 29% interest in Rotorwing Leasing Resources, L.L.C (“RLR”) for $7.6 million and as a result own 99% of RLR.  We have the option to purchase the remaining 1% of RLR on January 18, 2015, or earlier if the current 1% interest holder ceases to be a guarantor of 30% of RLR’s outstanding debt to a lender.  Additionally, in January and February 2010, we and our partner contributed $4.6 million and $14.5 million, respectively, to Heliservicio, in which we have a 24% equity method investment.  This recent contribution did not change our ownership percentage in Heliservicio. RLR has leased all of its aircraft to Heliservicio.  As of March 31, 2010, Heliservicio owed RLR and other of our subsidiaries $12.8 million; we have provided an allowance for doubtful accounts of $4.6 million.
 
As a result of the expiration of our partner’s aircraft operating certificate in Kazakhstan in mid-October, we have removed our two aircraft from this market.  Neither we nor our partner in Kazakhstan are operating in this market, which resulted in a reduction in revenue.  During fiscal year 2010, we had revenue from our operations in Kazakhstan totaling $8.6 million and operating income totaling $3.5 million (including $2.5 million of reversal of bad debt allowance) versus $11.9 million of revenue and $1.4 million of operating income in fiscal year 2009.
 


Corporate and Other
 
   
Fiscal Year Ended
March 31,
 
Favorable
 
   
2010
   
2009
 
(Unfavorable)
 
   
(In thousands, except percentages)
 
Gross revenue
 
$
43,815
   
$
39,886
   
$
3,929
     
9.9
%
Operating expense
   
89,087
     
78,019
     
(11,068
)
   
(14.2
)%
Losses from unconsolidated affiliates
   
     
53
     
53
     
100.0
%
Operating loss
 
$
(45,272
)
 
$
(38,186
)
 
$
(7,086
)
   
(18.6
)%
 
Corporate and Other includes our Bristow Academy business unit, technical services business and Corporate costs that have not been allocated out to other business units.
 
Gross revenue increased due to increased revenue at Bristow Academy as a result of increased military training and the acquisition of additional training aircraft, partially offset by a decrease in technical services revenue due to timing of part sales.