COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next six fiscal years to purchase additional aircraft. As of June 30, 2017, we had 29 aircraft on order and options to acquire an additional four aircraft. Although a similar number of our existing aircraft may be sold during the same period, the additional aircraft on order will provide incremental fleet capacity in terms of revenue and operating income.



	Nine Months Ending March 31, 2018		Fiscal Year Ending March 31,
	Nine Months Ending March 31, 2018		2019		2020		2021		2022 and thereafter⁽¹⁾		Total
Commitments as of June 30, 2017: ⁽²⁾
Number of aircraft:
Medium	2		—		—		—		—		2
Large	—		5		4		4		10		23
U.K. SAR	4		—		—		—		—		4
	6		5		4		4		10		29
Related commitment expenditures (in thousands) ⁽³⁾
Medium and large	$	995	$	94,804	$	74,118	$	71,124	$	128,857	$	369,898
U.K. SAR	62,889		—		—		—		—		62,889
	$	63,884	$	94,804	$	74,118	$	71,124	$	128,857	$	432,787
Options as of June 30, 2017:
Number of aircraft:
Large	—		2		2		—		—		4
	—		2		2		—		—		4

Related option expenditures (in thousands) ⁽³⁾	$	—	$	44,181	$	31,536	$	—	$	—	$	75,717

_____________


⁽¹⁾	Includes $86.0 million for five aircraft orders that can be cancelled prior to delivery dates. As of June 30, 2017, we made non-refundable deposits of $4.5 million related to these aircraft.


⁽²⁾	Signed client contracts are currently in place that will utilize four of these aircraft.


⁽³⁾	Includes progress payments on aircraft scheduled to be delivered in future periods only if options are exercised.

The following chart presents an analysis of our aircraft orders and options during the three months ended June 30, 2017:



	Orders		Options
Beginning of period	32		4
Aircraft delivered	(3	)	—
End of period	29		4

We periodically purchase aircraft for which we have no orders.

Operating Leases — We have non-cancelable operating leases in connection with the lease of certain equipment, land and facilities, including leases for aircraft. Rental expense incurred under all operating leases was $58.7 million and $51.3 million for the three months ended June 30, 2017 and 2016, respectively, which includes rental expense incurred under operating leases for aircraft of $51.7 million and $44.7 million, respectively.

The aircraft leases range from base terms of up to 180 months with renewal options of up to 240 months in some cases, include purchase options upon expiration and some include early purchase options. The leases contain terms customary in transactions of this type, including provisions that allow the lessor to repossess the aircraft and require us to pay a stipulated amount if we default on our obligations under the agreements. The following is a summary of the terms related to aircraft leased under operating leases with original or remaining terms in excess of one year as of June 30, 2017:



	End of Lease Term		Number of Aircraft
	Nine months ending March 31, 2018 to fiscal year 2019		29
	Fiscal year 2020 to fiscal year 2022		48
	Fiscal year 2023 to fiscal year 2024		14
			91

We lease six S-92 model aircraft and one AW139 model aircraft from VIH Aviation Group, which is a related party due to common ownership of Cougar; we paid lease fees of $4.5 million for the three months ended June 30, 2017. Additionally, in July 2016, we began leasing a facility in Galliano, Louisiana from VIH Helicopters USA, Inc., another related party due to common ownership of Cougar; we paid $0.1 million in lease fees during three months ended June 30, 2017.

Employee Agreements — Approximately 53% of our employees are represented by collective bargaining agreements and/or unions with 84% of these employees being represented by collective bargaining agreements and/or unions that have expired or will expire in one year. These agreements generally include annual escalations of up to 3%. Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement. We also have employment agreements with members of senior management.

Separation Programs — In March 2015 and May 2016, we offered voluntary separation programs (“VSPs”) to certain employees as part of our ongoing efforts to improve efficiencies and reduce costs. Additionally, beginning in March 2015, we initiated involuntary separation programs (“ISPs”) in certain regions. Also, during June 2017, two named executive officers and the principal operating officer, along with other employees across various regions, departed from the Company as part of an organizational restructuring. In April 2016, one named executive officer, along with other employees across various regions, departed from the Company as part of a previous restructuring. We recognized compensation expense related to the departure of these officers and other employees included in the table below. The expense related to the VSPs and ISPs for the three months ended June 30, 2017 and 2016 is as follows (in thousands):



	Three Months Ended June 30,
	2017		2016
VSP:
Direct cost	$	—	$	855
General and administrative	—		23
Total	$	—	$	878
ISP:
Direct cost	$	1,070	$	498
General and administrative	7,609		4,030
Total	$	8,679	$	4,528

Environmental Contingencies — The U.S. Environmental Protection Agency (the “EPA”), has in the past notified us that we are a potential responsible party (“PRP”) at three former waste disposal facilities that are on the National Priorities List of contaminated sites. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, also known as the Superfund law, persons who are identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites. Although we have not yet obtained a formal release of liability from the EPA with respect to any of the sites, we believe that our potential liability in connection with the sites is not likely to have a material adverse effect on our business, financial condition or results of operations.

Other Purchase Obligations — As of June 30, 2017, we had $65.2 million of other purchase obligations representing unfilled purchase orders for aircraft parts, commitments associated with upgrading facilities at our bases and non-cancelable power-by-the-hour maintenance commitments.

Other Matters — Although infrequent, aircraft accidents have occurred in the past, and the related losses and liability claims have been covered by insurance subject to deductible, self-insured retention and loss sensitive factors.

As previously reported, on April 29, 2016, another company’s EC 225LP (also known as a H225LP) model helicopter crashed near Turøy outside of Bergen, Norway. The aircraft was carrying eleven passengers and two crew members at the time of the accident. Thirteen fatalities were reported. The Accident Investigation Board Norway (“AIBN”) issued a report confirming its initial findings that the accident was caused by the fatigue fracture of a component within the aircraft's gearbox. The AIBN continues to investigate.

Prior to the accident, we operated a total of 27 H225LP model aircraft (including 16 owned and 11 leased) worldwide as follows:

•Five H225LP model aircraft registered in Norway;

•Thirteen H225LP model aircraft registered in the United Kingdom; and

•Nine H225LP model aircraft registered in Australia.

On June 2, 2016, the European Aviation Safety Agency (“EASA”) issued an emergency airworthiness directive, which was subsequently amended on June 3, 2016 and June 9, 2016 (collectively, the “June 2016 EASA Airworthiness Directive”), prohibiting flight of H225LP and AS332L2 model aircraft. The June 2016 EASA Airworthiness Directive by its terms did not apply to military, customs, police, search and rescue, firefighting, coastguard or similar activities or services as those types of services are governed by the member states of EASA directly.

On October 7, 2016, EASA subsequently issued a new airworthiness directive effective October 13, 2016 (the “October EASA Airworthiness Directive”) which expressly supersedes the June 2016 Airworthiness Directive and details the mandatory actions necessary to permit a return to service of the H225LP and AS332L2 model aircraft. However, the safety directives issued in June 2016 by the Norway Civil Aviation Agency (“NCAA”) and the U.K. Civil Aviation Authority (“U.K. CAA”) prohibiting commercial operation of the H225LP and AS332L2 model aircraft remained in effect.

On July 7, 2017, the U.K. CAA announced its intention and the intention of the NCAA to remove the restrictions on commercial operations of the H225LP and AS332L2 model aircraft and to establish conditions for return to flight of such aircraft model types. The U.K. CAA stated that the manufacturer of such aircraft model types has developed certain specified modifications and enhanced safety measures and that a plan of checks, modifications and inspections will be undertaken before any flights take place.

On July 20, 2017, the U.K. CAA and NCAA issued safety and operational directives which detail the conditions to apply for safe return to service of H225LP and AS332L2 model aircraft, where operators wish to do so. We do not currently have any AS332L2 model aircraft in our fleet. We continue not to operate for commercial purposes our sole H225LP model aircraft in Norway, our thirteen H225LP model aircraft in the United Kingdom or our six H225LP model aircraft in Australia, or for search and rescue purposes, including training and missions, any of our other four H225LP model aircraft in Norway or our other three H225LP model aircraft in Australia. Our other aircraft, including SAR, continue to operate globally.

We are working with local regulators, Airbus, HeliOffshore and clients, to carefully evaluate next steps and demand for the H225LP model aircraft in our oil and gas and search and rescue operations worldwide. In compliance with the updated safety directives, we are continuing redelivery work on four H225LP aircraft for their planned return to the leasing company over the course of this fiscal year as per the lease redelivery requirements. This redelivery work includes required flight testing as a final part of returning the aircraft to full serviceability. We continue to monitor the situation closely, with the safety of passengers and crews remaining our highest priority.

It is too early to determine whether the H225LP accident that occurred in Norway in April 2016 will have a material impact on us as we are in the process of quantifying the impact and investigating potential claims against Airbus.

We operate in jurisdictions internationally where we are subject to risks that include government action to obtain additional tax revenue. In a number of these jurisdictions, political unrest, the lack of well-developed legal systems and legislation that is not clear enough in its wording to determine the ultimate application, can make it difficult to determine whether legislation may impact our earnings until such time as a clear court or other ruling exists. We operate in jurisdictions currently where amounts may be due to governmental bodies that we are not currently recording liabilities for as it is unclear how broad or narrow legislation may ultimately be interpreted. We believe that payment of amounts in these instances is not probable at this time, but is reasonably possible.

A loss contingency is reasonably possible if the contingency has a more than remote but less than probable chance of occurring. Although management believes that there is no clear requirement to pay amounts at this time and that positions exist suggesting that no further amounts are currently due, it is reasonably possible that a loss could occur for which we have estimated a maximum loss at June 30, 2017 to be approximately $4 million to $6 million.

We are a defendant in certain claims and litigation arising out of operations in the normal course of business. In the opinion of management, uninsured losses, if any, will not be material to our financial position, results of operations or cash flows.