COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Contracts — As shown in the table below, we expect to make additional capital expenditures over the next seven fiscal years to purchase additional aircraft. As of February 8, 2018, we had 27 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.



	Three Months Ending March 31, 2018		Fiscal Year Ending March 31,
	Three Months Ending March 31, 2018		2019		2020		2021		2022 and thereafter⁽¹⁾		Total
Commitments as of February 8, 2018: ⁽²⁾
Number of aircraft:
Large	—		1		—		4		18		23
U.K. SAR	—		—		4		—		—		4
	—		1		4		4		18		27
Related commitment expenditures (in thousands) ⁽²⁾⁽³⁾
Medium and large	$	—	$	19,856	$	25,536	$	78,726	$	285,295	$	409,413
U.K. SAR	3,242		—		62,970		—		—		66,212
	$	3,242	$	19,856	$	88,506	$	78,726	$	285,295	$	475,625
Options as of February 8, 2018:
Number of aircraft:
Large	—		2		2		—		—		4
	—		2		2		—		—		4

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

_____________


⁽¹⁾	Includes $96.0 million for five aircraft orders that can be cancelled prior to delivery dates. We made non-refundable deposits of $4.5 million related to these aircraft.


⁽²⁾	We have an agreement to defer payment of approximately $63.0 million in capital expenditures out of fiscal year 2018 and into future periods which is reflected in the table above.


⁽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 fiscal year 2018:



	Three Months Ended
	December 31, 2017		September 30, 2017			June 30, 2017
	Orders	Options	Orders		Options	Orders		Options
Beginning of period	27	4	29		4	32		4
Aircraft delivered	—	—	(2	)	—	(3	)	—
End of period	27	4	27		4	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, including leases for aircraft, and land and facilities. Rent expense incurred under all operating leases was $42.6 million and $53.7 million for the three months ended December 31, 2017 and 2016, respectively, and $158.5 million and $156.9 million for the nine months ended December 31, 2017 and 2016, respectively. Rent expense incurred under operating leases for aircraft was $36.5 million and $47.9 million for the three months ended December 31, 2017 and 2016, respectively, and $137.9 million and $138.7 million for the nine months ended December 31, 2017 and 2016, 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 December 31, 2017:



	End of Lease Term		Number of Aircraft
	Three months ending March 31, 2018 to fiscal year 2019		25
	Fiscal year 2020 to fiscal year 2022		48
	Fiscal year 2023 to fiscal year 2024		17
			90

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 $4.7 million and $14.4 million during the three and nine months ended December 31, 2017, respectively. 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 the nine months ended December 31, 2017.

Employee Agreements — Approximately 53% of our employees are represented by collective bargaining agreements and/or unions with 90% 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 4%. 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, and during fiscal year 2018 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 and nine months ended December 31, 2017 and 2016 is as follows (in thousands):



	Three Months Ended December 31,				Nine Months Ended December 31,
	2017		2016		2017		2016
VSP:
Direct cost	$	—	$	179	$	—	$	1,624
General and administrative	—		—		—		23
Total	$	—	$	179	$	—	$	1,647
ISP:
Direct cost	$	2,661	$	464	$	5,208	$	5,360
General and administrative	120		102		8,662		8,697
Total	$	2,781	$	566	$	13,870	$	14,057

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 December 31, 2017, we had $28.4 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 resulting in the European Aviation Safety Agency (“EASA”) issuing airworthiness directives prohibiting flight of H225LP and AS332L2 model aircraft. 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 continue not to operate for commercial purposes our sole H225LP model aircraft in Norway, our thirteen H225LP model aircraft in the U.K. 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. We are carefully evaluating next steps and demand for the H225LP model aircraft in our oil and gas and search and rescue operations worldwide, with the safety of passengers and crews remaining our highest priority. During the three months ended December 31, 2017, we returned three of these H225LP models to the lessor; two were previously operating in Australia and one was previously operating in the U.K. During February 2018, we returned one H225LP model to the lessor that was previously operating in the U.K.

Separately, our efforts to successfully integrate AW189 aircraft into service for the U.K. SAR contract have been delayed due to a product improvement plan with the aircraft. As a result, the acceptance of four AW189 aircraft will be pushed to later dates. We continue to meet our contractual obligations under the U.K. SAR contract through the utilization of other aircraft.

During fiscal year 2018, we reached agreements with OEMs to recover approximately $130.0 million related to ongoing aircraft issues mentioned above, of which $125.0 million was recovered during the three months ended December 31, 2017. For further details on the accounting treatment, see Note 1 — Basis of Presentation, Consolidation and Summary of Significant Accounting Policies — Property and Equipment and Assets Held for Sale.

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 December 31, 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.