COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next five fiscal years to purchase additional aircraft. As of July 11, 2013, we had 58 aircraft on order and options to acquire an additional 70 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. As discussed in the fiscal year 2013 Financial Statements, we were awarded a contract to provide civilian SAR services for all of the U.K. (the "U.K. SAR contract"). The SAR configured aircraft on order in the table below are intended to service this contract.



	Nine Months Ending March 31, 2014		Fiscal Year Ending March 31,
	Nine Months Ending March 31, 2014		2015		2016		2017		2018 and thereafter		Total
Commitments as of July 11, 2013: ⁽¹⁾⁽²⁾
Number of aircraft:
Medium	9		5		—		—		—		14
Large⁽³⁾	11		7		7		1		—		26
SAR configured	—		10		8		—		—		18
	20		22		15		1		—		58
Related expenditures (in thousands)⁽⁴⁾⁽⁵⁾
Medium and large	$	318,197	$	177,456	$	87,332	$	13,771	$	—	$	596,756
SAR configured	151,337		172,483		113,079		—		—		436,899
	$	469,534	$	349,939	$	200,411	$	13,771	$	—	$	1,033,655
Options as of July 11, 2013:⁽³⁾
Number of aircraft:
Medium	1		8		9		5		3		26
Large ⁽³⁾	—		9		12		15		8		44
	1		17		21		20		11		70

Related expenditures (in thousands)⁽⁴⁾	$	114,341	$	392,553	$	399,476	$	372,541	$	134,555	$	1,413,466

______


⁽¹⁾	Signed client contracts are currently in place that will utilize 31 of these aircraft.


⁽²⁾	On July 11, 2013, we entered into an agreement to order 11 AW189 large aircraft which are reflected in this table. These aircraft orders have delivery dates in fiscal years 2015 and 2016 with total payments of approximately $209.3 million.


⁽³⁾	Twenty-two aircraft on order and thirteen aircraft under options are expected to enter service between fiscal years 2014 and 2018 are subject to the successful development and certification of the aircraft.


⁽⁴⁾	Includes progress payments on aircraft scheduled to be delivered in future periods.


⁽⁵⁾	Expenditures for the nine months ending March 31, 2014 include payments made during the period from July 1 to July 11, 2013.

The following chart presents an analysis of our aircraft orders and options during fiscal year 2014:



	July 1 to		Three Months Ended
	July 11, 2013		June 30, 2013
	Orders	Options	Orders		Options
Beginning of period	47	70	45		70
Aircraft delivered	—	—	(5	)	—
Aircraft ordered	11	—	7		—
End of period	58	70	47		70

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, except for those with terms of a month or less that were not renewed, was $23.1 million and $16.3 million for the three months ended June 30, 2013 and 2012, respectively, which includes rental expense incurred under operating leases for aircraft of $18.1 million and $11.2 million, respectively.

The aircraft leases range from base terms of 60 to 84 months with renewal options of up to 108 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:



End of Lease Term	Number of Aircraft	Monthly Lease Payments (in thousands)
Nine months ending March 31, 2014 to fiscal year 2015	3	$	224
Fiscal year 2016 to fiscal year 2018	17	3,523
Fiscal year 2019 to fiscal year 2024	16	1,485
	36	$	5,232

Employee Agreements — Approximately 55% of our employees are represented by collective bargaining agreements and/or unions. These agreements generally include annual escalations of up to 12%. Periodically, certain groups of our employees who are not covered by a collective bargaining agreement consider entering into such an agreement.

During the three months ended June 30, 2012, we recognized $2.2 million in compensation expense included in direct cost related to severance costs as a result of the termination of a contract in the Southern North Sea. Also, during the three months ended June 30, 2012, we recognized approximately $2.0 million in compensation expense (including expenses recorded for the acceleration of unvested stock options and restricted stock) included in general and administrative expense related to the separation between us and an officer.

Nigerian Litigation — In November 2005, two of our consolidated foreign affiliates were named in a lawsuit filed with the High Court of Lagos State, Nigeria by Mr. Benneth Osita Onwubalili and his affiliated company, Kensit Nigeria Limited, which allegedly acted as agents of our affiliates in Nigeria. The claimants allege that an agreement between the parties was terminated without justification and seek damages of $16.3 million. We responded to this claim in early 2006. There has been minimal activity on this claim since then.

Environmental Contingencies — The U.S. Environmental Protection Agency, also referred to as the EPA, has in the past notified us that we are a potential responsible party, or 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 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.

On October 5, 2012, a Bell 407 helicopter operated by a U.S. subsidiary of ours was involved in an accident in which the pilot was fatally injured. There were no other passengers onboard. We are currently working with authorities in their investigation.

On October 22, 2012, an incident occurred with a Eurocopter EC225 Super Puma helicopter operated by another helicopter company, which resulted in a controlled ditching on the North Sea, south of the Shetland Isles, U.K. Following the ditching, all 19 passengers and crew were recovered safely and without injuries.

Related to this incident, the CAAs in the U.K. and Norway issued safety directives in October 2012, requiring operators to suspend operations of the affected aircraft. As a result, we ceased operating a total of sixteen large Eurocopter aircraft until further notice: twelve in the U.K., three in Australia and one in Norway.

In order to mitigate the impact on our clients, we have increased utilization of other in-region aircraft, returned to service previously idle Eurocopter AS332L helicopters not affected by the CAA safety directives and purchased ten Sikorsky S-92 large aircraft with options for 16 more.

Eurocopter, the manufacturer of the EC225 Super Puma aircraft, has indicated that they have determined the root causes of the gear shaft failure in the EC225 that occurred in 2012. This determination has been reviewed and verified by airworthiness authorities and independent third parties. The definitive solution to the problem will be a redesign of the gear shaft with earliest possible availability being in the middle of calendar year 2014. However, in July 2013 the European Aviation Safety Authority (the "EASA") issued an airworthiness directive providing for interim solutions involving minor aircraft modifications and new maintenance/operating procedures for mitigating shaft failure and enhancing early detection.

The CAAs in the U.K. and Norway have issued safety directives, which superseded and revoked the safety directive of October 2012 and now permits a return to service of the EC225 aircraft over harsh environments conditional upon compliance with the EASA airworthiness directive. We have commenced the required modifications and are carrying out the required inspections on our EC225 fleet in the U.K., Norway and Australia.

Currently, no client contracts have been cancelled in connection with the suspension in operations of the EC225 aircraft and we believe we have the contractual right to continue to receive monthly standing charges billed to our clients. In certain instances we have agreed to reduced monthly standing charge billings for the affected aircraft. We have been able to substantially replace the lost utilization from the EC225 aircraft with other aircraft, mitigating the impact on our results of operations for three months ended June 30, 2013.

The current situation will continue until the necessary modifications are made to the EC225 fleet and we are confident that the interim modifications will allow us to operate the aircraft safely, which could result in our return to revenue service for the EC225 aircraft in the third quarter of our fiscal year 2014. Until then, this situation could have a material adverse effect on our future business, financial condition and results of operations.

On October 27, 2012, in the course of routine operations, a Bell 206 performed a controlled sea ditching in Nigeria. All four people on board were uninjured and safe and the aircraft has been recovered. We are currently working with authorities in their investigation.

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.