Variable interest entities

3 Months Ended

12 Months Ended

Jul. 31, 2012

Apr. 30, 2012

2.	Variable interest entities:

(a)

VIEs of which the Company is the primary beneficiary:

(i)

Local ownership VIEs:

Certain areas of operations are subject to local governmental regulations that may limit foreign ownership of aviation companies. Accordingly, operations in certain jurisdictions may require the establishment of local ownership entities that are considered to be VIEs. The nature of the Company’s involvement with consolidated local ownership entities is as follows:

EEA Helicopters Operations B.V. (“EHOB”)

EHOB is incorporated in the Netherlands and through its wholly-owned subsidiaries in Norway, Denmark, the Netherlands, the United Kingdom and Ireland provides helicopter flying services to customers in Europe.

The Company owns 49.9% of the common shares (9,896,085 Class B shares) of EHOB, with the remaining 50.1% of the common shares (9,935,750 Class A shares) held by a European investor. The Management Board of EHOB is comprised of one director nominated by the Class B shareholders and three directors nominated by the Class A shareholder.

The Company also owns 7,000,000 par value 1 Euro Profit Certificates in EHOB. Through its ownership of the Profit Certificates, the Company is entitled to a cumulative annual dividend equal to 30% of the issue price of each Profit Certificate (equivalent to a cumulative annual dividend of € 2.1 million) for the first 7 years after issuance and thereafter, a cumulative annual dividend equal to 5% of the issue price of each Profit Certificate (equivalent to a cumulative annual dividend of €0.35 million), subject to Board approval and the availability of cash and further subject to any and all restrictions applicable under Dutch law.

The Company also holds a call option over the Class A shareholder’s stock in EHOB and has granted a put option to the Class A shareholder which entitles the Class A shareholder to put its shares back to the Company. Both the put and call are exercisable in certain circumstances including: liquidation, events of default, and if the Company makes a public offering of its shares resulting in change in control. The Class A shareholder also holds a call option over the Company’s Class B shares which is exercisable only in the event of bankruptcy.

The Company has determined that the activities that most significantly impact the economic performance of EHOB are: servicing existing flying services contracts and entering into new contracts, safety and training, and maintenance of aircraft. Through agreement with EHOB, the Company has the right to enter directly into new flying services contracts and require that EHOB act as the subcontractor for provision of those services. EHOB’s fleet of aircraft is leased entirely from the Company and the lease agreements require that all aircraft maintenance be provided by the Company. The shareholders’ agreement requires EHOB to ensure safety standards meet minimums set by the Company.

As a result of consolidating EHOB, the Company has recorded a non-controlling interest relating to the 50.1% Class A shareholder’s interest in the net assets of EHOB. As at July 31, 2012, the redeemable non-controlling interest is $4.3 million (April 30, 2012 - $1.7 million). Because of the terms of the put and call arrangements with the European investor, the non-controlling interest is considered redeemable and is classified outside of equity.

BHH - Brazilian Helicopter Holdings S.A. (“BHH”)

BHH holds an investment in the common shares of its subsidiary, BHS - Brazilian Helicopter Services Taxi Aereo S.A. (“BHS”). BHS provides helicopter flying services to customers in Brazil.

The Company has a 60% interest in BHH, comprised of 100% of the non-voting preferred shares and 20% of the ordinary voting shares. The remaining equity interest comprised of 80% of the ordinary voting shares is held by a Brazilian investor, whose investment was financed by the Company and is therefore considered to be a related party.

The Company has entered into a put/call arrangement which gives it the right to purchase the BHH shares held by the Brazilian investor and the Brazilian investor the right to put its shares to the Company at any time and for any reason. The put/call price is the greater of the book value of the shares and the original capital contribution plus 2% per annum. The guaranteed return due to the Brazilian investor has been recorded as a redeemable non-controlling interest.

The Company has entered into a shareholders’ agreement with the Brazilian Investor, which requires unanimous shareholder consent for important business decisions.

CHC Helicopters Canada Inc (“CHC Canada”)

CHC Canada provides helicopter flying services to customers in Canada.

The Company owns 200,000 Class A Common Shares (25%) and 200,000 (100%) Class B Non-voting Preferred Shares of CHC Canada, with the remaining 600,000 (75%) of the Class A Common Shares held by a Canadian Investor who is a director of the Company’s ultimate parent and therefore a related party. The Board of CHC Canada is comprised of one director nominated by the Company and two directors nominated by the Canadian Investor.

The Company has entered in an arrangement which allows the Canadian Investor to put its shares back to it at any time for any reason. The Company has also entered into a call arrangement which allows it or the Canadian Investor to elect to purchase the other party’s shares. The calls are exercisable in certain circumstances including: liquidation, events of default, and if the Company makes a public offering of its shares resulting in change of control. The price on the put and the call arrangement is the higher of the book value of the shares and the original capital contribution plus 6% per annum. The guaranteed return due to the Canadian investor has been recorded as a redeemable non-controlling interest.

The Company has entered into a shareholder’s agreement with the Canadian Investor, which requires unanimous shareholder consent for CHC Canada to enter into any material contracts.

Other local ownership VIEs

The Company also has operations in several other countries that are conducted through entities with local ownership. The Company has consolidated these entities because the local owners do not have extensive knowledge of the aviation industry and defer to the Company in the overall management and operation of these entities.

Financial information of local ownership VIEs

All of the local ownership VIEs and their subsidiaries have the same purpose and are exposed to similar operational risks and are monitored on a similar basis by management. As such, the financial information reflected on the consolidated balance sheets and statements of operations for all local ownership VIEs has been presented in the aggregate below, including intercompany amounts with other consolidated entities:


	July 31, 2012		April 30, 2012
Cash and cash equivalents	$	28,036	$	30,372
Receivables, net of allowance		99,757		86,623
Other current assets		32,073		28,423
Goodwill		71,893		72,269
Other long-term assets		83,170		84,127

Total assets	$	314,929	$	301,814

Payables and accruals	$	262,036	$	231,191
Other current liabilities		24,314		40,455
Accrued pension obligations		50,283		55,365
Other long-term liabilities		56,615		58,183

Total liabilities	$	393,248	$	385,194


	Three months ended
	July 31, 2012		July 31, 2011
Revenue	$	260,749	$	267,497
Net earnings		4,318		17,277

(ii)

Accounts receivable securitization:

The Company enters into trade receivables securitization transactions to raise financing, through the sale of pools of receivables, or beneficial interests therein, to a VIE, Finacity Receivables – CHC 2009, LLC (“Finacity”). Finacity only buys receivables, or beneficial interests therein, from the Company. These transactions with Finacity satisfy the requirements for sales accounting treatment. Finacity is financed directly by a multi-seller commercial paper conduit, Hannover Funding Company LLC (“Hannover”), which purchases undivided ownership interests in the receivables, or beneficial interests therein, acquired by Finacity from the Company.

The Company has determined that servicing decisions most significantly impact the economic performance of Finacity and as the Company has the power to make these decisions, it is the primary beneficiary of Finacity.

As a result of consolidation, intercompany receivables and payables between the Company and Finacity together with any gain/(loss) arising from the sales treatment of the securitization transactions have been eliminated. The securitized assets and associated liabilities are included in the consolidated financial statements. Cash and cash equivalent balances of Finacity are used only to support the securitizations of the receivables transferred, including the payment of related fees, costs and expenses. The receivables that have been included in securitizations are pledged as security for the benefit of Hannover and are only available for payment of the debt or other obligations arising in the securitization transactions until the associated debt or other obligations are satisfied. The asset backed debt has been issued directly by Finacity.

The following table shows the assets and the associated liabilities related to the Company’s secured debt arrangements that are included in the consolidated financial statements:


	July 31, 2012		April 30, 2012
Restricted cash	$	6,665	$	14,882
Transferred receivables		67,126		66,177
Current facility secured by accounts receivable		52,763		45,566

(iii)

Trinity Helicopters Limited:

As at July 31, 2012 the Company leased two aircraft from Trinity Helicopters Limited (“Trinity”), an entity considered to be a VIE. Prior to December 2011, Trinity was funded by an unrelated lender who was considered to be the primary beneficiary. In conjunction with the Company’s lease covenant negotiations, the Company agreed to purchase the aircraft off lease from the lender. Instead of outright purchasing the aircraft the Company loaned the lease termination sum to Trinity who used these funds to repay the financing from the unrelated lender and continued to lease the aircraft to the Company. The security interest in the aircraft was assigned to the Company.

The Company has been determined to be the primary beneficiary of the VIE and began consolidating this entity upon repayment of the previous lendor. Prior to consolidation of this entity, the aircraft leases were recorded as capital leases.

(b)

VIEs of which the Company is not the primary beneficiary:

(i)

Local ownership VIEs:

Thai Aviation Services (“TAS”)

TAS provides helicopter flying services in Thailand. The Company has a 29.9% interest in the ordinary shares of TAS, with the remaining 70.1% owned by a group of Thai Investors who are considered to be related to each other. The Thai investors have the ability to call and the Company has the ability to put all shares owned by the Company to the Thai investors at fair value in the event of a dispute.

The Company has determined that the activities that most significantly impact the economic performance of TAS are: servicing existing flying services contracts and entering into new contracts, safety and training, maintenance of aircraft and other investment activities. The Thai investors have the ability to control the majority of these decisions through Board majority.

The following table summarizes the amounts recorded for TAS in the consolidated balance sheet:


	July 31, 2012				April 30, 2012
	Carrying amounts		Maximum exposure to loss		Carrying amounts		Maximum exposure to loss
Receivables, net of allowances	$	2,543	$	2,543	$	2,408	$	2,408
Equity method investment		16,229		16,229		15,548		15,548

(ii)

Leasing entities:

Related party lessors

As at July 31, 2012 the Company had operating lease agreements for the lease of 28 aircraft (July 31, 2011 – 14 aircraft) from individual related party entities considered to be VIEs. The total operating lease expense for these leases was $10.9 million for the three months ended July 31, 2012 (July 31, 2011 - $5.7 million), with $4.7 million outstanding in payables and accruals at July 31, 2012 (April 30, 2012 - $4.4 million).

The lessor VIEs are considered related parties because they are partially financed through equity contributions from entities that have also invested in the Company. The Company has determined that the activity that most significantly impacts the economic performance of the related party lessor VIEs is the remarketing of the aircraft at the end of the lease term. As the Company does not have the power to make remarketing decisions, the Company has determined that it is not the primary beneficiary of the lessor VIEs.

Other VIE lessors

At July 31, 2012 the Company leased 8 aircraft (July 31, 2011 – 11 aircraft) from two different entities considered to be VIEs. At July 31, 2012, all eight leases were considered to be operating leases (July 31, 2011 – eight operating leases and three capital leases).

The Company has determined that the activity that most significantly impacts the economic performance of the lessor VIEs is the remarketing of the aircraft at the end of the lease term. As the Company does not have the power to make remarketing decisions, the Company has determined that it is not the primary beneficiary of the lessor VIEs.

4.	Variable interest entities:

(a)

VIEs of which the Company is the primary beneficiary:

(i)

Local ownership VIEs:

EEA Helicopters Operations B.V. (“EHOB”)

As a result of consolidating EHOB, the Company has recorded a non-controlling interest relating to the 50.1% Class A shareholder’s interest in the net assets of EHOB. As at April 30, 2012, the redeemable non-controlling interest is $1.7 million (April 30, 2011 – $3.1 million). Because of the terms of the put and call arrangements with the European investor, the non-controlling interest is considered redeemable and is classified outside of equity.

(a)

VIEs of which the Company is the primary beneficiary (continued):

(i)

Local ownership VIEs (continued):

BHH – Brazilian Helicopter Holdings S.A. (“BHH”)

BHH holds an investment in the common shares of its subsidiary, BHS – Brazilian Helicopter Services Taxi Aereo S.A. (“BHS”). BHS provides helicopter flying services to customers in Brazil.

The Company has entered into a shareholders’ agreement with the Brazilian Investor, which requires unanimous shareholder consent for important business decisions.

CHC Helicopters Canada Inc (“CHC Canada”)

CHC Canada provides helicopter flying services to customers in Canada.

The Company has entered into a shareholder’s agreement with the Canadian Investor, which requires unanimous shareholder consent for CHC Canada to enter into any material contracts.

Other local ownership VIEs

(a)

VIEs of which the Company is the primary beneficiary (continued):

(i)

Local ownership VIEs (continued):

Financial information of local ownership VIEs


	2012			2011

Cash	$	30,372		$	57,652
Accounts receivable		86,623			40,256
Other current assets		28,423			38,116
Goodwill		72,269			72,619
Other long-term assets		84,127			44,727


Total assets	$	301,814		$	253,370


Accounts payable	$	231,191		$	155,882
Other current liabilities		40,455			50,170
Pension liability		55,365			49,024
Other long-term liabilities		58,183			48,972


Total liabilities	$	385,194		$	304,048


Revenue	$	993,959		$	1,038,216
Net earnings (loss)		(3,589	)		5,650

(ii)

Accounts receivable securitization:

The following table shows the assets and the associated liabilities related to the Company’s secured debt arrangements that are included in the consolidated financial statements:


	2012		2011

Restricted cash	$	14,882	$	3,399
Transferred receivables		66,177		25,274
Current facility secured by accounts receivable		45,566		21,571

(iii)

Trinity Helicopters Limited:

As at April 30, 2012 the Company leased two aircraft from Trinity Helicopters Limited (“Trinity”), an entity considered to be a VIE. Prior to December 2011, Trinity was funded by an unrelated lender who was considered to be the primary beneficiary. In conjunction with the Company’s lease covenant negotiations (Note 25), the Company agreed to purchase the aircraft off lease from the lender. Instead of outright purchasing the aircraft the Company loaned the lease termination sum to Trinity who used these funds to repay the financing from the unrelated lender and continued to lease the aircraft to the Company. The security interest in the aircraft was assigned to the Company.

At the time of consolidation by the Company, Trinity owned aircraft with a book value of $13.2 million, which approximated fair value.

(b)

VIEs of which the Company is not the primary beneficiary:

(i)

Local ownership VIEs:

Thai Aviation Services (“TAS”)

(b)

VIEs of which the Company is not the primary beneficiary (continued):

(i)

Local ownership VIEs (continued):

The following table summarizes the amounts recorded for TAS in the consolidated balance sheet:


	April 30, 2012				April 30, 2011
	Carrying amounts		Maximum exposure to loss		Carrying amounts		Maximum exposure to loss

Accounts receivable	$	2,408	$	2,408	$	2,107	$	2,107
Equity method investment		15,548		15,548		14,250		14,250

(ii)

Leasing entities:

Related party lessors:

During the year ended April 30, 2012 the Company had operating lease agreements for the lease of 25 aircraft (2011 – 14 aircraft) from individual related party entities considered to be VIEs. The total operating lease expense for these leases was $28.8 million for the year ended April 30, 2012 (2011 – $20.5 million), with $4.4 million outstanding in accrued liabilities at April 30, 2012 (2011 – $3.0 million).

Other VIE lessors:

At April 30, 2012, the Company leased eight aircraft (2011 – ten aircraft) from two different entities considered to be VIEs. At April 30, 2012, all eight leases were considered to be operating leases (2011 – seven operating leases, three capital leases).

(b)

VIEs of which the Company is not the primary beneficiary (continued):

(ii)

Leasing entities (continued):

The following table summarizes the amounts recorded in respect of the operating leases with VIE lessors:


	April 30, 2012				April 30, 2011
	Carrying amounts		Maximum exposure to loss		Carrying amounts		Maximum exposure to loss

Funded residual value guarantees and receivables (included in Other assets)	$	—	$	—	$	2,386	$	2,386
Embedded equity		—		—		1,752		1,752
Accrued liabilities		—		n/a		330		n/a

The following table summarizes the amounts recorded in respect of the capital leases with VIE lessors:


	April 30, 2012				April 30, 2011
	Carrying amounts		Maximum exposure to loss		Carrying amounts		Maximum exposure to loss

Assets under capital lease	$	—	$	—	$	20,776	$	20,776
Capital lease obligation		—		n/a		15,515		n/a