20-F/A 1 chc20fa.htm FORM 20-F/A chc20fa.htm
 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F/A
Amendment No. 1
 
£
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g)
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR
   
S
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended April 30, 2007
 
OR
   
£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
 
OR
   
£
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report _____
For the transition period from __________ to __________
 
Commission File Number 0-21756
 
CHC HELICOPTER CORPORATION
(Exact name of Registrant as specified in its charter)
 
Canada
(Jurisdiction of incorporation or organization)
 
4740 Agar Drive
Richmond, British Columbia
Canada V7B 1A3
(Address of principal executive offices)
 
Securities registered or to be registered pursuant to Section 12(b) of the Act.
 
None
 
Securities registered or to be registered pursuant to Section 12(g) of the Act.
 
Class A Subordinate Voting Shares
(Title of Class)
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
 
Class A Subordinate Voting Shares
(Title of Class)
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
 
39,858,497 Class A Subordinate Voting Shares
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes S
No £
 
 


 

 
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes £
No S
 
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
 
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 S
No £
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large Accelerated Filer S
Accelerated Filer £
Non-Accelerated Filer £
 
Indicate by check mark which financial statement item the registrant has elected to follow:
 
Item 17 S
Item 18 £
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes £
No S
 
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 
Yes £
No £




EXPLANATORY NOTE
 
As described in further detail in Items 15 and 17 of this Annual Report on Form 20-F (the “Amended Report”), CHC Helicopter Corporation (the “Company” or “CHC”) is amending its Annual Report on Form 20-F for the fiscal year ended April 30, 2007 filed with the United States Securities and Exchange Commission on September 17, 2007 (the “Original Annual Report on Form 20-F”) as a result of restating its consolidated financial statements for the years ended April 30, 2007, 2006 and 2005 (the “Restatement”).  The Company has not amended and does not intend to amend any of its previously filed Annual Reports on Form 20-F or quarterly reports for the periods affected by the Restatement other than this Amended Report.  Accordingly, the Company’s previously issued financial statements, earnings press releases and similar communications affected by the Restatement and any related reports of its independent registered public accounting firm should not be relied upon, in so far as they relate to the periods and items that are the subject matter of the Restatement.
 
Following an internal review of existing and expired non-financial contracts during the adoption of the new financial instruments guidance under Canadian generally accepted accounting principles (“Canadian GAAP”) effective for the Company for fiscal 2008, the Company concluded that each of the reconciliation to accounting principles generally accepted in the United States (“US GAAP Reconciliation”) note and supplemental guarantor financial information note to its consolidated financial statements for the years ending April 30, 2007, 2006 and 2005 should be restated to record the impact of foreign currency embedded derivatives that required separation from their host contracts under SFAS 133 - Accounting for Derivative Instruments and Hedging Activities to correct a material accounting error in prior years.  The Company has adjusted its US GAAP Reconciliation and Supplemental Guarantor Financial Information, Notes 32 and 33, respectively, to the audited consolidated financial statements for the fiscal years ended April 30, 2007, 2006, 2005 and 2004 for these embedded derivatives.  The adjustment to record these embedded derivatives is reflected appropriately in the financial statements prepared in accordance with Canadian GAAP and therefore, only the US GAAP Reconciliation and Supplemental Guarantor Financial Information Note are impacted by the Restatement.  The host contracts (the “Contracts”) containing these embedded derivatives were all entered into in fiscal 2004 and beyond.  Therefore, there is no impact on net earnings according to US generally accepted accounting principles (“US GAAP”) in fiscal years prior to 2004.
 
As a result of the Restatement, net earnings according to US GAAP for the fiscal years ended April 30, 2006, 2005 and 2004 decreased by $0.5 million, $6.3 million and $0.6 million, respectively.  Net earnings according to US GAAP for the fiscal year ended April 30, 2007 increased by $1.8 million.
 
As described in further detail on page 93, “Management’s Consideration of the Restatement”, management has reconsidered its original conclusions on the effectiveness of internal controls over financial reporting as at April 30, 2007 and has concluded that due to the failure to detect and record the impact of the embedded derivatives in the Contracts, there was a material weakness in its internal control over financial reporting as of April 30, 2007.
 
The Company has had in place, since fiscal 2007, an effective contract review control to, among other things, detect and record embedded derivatives in all new contracts.  As well, as a result of the adoption of new Canadian accounting standards for financial instruments the Company has reviewed all relevant contracts entered into prior to the new contract review control being implemented.  Between the filing of the Original Annual Report on Form 20-F and the Amended Report, the Company made improvements to its controls to value and record embedded derivatives in all contracts.
 
 
TABLE OF CONTENTS
 
Item
 
Page
     
PART I
 
5
     
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
5
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
5
ITEM 3.
KEY INFORMATION
5
ITEM 4.
INFORMATION ON THE COMPANY
17
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
33
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
72
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
91
ITEM 8.
FINANCIAL INFORMATION
93
ITEM 9.
THE OFFER AND LISTING
93
ITEM 10.
ADDITIONAL INFORMATION
95
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
97
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
98
     
PART II
 
99
     
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
99
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
99
ITEM 15.
CONTROLS AND PROCEDURES
99
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
100
ITEM 16B.
CODE OF ETHICS
100
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
100
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
101
ITEM 16E.
PURCHASE OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS
101
     
PART III
 
102
     
ITEM 17.
FINANCIAL STATEMENTS
102
ITEM 18.
FINANCIAL STATEMENTS
164
ITEM 19.
EXHIBITS
165

All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily-prescribed meanings when used in this Annual Report on Form 20-F.
 



For purposes of this Annual Report, all references to dollar amounts are expressed in Canadian dollars unless otherwise specified. On September 10, 2007, the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York was $0.9495 US = $1.00 Canadian.
 
FORWARD-LOOKING STATEMENTS
 
This Annual Report may contain projections and other forward-looking statements within the meaning of the “safe harbour” provision of the United States Private Securities Litigation Reform Act of 1995. While these projections, conclusions, forecasts and other statements represent our best current judgement, the actual results could differ materially from the conclusion, forecast or projection contained in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection in forward-looking information contained herein. Such factors include, but are not limited to, the following: exchange rate fluctuations, inherent risk, trade credit risk, industry exposure, inflation, contract loss, inability to maintain government issued licenses, inability to obtain necessary aircraft or insurance, competition, political, economic and regulatory uncertainty, loss of key personnel, pension risk, work stoppages due to labour disputes, international uncertainty and future material acquisitions are further detailed in this Annual Report and in other filings with the United States Securities and Exchange Commission and Canadian securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. CHC Helicopter Corporation disclaims any intentions or obligations to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.
 




PART I
 
 
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not Applicable.
 
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not Applicable.
 
 
ITEM 3.
KEY INFORMATION
 
SELECTED FINANCIAL DATA
 
The following consolidated historical financial data as at and for the fiscal years ended April 30, 2007, 2006, 2005, 2004, and 2003 for CHC Helicopter Corporation (“CHC”, “the Company”, “the Corporation”, “we”, “our”, or “us”) are derived from the audited consolidated financial statements of CHC. The CHC consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), which differ in certain respects from US GAAP. For the reconciliation to US GAAP for the three most recently completed fiscal years, see Note 32 to our audited consolidated financial statements included elsewhere in this Annual Report.
 

5


The following data should be read in conjunction with "Operating and Financial Review and Prospects" and our audited consolidated financial statements included elsewhere in this Annual Report.
 
   
As at and for the fiscal year ended April 30,
 
   
2007
   
2006
   
2005
   
2004
   
2003
 
         
(i)
   
(i)
             
   
(in millions of Canadian dollars except per share amounts)
 
Amounts under Canadian GAAP
                             
Operating Data:
                             
Revenue
  $
1,149.1
    $
997.1
    $
954.2
    $
771.4
    $
762.9
 
Direct costs
    (924.7 )     (788.5 )     (732.7 )     (620.3 )     (579.2 )
General and administration costs
    (43.4 )     (27.9 )     (35.3 )     (18.6 )     (31.1 )
Amortization
    (65.3 )     (55.5 )     (50.1 )     (38.5 )     (32.1 )
Restructuring (costs) recovery
   
2.3
      (16.1 )     (17.4 )     (9.2 )    
-
 
Gain (loss) on disposals of assets
    (3.0 )    
-
     
4.1
     
3.3
     
2.4
 
Fair value adjustment
   
-
     
-
      (14.3 )    
-
      (12.8 )
Operating income
   
115.0
     
109.1
     
108.5
     
88.1
     
110.1
 
Debt settlement costs
   
-
     
-
      (2.0 )     (19.7 )     (12.5 )
Financing charges
                                       
    Interest expense
    (51.8 )     (43.5 )     (32.4 )     (30.6 )     (31.1 )
    Other
    (6.5 )     (9.5 )     (5.0 )    
0.8
      (4.5 )
Earnings from continuing operations before taxes and undernoted items
   
56.7
     
56.1
     
69.1
     
38.6
     
62.0
 
Gain on sale of long-term investments
   
-
     
37.5
     
-
     
-
     
-
 
Equity in earnings of associated companies and non-controlling interest
   
1.1
     
6.6
     
5.2
     
3.9
     
2.3
 
Income tax (provision) recovery
    (16.8 )     (10.5 )     (27.4 )    
9.7
     
2.2
 
Net earnings from continuing operations
   
41.0
     
89.7
     
46.9
     
52.2
     
66.5
 
Net earnings (loss) from discontinued operations
   
2.2
     
1.0
     
9.6
      (0.3 )    
-
 
Extraordinary item
   
0.8
     
-
     
-
     
-
     
-
 
Net earnings
  $
44.0
    $
90.7
    $
56.5
    $
51.9
    $
66.5
 
                                         
Per Share Data:
                                       
Basic
                                       
    Net earnings from continuing operations
  $
0.97
    $
2.14
    $
1.12
    $
1.26
    $
1.60
 
    Net earnings (loss) from discontinued operations
   
0.05
     
0.02
     
0.23
      (0.01 )    
-
 
    Extraordinary item
   
0.02
     
-
     
-
     
-
     
-
 
    Net earnings
   
1.04
     
2.16
     
1.35
     
1.25
     
1.60
 
Diluted
                                       
    Net earnings from continuing operations
   
0.90
     
1.95
     
1.03
     
1.16
     
1.48
 
    Net earnings (loss) from discontinued operations
   
0.05
     
0.02
     
0.20
      (0.01 )    
-
 
    Extraordinary item
   
0.02
     
-
     
-
     
-
     
-
 
    Net earnings
   
0.97
     
1.97
     
1.23
     
1.15
     
1.48
 
Dividends per participating voting share
   
0.50
     
0.40
     
0.30
     
0.25
     
0.10
 
Dividends (in US $) per share (ii)
   
0.44
     
0.34
     
0.24
     
0.19
     
0.06
 
                                         
Weighted average shares outstanding in (000)
   
42,819
     
42,708
     
42,673
     
42,122
     
41,456
 
                                         
Other Financial Data (iii):
                                       
Revenue - 2007, 2006 and 2005
                                       
    Operating segments
                                       
        Global Operations
  $
428.0
    $
330.9
    $
292.1
                 
        European Operations
   
539.9
     
520.4
     
530.9
                 
        Heli-One
   
180.6
     
145.7
     
130.8
                 
     
1,148.5
     
997.0
     
953.8
                 
    Corporate and other
   
0.6
     
0.1
     
0.4
                 
Total revenue
  $
1,149.1
    $
997.1
    $
954.2
                 

 

6



 
   
As at and for the fiscal year ended April 30,
 
   
2007
   
2006
   
2005
   
2004
   
2003
 
         
(i)
   
(i)
             
   
(in millions of Canadian dollars except per share amounts)
 
Other Financial Data (iii) (cont’d):
                             
Revenue - 2004 and 2003
                             
Helicopter operations
                             
Europe
                    $
482.1
    $
508.7
 
International
                     
191.8
     
184.8
 
Schreiner (iv)
                     
32.4
     
-
 
Composites
                     
7.0
     
6.4
 
                       
713.3
     
699.9
 
Repair and overhaul
                     
58.1
     
63.0
 
Total revenue
                    $
771.4
    $
762.9
 
                                   
Segment EBITDAR - 2007, 2006 and 2005 (v)
                                 
Operating segments
                                 
Global Operations
  $
135.1
    $
90.9
    $
87.3
                 
European Operations
   
95.3
     
107.5
     
110.8
                 
Heli-One
   
273.2
     
229.5
     
231.0
                 
     
503.6
     
427.9
     
429.1
                 
Corporate and other
    (41.3 )     (27.7 )     (32.1 )                
Inter-segment eliminations      (180.8      (154.0      (153.2                
    $
281.5
    $
246.2
    $
243.8
                 
                                         
Segment EBITDA - 2004 and 2003 (vi)
                                       
Helicopter operations
                                       
Europe
                          $
72.1
    $
89.3
 
International
                           
23.4
     
35.3
 
Schreiner
                           
3.4
     
-
 
Composites
                            (2.0 )     (3.2 )
                             
96.9
     
121.4
 
Repair and overhaul
                           
55.4
     
52.8
 
Corporate and other
                            (19.7 )     (21.5 )
                            $
132.6
    $
152.7
 
                                         
Total property and equipment additions (vii)
  $
423.3
    $
304.3
    $
250.3
    $
170.6
    $
58.1
 
Ratio of earnings to fixed charges (viii)
   
1.5x
     
1.9x
     
1.9x
     
1.7x
     
1.9x
 
                                         
Balance Sheet Data:
                                       
Working capital (ix)
  $
210.3
    $
147.1
    $
110.2
    $
127.7
    $
131.6
 
Total assets
   
2,102.2
     
1,686.1
     
1,686.7
     
1,527.6
     
1,106.7
 
Total debt
   
840.6
     
624.1
     
624.5
     
514.0
     
321.3
 
Total liabilities
   
1,550.9
     
1,195.4
     
1,226.6
     
1,108.3
     
726.3
 
Capital stock
   
252.5
     
240.2
     
239.5
     
238.4
     
237.0
 
Shareholders’ equity
   
551.3
     
490.7
     
460.1
     
419.3
     
380.4
 

 

7


   
As at and for the fiscal year ended April 30,
 
   
2007
(Restated)
   
2006
(Restated)
   
2005
(Restated)
   
2004
(Restated)
   
2003
 
         
(i)
   
(i)
             
   
(in millions of Canadian dollars except per share amounts)
 
Amounts under US GAAP
                             
Operating Data (cont'd):
                             
Revenue
  $ 1,149.1     $ 997.1     $ 954.2     $ 771.4     $ 762.9  
Direct and general and administrative costs
    970.5       816.2       773.1       637.7       613.8  
Amortization
    65.1       55.2       50.1       38.5       32.1  
Financing charges
    67.7       5.5       50.9       54.1       18.9  
Net earnings
    34.7       130.1       42.9       33.4       87.6  
                                         
Per Share Data:
                                       
Basic earnings per share
  $ 0.82     $ 3.10     $ 1.02     $ 0.81     $ 2.11  
Diluted earnings per share
    0.75       2.82       0.93       0.74       1.95  
Dividends per participating voting share
    0.50       0.40       0.30       0.25       0.10  
Dividends (in US $) per share (ii)
    0.44       0.34       0.24       0.19       0.06  
                                         
Weighted average shares outstanding in (000)
    42,819       42,708       42,673       42,122       41,456  
                                         
Balance Sheet Data:
                                       
Working capital (ix)
  $ 32.7     $ 148.9     $ 107.2     $ 128.8     $ 145.9  
Total assets
    2,301.7       1,690.4       1,688.5       1,528.7       1,073.9  
Total debt
    840.6       624.3       625.0       515.0       322.2  
Total liabilities
    1,852.1       1,255.4       1,306.3       1,114.4       724.0  
Capital stock
    251.7       240.2       239.5       238.4       237.0  
Shareholders’ equity
    449.6       435.0       382.2       414.3       349.9  
 
(i)
See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report.
(ii)
Amounts have been converted to US dollars at the average exchange rate for the period as provided below.
(iii)
Prior to May 1, 2005, the Company reported under a different structure. Segment information for the years ended April 30, 2004 and 2003 has not been presented under the current organizational structure as accurate estimates to reflect certain lease, power-by-the-hour (“PBH”) and associated transactions between the Company’s operating segments could not be made.
(iv)
Schreiner helicopter operations revenue includes some repair and overhaul revenue.
(v)
Segment EBITDAR is defined as segment EBITDA before aircraft leases and associated costs.
(vi)
Segment EBITDA is revenue less operating expenses allocated to each of our segments. See Note 25 to our audited consolidated financial statements included elsewhere in this Annual Report.
(vii)
Total property and equipment additions include all asset acquisitions, including aircraft, as well as helicopter major inspection and helicopter component expenditures during the period.
(viii)
For the purpose of this calculation "earnings" are defined as earnings before income taxes and undistributed earnings from equity investees. Fixed charges consist of interest and an estimated portion of aircraft lease expense representative of the interest factor.
(ix)
Working capital consists of current assets less current liabilities, excluding the current portion of debt obligations.

EXCHANGE RATE DATA
 
The following table sets forth, for the periods indicated, certain exchange rates based on the high and low noon buying rates in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The average exchange rate is based on the average of the exchange rates on the last day of each month during such periods. The rates quoted are the number of United States dollars per one Canadian dollar.
 
   
Year ended April 30,
 
   
2007
US$
   
2006
US$
   
2005
US$
   
2004
US$
   
2003
US$
 
                               
Exchange rate at the end of period
   
0.9035
     
0.8926
     
0.7957
     
0.7293
     
0.6975
 
Average exchange rate during period
   
0.8818
     
0.8499
     
0.7891
     
0.7445
     
0.6498
 
High exchange rate during period
   
0.9100
     
0.8926
     
0.8493
     
0.7880
     
0.6975
 
Low exchange rate during period
   
0.8437
     
0.7872
     
0.7158
     
0.7032
     
0.6264
 

 

8



 
The following table sets forth, for the periods indicated, the monthly high and low US dollar exchange rates based on the high and low noon buying rates in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The rates quoted are the number of United States dollars per one Canadian dollar.
 
   
Month ended
 
   
August 31, 2007
US$
   
July 31, 2007
US$
   
June 30, 2007
US$
   
May 31, 2007
US$
   
April 30, 2007
US$
   
March 31, 2007
US$
 
                                     
High
   
0.9527
     
0.9641
     
0.9453
     
0.9345
     
0.9035
     
0.8673
 
Low
   
0.9470
     
0.9355
     
0.9322
     
0.8980
     
0.8633
     
0.8467
 
 
We report our financial results in Canadian dollars and, unless otherwise indicated, references herein to "dollars", "$" or "CDN" are to Canadian dollars. Except where otherwise specifically noted, all amounts stated in US dollars are included for convenience and are stated as a matter of arithmetical computation only. Except where otherwise specifically noted, US dollar amounts are based on the April 30, 2007 noon buying rate for cable transfers of the Canadian dollar in New York City of US $0.9035 as certified for customs purposes by the Federal Reserve Bank of New York. These amounts should not be construed as representations that the Canadian dollar amounts actually represent such US dollar amounts or could be converted into US dollars at these rates. These rates differ from some of the rates used in the preparation of our financial statements included in this Annual Report and therefore US dollar amounts used herein may differ from corresponding actual US dollar amounts that were translated into Canadian dollars in the preparation of these financial statements. On September 10, 2007 the noon buying rate for a Canadian dollar was US $0.9495.
 
RISK FACTORS
 
This section is intended to be a summary of more detailed discussions elsewhere in this Annual Report. The risks described below are not the only ones we face. Additional risks may impair our business operations. Our business, results of operations or financial condition could be materially adversely affected if any of these risks materialize.
 
Dependent on the Level of Activity in the Oil and Gas Industry
 
We are largely dependent upon the level of activity in the oil and gas industry. To varying degrees these activity levels are affected by trends in oil and gas prices. Historically, the prices for oil and gas have been volatile and are subject to wide fluctuations in response to changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors beyond our control. We cannot predict future oil and gas price movements. Any prolonged reduction in oil and gas prices could depress the level of helicopter activity in support of exploration and to a lesser extent, production activity and, therefore, have a material adverse effect on our business, financial condition and results of operations. For the fiscal year ended April 30, 2007 revenue generated by helicopter transportation services for the oil and gas industry was 70% of our total revenue.
 
Cost Reduction Methods Undertaken by Oil and Gas Companies
 
Companies in the oil and gas production and exploration sector continually seek to implement measures aimed at greater cost savings, including helicopter support operations. For example, companies have reduced manning levels on both old and new installations by using new technology to permit unmanned installations. The implementation of such measures could reduce the demand for helicopter transportation services and have a material adverse effect on our business, financial condition and results of operations.
 

9


Competitive Markets
 
Many of the markets in which we operate are highly competitive, which may result in a loss of market share or a decrease in revenue or profit margins. Contracting for helicopter services is usually done on the basis of competitive bidding among those having the necessary equipment and resources. In our medium and heavy helicopter operations, for which helicopters comprising 91% of our helicopter fleet at April 30, 2007 are used, we compete against a number of helicopter operators including Bristow Group Inc. (“Bristow”), which is the other major global commercial helicopter operator, and other local and regional operators. In addition, many of our customers in the oil and gas industry have the financial ability to perform their own helicopter flying operations in-house should they elect to do so.
 
Competition from Original Equipment Manufacturers/Suppliers
 
Our main competitors within the repair and overhaul business are the original equipment manufacturers of helicopters and their components. As such, our main competitors are also our main parts suppliers, which could result in the inability to obtain parts in a timely manner in required quantities at competitive prices.
 
Long-Term Contracts
 
We rely on a limited number of large, long-term offshore helicopter support contracts and if some of these are discontinued, our revenues could suffer. We derive a significant amount of our revenue from long-term offshore helicopter support contracts with oil and gas companies. A substantial number of our long-term contracts contain provisions permitting early termination by the customer. In addition, upon expiration of their term, these contracts are subject to a bidding process that could result in the loss of these contracts to competitors. The pricing for the bidding process for both power-by-the-hour (“PBH”) and flying contracts requires cost estimates. Unanticipated costs or cost increases could materially affect the profitability of these long-term contracts. The loss of one or more of these large contracts could have a material adverse effect on our business, financial condition and results of operations.
 
Acquisition of Aircraft
 
If we are unable to acquire the necessary aircraft, we may not be able to take advantage of growth opportunities. There are lead times of approximately 18 months to obtain the primary new heavy and medium aircraft types most often required by our customers. Although we have been able to acquire sufficient aircraft to date, a lack of available aircraft or the failure of our suppliers to deliver the aircraft we have ordered on a timely basis could limit our ability to take advantage of growth opportunities.
 
Insurance
 
Helicopter operations involve risks that may not be covered by our insurance or may increase the cost of our insurance.
 
We operate, through a wholly owned subsidiary, a reinsurance business that we use to place insurance coverages that are not available in the market or, if they are available, their cost is prohibitive or excessive. Our reinsurance subsidiary covers the following risks:
 
(i)
Loss of license insurance for our pilots in Europe, Africa and Australia.
(ii)
Death and disability insurance for employees of our Norwegian operations.
(iii)
Valuation rate protection for the pension plan for employees of our Norwegian operations.
(iv)
Benefit plans of various operating subsidiaries.

We have not been exposed to any significant losses in connection with our reinsurance business.
 

10


Inherent Risk
 
Operation of helicopters involves some degree of risk. Hazards, such as aircraft accidents, adverse weather and marine conditions, collisions and fire, are inherent in furnishing helicopter services and can cause personal injury and loss of life, severe damage to and destruction of property and equipment, and suspension of operations. Our inability to renew our liability insurance coverage or the loss, expropriation or confiscation of, or severe damage to, a large number of our helicopters could adversely affect our operations and financial condition. We believe we are adequately covered by insurance in light of the historical need for insurance coverage. The events of September 11, 2001 caused a worldwide increase in insurance rates, particularly in the business in which we operate and restricted the ability of operators to acquire war liability coverage above certain limits. As a result of these and other factors, no assurance can be given that we will be able to maintain adequate insurance in the future at rates we consider reasonable. Furthermore, we are not insured for loss of profit or use of our helicopters.
 
We maintain a flight safety organization that is responsible for ensuring compliance with safety standards within the organization and the requisite proficiency among flight crews. Our safety organization is responsible for training flight crews, conducting regular safety audits and seminars for all flight personnel, and generally ensuring safe operating techniques and standards consistent with Canadian and other government regulations and customer requirements. In addition, aviation regulatory bodies and customers conduct safety audits to ensure that our standards meet their requirements.
 
Government Regulations
 
If we are unable to maintain required government-issued licenses for our operations, we will be unable to conduct helicopter operations in the applicable country.
 
Europe
 
Approximately 45% of our revenue for the fiscal year ended April 30, 2007 originated from helicopter flying services from our European based operations (UK, Norway, Denmark, the Netherlands and Ireland). To operate helicopters in the UK and in the UK sector of the North Sea, an operator must be licensed by the UK Civil Aviation Authority. Under applicable European law, an operator must be "effectively controlled" and "majority owned" by nationals of Member States of the European Union (or the European Economic Area) to maintain its license. We believe that we are currently “majority owned” and “effectively controlled” within the meaning of European Union and European Economic Area licensing requirements. However, it may be difficult to establish with certainty that we are majority owned by European nationals, given the difficulty of establishing the beneficial ownership of shares held through depositories and nominees.
 
Our UK operating subsidiary, CHC Scotia Limited (“Scotia”) has been licensed to operate helicopters by the UK Civil Aviation Authority, on the basis that we are (and therefore Scotia is) majority owned and controlled by European Nationals. This is because the Estate of Craig L. Dobbin (the “Estate”), all of the beneficiaries of which are citizens of both Canada and Ireland (a Member State of the European Union), holds a sufficient number of securities of the Company. However, the UK Secretary of State (generally acting upon the advice of the UK Civil Aviation Authority) may revoke the license held by Scotia or effectively require us to dispose of our interests in Scotia if at any time we do not satisfy applicable nationality requirements. In 1994, two UK competitors of ours alleged that we did not satisfy these requirements and that, as a result, Brintel Helicopters Limited (“Brintel”), our only UK helicopter operation at the time, was not entitled to maintain its operating license. Although discussions and correspondence with the European Commission, the United Kingdom Department of Environment, Transport and the Regions and the UK Civil Aviation Authority confirmed that the issuance of ordinary shares to a corporation controlled by Craig L. Dobbin (now controlled by the Estate) in December 1997 allowed us to satisfy the nationality requirements, this will not necessarily preclude further challenges of Scotia's right to maintain our operating license on this or any other basis. Further, Scotia's eligibility to maintain its license could be adversely affected if the Estate were to dispose of the shares it holds in the Company or if our percentage ownership of the Company were to otherwise decrease.
 

11


Our Danish, Irish and Dutch subsidiaries are subject to the same European Union nationality requirements as Denmark, Ireland and the Netherlands are all member states of the European Union. The Dutch Civil Aviation Authority advised us in writing prior to our acquisition of Schreiner Luchtvaart Groep BV (“Schreiner”) that Schreiner was in compliance with applicable European ownership and control requirements and, based on information provided by us, would continue to be so following acquisition. In accordance with Dutch Civil Aviation procedures, we are required to submit certain information regarding ownership and control to the Dutch Civil Aviation Authority following the acquisition of Schreiner to formally demonstrate that our flying subsidiary in the Netherlands, CHC Helicopter Netherlands B.V., continues to meet the European ownership and control requirements. We have submitted the required information to the Dutch Civil Aviation Authority.
 
Our Norwegian flying subsidiary, CHC Helikopter Service AS, is subject to substantially the same European Union nationality requirements with regard to ownership and control as are our other European subsidiaries due to Norway’s status as a Member State of the European Economic Area, and the agreement between the European Union and the European Economic Area harmonizing aviation relations between the two. On May 9, 1999, in response to objections initiated by the previous management of Helicopter Services Group AS (“HSG”), the Norwegian Ministry of Transport confirmed in writing that it had adopted the same position as the UK Civil Aviation Authority with regard to our satisfaction of the European Union (and European Economic Area) nationality requirements and therefore would not challenge HSG's eligibility to hold helicopter operating licenses in Norway after our acquisition of HSG.
 
We have met with the civil aviation authority in each of the United Kingdom, Ireland, the Netherlands, Denmark and Norway following the death of Craig L. Dobbin and the transmission, by operation of law, of the shares formerly controlled by him to the Estate and have provided such authorities with all requested documentation to substantiate our continued compliance with applicable licensing requirements.
 
Canada
 
Our helicopter operations in Canada are regulated by Transport Canada. Our helicopter operations in Canada and certain other countries are conducted pursuant to an air operator certificate issued by the Minister of Transport (Canada) under the provisions of the Aeronautics Act (Canada). One of our subsidiaries operates heavy helicopters off Canada’s east coast in support of the oil and gas industry. Our ability to conduct our helicopter operating business in Canada is dependent on our ability to maintain this certificate.
 
South Africa
 
South African law requires that at least 75% of the voting rights of a holder of a domestic air services license must be held by residents of the Republic of South Africa. Upon acquiring its interest in Court Air (Pty) Ltd. (“Court Air”), HSG obtained a letter from the Ministry of Transport in South Africa confirming its approval of HSG's indirect acquisition of Court Air on the basis that Court Air's immediate parent, Court Air Holdings (Pty) Ltd., was a South African registered company. Legal advice from our South African counsel confirmed that Court Air's licenses for helicopter operations in South Africa would not be adversely affected by our acquisition of HSG, but cautioned that there is some continuing risk that the South African Ministry of Transport could reverse its prior decision. While no action with respect to these licenses has been taken since our acquisition of HSG in 1999, any such reversal of decision could materially and adversely affect our business, financial condition and results of operations.
 
Australia
 
Civil aviation in Australia is governed by the Civil Aviation Act, 1988, and regulations made thereunder. To operate an aircraft in Australia, it must be registered with the Australian Civil Aviation Safety Administration and a Certificate of Airworthiness must be obtained, be valid and in effect. The operation of an aircraft for a commercial purpose into, out of, or within Australian territory can only be undertaken as authorized by an Air Operators' Certificate. Our ability to offer our helicopter transportation services in Australia is dependent on maintaining these certificates.
 

12


Barbados
 
The Barbados subsidiaries are incorporated pursuant to the Companies Act Chapter 308 of the laws of Barbados as international business companies. As such, they are registered and licensed annually by the Ministry of Economic Development and International Business in accordance with the International Business Companies Act. An IBC license is issued annually which enables the respective companies to engage in international business or international trade and commerce. No registration, licensing or authorization is required with the Civil Aviation Authority which is the local governmental authority that regulates aviation operations in Barbados. Our ability to engage in international business or international trade and commerce is dependent on maintaining these licenses.
 
Other Countries
 
Our operations in other foreign countries are regulated to various degrees by their governments and must be operated in compliance with those regulations and, where applicable, in accordance with our international air service licenses and air operator certificates. These regulations may require us to obtain a license to operate in that country, may favour local companies or require operating permits that can only be obtained by locally registered companies and may impose other nationality requirements. Although we have operated in most of these countries for a number of years, there is no assurance regarding what foreign governmental regulations may be applicable in the future to our helicopter operations. In addition, we operate in association with local parties in many of these other foreign countries.
 
The revocation of any of the licenses discussed above or the termination of any of the relationships with local parties discussed above could have a material adverse effect on our business, financial condition and results of operations.
 
International Uncertainty
 
Our international operations may suffer due to political, economic and regulatory uncertainty. A substantial portion of revenue in recent years has been attributable to operations outside North America and Europe. For the fiscal year ended April 30, 2007, approximately 35% of revenue was generated from these operations. Risks associated with some of our international operations include war and civil disturbances or other events that may limit or disrupt markets, expropriation, requirements to award contracts, concessions or licenses to nationals, international exchange restrictions and currency fluctuations, changing political conditions, licensing requirements and monetary policies of foreign governments. Any of these events could materially adversely affect our ability to provide services to our international customers. Certain of our helicopter leases and loan agreements impose limitations on our ability, including requiring the prior approval of the lessor or the lender, to locate particular helicopters in certain countries. We cannot provide assurance that these limitations will not affect our ability to allocate resources in the future.
 
Foreign Exchange Rate Risk
 
Fluctuations in currencies may make it more costly for us to pay our debt. The consolidated financial statements are prepared in Canadian dollars. However, a significant portion of revenue and operating expenses are denominated in the reporting currencies of our principal foreign operating subsidiaries which consist primarily of pound sterling, Norwegian kroner, US dollars, Australian dollars, South African rand and euros. In addition, certain revenue and operating expenses are transacted in currencies other than the reporting currencies of these subsidiaries. The foreign exchange impact on revenue and segment EBITDAR, is comprised of (i) foreign exchange on the translation of the financial results of the foreign subsidiaries into Canadian dollars (“translation impact”); and (ii) foreign exchange on the translation of foreign denominated transactions into the reporting currencies of the subsidiaries (“transaction impact”).
 
The total unfavourable FX impact on revenue for fiscal 2007 was $11.0 million. This consisted of an unfavourable translation impact of $17.4 million partially offset by a $6.4 million favourable transaction impact.
 
The total unfavourable FX impact on operating income for fiscal 2007 was $0.3 million. This consisted of a favourable translation impact of $1.6 million and an unfavourable transaction impact of $1.9 million.
 

13


Our overall approach to managing foreign currency exposures includes identifying and quantifying our exposures and putting in place the necessary financial instruments to manage the exposure. We operate under a corporate policy that restricts us from using any financial instrument for speculative or trading purposes. The policy provides that we may participate in derivative transactions only with Schedule I Canadian chartered banks or other financial institutions with an “A” credit rating.
 
We have developed a risk management plan to mitigate potential risks with respect to foreign currencies. The strategy is to match cash inflows and outflows by currency, thereby minimizing net currency exposures to the extent possible. This is accomplished by ensuring that customer contracts, major expenditures and debt are denominated in the appropriate currencies. To mitigate the impact that fluctuating currencies could have on operating cash flows, we have entered into forward foreign exchange contracts.
 
Loss of key personnel
 
The loss of key personnel could affect our growth and future success. Our success has been dependent on the quality of key management personnel, including Craig L. Dobbin, our former Executive Chairman, and Sylvain A. Allard, President and Chief Executive Officer. Mr. Dobbin died in October 2006. Our Board of Directors elected Mr. Dobbin’s son and the executor of the Estate as non-executive Chairman in October 2006. While the loss of Craig L. Dobbin is felt by all who knew him, we believe that the death of Craig L. Dobbin has not had a material adverse effect on our business. The loss of Mr. Allard, due to time constraints, illness, death or any other reason could have a material adverse effect on the business. In addition, since we have independent management teams at our divisions, loss of the services of other key management personnel at our corporate and divisional headquarters without being able to attract personnel of equal ability could have a material adverse effect upon us.
 
Labour disruptions
 
We may experience work stoppages that could cause disruptions in operations.
 
Our workforce in Europe and Australia is unionized as is the workforce at CHC Composites Inc. While we have renewed all collective agreements and are satisfied with our labour relations, there is no assurance that labour disruptions will not occur in the future. During fiscal 2007, we experienced a pilot work-to-rule job action in Denmark that had a negative impact on operating income.
 
With the exception of Australia noted above, the workforce of the Global Operations segment is not unionized. A group of the Global Operations pilots have formed an association that has made an application to the Canadian Industrial Relations Board (the “Board”) to unionize the Global Operations pilots. Among other grounds, we believe that the Board does not have jurisdiction over these pilots and have made a submission to the Board that the application for certification should be denied. We cannot guarantee the success of our position before the Board. If the Global Operations pilots are unionized we will have to negotiate a first collective agreement. We cannot predict the consequences of negotiating such an agreement.
 
Our operations in the Netherlands are subject to the Netherlands Work Council Act and we must seek the advice of the Netherlands Work Council prior to implementing a variety of decisions. We cannot provide assurance that we will not experience strikes, lockouts or other significant work stoppages in the future or that our relationship with employees will continue to be good, either of which may adversely affect our business, financial condition and results of operations.
 
Voting Control
 
We are controlled by our principal shareholder, the Estate, which can determine the outcome of matters to be decided by our shareholders. As of April 30, 2007, the Estate, directly and indirectly through Discovery Helicopters Inc. (“Discovery”) and O.S. Holdings Inc., beneficially owned 13.6% of our Class A Subordinate Voting Shares (which are entitled to one vote per share), 94.8% of our Class B Multiple Voting Shares (which are entitled to 10 votes per share) and all of our Ordinary Shares (which are entitled to one vote per 10 shares), representing in the aggregate 62.8% of the voting power on matters put before our shareholders.
 

14


The Estate has advised us that if we issue additional shares of voting securities, it intends to purchase, through Discovery, sufficient voting shares to enable it to maintain control of more than 50% of the voting power attached to all outstanding voting shares. As a result, the Estate would, subject to certain exceptions, continue to (i) control the outcome of all matters requiring a majority vote of shareholders, including the power to elect all of the directors but excluding those matters that require an affirmative vote of the majority of disinterested minority shareholders, (ii) be able to prevent the approval of any matter requiring shareholder approval and (iii) be likely to determine the outcome of any matter that under applicable corporate law would require a shareholders' resolution passed by not less than two-thirds of the votes cast, such as the sale by us of all or substantially all of our assets or an amalgamation with an unrelated corporation.
 
Norwegian Law
 
If our Norwegian operating subsidiaries incur substantial operating losses, they may be subject to liquidation under Norwegian law. The corporate law under which the Norwegian subsidiaries operate differs from Canadian and US law in a number of areas, including with respect to corporate liquidation. Under Norwegian law, if the losses of any of the Norwegian subsidiaries reduce that subsidiary's equity to an amount less than 50% of its share capital or the equity of the subsidiary becomes inadequate compared to the risks and the size of the subsidiary's business, the directors of the subsidiary would be obligated by law to convene a general shareholders' meeting to resolve to balance the amount of such equity and share capital by either:
 
increasing the equity in an amount sufficient to achieve such balance and to ensure that the equity of the subsidiary becomes adequate compared to the risks and the size of the subsidiary's business; or
 
reducing the share capital to pay off losses in an amount sufficient to achieve such balance.
 
To the extent reductions in the share capital of the Norwegian subsidiaries as a result of operating losses are substantial and if no appropriate resolutions are made, they could ultimately result in liquidation, which could have a material adverse effect on our business, financial condition and results of operations.
 
Safety records
 
Failure to maintain a record of acceptable safety performance may have an adverse impact on our ability to attract and retain customers. Our customers consider safety and reliability two primary attributes when selecting a provider of helicopter transportation services. If we fail to maintain a record of safety and reliability that is satisfactory to customers, our ability to retain current customers and attract new customers may be adversely affected.
 
Management resources
 
Assimilating our recent acquisitions or any future material acquisitions into our corporate structure may strain our resources and have an adverse impact on the business. The assimilation of recent acquisitions and any future material acquisitions we may make will require substantial time, effort, attention and dedication of management resources and may distract management in unpredictable ways from ordinary operations. The transition process could create a number of potential challenges and adverse consequences, including the possible unexpected loss of key employees, customers or suppliers, a possible loss of revenues or an increase in operating or other costs. Inefficiencies and difficulties may arise because of unfamiliarity with new assets and the business associated with them, new geographic areas and new regulatory systems. These types of challenges and uncertainties could have a material adverse effect on the business, financial condition and results of operations. We may not be able to effectively manage the combined operations and assets or realize any of the anticipated benefits of acquiring such acquisitions or any future material acquisitions.
 
Pension Risk
 
If the assets in our defined benefit pension plans are not sufficient to meet the plans’ obligations, we may be required to make substantial cash contributions and our liquidity may be adversely affected. We sponsor funded and partially funded defined benefit pension plans for our employees principally in Canada, the UK, the Netherlands and Norway. As of April 30, 2007, there was a $23.6 million funding deficit related to our various defined benefit pension plans which require ongoing funding by us and a $53.6 million obligation related to the various partially funded plans.
 

15


Our estimate of liabilities and expenses for pensions incorporates significant assumptions, including the interest rate used to discount future liabilities and expected long-term rates of return on plan assets. Our pension contributions and expenses, results of operations, liquidity or shareholders’ equity in a particular period could be materially adversely affected by market returns that are less than the plans’ expected long-term rates of return, a decline in the rate used to discount future liabilities and changes in the currency exchange rates. If the assets of our pension plans do not achieve expected investment returns for a fiscal year, such deficiency may require increases in pension expense. Changing economic conditions, poor pension investment returns or other factors may require us to make substantial cash contributions to the pension plans in the future, preventing the use of such cash for other purposes and adversely affecting our liquidity.
 
Customer Base
 
Our customers are concentrated in the oil and gas industry and, as a result, the credit exposure within this industry is significant. The majority of our customers are engaged in oil and gas production and exploration. This concentration may impact the overall exposure to credit risk because changes in economic and industry conditions that adversely affect the oil and gas industry could affect the majority of our customers. We generally do not require letters of credit or other collateral to support our trade receivables. Accordingly, a sudden or protracted downturn in the economic conditions of the oil and gas industry could adversely impact our ability to collect our receivables and thus, our financial condition.
 
Fuel Prices
 
Our contracts generally require that fuel be provided directly by the customer or be charged directly to the customer based on actual fuel costs. As a result, we have no significant exposure to changes in fuel prices.
 
Trade Credit Risk
 
Trade receivables consist primarily of amounts due from multinational companies operating in the oil and gas industry. Credit risk on these receivables is reduced by the large and diversified customer base. Included in accounts receivable is an allowance for doubtful accounts of $8.4 million at April 30, 2007 (fiscal 2006 - $24.5 million).
 
Environmental
 
We are subject to certain environmental regulations, which may have an adverse impact on our business. We are subject to extensive laws, rules, regulations and ordinances relating to pollution and protection of the environment, including those relating to emissions to the air, discharges to waters, the use, storage and disposal of petroleum and other regulated materials and the remediation of contaminated sites.
 
Our operations sometimes involve the use, handling and storage of material that may be classified as environmentally hazardous. Laws protecting the environment have become more stringent in Canada and certain other countries in recent years and may, in certain circumstances, impose liability for cleanup of releases of regulated materials and related environmental damage without regard to negligence or fault. These laws also may expose us to liability for the conduct of, or conditions caused by, others such as historic spills of regulated materials at our facilities or for acts that were in compliance with all applicable laws at the time these acts were performed. We believe that we are in substantial compliance with applicable environmental requirements and that ensuring compliance has not, to date, had a material adverse effect on our financial position. We cannot, however, predict the likelihood of change to these laws or in their enforcement or the impact of any such change, or discovery of previously unknown conditions, which may require unanticipated costs on our financial position.
 
Taxes
 
We are subject to many different forms of taxation in various jurisdictions throughout the world including but not limited to income tax, withholding tax, commodity tax and social security and other payroll related taxes. Tax law and administration is extremely complex and often requires us to make subjective determinations. The tax authorities in the various jurisdictions where we carry on business may not agree with the determinations that are made by us with respect to the application of tax law. Such disagreements could result in lengthy legal disputes and, ultimately, in the payment of substantial amounts for tax, interest and penalties, which could have a material effect on our results of operations.
 

16


Our estimate of our tax related assets, liabilities, recoveries and expenses incorporates significant assumptions. These assumptions include, but are not limited to, the tax rates in various jurisdictions, the effect of tax treaties between jurisdictions, taxable income projections, and the benefits of various restructuring plans. To the extent that such assumptions differ from actual results, we may have to record additional tax expenses and liabilities including interest and penalties.
 
Inflation
 
Although we believe that inflation has not had any material effect on our operating results, our business may be affected by inflation in the future.
 
Interest Deductibility
 
In May 2007, the Canadian Federal Government released revisions to measures contained in its March 2007 budget to eliminate the deductibility of interest on certain debt incurred to finance foreign affiliates. Although the revised measures were named the “Anti-Tax-Haven Initiative,” they apply to situations involving any foreign jurisdiction, not only those generally considered to be tax havens. The measures would be applicable to interest paid or payable in respect of a period that begins after 2011. Although the impact of these measures on us is not currently known, our tax provision could be materially affected in the future.
 
 
ITEM 4.
INFORMATION ON THE COMPANY
 
HISTORY AND DEVELOPMENT OF THE COMPANY
 
CHC Helicopter Corporation was formed by amalgamation on July 31, 1987 under the Canada Business Corporations Act. Our registered office is 34 Harvey Road, 5th Floor, St. John’s, Newfoundland and Labrador, Canada, A1C 5V5. Our head office is 4740 Agar Drive, Richmond, British Columbia, Canada, V7B 1A3 (telephone number 604-276-7500). Our internet website address is located at http://www.chc.ca.
 
In the United States, our agent for service of process is CT Corporation System, 111 Eighth Avenue, 13th Floor, New York, New York, 10011 (telephone number 1-800-223-7567).
 
We were created in 1987 as a holding company to combine the operations of Sealand Helicopters Limited and Toronto Helicopters Limited (both of which were Canadian companies controlled by Mr. Craig L. Dobbin, the former Executive Chairman of the Company and principal shareholder through the Estate) and to acquire Okanagan Helicopters Ltd., a Canadian company that operated 125 helicopters at the time of its acquisition. Since our formation, we have grown internally as well as through acquisitions; the most significant of which were the acquisition in 1988 of the majority of the assets of Ranger Helicopters Limited, which was then operating 37 helicopters; the acquisition in 1989 of all the outstanding shares of Viking Helicopters Limited, which was then operating 60 helicopters; the acquisition in 1993 and 1994 of all the outstanding shares of Brintel, which was then operating approximately 25 heavy helicopters; the acquisition in August 1999 of all the outstanding shares of HSG, which was then operating 115 helicopters; and the acquisition in February 2004 of all the shares of Schreiner which was then operating 43 aircraft. Since that date we have acquired a number of smaller operations as noted below.
 
PRINCIPAL ACQUISITIONS, DISCONTINUED OPERATIONS AND CAPITAL EXPENDITURES
 
Acquisitions
 
On March 8, 2007, following regulatory approval, we acquired an equity position in BHS - Brazilian Helicopter Services Taxi Aereo Ltda., subsequently named BHS - Brazilian Helicopter Services Taxi Aereo S.A. (“BHS”). 100% of the voting common shares were acquired through a jointly owned subsidiary BHH - Brazilian Helicopters Holdings S.A. (“BHH”). BHS is one of the largest operators in the Brazilian offshore sector.
 
On November 30, 2006, we acquired 100% of the issued and outstanding shares of Heli-Dyne Systems Inc. (“Heli-Dyne”), subsequently named Heli-One USA Inc., a helicopter completion and maintenance centre based in Hurst, Texas.
 

17


During the fourth quarter of fiscal 2006, we entered into discussions with two unaffiliated private equity firms regarding a potential acquisition of the Company. These discussions terminated with no offer being made to the shareholders.
 
During fiscal 2006, we purchased the remaining 40% non-controlling interest in Aero Turbine Support Ltd. (“ATSL”). The acquisition supported Heli-One’s strategic expansion objectives for global helicopter support.
 
On January 13, 2005, we acquired the assets and capabilities of Coulson Aero Technologies Ltd. (“Coulson”), a British Columbia based helicopter component and turbine engine maintenance repair and overhaul (“MRO”) provider.
 
On September 23, 2004, we acquired a majority of the shares of ATSL. ATSL is an aircraft engine repair and overhaul company servicing General Electric CT58/T58 and Pratt & Whitney Canada, PT6T turboshaft engines.
 
On August 17, 2004, we acquired 100% of the shares of Multifabs Survival Ltd. (“Multifabs”), an Aberdeen based company specializing in the production of cold water survival suits for military forces, emergency services and offshore oil and gas companies around the world.
 
Discontinued operations
 
During the fiscal year ended April 30, 2007, we classified Survival-One Limited (“Survival-One”) as discontinued operations as a result of the decision by management to divest of this business. The assets and liabilities of Survival-One were measured at the lower of their carrying amount and their estimated fair value using discounted cash flows less costs to sell. No fair value adjustment was recorded when Survival-One was classified as discontinued operations at January 31, 2007. We have recorded imputed interest in the results of discontinued operations. The results of operations of Survival-One have been reported in discontinued operations for the year ended April 30, 2007 and the prior period comparative figures have been reclassified. Previously, these amounts were included in continuing operations in the Heli-One segment.
 
Subsequent to the year ended April 30, 2007, the sale of Survival-One was completed for gross proceeds of approximately $37 million. An after-tax gain on sale of Survival-One of $16.4 million was recorded in the first quarter of fiscal 2008. Accordingly, commencing on May 1, 2007, the operations and cash flows of Survival-One have been eliminated from our ongoing operations.
 
We reclassified CHC Composites Inc. (“Composites”) to continuing operations in the Heli-One segment for the year ended April 30, 2005 as we did not receive an acceptable offer for Composites while the business was held for sale. The impact of reclassifying Composites to continuing operations resulted in a decrease in net earnings from continuing operations of $21.3 million, consisting of a $7.0 million net loss from operations and a $14.3 million fair value adjustment. The fair value adjustment was originally recorded when Composites was classified as held for sale and the assets and liabilities of the business were valued at the lower of their carrying amounts and their estimated fair value, less costs to sell. The fair value adjustment of $14.3 million was recorded in the 2005 fiscal year and allocated to property and equipment ($11.4 million) and other long-term assets ($2.9 million).
 
During fiscal 2005 we sold two non-core components of the Schreiner group of companies legally operating as Schreiner Canada Ltd. (“Schreiner Canada”) and Schreiner Aircraft Maintenance B.V. (“SAMCO”) and realized an after-tax gain on sale of $8.6 million. Operating results from discontinued businesses have been recorded in earnings from discontinued operations up to the date of disposition. Operating results from discontinued businesses included imputed interest on debt assumed by the buyer or required to be repaid as a result of the proposed disposal transaction where appropriate.
 

18


Capital Expenditures
 
Total property and equipment additions include all asset acquisitions, including aircraft, as well as helicopter major inspection expenditures. Property and equipment additions of $393.2 million during the year ended April 30, 2007 comprised of (i) $245.3 million for the purchase of 35 helicopters (five aircraft purchased off-lease), including 24 that were subsequently leased through sale-leaseback transactions, (ii) $18.1 million for aircraft modifications, (iii) $39.4 million related to buildings and other equipment; and (iv) $90.4 million related to investments in spare parts (rotables) to support the Company’s existing fleet and additional aircraft and new aircraft types. We also spent $30.1 million on helicopter major inspections. Proceeds on 28 sale-leaseback transactions and the disposal of 13 aircraft and other dispositions were $318.3 million for the year ended April 30, 2007.
 
During fiscal 2007, we announced the establishment of a new helicopter maintenance, repair and overhaul facility at Boundary Bay Airport in Delta, BC, Canada. Heli-One will establish a 240,000 square-foot facility including aircraft hangar, workshops and office space, with completion anticipated in the fourth quarter of fiscal 2008. This new facility will support a wide range of components, engines and aircraft types including AgustaWestland, Bell, Eurocopter and Sikorsky. We will invest approximately $30 million in establishing the new facility, which will allow Heli-One to provide total helicopter support and improved efficiency for our rapidly expanding fleet of aircraft and for third-party customers around the world.
 
Property and equipment additions of $280.7 million during the year ended April 30, 2006 comprised of (i) $177.2 million for the purchase of 20 helicopters, including 12 that were subsequently leased through sale-leaseback transactions, (ii) $12.6 million for aircraft modifications, (iii) $67.1 million for major spares and repairable parts, (iv) $3.6 million in connection with the construction of buildings and hangars, and (v) $20.2 million for ground equipment, vehicles, a simulator and office furniture and fixtures. We also spent $23.6 million on helicopter major inspections. Proceeds on disposal of assets and long-term investments were $209.8 million for the year ended April 30, 2006.
 
Property and equipment additions of $234.7 million during the year ended April 30, 2005 comprised of (i) $149.0 million related to the purchase of 20 helicopters, including four that were subsequently leased through sale-leaseback transactions, (ii) $21.6 million for aircraft modifications, (iii) $44.4 million for major spares and repairable parts, and (iv) $19.7 million related to other property and equipment. We also spent $15.5 million on helicopter major inspections. Proceeds on disposal of assets were $90.9 million for the year ended April 30, 2005.
 
INDUSTRY OVERVIEW
 
Helicopters first came into widespread commercial use in the oil and gas industry for transporting personnel and supplies to offshore oil rigs and remote onshore areas. Over the years, the use of helicopters has expanded into many other areas where urgency or difficulty of access justifies the cost. Although the oil and gas industry still accounts for a substantial portion of the demand for helicopter services worldwide, helicopters have been used for a variety of purposes for several decades, including forestry, mining, search and rescue, emergency medical services, scheduled service, construction, and recreation.
 
The level of worldwide offshore oil and gas exploration and production has traditionally influenced demand for helicopter transportation services. Exploration activities are sensitive to changes in oil and gas prices, whereas production activities are generally more stable. For the fiscal year ended April 30, 2007, approximately 70% of our total revenue was derived from oil and gas activity (fiscal 2006 - 70%). Technology improvements allow oil and gas exploration and production companies to push production into deeper waters. This translates into longer trips, more flying hours and the need for larger new technology helicopters, which generally have an improved range and passenger capacity. We also expect new exploration and production activity to occur in already producing regions and in currently non-producing regions of Africa, Asia, South America, the Caspian Sea, Australia, the North Sea and eastern Canada. We believe this increase in activity will result in increased global demand for helicopter transportation services. There are 133 deep-water installations forecast for the period from 2007 to 2011 compared to 93 installations in the preceding five-year period. Demand for new offshore helicopters is forecast to increase by 100 aircraft between 2006 and 2010.
 

19


The North Sea is the largest producing offshore oil and gas region in the world and continues to experience growth in rig demand. Rig utilization in the North Sea rose above 95% in June 2007 for a new high in recent history. Projected utilization rates have also risen, indicating that the market will likely remain strong in the future. In addition to new smaller oil and gas producers targeting the North Sea, large companies are expanding their activities and upgrading production facilities to extend field production life. The market’s buoyancy is also prompting an increase in new-build contracts. We believe the need for transportation services will increase as activity throughout the world continues to increase from current levels.
 
We expect further increased demand for helicopter services as a result of government momentum towards civil search and rescue services in the UK, Australia and throughout Europe. The UK government intends to privatize ten to thirteen additional coastguard bases commencing in 2012 for a period of 20-30 years. We have already entered into the bidding process for this contract.
 
To effectively compete on a global basis for helicopter transportation service contracts, we believe a helicopter service provider needs to have:
 
an established brand name;
a strong track record of providing high quality, safe and reliable service;
a large, diversified fleet of helicopters to accommodate various customer requirements;
a highly skilled and dedicated team of pilots, engineers and support staff;
a cost structure that allows the provision of services at competitive prices;
an effective capital structure that permits financing of new aircraft;
a broad network of regional bases to cost-effectively bid for new contracts in most areas of the world as opportunities arise; and
familiarity with a variety of local business practices and regulations around the world and established local joint venture partnerships and strategic customer alliances.
 
We believe that we possess all of these characteristics.
 
BUSINESS OVERVIEW
 
General
 
We are the world’s largest global commercial helicopter operator. Through our subsidiaries, we have been providing helicopter services for more than 60 years and currently operate in over 30 countries, on all seven continents and in most of the major offshore oil and gas producing regions of the world. Our major operating units are based in the United Kingdom, Norway, the Netherlands, South Africa, Australia and Canada. We provide helicopter transportation services to the oil and gas industry for production and exploration activities through our European and Global Operations segments. We also provide helicopter transportation services for emergency medical services (“EMS”) and search and rescue (“SAR”) activities and ancillary services such as flight training. Our Heli-One segment is the world’s largest non-original equipment manufacturer helicopter support company, providing repair and overhaul (“R&O”) services, aircraft leasing, integrated logistics support, helicopter parts sales and distribution, and other related services to our flight operations and third-party customers around the world.
 
We provide helicopter transportation services to a broad base of independent and state-owned oil and gas companies transporting personnel to offshore production platforms, drilling rigs and other facilities. In general, we target opportunities with long-term contracts and customers who require sophisticated medium and heavy helicopters operated by highly trained personnel. We are a market leader in most of the regions we serve, with an established reputation for high quality and reliable service. We are the largest operator in the North Sea and a global operator servicing the oil and gas industry in Brazil, Africa, Australia, Asia and Canada. For the fiscal years ended April 30, 2007 and 2006, revenue generated by helicopter transportation services for the oil and gas industry was approximately 70% of our total revenue.
 
We believe that our R&O and flight training capabilities reduce our costs and give us control over the quality and timeliness of our maintenance and training. We believe that these capabilities enhance our competitive position, further diversify our revenue and solidify our worldwide reputation as a full-service, high-quality helicopter operator. Furthermore, we believe that our repair and overhaul capabilities provide us with a source of relatively stable third-party revenue.
 

20


Our global customer base consists of a broad range of oil and gas companies and governmental bodies and includes operating subsidiaries of, and government bodies in:
 
Agip
ExxonMobil
Premier
Apache
Ireland
Royal Dutch/Shell Group
Bp
Maersk
Statoil
Chevron
Marathon
TotalFinaElf
Commonwealth of Australia
Nexen
Unocal
ConocoPhillips
Petrobras
 

Competitive Strengths
 
We believe that we have the following competitive advantages:
 
Global Coverage. We currently provide helicopter transportation services in over 30 countries and on all seven continents. This broad geographic coverage and an efficient management structure enable us to respond quickly and cost effectively to customer needs and new business opportunities while adhering to local market regulations and customs. Since new contract and base start-up costs can represent a significant portion of operating expenses, our global network of bases allows us to reallocate equipment and crews efficiently and bid on new contracts at competitive rates. Additionally, as multinational oil and gas companies seek service providers that can provide one standard of service in many locations around the world, our geographic coverage makes us one of only two global providers that can effectively compete for many of these contracts.
 
Focus on Safety. In over 60 years of operations, we have developed sophisticated safety and training programs and practices that have resulted in a strong safety record. We have implemented a single Safety Management System worldwide and continue to meet or exceed the stringent safety and performance audits that are conducted by our customers. Our advanced flight training facility in Norway provides a wide variety of training services to our employees as well as third-party civil and military organizations around the world. Providing and expanding these advanced training services in Aberdeen and Vancouver enhances our global reputation for leadership and excellence in helicopter services.
 
Low Cost Operator. We believe that we have significant cost advantages over our competitors with respect to our medium and heavy helicopter services, which increase our likelihood of winning new contracts. We believe that our economies of scale, lower insurance costs related to our industry leading safety record and in-house R&O and training capabilities give us a cost advantage over competitors who must incorporate higher third-party R&O costs into their contract bids.
 
Long-Term Customer Relationships. We have worked successfully for many years with major oil and gas companies, some of which have been customers continuously for more than 20 years. As a result of our established long-term customer relationships, our focus on safety and flight training, our crews’ experience and the quality of our services, we consistently meet or exceed our customers’ standards and are invited to bid on new projects. In addition to standard helicopter transportation services, certain of our customers rely on us for ancillary services, including our computerized logistics systems for crew scheduling and passenger handling services, all of which help strengthen customer relationships.
 
Large, Modern and Diversified Fleet of Helicopters. To meet the diverse operational requirements of our customers, we operate a large fleet that includes some of the most sophisticated helicopters in the world. We have led the industry in fleet renewal with aircraft sought after by customers for their improved speed, range, passenger capacity, comfort and general superior performance. As of April 30, 2007, we operated 255 aircraft, comprised of 86 heavy helicopters, 146 medium helicopters, three light helicopters and twenty fixed-wing aircraft. The helicopter fleet consists of more than a dozen types of helicopters manufactured primarily by Eurocopter, Sikorsky, AgustaWestland and Bell. During the year we added an additional four Sikorsky S92 aircraft for a total of ten S92 aircraft to complement our fleet of twenty Super Puma MkIIs. These two aircraft types represent the most advanced civilian heavy helicopter types in service today. In addition, we have six AgustaWestland AW139 in our fleet. The AgustaWestland AW139 is a new aircraft type, which we have added to the fleet along with the Sikorsky S92. During the year, we signed a contract with Eurocopter for the purchase of 16 new EC225 helicopters to be delivered between fiscal 2008 and fiscal 2012. The EC225 aircraft is also a new heavy aircraft type.
 

21



 
Retention of Asset Value. Based on independent appraisals as of April 30, 2007 the estimated fair market value of our owned aircraft fleet was $628.2 million, exceeding our net book value by approximately $33.1 million. Since a significant portion of a helicopter’s value resides in its major components including engines, gearboxes, transmissions and repairable parts, which are replaced or upgraded on a regular basis, older models of helicopters that have been upgraded are capable of meeting many of the same performance standards as newer aircraft. As a result, when helicopters are sold as part of our ongoing fleet management, we often receive prices in excess of net book value.
 
In-house Repair and Overhaul Business. We believe that our R&O activities reduce our costs, diversify our revenue streams and help position us as a full-service, high-quality helicopter operator. We are a market leader in R&O capability and have the only licensed commercial engine and major component R&O facility in the world for the Eurocopter Super Puma and EC225 helicopters, other than the original equipment manufacturers, and have the capability to support several other helicopter types including Eurocopter Dauphin, Sikorsky S61 and S76 and Bell 212/412. This capability allows us to control the quality and cost of our helicopter maintenance, repair and refurbishment. The development of the Boundary Bay R&O facility, acquisition of Heli-Dyne and the expansion of in-house capabilities may result in our exit from third-party PBH maintenance programs in the future.
 
Business Strategy
 
Our goal is to enhance our leadership position in the global helicopter services industry by continuing to provide value-added services to our customers while maximizing return on assets, earnings and cash flows. In our pursuit of this goal, we intend to focus on the following key initiatives:
 
Strengthen Competitive Position in Existing Markets. We intend to increase our ability to win new contracts, renew existing contracts, strengthen our existing customer relationships and enhance our competitive position by improving our focus on customer needs and reducing costs while maintaining high standards for safety and reliability. Our organizational structure ideally positions us to service increased demand from existing customers and new entrants to the marketplace.
 
Growth Through Acquisition. During the year we acquired an equity position in BHS, one of the largest helicopter operators in the Brazilian offshore sector. We also acquired Heli-Dyne, a helicopter completion and maintenance centre based in Hurst, Texas. We intend to seek out additional acquisition opportunities to further strengthen our position in existing markets and expansion into new markets.
 
Selectively Expand International Operations. We intend to capitalize on our broad geographic coverage, our long-term customer relationships and our fleet capabilities to pursue new opportunities in Africa, Asia, Brazil and other developing oil and gas regions, which are expected to be the fastest growing markets for offshore helicopter transportation services.
 
Expand the Helicopter Support Business with Heli-One. We plan to continue to expand our R&O business by further penetrating the Eurocopter (Super Puma and EC225) major component and engine overhaul market and pursuing new opportunities in heavy and medium aircraft maintenance and military helicopter support through the development of facilities in North America, including the acquisition of Heli-Dyne in fiscal 2007. During the year, we began construction of a 240,000 square foot R&O facility at Boundary Bay Airport in Delta, BC, Canada, which is expected to be completed in the fourth quarter of fiscal 2008. Heli-One has the capability to support, on a nose-to-tail basis, our entire fleet of over 150 Sikorsky S61 and S76 and Eurocopter Super Puma aircraft and to compete for helicopter work for a worldwide fleet of aircraft in this sector. In addition to repair and overhaul, Heli-One provides the following services to the helicopter industry:
 
 
-
Integrated logistics support;
 
-
Aircraft leasing;
 
-
Heavy maintenance;
 
-
Design and engineering;
 
-
Helicopter parts and distribution; and
 
-
Inventory management.
 

22



 
Pursue Profitable New Business Beyond the Oil and Gas Sector. We believe that we have a competitive advantage in the EMS/SAR sectors by virtue of our experience in servicing both the oil and gas and EMS/SAR industries. We believe that this advantage stems from our ability to operate sophisticated twin-engine medium and heavy helicopters with highly trained pilots in complex situations. Typically, EMS/SAR customers require the operator to meet stringent quality standards on a long-term basis.
 
During the year we were awarded a new EMS contract with the Ambulance Service of New South Wales for the provision of five AW139 and EC145 aircraft in the Greater Sydney area. This contract commenced during the third quarter of fiscal 2007. The seven-year contract is the largest helicopter EMS contract ever awarded in Australia and includes three years of extension options.
 
During the first quarter of fiscal 2008, we will commence operations on the five-year, £ 106 million contract with the United Kingdom Maritime and Coastguard Agency to provide commercial SAR helicopter service from four bases in the UK.
 
Continue to Focus on Long-Term Contracts. We seek to enter into long-term contracts with our major customers in order to maximize the stability of our revenue. Revenue from operations under long-term contracts represented approximately 67% of our revenue during the year, compared to 66% in the prior year.
 
Industry
 
Helicopter Flying Operations
 
Helicopters in use today may be divided into two general categories. Single engine (light) aircraft, which have a passenger capacity of three to six, operate under visual flight rules (“VFR”) (daylight and good weather flying only) and can be operated with one pilot. Given their low passenger capacity and inability to fly in poor weather conditions, these aircraft are generally limited to onshore operations. In recent years, we have sold most of our operations and aircraft in this category. During fiscal 2007, we sold an additional six light aircraft and at April 30, 2007, only have three light helicopters remaining in our fleet.
 
Twin-engine (heavy and medium size) aircraft generally require two pilots, have a passenger capacity of nine to twenty-six and can operate under instrument flight rules (“IFR”) (daytime and night time flying under a variety of weather conditions). The greater passenger capacity, longer range, and ability to operate in adverse weather conditions make these aircraft more suitable than single engine aircraft for offshore support. The high cost of these larger aircraft, their limited availability, and long lead time on orders tends to lessen competition from smaller operators. We operated 232 helicopters in this category (86 heavy and 146 medium helicopters) as at April 30, 2007.
 
Various types of helicopters are required to meet the diverse needs of the industries they serve. Medium to heavy helicopters are generally utilized to support the oil and gas, construction and forestry industries and EMS/SAR customer base. They are also used for transporting larger numbers of passengers and supplies or for lifting heavy weights, and are capable of operating during the night and in adverse weather conditions. Typically equipped with IFR equipment, medium to heavy helicopters are capable of long distance flights to offshore oil platforms. Where appropriate, specialized equipment is installed to provide emergency medical service support or for use in certain challenging environments such as the North Sea. Light to medium helicopters are used to support the utility and mining sectors, as well as certain parts of the construction and forestry industry, where transporting a smaller number of passengers or carrying light loads is required.
 

23


We contract with customers to provide aircraft for various periods of time. Contracts for helicopter services in support of oil and gas exploration activities are generally short-term, usually twelve months or less. Contracts for transport of personnel and equipment to oil and gas production sites are generally long-term with terms typically ranging from two to ten years, averaging approximately five years. Such contracts are ordinarily awarded following a competitive bidding process among pre-qualified bidders. Contracts may be based on a fixed monthly fee with an additional hourly charge for actual flight time or solely on an hourly charge for actual flight time. Approximately 45% of our fiscal 2007 flying revenue (fiscal 2006 - 51%) was derived from hourly charges and the remaining 55% (fiscal 2006 - 49%) was generated by fixed monthly charges. Typically, we supply crew and maintenance personnel in addition to aircraft. However, we have a limited number of contracts under which we supply aircraft only to local helicopter operators, often in conjunction with other services. We will continue to pursue this latter type of contract as such arrangements may allow us to partner with other local operators to effectively penetrate new markets.
 
A substantial number of our long-term contracts contain provisions permitting early termination by the customer without penalty. However, during the last eight fiscal years, with the exception of contracts that were transferred to another operator due to the merger of oil and gas producers and contracts cancelled as a result of political instability or local unrest, no customer has exercised that right. At the expiration of a contract, customers typically solicit new bids for the next contract period. Contracts are usually awarded based on a number of factors, including price, long-term relationships, safety record of the helicopter service provider and quality of customer service. Generally, an incumbent operator has a competitive advantage in the bidding process stemming from its relationship with the customer, its knowledge of site characteristics, its understanding of the cost structure for the specific operations and its proven ability to meet service level requirements and provide the necessary aircraft and services.
 
Our contracts generally require that fuel be provided directly by the customer or be charged directly to the customer based on actual fuel costs. As a result, we have no significant exposure to changes in fuel prices.
 
New contract start-up costs can represent a significant portion of operating costs. We therefore believe that our global network of bases and aircraft operating licenses give us a competitive advantage in bidding on new contracts throughout most of the world. We are well positioned to meet the requirements of customers in most regions of the world within short periods of time at competitive rates. We also have long-term working relationships with most of the major oil and gas companies, including the operating subsidiaries of bp, ExxonMobil, ConocoPhillips, Shell, Statoil, TotalFinaElf, Chevron, Maersk, Nexen and Unocal. Many of these companies have been our customers for more than 30 years.
 
Revenue by Industry Sector
 
2007
 
2006(i)
 
2005(i)
   
(in millions)
   
  %
   
(in millions)
   
  %
   
(in millions)
   
  %
 
Oil and Gas
   
803.4
      69.9 %    
696.7
      69.9 %    
667.6
      70.0 %
Repair and Overhaul
   
159.3
      13.9 %    
131.5
      13.2 %    
112.2
      11.7 %
EMS/SAR
   
80.7
      7.0 %    
82.7
      8.3 %    
84.8
      8.9 %
Other
   
73.3
      6.4 %    
61.4
      6.1 %    
57.5
      6.0 %
Passenger Transportation
   
26.8
      2.3 %    
18.0
      1.8 %    
24.7
      2.6 %
Training
   
5.6
      0.5 %    
6.8
      0.7 %    
7.4
      0.8 %
Total
  $
1,149.1
      100.0 %   $
997.1
      100.0 %   $
954.2
      100.0 %

 

24



 
Revenue by Geographic Area
 
2007
 
2006(i)
 
2005(i)
   
(in millions)
   
   %
   
(in millions)
   
   %
   
(in millions)
   
   %
 
Canada
  $
48.2
      4.2 %   $
32.9
      3.3 %   $
24.0
      2.5 %
United Kingdom
   
248.8
      21.7 %    
209.4
      21.0 %    
237.7
      24.9 %
Norway
   
202.0
      17.6 %    
206.7
      20.7 %    
182.9
      19.2 %
Africa
   
189.9
      16.5 %    
150.1
      15.1 %    
124.3
      13.0 %
Australia
   
74.6
      6.5 %    
64.5
      6.5 %    
62.2
      6.5 %
Denmark
   
29.1
      2.5 %    
28.1
      2.8 %    
35.5
      3.7 %
The Netherlands
   
72.1
      6.3 %    
67.2
      6.7 %    
65.9
      7.0 %
Other Asian countries
   
68.1
      5.9 %    
52.7
      5.3 %    
88.5
      9.3 %
Other European countries
   
120.9
      10.5 %    
108.0
      10.8 %    
88.7
      9.3 %
Other countries
   
95.4
      8.3 %    
77.5
      7.8 %    
44.5
      4.6 %
Consolidated total
  $
1,149.1
      100.0 %   $
997.1
      100.0 %   $
954.2
      100.0 %
 
(i)
See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report.

European Operations
 
We are one of the leading providers of helicopter services in Europe. We provide services to the offshore oil and gas industry to customers located primarily in the UK, Norwegian, Danish and Dutch sectors of the North Sea. We also provide helicopter services (primarily search and rescue) in Ireland. Our primary European bases are located in Aberdeen (Scotland), Stavanger (Norway), Bergen (Norway) and Den Helder (the Netherlands) where we conduct our operations in the respective sectors of the North Sea. We operate 76 aircraft in this segment, consisting of 48 heavy and 28 medium aircraft. Included in the heavy aircraft were 34 Super Pumas, nine Sikorsky S61N and five Sikorsky S92 aircraft.
 
Norwegian Operations: While the focus on the oil and gas sector in Norway is substantially the same as in the UK, differences in regulatory regimes and territorial issues make it more appropriate to service the Norwegian sector of the North Sea from Norway. These regulatory differences also limit somewhat our operational flexibility and impact our costs.
 
Our Norwegian operations primarily service oil and gas customers in the North Sea, including Statoil, Norsk Hydro and bp.
 
The other major helicopter service provider in the Norwegian sector of the North Sea is Norsk Helicopters.
 
UK Operations: Our UK operations primarily service oil and gas customers in the UK sector of the North Sea, including operating subsidiaries of ConocoPhillips, Apache, Nexen, Total, Marathon, Perenco UK Limited and TotalFinaElf, some of which we have serviced for more than 10 years.
 
Our UK operations also manage our operations in Denmark, where we signed a long-term contract in 1999 with Maersk Oil and Gas AS to provide offshore helicopter support. This contract was extended for one year to June 2007. During Fiscal 2006, we were awarded a five-year contract renewal (plus three one-year options) by Maersk Oil and Gas AS for the provision of helicopter transportation services in support of their oil and gas operations in the Danish sector of the North Sea that began in July 2007.
 
In Ireland SAR services are performed as well as oil and gas support. The Irish SAR contract was extended for two years to July 2007. During fiscal 2007, we were awarded a contract renewal by the Irish Minister for Transport for the continued provision of marine search and rescue services in Ireland from July 2007 to July 2010, plus three option years.
 
There is potential for new oil and gas developments off the west coasts of Scotland and Ireland and in the North Sea off the northern coast of Norway. These opportunities are expected to lead to additional helicopter service requirements. We believe we are well positioned to compete for these new contracts as a result of: (1) our long-standing relationships with many of the major oil and gas companies which are expected to play a significant role in these projects; and (2) the need for long-range Super Puma MkIIs and Sikorsky S92 helicopters to reach more remote regions.
 

25


During and subsequent to fiscal 2007, we were awarded three new contracts in Norway with TOTAL E&P Norge AS and Statoil ASA, Norway. These contracts begin in 2008 and 2009. In addition, we were awarded contract renewals with Statoil in Norway and GDF Production Nederland BV in Den Helder.
 
Future opportunities within the SAR sector in the UK exist. During fiscal 2006, we were awarded a five-year, £ 106 million contract with the United Kingdom Maritime and Coastguard Agency to provide commercial SAR helicopter service from four bases in the UK. In addition, we have entered into the bidding process for a 20-30 year contract with the UK government, which intends to privatize ten to thirteen additional coastguard bases commencing in 2012.
 
Global Operations
 
Our Global Operations segment provides helicopter and fixed-wing flying services in Africa, Asia, Australia, the Middle East, the Americas and other locations around the world, except Europe, to customers in oil and gas, EMS/SAR and other industries. We believe that the collective international experience we have gained over the last 60 years enables us to draw upon our knowledge of local conditions to provide high levels of customer service in diverse operating environments. Our Global Operations segment consists of CHC Helicopters International, based in Vancouver, Canada; CHC Australia, based in Adelaide, Australia; and CHC Africa, based in Cape Town, South Africa. We operate 145 aircraft in this segment, consisting of 27 heavy, 97 medium, and one light aircraft as well as 20 fixed-wing aircraft.
 
In some of the countries in which we operate, local regulations impose certain nationality requirements. As a result, we often obtain a license to operate in that country in conjunction with a local representative or partner. Our representatives or partners typically receive a small percentage of local revenues or a fixed fee but generally do not provide any personnel or assume any of the liabilities related to performance of the contract. We currently have representatives or partners in a number of countries including Azerbaijan, Ecuador, Equatorial Guinea, Libya, Myanmar, Namibia and Thailand. We believe we have a competitive advantage in securing contracts in these areas due to our established local partnerships. In other jurisdictions such as India, Angola, Brazil and Malaysia, we provide aircraft and maintenance services to other local helicopter operators.
 
CHC Helicopters International conducts business with major oil and gas companies including operating subsidiaries of Shell, bp, ExxonMobil, Unocal, Chevron, United Helicharters and TotalFinaElf. Our strong customer relationships, established reputation, ability to operate in various environments and commitment to quality, safety and cost efficiency have proven to be extremely important in the international markets. We have been serving Unocal in Thailand for over 30 years. Since our establishment in Azerbaijan over 10 years ago, we have been working on long-term projects in the Caspian Sea with a consortium led by bp and another consortium led by TotalFinaElf and ExxonMobil. During fiscal 2006, we were awarded a two-year contract with Malaysian Helicopter Services in support of Shell offshore operations. We are well established on the east coast of Canada, having a contract with ExxonMobil. We also maintain contracts for ongoing work in such countries such as Ecuador and Georgia. We have been able to penetrate the oil and gas industry in India and, during fiscal 2006, we were awarded a four-year contract for the lease of two Bell 412 helicopters in India. Subsequent to fiscal 2006, we were awarded, through BHS, a five-year contract for the provision of eight Sikorsky S76C+ helicopters in support of Petrobras operations in the Brazilian offshore sector.
 
Our Australian operations, as well as a small portion of our Southeast Asian operations (principally East Timor), are conducted by CHC Australia, with headquarters in Adelaide, Australia. We are a leading commercial helicopter operator in Australia. Our customers include Coogee Resources and ConocoPhillips Petroleum. In addition, we operate emergency medical services in South Australia, Western Australia, Queensland, New South Wales, the Australian Capital Territory and Victoria, perform search and rescue services for the Royal Australian Air Force, and provide various functions supporting the utility and construction industries, such as pipeline inspection. During fiscal 2007, we were awarded a seven-year (plus three years of extension options) EMS contract with the Ambulance Service of New South Wales for the provision of five aircraft in the Greater Sydney area. The contract commenced in late fiscal 2007.
 
Our African operations are headquartered in Cape Town, South Africa, with nine bases in many countries in Africa that support oil and gas operations, as well as provide emergency medical and other services. Our African operations service a variety of customers, including Chevron, Sonair, Triton/Hess, United Nations, Premier, Noble Energy and South African Government Antarctic Expedition, among others.
 

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Our geographic coverage enables us to serve multinational oil and gas customers on a worldwide basis. Growth in the Global Operations segment is expected to continue as new opportunities develop in Africa, Asia, Brazil and other developing oil and gas regions.
 
Competition - Flying Operations
 
We are one of only two global providers of helicopter transportation services to the offshore oil and gas industry. There are other competitors, but they are smaller, regional operators. We have a significant market position in all global offshore oil and gas markets, with the exception of the Gulf of Mexico, where we do not have a presence. Our absence in that market stems from the fact that the oil and gas companies operating in the Gulf of Mexico utilize primarily light and medium helicopters under short-term contracts. We estimate that we have a market share of approximately 64% in the combined Norwegian, UK, Danish and Dutch sectors of the North Sea, the world’s largest area of offshore oil and gas development. We are well positioned to capitalize on future growth opportunities. As oil and gas wells are depleted, oil companies are going further offshore to develop deep-water reserves. Our global presence, long-term customer relationships and modern fleet of aircraft, including new technologically advanced aircraft, position us to participate in new oil and gas developments in most offshore oil and gas regions.
 
At present, the limited supply of helicopters available for use in the offshore oil and gas industry is a competitive advantage for us. In our experience, the Eurocopter Super Puma MkII, Sikorsky S92, Sikorsky S76C++, AgustaWestland AW139 and new Eurocopter EC225 aircraft are the aircraft of choice for major oil and gas companies due to their superior flying range, passenger capacity and cabin crew comfort. At present, together with our major competitor, we operate approximately 90% of the worldwide fleet of commercial Super Puma aircraft configured for offshore work. The manufacturers of these aircraft do not stock new aircraft. The current lead time to acquire a new EC225 or S92 is in excess of two years and the next available delivery slot for heavy aircraft (S92 or EC225) is the fall of 2009. During the year, we added four Sikorsky S92 aircraft and four AgustaWestland AW139 aircraft to our fleet. In addition, during the year, we announced the signing of a contract with Eurocopter for the purchase of 16 new EC225 helicopters, expected to be delivered between fiscal 2008 and fiscal 2012. We plan to use these aircraft in support of new offshore oil and gas contracts and potentially as SAR aircraft to meet the unprecedented demand from various customers in both the offshore oil and gas industry and government sponsored SAR.
 
Fixed-Wing Flying Operations
 
We also provide fixed-wing aviation services to support, directly and indirectly, oil and gas operations around the world, flying in conjunction with, or independent of, our offshore helicopter services. Fixed-wing customers include Aero Contractors Company of Nigeria Limited (“ACN”) (a 40% owned equity investment), Woodside, EEPCI, Encana, COTCO, Debmar and Premier. We operate dedicated Bombardier Dash-8 series aircraft, business jets and other turbo prop aircraft, as well as Boeing 737 aircraft. The majority of the fixed-wing aircraft are used to provide an integrated service to our oil and gas customers. We had 20 fixed-wing aircraft in our fleet as at April 30, 2007.
 
Repair and Overhaul
 
All aircraft airframes, engines and components are required by their manufacturers and government regulations to be serviced and overhauled based on flight hours, cycles or the actual condition of parts. The R&O process includes the disassembly, cleaning, inspection, repair and reassembly of engines, components and accessories, and the testing of complete engines and components. The choice of whether to perform a given task in-house or to outsource to a third-party depends on the complexity and cost of the task and the capabilities of the operator in question. Companies engaged in the R&O business are required to obtain licenses from government regulatory bodies and, in many cases, the manufacturers. Companies active in this industry include (i) the manufacturers of the helicopters, components, and accessories; (ii) repair facilities authorized by the manufacturers to repair and overhaul their products; and (iii) small workshops not typically authorized by the manufacturers. The low cost of transporting components relative to the total cost of the repair and overhaul services has resulted in the development of a worldwide market for repair and overhaul services.
 

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Our Heli-One segment is the world’s largest independent helicopter support company. We will continue to grow this segment with the development of the new R&O facility at Boundary Bay Airport which is currently under construction. Heli-One provides comprehensive capability for repair, overhaul, modification and testing of dynamic components, including Sikorsky S61 and S76, Bell 206, 205, 212 and 412 and all Eurocopter Super Puma AS332/532 models in North America and Norway.
 
Heli-One is also able to provide its customers with integrated logistics support, providing 24-hour service, covering all scheduled and unscheduled R&O for engines, dynamic components, all repairable components and consumable parts, plus support for any special mission equipment. Our global buying power translates to competitive pricing on all major components. Heli-One can offer next day delivery in most locations on a wide range of helicopter parts from all major manufacturers through its global distribution network utilizing its new global warehouse facility in the Netherlands. In addition, we have extensive expertise in all areas of engineering and design, for either conversion upgrades or refurbishments including avionics.
 
Competition - Repair and Overhaul
 
Heli-One’s main competitors within the R&O business are the original equipment manufacturers of helicopters and their components. As such, its main competitors are also its main parts suppliers. To minimize issues related to availability and pricing of parts that Heli-One needs to perform its business, Heli-One generally has long-term supply arrangements with the original equipment manufacturers and works closely with them on items such as modifications and approvals of parts and components.
 
Factors that affect competition within the repair and overhaul market include price, quality and customer service. We believe that Heli-One has a competitive advantage over original equipment manufacturers in that it focuses on supporting commercial operations and can leverage our extensive operational experience. We believe Heli-One is able to provide low cost quality support services to civilian and military helicopter operators worldwide.
 
Flight Training
 
We operate an advanced flight training facility in Norway that provides additional revenue and enhances our global reputation for excellence and leadership in helicopter services. The facility enables us to satisfy fully the Eurocopter Super Puma training requirements for our pilots, in addition to selling training services to external pilots. Our experienced instructors provide a wide variety of training services to our employees as well as civil and military organizations around the world. Our Norwegian flight training group operates two full flight simulators and is certified and approved by the Norwegian Civil Aviation Authority as well as several other national aviation authorities. Since its inception, this facility has trained more than 30,000 pilots, engineers and helideck landing officers from over 40 countries. We are currently building in-house flight training capability in Vancouver and Aberdeen.
 
Helicopter Leasing
 
Heli-One manages the world’s largest fleet of medium and heavy civilian helicopters, enabling us to offer flexible leasing terms on a wide range of aircraft to third-party customers.
 
Seasonality
 
See page 39, “Results of Operations - Quarterly Information” for discussion on the impacts of seasonality.
 
Safety and Insurance
 
Operation of helicopters involves some degree of risk. Hazards, such as aircraft accidents, collisions and fire, are inherent in providing helicopter services. We maintain a flight safety organization that is responsible for ensuring compliance with safety standards within our organization and the requisite proficiency among flight crews. Our safety organization is responsible for training flight crews, conducting regular safety audits and seminars for all flight personnel, and generally ensuring safe operating techniques and standards consistent with Canadian and other government regulations and customer requirements. In addition, aviation regulatory bodies and customers conduct safety audits to ensure that our standards meet their requirements.
 

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On December 27, 2006, we suffered the loss of one medium AS365N aircraft in a helicopter accident off the west coast of England. Five passengers and two crew members perished in the accident. The cause of this unfortunate accident has not yet been ascertained as it is still under investigation by the Air Accidents Investigation Branch. This aircraft had a net book value of $3.2 million which has been fully recovered through insurance proceeds. All other incurred or outstanding liabilities relating to this incident are expected to be covered by our insurance providers.
 
During fiscal 2006, there were no major insurance incidents reported.
 
During fiscal 2005, we received insurance proceeds of $1.7 million for the total loss of a Bell 212 aircraft operating in Australia on June 2, 2004. The book value of the aircraft was $0.8 million, resulting in a gain of $0.9 million. The aircraft was being flown for a medical evacuation and crashed while manoeuvring in heavy rain during approach resulting in only minor injuries of passengers and crew. Any incurred or outstanding liabilities relating to the incident are covered by our insurance providers.
 
We maintain liability insurance coverage against general and aircraft liability, including personal injury, subject to a self-insured retention. In addition, we have separate hull policies that insure against physical loss of, or damage to, our helicopters in certain circumstances, subject to a self-insured retention, including losses due to war, expropriation, confiscation and nationalization. We are not insured for loss of profit or loss of use of our helicopters.
 

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ORGANIZATIONAL STRUCTURE
 
Refer to Exhibit 8.1 for a list of our principal subsidiaries, their jurisdiction of incorporation and the percentage of votes attached to voting securities held directly or indirectly by us.
 
PROPERTY AND EQUIPMENT
 
Fleet - By Type of Aircraft
 
The composition of our fleet at April 30, 2007, and some of the characteristics of the individual types of aircraft we own or lease are as follows:
 
 
Number in Fleet
     
Passenger
Capacity (i)
Fleet Composition
Owned
Leased
 
Type of Engine
     
    Light Helicopters
             
    Eurocopter AS350 Series
 1
-
 
Turbine
 
 5
 
    Eurocopter AS355 Twin Star
 1
-
 
Twin Turbine
 
 4
 
    MD 902
 1
-
 
Twin Turbine
 
 7
 
    Total Light Helicopters
 3
-
         
               
    Medium Helicopters
             
    AgustaWestland AW139
 2
 4
 
Twin Turbine
 
15
 
    Bell 212 Series
 9
 1
 
Twin Turbine
 
14
 
    Bell 214
 1
-
 
Twin Turbine
 
19
 
    Bell 412
 8
 9
 
Twin Turbine
 
14
 
    Eurocopter 155B
-
 2
 
Twin Turbine
 
12
 
    Eurocopter 365 Series
 19
 13
 
Twin Turbine
 
10
 
    Sikorsky S76 Series
 48
 30
 
Twin Turbine
 
 9
 
    Total Medium Helicopters
 87
 59
         
               
    Heavy Helicopters
             
    Eurocopter Super Puma 332L/L1
 17
 15
 
Twin Turbine
 
20
 
    Eurocopter Super Puma 332 MkII
 1
 19
 
Twin Turbine
 
19
 
    Sikorsky S61N
 22
 2
 
Twin Turbine
 
26
 
    Sikorsky S92 Series
-
 10
 
Twin Turbine
 
19
 
    Total Heavy Helicopters
 40
 46
         
               
    Fixed-Wing Aircraft
             
    ATR 42-500
-
 1
 
Twin Turboprop
 
48
 
    Boeing 737-300
-
 2
 
Twin Jet
 
149
 
    Convair 580
 2
-
 
Twin Turboprop
 
55
 
    Dash 8
 6
 2
 
Twin Turboprop
 
47
 
    Learjet 45
 1
-
 
Twin Jet
 
 9
 
    Twin Otter
 5
 1
 
Twin Turboprop
 
19
 
    Total Fixed-Wing Aircraft
 14
 6
         
               
TOTAL
 144
 111
         
 
(i)
Excludes pilots and assumes standard seating of only one pilot.

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Fleet - By Segment
 
Our fleet at April 30, 2007 was comprised of the following aircraft by segment:
 
Aircraft Type
 
Global
Operations
   
European
Operations
   
Heli-One
   
Total
   
Owned
   
Leased
 
Heavy
                                   
Eurocopter Super Puma
   
9
     
18
     
5
     
32
     
17
     
15
 
Eurocopter Super Puma MkII
   
4
     
16
     
-
     
20
     
1
     
19
 
Sikorsky S61N
   
12
     
9
     
3
     
24
     
22
     
2
 
Sikorsky S92 series
   
2
     
5
     
3
     
10
     
-
     
10
 
     
27
     
48
     
11
     
86
     
40
     
46
 
Medium
                                               
AgustaWestland AW139
   
2
     
4
     
-
     
6
     
2
     
4
 
Bell 212
   
10
     
-
     
-
     
10
     
9
     
1
 
Bell 412
   
15
     
-
     
2
     
17
     
8
     
9
 
Eurocopter 365 Series
   
15
     
8
     
9
     
32
     
19
     
13
 
Sikorsky S76 Series
   
55
     
13
     
10
     
78
     
48
     
30
 
Other
   
-
     
3
     
-
     
3
     
1
     
2
 
     
97
     
28
     
21
     
146
     
87
     
59
 
Light
                                               
Eurocopter AS350/355
   
1
     
-
     
1
     
2
     
2
     
-
 </