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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 31, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 333-188927

CHC Helicopter S.A.

(Exact name of registrant as specified in its charter)

Luxembourg

98-0596821

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4740 Agar Drive

Richmond, BC V7B 1A3, Canada

(Address of principal executive offices, zip code)

(604) 276-7500

(Registrant’s telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 31, 2013, our ultimate parent, 6922767 Holding (Cayman) Inc., had 1,870,561,417 Class A Shares, 7,859,869 Class B Shares, 313,000 Special Shares and one Class C Share of stock outstanding.

CHC HELICOPTER S.A.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED

October 31, 2013

TABLE OF CONTENTS


		Page Number

	PART I—FINANCIAL INFORMATION

	Trademarks		3

	Glossary		3

ITEM 1.	Financial statements		5

	6922767 Holding S.à.r.l. consolidated balance sheets (unaudited) as of April 30, 2013 and October 31, 2013		5

	6922767 Holding S.à.r.l. consolidated statements of operations (unaudited) for the three and six months ended October 31, 2012 and 2013		6

	6922767 Holding S.à.r.l. consolidated statements of comprehensive loss (unaudited) for the three and six months ended October 31, 2012 and 2013		7

	6922767 Holding S.à.r.l. consolidated statements of cash flows (unaudited) for the six months ended October 31, 2012 and 2013		8

	6922767 Holding S.à.r.l. consolidated statements of shareholder’s equity (unaudited) for the six months ended October 31, 2012 and 2013		9

	Notes to 6922767 Holding S.à.r.l. interim consolidated financial statements (unaudited)		10

ITEM 2.	Management’s discussion and analysis of financial condition and results of operations		44

ITEM 3.	Quantitative and qualitative disclosures about market risk		74

ITEM 4.	Controls and procedures		75

	PART II—OTHER INFORMATION

ITEM 1.	Legal proceedings		76

ITEM 1A.	Risk factors		76

ITEM 2.	Unregistered sales of equity securities and use of proceeds		89

ITEM 3.	Defaults upon senior securities		89

ITEM 4.	Mine safety disclosures		89

ITEM 5.	Other information		89

ITEM 6.	Exhibits		89

PART I—FINANCIAL INFORMATION

TRADEMARKS

CHC Helicopter and the CHC Helicopter logo are trademarks of CHC Capital (Barbados) Ltd, a wholly owned subsidiary of CHC Helicopter S.A. All other trademarks and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders. All rights reserved. The absence of a trademark or service mark or logo from this Quarterly Report on Form 10-Q does not constitute a waiver of trademark or other intellectual property rights of CHC Helicopter S.A, its subsidiaries, affiliates, licensors or any other persons.

GLOSSARY



Deepwater		Water depths of approximately 4,500 feet to 7,499 feet.

Embedded equity		Embedded equity, an intangible asset, represents the amount by which the estimated market value of a leased helicopter exceeded the leased helicopter purchase option price at September 16, 2008, the acquisition date of the predecessor of our direct parent company by First Reserve. Embedded equity is assessed on an ongoing basis for impairment. Impairment, if any, is recognized in the consolidated statements of operations.

EMS		Emergency medical services.

Heavy helicopter		A category of twin-engine helicopters that requires two pilots, can accommodate 16 to 26 passengers and can operate under instrument flight rules, which allow daytime and nighttime flying in a variety of weather conditions. The greater passenger capacity, larger cabin, longer flight range, and ability to operate in adverse weather conditions make heavy helicopters more suitable than single engine helicopters for offshore support. Heavy helicopters are generally utilized to support the oil and gas sector, construction and forestry industries and SAR and EMS customer requirements.

HE count		Our heavy and medium helicopters, including owned and leased, are weighted at 100% and 50%, respectively, to arrive at a single HE count, excluding helicopters that are expected to be retired from the fleet.

HE Rate		The Heavy Equivalent Rate, or the HE Rate, is the third-party operating revenue from the Helicopter Services segment (excluding reimbursable revenue) divided by a weighted average factor corresponding to the number of heavy and medium helicopters in our fleet.

Long- term contracts		Contracts of three years or longer in duration.

Medium helicopter		A category of twin-engine helicopters that generally requires two pilots, can accommodate eight to 15 passengers and can operate under instrument flight rules, which allow daytime and nighttime flying in a variety of weather conditions. The greater passenger capacity, longer flight range, and ability to operate in adverse weather conditions make medium helicopters more suitable than single engine helicopters for offshore support. Medium helicopters are generally utilized to support the oil and gas sector, construction and forestry industries and SAR and EMS customer bases in certain jurisdictions. Medium helicopters can also be used to support the utility and mining sectors, as well as certain parts of the construction and forestry industries, where transporting a smaller number of passengers or carrying light loads over shorter distances is required.

MRO		Maintenance, repair and overhaul.

New technology		When used herein to classify our helicopters, a category of higher-value, recently produced, more sophisticated and more comfortable helicopters, including Eurocopter’s EC225, EC135, EC145 and EC155; Agusta’s AW139; and Sikorsky S76C+, S76C++ and S92A.



OEM		Original equipment manufacturer.

PBH		Power-by-the-hour. A program where a helicopter operator pays a fee per flight hour to an MRO provider as compensation for repair and overhaul components required in order for the helicopter to maintain an airworthy condition.

Rotables		Helicopter parts that can be repaired and reused such that they typically have an expected life approximately equal to the helicopters they support.

SAR		Search and rescue.

Ultra-deepwater		Water depths of approximately 7,500 feet or more.

6922767 HOLDING S.à.r.l.

Consolidated Balance Sheets

(Expressed in thousands of United States dollars except share information)

(Unaudited)


	April 30, 2013			October 31, 2013
Assets

Current assets:
Cash and cash equivalents	$	123,714		$	84,102
Receivables, net of allowance for doubtful accounts of $4.3 million and $3.8 million, respectively		317,249			293,564
Income taxes receivable		25,871			24,787
Deferred income tax assets		49			54
Inventories (note 5)		105,794			119,906
Prepaid expenses		22,219			30,212
Other assets (note 6)		56,083			58,536

		650,979			611,161
Property and equipment, net (note 3)		1,075,254			1,010,106
Investments		26,896			29,451
Intangible assets (note 7)		197,810			186,588
Goodwill		430,462			429,865
Restricted cash		29,639			33,188
Other assets (note 6)		438,777			543,758
Deferred income tax assets		10,752			9,562
Assets held for sale (note 4)		32,047			38,519

	$	2,892,616		$	2,892,198


Liabilities and Shareholder’s Equity

Current liabilities:
Payables and accruals	$	419,179		$	345,429
Deferred revenue		27,652			34,721
Income taxes payable		47,987			42,115
Deferred income tax liabilities		618			916
Current facility secured by accounts receivable (note 2)		53,512			43,400
Other liabilities (note 8)		22,791			21,155
Current portion of long-term debt obligations (note 9)		2,138			18,609

		573,877			506,345
Long-term debt obligations (note 9)		1,475,087			1,646,670
Deferred revenue		55,990			72,659
Other liabilities (note 8)		246,455			253,344
Deferred income tax liabilities		10,627			10,183

Total liabilities		2,362,036			2,489,201

Redeemable non-controlling interest (note 2)		(8,262	)		(7,177	)

Capital stock: Par value 1 Euro;
Authorized and issued: 1,228,377,771 and 1,228,377,772		1,607,101			1,607,101
Contributed surplus		80,686			140,915
Deficit		(1,059,110	)		(1,230,878	)
Accumulated other comprehensive loss		(89,835	)		(106,964	)

		538,842			410,174

	$	2,892,616		$	2,892,198

See accompanying notes to interim consolidated financial statements.

6922767 HOLDING S.à.r.l.

Consolidated Statements of Operations

(Expressed in thousands of United States dollars)

(Unaudited)


	Three months ended						Six months ended
	October 31, 2012			October 31, 2013			October 31, 2012			October 31, 2013

Revenue	$	446,786		$	443,372		$	862,855		$	858,303

Operating expenses:
Direct costs		(351,397	)		(371,794	)		(697,484	)		(714,900	)
Earnings from equity accounted investees		825			1,527			1,837			3,918
General and administration costs		(18,914	)		(19,092	)		(37,439	)		(37,153	)
Depreciation		(27,635	)		(38,694	)		(55,945	)		(70,751	)
Restructuring costs		(1,797	)		—			(3,727	)		—
Asset impairments (notes 3, 4, 6 and 7)		(9,846	)		(14,575	)		(16,347	)		(21,899	)
Loss on disposal of assets		(3,026	)		(3,299	)		(4,617	)		(4,421	)

		(411,790	)		(445,927	)		(813,722	)		(845,206	)


Operating income (loss)		34,996			(2,555	)		49,133			13,097

Interest on long-term debt		(30,075	)		(39,143	)		(59,958	)		(77,720	)
Foreign exchange gain (loss)		10,562			190			3,161			(12,958	)
Other financing income (charges) (note 10)		(3,449	)		(1,707	)		(11,603	)		4,117


Income (loss) from continuing operations before income tax		12,034			(43,215	)		(19,267	)		(73,464	)

Income tax expense (note 12)		(5,022	)		(5,491	)		(6,303	)		(10,799	)


Income (loss) from continuing operations		7,012			(48,706	)		(25,570	)		(84,263	)

Earnings from discontinued operations, net of tax		467			—			812			—

Net earnings (loss)	$	7,479		$	(48,706	)	$	(24,758	)	$	(84,263	)


Net earnings (loss) attributable to:
Controlling interest	$	6,999		$	(48,415	)	$	(26,106	)	$	(86,620	)
Non-controlling interest		480			(291	)		1,348			2,357

Net earnings (loss)	$	7,479		$	(48,706	)	$	(24,758	)	$	(84,263	)

See accompanying notes to interim consolidated financial statements.

6922767 HOLDING S.à.r.l.

Consolidated Statements of Comprehensive Loss

(Expressed in thousands of United States dollars)

(Unaudited)


	Three months ended						Six months ended
	October 31, 2012			October 31, 2013			October 31, 2012			October 31, 2013

Net earnings (loss)	$	7,479		$	(48,706	)	$	(24,758	)	$	(84,263	)

Other comprehensive income (loss):
Net foreign currency translation adjustments		24,747			8,237			(3,817	)		(19,800	)
Net change in defined benefit pension plan, net of income tax		(1,913	)		355			(4,553	)		698
Net change in cash flow hedges		—			—			(169	)		—

Comprehensive income (loss)	$	30,313		$	(40,114	)	$	(33,297	)	$	(103,365	)


Comprehensive income (loss) attributable to:
Controlling interest	$	30,123		$	(38,442	)	$	(36,111	)	$	(103,749	)
Non-controlling interest		190			(1,672	)		2,814			384

Comprehensive income (loss)	$	30,313		$	(40,114	)	$	(33,297	)	$	(103,365	)

See accompanying notes to interim consolidated financial statements.

6922767 HOLDING S.à.r.l.

Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited)


	Six months ended
	October 31, 2012			October 31, 2013

Cash provided by (used in):
Operating activities:
Net loss	$	(24,758	)	$	(84,263	)
Earnings from discontinued operations, net of tax		812			—

Loss from continuing operations		(25,570	)		(84,263	)
Adjustments to reconcile net loss to cash flows provided by (used in) operating activities:
Depreciation		55,945			70,751
Loss on disposal of assets		4,617			4,421
Asset impairments		16,347			21,899
Earnings from equity accounted investees		(1,837	)		(3,918	)
Deferred income taxes		(6,252	)		978
Non-cash stock-based compensation expense		223			229
Amortization of unfavorable contract credits		(2,826	)		—
Amortization of lease related fixed interest rate obligations		(1,443	)		(965	)
Amortization of long-term debt and lease deferred financing costs		4,719			5,241
Non-cash accrued interest income on funded residual value guarantees		(3,580	)		(3,363	)
Mark to market loss (gain) on derivative instruments		2,964			(10,340	)
Non-cash defined benefit pension expense (note 13)		3,431			216
Defined benefit contributions and benefits paid		(20,867	)		(26,334	)
Increase to deferred lease financing costs		(1,489	)		(2,893	)
Unrealized loss (gain) on foreign currency exchange translation		(582	)		9,295
Other		7,922			3,055
Decrease in cash resulting from changes in operating assets and liabilities (note 15)		(55,480	)		(7,823	)

Cash used in operating activities		(23,758	)		(23,814	)


Financing activities:
Sold interest in accounts receivable, net of collections		8,917			(10,349	)
Proceeds from issuance of capital stock		—			60,000
Proceeds from issuance of senior secured notes		202,000			—
Proceeds from issuance of senior unsecured notes		—			300,000
Long-term debt proceeds (note 17 (e))		390,229			450,000
Long-term debt repayments (note 17 (e))		(471,824	)		(561,378	)
Increase in revolver and notes deferred financing costs		(3,793	)		(5,987	)
Dividend distribution to parent		—			(85,148	)

Cash provided by financing activities		125,529			147,138


Investing activities:
Property and equipment additions		(142,267	)		(227,562	)
Proceeds from disposal of property and equipment		93,413			169,209
Aircraft deposits net of lease inception refunds		(40,926	)		(92,676	)
Restricted cash		5,384			(1,592	)
Distribution from equity investments		—			1,677

Cash used in investing activities		(84,396	)		(150,944	)

Cash provided by (used in) continuing operations		17,375			(27,620	)

Cash flows provided by (used in) discontinued operations:
Cash flows provided by operating activities		812			—
Cash flows used in financing activities		(812	)		—

Cash provided by (used in) discontinued operations		—			—

Effect of exchange rate changes on cash and cash equivalents		(4,144	)		(11,992	)

Change in cash and cash equivalents during the period		13,231			(39,612	)
Cash and cash equivalents, beginning of period		55,547			123,714

Cash and cash equivalents, end of period	$	68,778		$	84,102

See accompanying notes to interim consolidated financial statements.

6922767 HOLDING S.à.r.l.

Consolidated Statements of Shareholder’s Equity

(Expressed in thousands of United States dollars)

(Unaudited)


Six months ended October 31, 2012	Capital stock		Contributed surplus		Deficit			Accumulated other comprehensive loss			Total shareholder’s equity			Redeemable non- controlling interests

April 30, 2012	$	1,607,101	$	55,318	$	(940,031	)	$	(61,596	)	$	660,792		$	1,675

Net change in cash flow hedges		—		—		—			(169	)		(169	)		—
Foreign currency translation		—		—		—			(5,844	)		(5,844	)		2,027
Stock compensation expense		—		223		—			—			223			—
Defined benefit plan, net of income tax		—		—		—			(3,992	)		(3,992	)		(561	)
Net earnings (loss)		—		—		(26,106	)		—			(26,106	)		1,348

October 31, 2012	$	1,607,101	$	55,541	$	(966,137	)	$	(71,601	)	$	624,904		$	4,489


Six months ended October 31, 2013	Capital stock		Contributed surplus		Deficit			Accumulated other comprehensive loss			Total shareholder’s equity			Redeemable non- controlling interests

April 30, 2013	$	1,607,101	$	80,686	$	(1,059,110	)	$	(89,835	)	$	538,842		$	(8,262	)

Issuance of capital stock (note 11)		—		60,000		—			—			60,000			—
Dividend paid to Parent (note 17(d) and (f))		—		—		(85,148	)		—			(85,148	)		—
Capital contribution by shareholder (note 2)		—		—		—			—			—			701
Foreign currency translation		—		—		—			(17,351	)		(17,351	)		(2,449	)
Stock compensation expense		—		229		—			—			229			—
Defined benefit plan, net of income tax		—		—		—			222			222			476
Net earnings (loss)		—		—		(86,620	)		—			(86,620	)		2,357

October 31, 2013	$	1,607,101	$	140,915	$	(1,230,878	)	$	(106,964	)	$	410,174		$	(7,177	)

See accompanying notes to interim consolidated financial statements.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

1.	Significant accounting policies:

(a)

Basis of presentation:

The unaudited interim consolidated financial statements (“interim financial statements”) include the accounts of 6922767 Holding S.à.r.l., a Luxembourg private limited liability company (société à responsabilité limitée) which is the direct parent of CHC Helicopter S.A., the registrant, and its subsidiaries (the “Company”, “we”, “us” or “our”) after elimination of all significant intercompany accounts and transactions. The ultimate indirect parent of the Company is 6922767 Holding (Cayman) Inc. The interim financial statements are presented in United States dollars and have been prepared in accordance with the United States Generally Accepted Accounting Principles (“US GAAP”) for interim financial information. Accordingly, the interim financial statements do not include all of the information and disclosures for complete financial statements.

In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Results of operations for the periods presented are not necessarily indicative of results of operations for the entire year.

The financial information as of April 30, 2013 is derived from our annual audited consolidated financial statements and notes for the fiscal year ended April 30, 2013. These interim financial statements should be read in conjunction with our consolidated financial statements and related notes included in our annual audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013 which was filed with the SEC on July 15, 2013.

(b)

Foreign currency:

The currencies which most influence our foreign currency translations and the relevant exchange rates were:


	Six months ended
	October 31, 2012		October 31, 2013

Average rates:
£/US $		1.582551		1.557071
CAD/US $		0.998203		0.967305
NOK/US $		0.169695		0.168505
AUD/US $		1.023458		0.939447
€/US $		1.264125		1.326369

Period end rates:
£/US $		1.611044		1.606578
CAD/US $		1.000400		0.958865
NOK/US $		0.175170		0.168089
AUD/US $		1.036815		0.947071
€/US $		1.295818		1.359382

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

1.	Significant accounting policies (continued):

(c)

Comparative figures:

Certain comparative figures have been reclassified to conform with the financial presentation adopted for the current interim period. A portion of the General and administration costs have been reclassified to Direct costs to reflect the safety group being moved from Corporate to Helicopter Services to reflect its focus on safety within the flying services segment. The impairments of funded residual value guarantees, intangible assets, assets held for use and assets held for sale have been grouped together and shown as asset impairments on the consolidated statements of operations.

During the year ended April 30, 2013, the Company’s chief operating decision maker (“the CODM”) decided to tightly integrate aircraft planning with our Helicopter Services’ commercial operations. As a result, the fleet division previously included in the Corporate Segment was combined with Helicopter Services in the financial information provided to the CODM. Heli-One revenues were also restated to exclude the elimination of inter-company profits on the internal base maintenance work performed for our internal fleet of aircraft. The segmented information for the three and six months ended October 31, 2012 has been restated in the financial information provided to the CODM to reflect the reclassification of the financial information for both of these changes.

(d)

Recent accounting pronouncements adopted in the period:

Reporting of amounts reclassified out of accumulated other comprehensive loss:

On May 1, 2013 we adopted the amendment to the disclosure requirements for amounts reclassified out of accumulated other comprehensive loss. Entities are required to separately provide information about the effects on net earnings (loss) of significant amounts reclassified out of each component of accumulated other comprehensive loss if those amounts all are required under other accounting pronouncements to be reclassified to net earnings (loss) in their entirety in the same reporting period. Entities are required to provide this information together, either on the face of the statement where net earnings (loss) is presented or as a separate disclosure in the notes to the financial statements. The amounts reclassified out of accumulated other comprehensive loss for defined benefit pension plans are included in the computation of net defined benefit pension plan expense (note 13). No other amounts are reclassified out of accumulated other comprehensive loss.

Annual indefinite-life intangible asset impairment testing:

On May 1, 2013 we adopted the amended accounting guidance on the annual indefinite-life intangible asset impairment testing to allow for the assessment of qualitative factors in determining if it is more likely than not that an asset might be impaired and whether it is necessary to perform the intangible asset impairment test required by the current accounting standards. This new guidance did not have a material impact on our consolidated financial statements.

(e)

Recent accounting pronouncements not yet adopted:

In July 2013, the FASB issued accounting guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss or tax credit carryforward exists. This guidance is effective for the annual financial statements for the year ending April 30, 2015. We are currently assessing the impact of this guidance on our consolidated financial statements.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

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 our 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.

We own 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.

We also own 7,000,000 par value 1 Euro Profit Certificates in EHOB. Through our ownership of the Profit Certificates, we are 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.

We also hold a call option over the Class A shareholder’s stock in EHOB and have granted a put option to the Class A shareholder which entitles the Class A shareholder to put its shares back to us. 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 of control. The Class A shareholder also holds a call option over our Class B shares which is exercisable only in the event of bankruptcy.

We have 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, we have 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 us and the lease agreements require that all aircraft maintenance be provided by us. The shareholders’ agreement requires EHOB to ensure safety standards meet minimums set by us.

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, 2013, the redeemable non-controlling interest is a loss of $8.3 million and as at October 31, 2013, the redeemable non-controlling interest is a loss of $7.9 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.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

2.	Variable interest entities (continued):

(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.

We have 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 us and is therefore considered to be a related party.

We have entered into a put/call arrangement which gives us the right to purchase the BHH shares held by the Brazilian investor and the Brazilian investor the right to put its shares to us 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.

We have 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.

We own 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. The Board of CHC Canada is comprised of one director nominated by us and two directors nominated by the Canadian Investor.

We have entered into an arrangement which allows the Canadian Investor to put its shares back to us at any time for any reason. We have also entered into a call arrangement which allows us 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.

We have entered into a shareholders’ agreement with the Canadian Investor, which requires unanimous shareholder consent for CHC Canada to enter into any material contracts.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

2.	Variable interest entities (continued):

(a)

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

(i)

Local ownership VIEs (continued):

Atlantic Aviation Limited and Atlantic Aviation FZE (collectively “Atlantic Aviation”)

On October 22, 2012, the Company and a Nigerian company (“Nigerian Company”) finalized an agreement to provide helicopter flying services to customers in Nigeria through Atlantic Aviation.

We have no equity ownership in Atlantic Aviation as 100% of the share capital of Atlantic Aviation is held by the Nigerian Company.

The Nigerian Company’s risks and rewards are not representative of its equity interest as it is only entitled to management fees for the first four years of the agreement. In the fifth year the Nigerian Company can opt to receive 40% of the profits or losses or continue with the existing arrangement. We will bear the risk for substantially all of the losses for the first four years of the arrangement.

Under the terms of the agreement the Nigerian Company will not provide any additional funding to Atlantic Aviation as we are funding all start-up costs.

We have also entered into a put/call arrangement which gives us the right to purchase all of the Atlantic Aviation shares held by the Nigerian Company and the Nigerian Company the right to put its shares to us. The calls are exercisable in certain circumstances including: liquidation, events of default, and change of control of the Company or the Nigerian Company. The put is exercisable in the event the agreement is terminated with cause and the Nigerian Company does not continue the business of Atlantic Aviation. The price on the put/call arrangement is a multiple of the Nigerian Company’s share of the preceding 12 months of profits of Atlantic Aviation.

We have determined that the activities that most significantly impact the economic performance of Atlantic Aviation are: entering into flying contracts, safety and training, and maintenance of aircraft. Atlantic Aviation’s fleet of aircraft is leased entirely from us and the lease agreements require that all aircraft maintenance be provided by us. We have entered into various contracts with Atlantic Aviation to provide management, employees and technical services. The framework agreement requires Atlantic Aviation to ensure safety standards meet minimums set by us.

As a result of consolidating Atlantic Aviation, the Company has recorded a non-controlling interest relating to the Nigerian Company shareholder’s interest in the net assets of Atlantic Aviation. As at October 31, 2013, the redeemable non-controlling interest is $0.7 million. Because of the terms of the put and call arrangements with the Nigerian Company, the non-controlling interest is considered redeemable and is classified outside of equity.

Atlantic Aviation has a contingent credit with a third party bank for up to $10.0 million to be able to issue bonds.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

2.	Variable interest entities (continued):

(a)

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

(i)

Local ownership VIEs (continued):

Other local ownership VIEs

We also have operations in several other countries that are conducted through entities with local ownership. We have consolidated these entities because the local owners do not have extensive knowledge of the aviation industry and defer to us 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:


	April 30, 2013		October 31, 2013

Cash and cash equivalents	$	46,366	$	9,795
Receivables, net of allowance		102,659		118,440
Other current assets		37,174		50,739
Goodwill		72,042		72,517
Other long-term assets		114,657		133,738

Total assets	$	372,898	$	385,229


Payables and accruals	$	338,802	$	357,762
Other current liabilities		37,069		30,032
Accrued pension obligations		74,268		70,255
Other long-term liabilities		54,252		63,611

Total liabilities	$	504,391	$	521,660


	Three months ended					Six months ended
	October 31, 2012		October 31, 2013			October 31, 2012		October 31, 2013
Revenue	$	274,788	$	272,092		$	535,537	$	528,270
Net earnings (loss)		1,700		(1,953	)		6,018		(4,978	)

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

2.	Variable interest entities (continued):

(a)

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

(ii)

Accounts receivable securitization:

We enter 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 us. 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 us.

We have determined that servicing decisions most significantly impact the economic performance of Finacity and as we have the power to make these decisions, we are 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 our secured debt arrangements that are included in the consolidated financial statements:


	April 30, 2013		October 31, 2013

Restricted cash	$	14,143	$	5,846
Transferred receivables		77,473		72,576
Current facility secured by accounts receivable		53,512		43,400

(iii)

Trinity Helicopters Limited:

As at October 31, 2013 we 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 our lease covenant negotiations, we agreed to purchase the aircraft off lease from the lender. Instead of outright purchasing the aircraft we loaned the lease termination sum to Trinity which used these funds to repay the financing from the unrelated lender and continued to lease the aircraft to us. The security interest in the aircraft was assigned to us.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

2.	Variable interest entities (continued):

(a)

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

(iii)

Trinity Helicopters Limited (continued):

We have been determined to be the primary beneficiary of the VIE and began consolidating this entity upon repayment of the previous lender. 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. We have 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 we have the ability to put all shares owned by us to the Thai investors at fair value in the event of a dispute.

We have 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:


	April 30, 2013				October 31, 2013
	Carrying amounts		Maximum exposure to loss		Carrying amounts		Maximum exposure to loss

Receivables, net of allowances	$	2,662	$	2,662	$	2,565	$	2,565
Equity method investment		18,119		18,119		19,347		19,347

(ii)

Leasing entities:

Related party lessors

As at October 31, 2012 and 2013 we had operating lease agreements for the lease of 29 aircraft and 31 aircraft, respectively, from individual related party entities considered to be VIEs. These transactions are carried out on an arm’s-length basis and are recorded at the exchange amounts. The total operating lease expense for these leases was $11.9 million and $12.6 million for the three months ended October 31, 2012 and 2013, respectively, and $22.8 million and $25.2 million for the six months ended October 31, 2012 and 2013, respectively, with $4.5 million and $4.0 million outstanding in payables and accruals at April 30, 2013 and October 31, 2013, respectively. Accounts receivable of $5.1 million and $6.7 million are due from related party lessors as at April 30, 2013 and October 31, 2013, respectively.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

2.	Variable interest entities (continued):

(b)

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

(ii)

Leasing entities (continued):

The lessor VIEs are considered related parties because they are partially financed through equity contributions from entities that have also invested in the Company. We have 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 we do not have the power to make remarketing decisions, we have determined that we are not the primary beneficiary of the lessor VIEs.

Other VIE lessors

As at October 31, 2012 we leased 10 aircraft from two different entities considered to be VIEs. As at October 31, 2013 we leased 32 aircraft from three different entities considered to be VIEs. All 10 and 32 leases were considered to be operating leases as at October 31, 2012 and 2013, respectively.

We have 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 we do not have the power to make remarketing decisions, we have determined that we are not the primary beneficiary of the lessor VIEs.

3.	Property and equipment:

Due to aircraft coming off contract and with no plan to redeploy them within the business we recorded $2.5 million of impairment charges to write down the carrying value of three aircraft held for use to their fair values for the three and six months ended October 31, 2013. These amounts are included in asset impairments on the consolidated statements of operations. This measurement is considered a level 2 measurement in the fair value hierarchy as the measurement of the fair value of the flying assets is based on aircraft values from third party appraisals using market data.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

4.	Assets held for sale:

We have classified certain assets such as aircraft and buildings as held for sale as these assets are ready for immediate sale and management expects these assets to be sold within one year.


	April 30, 2013						October 31, 2013
	# Aircraft						# Aircraft

Aircraft held for sale:
Book value, beginning of period		18		$	79,293			14		$	30,206
Classified as held for sale, net of impairment		11			7,454			14			27,005
Sales		(10	)		(35,303	)		(4	)		(12,405	)
Reclassified as held for use		(5	)		(21,049	)		(6	)		(7,514	)
Foreign exchange		—			(189	)		—			(677	)


Aircraft held for sale		14			30,206			18			36,615

Buildings held for sale		—			1,841			—			1,904

Total assets held for sale				$	32,047					$	38,519

The aircraft classified as held for sale are older technology aircraft that are being divested by us. The buildings classified as held for sale are the result of relocation of certain of our base operations. During the six months ended October 31, 2013, there were six aircraft that were reclassified to assets held for use as management determined that we would obtain a higher value from using these aircraft as parts within the business than selling them in the external market.

During the three months ended October 31, 2012 and 2013, we recorded impairment charges of $3.7 million and $11.4 million to write down the carrying value of eight aircraft and 12 aircraft held for sale to their fair value less costs to sell, respectively. During the six months ended October 31, 2012 and 2013, we recorded impairment charges of $9.3 million and $18.5 million to write down the carrying value of 15 aircraft and 19 aircraft held for sale to their fair value less costs to sell, respectively. These amounts are included in asset impairments on the consolidated statements of operations. The fair value of assets held for sale is considered a level 2 measurement in the fair value hierarchy as the measurement is based on third party appraisals using market data.

5.	Inventories:


	April 30, 2013			October 31, 2013

Work-in-progress for maintenance contracts under completed contract accounting	$	3,661		$	5,384
Consumables		111,862			122,628
Provision for obsolescence		(9,729	)		(8,106	)

	$	105,794		$	119,906

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

6.	Other assets:


	April 30, 2013		October 31, 2013

Current:
Aircraft operating lease funded residual value guarantees (a)	$	20,184	$	18,255
Deferred financing costs		8,771		9,641
Mobilization costs		6,474		8,240
Residual value guarantee		6,278		3,777
Foreign currency embedded derivatives and forward contracts (note 14)		5,764		8,595
Prepaid aircraft rentals		3,465		3,340
Other (note 2 (b) (ii))		5,147		6,688

	$	56,083	$	58,536


Non-current:
Aircraft operating lease funded residual value guarantees (a)	$	196,497	$	201,954
Aircraft deposits		67,347		134,882
Accrued pension asset		49,562		67,445
Deferred financing costs		48,971		52,655
Mobilization costs		22,645		22,683
Residual value guarantee		15,047		15,252
Security deposits		10,903		24,349
Pension guarantee assets		10,141		9,833
Prepaid aircraft rentals		9,940		8,192
Foreign currency embedded derivatives and forward contracts (note 14)		2,223		4,152
Other		5,501		2,361

	$	438,777	$	543,758

(a)

Aircraft operating lease funded residual value guarantees:

We believe that the aircraft will realize a value upon sale at the end of the lease terms sufficient to recover the carrying value of these guarantees, including accrued interest. In the event that aircraft values decline such that we do not believe funded residual value guarantees are recoverable, an impairment is recorded. During the three months ended October 31, 2012 we recognized a recovery of $0.1 million. During the six months ended October 31, 2012, we recognized impairment losses of $0.6 million. The impairment losses are included in asset impairments on the consolidated statements of operations.

7.	Intangible assets:

Due to a decline in aircraft values, we recorded impairment charges of $6.3 million and $0.7 million in the three months ended October 31, 2012 and 2013, respectively, and $5.8 million and $0.9 million in the six months ended October 31, 2012 and 2013 to write down a portion of our embedded equity to fair value. These amounts are included in asset impairments on the consolidated statements of operations. This measurement is considered a level 2 measurement in the fair value hierarchy as the measurement of embedded equity is based on aircraft values from third party appraisals using market data.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

8.	Other liabilities:


	April 30, 2013		October 31, 2013

Current:
Foreign currency embedded derivatives and forward contracts (note 14)	$	12,732	$	10,968
Deferred gains on sale-leasebacks of aircraft		4,632		6,325
Fixed interest rate obligations		1,783		829
Aircraft modifications		1,629		1,366
Residual value guarantees		944		875
Contract inducement		792		792
Lease aircraft return costs		279		—

	$	22,791	$	21,155


Non-current:
Accrued pension obligations	$	137,259	$	130,573
Deferred gains on sale-leasebacks of aircraft		34,616		55,223
Residual value guarantees		27,401		26,098
Foreign currency embedded derivatives and forward contracts (note 14)		15,771		10,678
Insurance claims accrual		11,192		13,387
Contract inducement		9,247		8,877
Fixed interest rate obligations		1,155		445
Deferred rent liabilities		1,045		1,348
Other		8,769		6,715

	$	246,455	$	253,344

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

9.	Long-term debt obligations:


	Principal Repayment terms		Facility maturity dates		April 30, 2013			October 31, 2013

Senior secured notes		At maturity		October 2020	$	1,287,303		$	1,287,901
Senior unsecured notes		At maturity		June 2021		—			300,000

Revolving credit facility:
US LIBOR plus a 4.5% margin		At maturity		October 2015		125,000			—
Alternate Base Rate plus a 3.5% margin		At maturity		October 2015		—			15,000

Other term loans:
Eurocopter Loan - 2.50%		At maturity		December 2015		2,238			2,340
EDC-B.A. CDOR rate (6 month) plus a 0.8% margin		Semi-annually		June 2014		1,616			1,040

Capital lease obligations		Quarterly		May 2014 - October 2017		25,663			25,140

Boundary Bay financing – 6.93%		Monthly		April 2035		35,405			33,858


Total long-term debt obligations						1,477,225			1,665,279

Less: current portion						(2,138	)		(18,609	)


Long-term debt obligations					$	1,475,087		$	1,646,670

On May 13, 2013, one of our subsidiaries issued $300.0 million of unsecured senior notes (the “unsecured notes”). The unsecured notes are issued under an indenture. The unsecured notes have an aggregate principal value of $300.0 million, were issued at par value, bear interest at a rate of 9.375% with semi-annual interest payments on June 1 and December 1 and mature on June 1, 2021.

The unsecured notes are guaranteed by us and most of our subsidiaries on a senior unsecured basis. The unsecured notes are effectively subordinated to the secured indebtedness including the revolving credit facility and the senior secured notes to the extent of the value of the collateral securing such secured indebtedness and are senior to all unsecured subordinated indebtedness of each guarantor.

The unsecured notes have the following optional redemption features:

•

Any time prior to June 1, 2016, the issuer can redeem 35% of the aggregate principal amount of the unsecured notes at a redemption price of 109.375% of the principal plus accrued and unpaid interest with the net proceeds of one or more equity offerings provided that at least 50% of the aggregate principal of the unsecured notes remains outstanding and the redemption occurs within 180 days of the closing date of the equity offering.

•

The issuer can redeem the unsecured notes in whole or part, on or after June 1, 2016, at redemption prices that range from 100% to 107.031% of the principal, plus accrued and unpaid interest.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

9.	Long-term debt obligations (continued):

•

The issuer can redeem the unsecured notes in whole or in part at a price of 100% of the aggregate principal amount plus a premium equal to the greater of 1% of the principal amount or the excess of the present value at the redemption date over the principal amount of the unsecured notes. Under this option, the present value at the redemption is to be computed based on a redemption price of 107.031% on June 1, 2016 plus all required interest payments due on the unsecured notes through June 1, 2016 (excluding accrued but unpaid interest to the applicable redemption date). The applicable discount rate is equal to the treasury rate as of the redemption date plus 50 basis points.

Each holder of the unsecured notes has the right to require us to repurchase the unsecured notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest upon the occurrence of certain events constituting a change of control of the Company.

The unsecured notes contain certain covenants limiting the incurrence of additional indebtedness and liens based on the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to fixed charges and total indebtedness as defined in the indenture and other restrictions including limitations on disposition of assets, the payment of dividends or redemption of equity interests and transactions with affiliates. At October 31, 2013, we were in compliance with all long-term debt obligations covenants.

10.

Other financing income (charges):


	Three months ended						Six months ended
	October 31, 2012			October 31, 2013			October 31, 2012			October 31, 2013

Amortization of deferred financing costs	$	(1,849	)	$	(2,091	)	$	(3,486	)	$	(5,849	)
Net gain (loss) on fair value of derivative financial instruments		608			(5,434	)		(3,703	)		8,793
Amortization of guaranteed residual values		(546	)		514			(1,067	)		(1,094	)
Interest expense		(3,282	)		(6,925	)		(6,363	)		(12,193	)
Interest income		3,239			5,105			6,326			9,163
Fee settlement		—			10,000			—			10,000
Other		(1,619	)		(2,876	)		(3,310	)		(4,703	)

	$	(3,449	)	$	(1,707	)	$	(11,603	)	$	4,117

11.

Capital stock:

On August 26, 2013, we issued one share of capital stock for cash consideration of $60.0 million, which was allocated one Euro to the Capital Stock of the Company and $60.0 million to contributed surplus.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

12.

Income taxes:

As we operate in several tax jurisdictions, our income is subject to various rates of taxation. The income tax expense differs from the amount that would have resulted from applying the Luxembourg statutory income tax rates to income (loss) from continuing operations before income taxes as follows:


	Three months ended						Six months ended
	October 31, 2012			October 31, 2013			October 31, 2012			October 31, 2013

Income (loss) from continuing operations before income tax	$	12,034		$	(43,215	)	$	(19,267	)	$	(73,464	)
Combined Luxembourg statutory income tax rate		29	%		29	%		29	%		29	%


Income tax recovery (expense) calculated at statutory rate		(3,490	)		12,533			5,587			21,305
(Increase) decrease in income tax recovery (expense) resulting from:
Rate differences in various jurisdictions		9,019			6,296			11,219			12,135
Change in tax law		(178	)		—			(757	)		(605	)
Non-deductible items		(7,281	)		(20,195	)		(15,751	)		(31,756	)
Other foreign taxes		(2,363	)		(5,236	)		(5,795	)		(7,290	)
Non-deductible portion of capital losses		(102	)		(1,183	)		81			(645	)
Non-taxable income		7,511			9,297			14,777			19,497
Adjustments to prior years		(667	)		—			(706	)		643
Functional currency adjustments		(3,904	)		(3,211	)		4,130			3,817
Valuation allowance		(3,630	)		(3,888	)		(18,791	)		(28,089	)
Other		63			96			(297	)		189

Income tax expense	$	(5,022	)	$	(5,491	)	$	(6,303	)	$	(10,799	)

As at October 31, 2013, there was $23.9 million in unrecognized tax benefits, of which $16.4 million would have an impact on the effective tax rate, if recognized.

During the six months ended October 31, 2013, no new uncertain tax positions were identified. As of April 30, 2013 and October 31, 2013, interest and penalties totaling $4.5 million and $5.4 million, respectively, were accrued.

13.

Employee pension plans:

The net defined benefit pension plan expense is as follows:


	Three months ended						Six months ended
	October 31, 2012			October 31, 2013			October 31, 2012			October 31, 2013

Current service cost	$	4,808		$	5,006		$	9,458		$	10,012
Interest cost		7,847			8,013			15,577			15,934
Expected return on plan assets		(10,391	)		(12,517	)		(20,485	)		(24,955	)
Amortization of net actuarial and experience losses		258			444			511			876
Amortization of past service credits		(94	)		(92	)		(186	)		(180	)
Employee contributions		(733	)		(736	)		(1,444	)		(1,471	)

	$	1,695		$	118		$	3,431		$	216

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

14.

Derivative financial instruments and fair value measurements:

We are exposed to foreign exchange risk primarily from our subsidiaries which incur revenue and operating expenses in currencies other than US dollars with the most significant being Pound Sterling, Norwegian Kroner, Canadian dollars, Australian dollars and Euros. We monitor these exposures through our cash forecasting process and regularly enter into foreign exchange forward contracts to manage our exposure to fluctuations in expected future cash flows related to transactions in currencies other than the functional currency.

The outstanding foreign exchange forward contracts are as follows:


	Notional		Fair value asset (liability)			Maturity dates

October 31, 2013:
Purchase contracts to sell US dollars and buy Canadian dollars	CAD	251,956	$	(5,102	)	November 2013 to May 2016

Purchase contracts to sell US dollars and buy Euros	€	69,268		8,143		December 2013 to July 2014

Purchase contracts to sell Pounds Sterling and buy Euros	€	45,000		(487	)	November 2013 to February 2016

We enter into long-term revenue agreements, which provide for pricing denominated in currencies other than the functional currency of the parties to the contract. This pricing feature was determined to be an embedded derivative which has been bifurcated for valuation and accounting purposes. The embedded derivative contracts are measured at fair value and included in other assets or other liabilities.

A net gain of $0.6 million, a net loss of $3.7 million, a net loss of $5.4 million and a net gain of $8.8 million due to the non-hedging derivative forward exchange contracts and the change in the fair value of embedded derivatives was recognized in the statement of operations as part of other financing charges for the three and six months ended October 31, 2012 and 2013, respectively.

The following tables summarize the financial instruments measured at fair value on a recurring basis excluding cash and cash equivalents and restricted cash:


	October 31, 2013
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair value

Financial assets:
Other assets, current:
Foreign currency forward contracts	$	—	$	8,222	$	—	$	8,222
Foreign currency embedded derivatives		—		373		—		373
Other assets, non-current:
Foreign currency forward contracts		—		127		—		127
Foreign currency embedded derivatives		—		4,025		—		4,025

	$	—	$	12,747	$	—	$	12,747

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

14.

Derivative financial instruments and fair value measurements (continued):


	October 31, 2013
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Fair value

Financial liabilities:
Other liabilities, current:
Foreign currency forward contracts	$	—	$	(3,298	)	$	—	$	(3,298	)
Foreign currency embedded derivatives		—		(7,670	)		—		(7,670	)
Other liabilities, non-current:
Foreign currency forward contracts		—		(2,497	)		—		(2,497	)
Foreign currency embedded derivatives		—		(8,181	)		—		(8,181	)

	$	—	$	(21,646	)	$	—	$	(21,646	)

Inputs to the valuation methodology for Level 2 measurements include publically available forward notes, credit spreads and US$ or Euro interest rates, and inputs are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. There were no transfers between categories in the fair value hierarchy.

The carrying values of the other financial instruments, which are measured at other than fair value, approximate fair value due to the short terms to maturity, except for non-revolving debt obligations, the fair values of which are as follows:


	October 31, 2013
	Fair value		Carrying value
Senior secured notes	$	1,407,250	$	1,287,901
Senior unsecured notes		303,000		300,000

The fair value of the senior secured and unsecured notes are determined based on market information provided by third parties which is considered to be a level 2 measurement in the fair value hierarchy.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

15.

Supplemental cash flow information:


	Six months ended
	October 31, 2012		October 31, 2013

Cash interest paid	$	58,354	$	63,867
Cash taxes paid		14,086		15,895
Assets acquired through non-cash capital leases		13,905		9,101

Change in cash resulting from changes in operating assets and liabilities:


	Six months ended
	October 31, 2012			October 31, 2013

Receivables, net of allowance	$	(36,666	)	$	21,222
Income taxes		(7,546	)		(5,051	)
Inventories		(7,503	)		(5,340	)
Prepaid expenses		1,089			(8,074	)
Payables and accruals		(2,733	)		(32,853	)
Deferred revenue		348			21,659
Other assets and liabilities		(2,469	)		614

	$	(55,480	)	$	(7,823	)

16.

Guarantees:

We have provided limited guarantees to third parties under some of our operating leases relating to a portion of the residual aircraft values at the termination of the leases, which have terms expiring between fiscal 2014 and 2024. Our exposure under the asset value guarantees including guarantees in the form of funded and unfunded residual value guarantees, rebateable advance rentals and deferred payments is approximately $232.3 million and $249.4 million as at April 30, 2013 and October 31, 2013, respectively.

17.

Related party transactions:

(a)

Related party leasing transactions and balances:

During the three months ended October 31, 2013 we engaged in leasing transactions with VIEs related to our ultimate parent (note 2).

(b)

Balances with ultimate parent:

At April 30, 2013, $2.0 million in payables and accruals is due to and $0.1 million in receivables is due from our ultimate parent. At October 31, 2013, $2.0 million in payables and accruals is due to our ultimate parent.

(c)

Balances with companies under common control with our ultimate parent company:

At April 30, 2013, $1.0 million in receivables is due from companies under common control with our ultimate parent. At October 31, 2013, $4.5 million in receivables is due from companies under common control with our ultimate parent company.

(d)

On June 24, 2013, we paid a dividend of $25.1 million to our parent.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

17.

Related party transactions (continued):

(e)

On July 16, 2013, we borrowed $25.0 million from our parent. On July 19, 2013, the loan was repaid. The loan bore interest at 4.5% per annum and it expired on October 16, 2013.

(f)

In August 2013, we issued one share of capital stock (note 11) and paid a dividend of $60.0 million to our parent.

18.

Commitments:

We have aircraft operating leases with 18 lessors for 166 aircraft and 19 lessors for 165 aircraft included in our fleet at April 30, 2013 and October 31, 2013, respectively. As at October 31, 2013, these leases had expiry dates ranging from fiscal 2014 to 2024. We have the option to purchase the majority of the aircraft for agreed amounts that do not constitute bargain purchase options, but have no commitment to do so. With respect to such leased aircraft, substantially all of the costs of major inspections of airframes and the costs to perform inspections, major repairs and overhauls of major components are at our expense. We either perform this work internally through our own repair and overhaul facilities or have the work performed by an external repair and overhaul service provider.

At October 31, 2013, we have commitments with respect to operating leases for aircraft, buildings, land and equipment. The minimum lease rentals required under operating leases are payable in the following amounts over the following years ended October 31:


	Aircraft operating leases		Building, land and equipment operating leases		Total operating leases

2014	$	237,026	$	13,064	$	250,090
2015		221,893		11,461		233,354
2016		205,842		9,725		215,567
2017		181,553		7,614		189,167
2018		168,937		5,403		174,340
and thereafter		361,758		57,207		418,965

	$	1,377,009	$	104,474	$	1,481,483

As at October 31, 2013, we have committed to purchase 36 new aircraft and the total required additional expenditures for these aircraft is approximately $953.9 million. These aircraft are expected to be delivered in fiscal 2014 to 2017 and will be deployed in our Helicopter Services segment. We intend to enter into leases for these aircraft or purchase them outright upon delivery from the manufacturer. Additionally, we have committed to purchase $71.9 million of helicopter parts by October 31, 2015 and $100.0 million of heavy helicopters from Eurocopter prior to December 31, 2016.

The terms of certain of the helicopter lease agreements impose operating and financial limitations on us. Such agreements limit the extent to which we may, among other things, incur indebtedness and fixed charges relative to our level of consolidated adjusted earnings before interest, taxes, depreciation and amortization.

Generally, in the event of a covenant breach, a lessor has the option to terminate the lease and require the return of the aircraft, with the repayment of any arrears of lease payments plus the present value of all future lease payments and certain other amounts which could be material to our financial position. The aircraft would then be sold and the surplus, if any, returned to us. Alternatively we could exercise our option to purchase the aircraft. As at October 31, 2013 we were in compliance with all financial covenants.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

19.

Contingencies:

One or more of our subsidiaries are, from time to time, named as defendants in lawsuits arising in the ordinary course of our business. Such disputes may involve, for example, breach of contract, employment, wrongful termination and tort claims. We maintain adequate insurance coverage to respond to most claims. We cannot predict the outcome of any such lawsuits with certainty, but our management team does not expect the outcome of pending or threatened legal matters to have a material adverse impact on our financial condition.

In addition, from time to time, the Company or its subsidiaries are involved in tax and other disputes with various government agencies. The following summarizes such presently pending disputes:

In 2006, we voluntarily disclosed to OFAC that several of our subsidiaries formerly operating as Schreiner Airways may have violated applicable US laws and regulations by re-exporting to Iran, Sudan, and Libya certain helicopters, related parts, map data, operation and maintenance manuals, and aircraft parts for third-party customers. OFAC’s investigation is ongoing and we continue to fully cooperate. Should the US government determine that these activities violated applicable laws and regulations, we or our subsidiaries may be subject to civil or criminal penalties, including fines and/or suspension of the privilege to engage in trading activities involving goods, software and technology subject to the US jurisdiction. At October 31, 2013, it is not possible to determine the outcome of this matter, or the significance, if any, to our business, financial condition and results of operations.

Brazilian customs authorities seized one of our helicopters (customs value of $10.0 million) as a result of allegations that we violated Brazilian customs law by failing to ensure our customs agent and the customs agent’s third party shipping company followed approved routing of the helicopter during transport. We secured release of the helicopter and are disputing through court action any claim for penalties associated with the seizure and the alleged violation. We have preserved our rights by filing a civil action against our customs agent for any losses that may result. At October 31, 2013, it is not possible to determine the outcome of this matter, or the significance, if any, to our business, financial condition and results of operations.

In the United Kingdom, the Ministry for Transport is investigating potential wrongdoing involving two ex-employees in conjunction with the SAR-H bid award processes. This arose from our self-reporting potential improprieties by these individuals upon their discovery in 2010. The SAR-H bid process was subsequently cancelled. We will continue to cooperate in all aspects of the investigation. At October 31, 2013, it is not possible to determine the outcome of this matter, or the significance, if any, to our business, financial condition and results of operations.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

20.

Segment information:

We operate under the following segments:

•

Helicopter Services;

•

Heli-One;

•

Corporate and other.

We have provided information on segment revenues and Adjusted EBITDAR because these are the financial measures used by the Company’s chief operating decision maker (“CODM”) in making operating decisions and assessing performance. Transactions between operating segments are at standard industry rates.

The segmented information for the three and six months ended October 31, 2012 has been restated (see note 1(c)).

The Helicopter Services segment includes flying operations around the world serving offshore oil and gas, EMS/SAR and other industries and the management of the fleet.

Heli-One, the maintenance, repair and overhaul segment, includes facilities in Norway, Canada, Australia, Poland, and the US that provide helicopter repair and overhaul services for our fleet and for an external customer base in Europe, Asia and North America.

Corporate and other includes corporate office costs in various jurisdictions and is not considered a reportable segment.

The accounting policies of the segments and the basis of accounting for transactions between segments are the same as those described in the summary of significant accounting policies.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

20.

Segment information (continued):


Three months ended October 31, 2012
	Helicopter Services			Heli-One			Corporate and other			Inter-segment eliminations			Consolidated

Revenue from external customers	$	404,298		$	42,488		$	—		$	—		$	446,786
Add: Inter-segment revenues		1,288			78,373			—			(79,661	)		—

Total revenue		405,586			120,861			—			(79,661	)		446,786
Direct costs (i)		(289,482	)		(91,760	)		—			78,642			(302,600	)
Earnings from equity accounted investees		825			—			—			—			825
General and administration costs		—			—			(18,914	)		—			(18,914	)

Adjusted EBITDAR (ii)		116,929			29,101			(18,914	)		(1,019	)		126,097

Aircraft lease and associated costs		(48,797	)		—			—			—			(48,797	)
Depreciation														(27,635	)
Restructuring costs														(1,797	)
Asset impairments (iii)														(9,846	)
Loss on disposal of assets														(3,026	)
Interest on long-term debt														(30,075	)
Foreign exchange gain														10,562
Other financing charges														(3,449	)
Income tax expense														(5,022	)


Income from continuing operations														7,012
Earnings from discontinued operations, net of tax														467

Net earnings													$	7,479

(i)	Direct costs in the segment information presented excludes aircraft lease and associated costs. In the consolidated statement of operations these costs are combined.

(ii)	Adjusted EBITDAR is defined as earnings before interest, taxes, depreciation, amortization and aircraft lease and associated costs or total revenue plus earnings from equity accounted investees less direct costs excluding aircraft lease and associated costs and general and administration expenses.

(iii)

Asset impairments relate to the Helicopter Services segment.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

20.

Segment information (continued):


Six months ended October 31, 2012
	Helicopter Services			Heli-One			Corporate and other			Inter-segment eliminations			Consolidated

Revenue from external customers	$	795,821		$	67,034		$	—		$	—		$	862,855
Add: Inter-segment revenues		2,137			146,983			—			(149,120	)		—

Total revenue		797,958			214,017			—			(149,120	)		862,855

Direct costs (i)		(577,106	)		(171,103	)		—			147,952			(600,257	)
Earnings from equity accounted investees		1,837			—			—			—			1,837
General and administration costs		—			—			(37,439	)		—			(37,439	)

Adjusted EBITDAR (ii)		222,689			42,914			(37,439	)		(1,168	)		226,996

Aircraft lease and associated costs		(97,227	)		—			—			—			(97,227	)
Depreciation														(55,945	)
Restructuring costs														(3,727	)
Asset impairments (iii)														(16,347	)
Loss on disposal of assets														(4,617	)
Interest on long-term debt														(59,958	)
Foreign exchange gain														3,161
Other financing charges														(11,603	)
Income tax expense														(6,303	)


Loss from continuing operations														(25,570	)
Earnings from discontinued operations, net of tax														812

Net loss													$	(24,758	)

(i)	Direct costs in the segment information presented excludes aircraft lease and associated costs. In the consolidated statement of operations these costs are combined.

(ii)	Adjusted EBITDAR is defined as earnings before interest, taxes, depreciation, amortization and aircraft lease and associated costs or total revenue plus earnings from equity accounted investees less direct costs excluding aircraft lease and associated costs and general and administration expenses.

(iii)

Asset impairments relate to the Helicopter Services segment.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

20.

Segment information (continued):


Three months ended October 31, 2013
	Helicopter services			Heli-One			Corporate and other			Inter-segment eliminations			Consolidated

Revenue from external customers	$	408,063		$	35,309		$	—		$	—		$	443,372
Add: Inter-segment revenues		1,354			68,785			—			(70,139	)		—

Total revenue		409,417			104,094			—			(70,139	)		443,372
Direct costs (i)		(298,006	)		(88,130	)		—			69,508			(316,628	)
Earnings from equity accounted investees		1,527			—			—			—			1,527
General and administration costs		—			—			(19,092	)		—			(19,092	)

Adjusted EBITDAR (ii)		112,938			15,964			(19,092	)		(631	)		109,179

Aircraft lease and associated costs		(55,166	)		—			—			—			(55,166	)
Depreciation														(38,694	)
Asset impairments (iii)														(14,575	)
Loss on disposal of assets														(3,299	)
Interest on long-term debt														(39,143	)
Foreign exchange gain														190
Other financing charges														(1,707	)
Income tax expense														(5,491	)

Net loss													$	(48,706	)


Segment assets	$	1,801,051		$	417,377		$	635,251		$	—		$	2,853,679
Segment assets - held for sale		38,519			—			—			—			38,519

Total assets	$	1,839,570		$	417,377		$	635,251		$			$	2,892,198

(i)	Direct costs in the segment information presented excludes aircraft lease and associated costs. In the consolidated statement of operations these costs are combined.

(ii)	Adjusted EBITDAR is defined as earnings before interest, taxes, depreciation, amortization and aircraft lease and associated costs or total revenue plus earnings from equity accounted investees less direct costs excluding aircraft lease and associated costs and general and administration expenses.

(iii)

Asset impairments relate to the Helicopter Services segment.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

20.

Segment information (continued):


Six months ended October 31, 2013
	Helicopter Services			Heli-One			Corporate and other			Inter-segment eliminations			Consolidated

Revenue from external customers	$	795,365		$	62,938		$	—		$	—		$	858,303
Add: Inter-segment revenues		1,778			138,467			—			(140,245	)		—

Total revenue		797,143			201,405			—			(140,245	)		858,303

Direct costs (i)		(559,494	)		(183,818	)		—			138,857			(604,455	)
Earnings from equity accounted investees		3,918			—			—			—			3,918
General and administration costs		—			—			(37,153	)		—			(37,153	)

Adjusted EBITDAR (ii)		241,567			17,587			(37,153	)		(1,388	)		220,613

Aircraft lease and associated costs		(110,445	)		—			—			—			(110,445	)
Depreciation														(70,751	)
Asset impairments (iii)														(21,899	)
Loss on disposal of assets														(4,421	)
Interest on long-term debt														(77,720	)
Foreign exchange loss														(12,958	)
Other financing income														4,117
Income tax expense														(10,799	)

Net loss													$	(84,263	)

(i)	Direct costs in the segment information presented excludes aircraft lease and associated costs. In the consolidated statement of operations these costs are combined.

(ii)	Adjusted EBITDAR is defined as earnings before interest, taxes, depreciation, amortization and aircraft lease and associated costs or total revenue plus earnings from equity accounted investees less direct costs excluding aircraft lease and associated costs and general and administration expenses.

(iii)

Asset impairments relate to the Helicopter Services segment.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)

21.

Supplemental condensed consolidated financial information:

The Company and certain of its direct and indirect wholly-owned subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guaranteed on a joint and several basis certain outstanding indebtedness of CHC Helicopter SA, the registrant. The following consolidating schedules present financial information as of October 31, 2013 and for the three and six months ended October 31, 2012 and 2013, based on the guarantor structure that was in place at October 31, 2013.

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)


Balance Sheets as at April 30, 2013 (Expressed in thousands of United States dollars)	Parent		Issuer		Guarantor			Non-guarantor			Eliminations			Consolidated

Assets
Current Assets
Cash and cash equivalents	$	19,391	$	3,478	$	117,444		$	(13,121	)	$	(3,478	)	$	123,714
Receivables, net of allowance for doubtful accounts		4		113		147,134			170,744			(746	)		317,249
Current intercompany receivables		12,352		439,585		496,789			241,723			(1,190,449	)		—
Income taxes receivable		—		—		362			25,509			—			25,871
Deferred income tax assets		—		—		(8	)		57			—			49
Inventories		—		—		100,263			5,531			—			105,794
Prepaid expenses		26		49		10,287			11,906			(49	)		22,219
Other assets		—		5,593		46,715			93,038			(89,263	)		56,083

		31,773		448,818		918,986			535,387			(1,283,985	)		650,979
Property and equipment, net		—		—		993,911			81,724			(381	)		1,075,254
Investments		507,725		393,062		357,608			18,116			(1,249,615	)		26,896
Intangible assets		—		—		194,360			3,450			—			197,810
Goodwill		—		—		334,129			96,333			—			430,462
Restricted cash		—		—		8,172			21,467			—			29,639
Other assets		—		29,449		377,211			61,596			(29,479	)		438,777
Long-term intercompany receivables		—		859,564		43,324			449,718			(1,352,606	)		—
Deferred income tax assets		—		—		10,104			648			—			10,752
Assets held for sale		—		—		32,047			—			—			32,047

	$	539,498	$	1,730,893	$	3,269,852		$	1,268,439		$	(3,916,066	)	$	2,892,616


Liabilities and Shareholder’s Equity
Current Liabilities
Payables and accruals	$	115	$	6,516	$	280,876		$	138,188		$	(6,516	)	$	419,179
Deferred revenue		—		—		18,901			8,751			—			27,652
Income taxes payable		525		457		36,891			10,571			(457	)		47,987
Current intercompany payables		—		35,729		284,548			466,300			(786,577	)		—
Deferred income tax liabilities		—		—		537			81			—			618
Current facility secured by accounts receivable		—		—		—			53,512			—			53,512
Other liabilities		—		83,596		100,129			6,332			(167,266	)		22,791
Current portion of long-term debt obligations		—		—		2,138			—			—			2,138

		640		126,298		724,020			683,735			(960,816	)		573,877
Long-term debt obligations		—		1,337,303		1,475,087			—			(1,337,303	)		1,475,087
Long-term intercompany payables		—		—		436,282			56,789			(493,071	)		—
Deferred revenue		—		—		25,910			30,080			—			55,990
Other liabilities		16		—		145,550			100,889			—			246,455
Deferred income tax liabilities		—		—		9,287			1,340			—			10,627

Total liabilities		656		1,463,601		2,816,136			872,833			(2,791,190	)		2,362,036

Redeemable non-controlling interests		—		—		—			(8,262	)		—			(8,262	)

Shareholder’s equity		538,842		267,292		453,716			403,868			(1,124,876	)		538,842

	$	539,498	$	1,730,893	$	3,269,852		$	1,268,439		$	(3,916,066	)	$	2,892,616

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)


Balance Sheets as at October 31, 2013 (Expressed in thousands of United States dollars)	Parent			Issuer		Guarantor			Non-guarantor			Eliminations			Consolidated

Assets
Current Assets
Cash and cash equivalents	$	(6,267	)	$	14,075	$	161,158		$	(70,789	)	$	(14,075	)	$	84,102
Receivables, net of allowance for doubtful accounts		4			113		104,676			189,510			(739	)		293,564
Current intercompany receivables		10,801			450,836		486,791			263,291			(1,211,719	)		—
Income taxes receivable		—			—		159			24,628			—			24,787
Deferred income tax assets		—			—		(5	)		59			—			54
Inventories		—			—		112,395			7,511			—			119,906
Prepaid expenses		—			91		11,659			18,553			(91	)		30,212
Other assets		—			6,272		46,032			187,228			(180,996	)		58,536

		4,538			471,387		922,865			619,991			(1,407,620	)		611,161
Property and equipment, net		—			—		921,728			88,759			(381	)		1,010,106
Investments		405,920			411,927		482,153			19,345			(1,289,894	)		29,451
Intangible assets		—			—		183,139			3,449			—			186,588
Goodwill		—			—		333,253			96,612			—			429,865
Restricted cash		—			—		18,467			14,721			—			33,188
Other assets		—			31,763		470,867			72,891			(31,763	)		543,758
Long-term intercompany receivables		—			1,081,145		65,068			449,753			(1,595,966	)		—
Deferred income tax assets		—			—		506			9,056			—			9,562
Assets held for sale		—			—		38,519			—			—			38,519

	$	410,458		$	1,996,222	$	3,436,565		$	1,374,577		$	(4,325,624	)	$	2,892,198


Liabilities and Shareholder’s Equity
Current Liabilities
Payables and accruals	$	44		$	20,151	$	217,346		$	128,039		$	(20,151	)	$	345,429
Deferred revenue		—			—		21,950			12,771			—			34,721
Income taxes payable		220			538		34,889			7,006			(538	)		42,115
Current intercompany payables		—			44,047		308,081			452,775			(804,903	)		—
Deferred income tax liabilities		—			—		835			81			—			916
Current facility secured by accounts receivable		—			—		—			43,400			—			43,400
Other liabilities		—			174,741		191,486			4,393			(349,465	)		21,155
Current portion of long-term debt obligations		—			—		18,609			—			—			18,609

		264			239,477		793,196			648,465			(1,175,057	)		506,345
Long-term debt obligations		—			1,602,901		1,646,670			—			(1,602,901	)		1,646,670
Long-term intercompany payables		—			—		449,750			65,075			(514,825	)		—
Deferred revenue		—			—		33,999			38,660			—			72,659
Other liabilities		20			—		161,991			91,333			—			253,344
Deferred income tax liabilities		—			—		7,018			3,165			—			10,183

Total liabilities		284			1,842,378		3,092,624			846,698			(3,292,783	)		2,489,201

Redeemable non-controlling interests		—			—		—			(7,177	)		—			(7,177	)

Shareholder’s equity		410,174			153,844		343,941			535,056			(1,032,841	)		410,174

	$	410,458		$	1,996,222	$	3,436,565		$	1,374,577		$	(4,325,624	)	$	2,892,198

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)


Statements of Operations for the three months ended October 31, 2012 (Expressed in thousands of United States dollars)	Parent			Issuer			Guarantor			Non-guarantor			Eliminations			Consolidated

Revenue	$	—		$	—		$	288,236		$	291,016		$	(132,466	)	$	446,786

Operating expenses:
Direct costs		—			(12	)		(210,318	)		(273,540	)		132,473			(351,397	)
Earnings from equity accounted investees		7,116			55,305			84,217			490			(146,303	)		825
General and administration costs		(186	)		(1,118	)		(13,493	)		(5,209	)		1,092			(18,914	)
Depreciation		—			—			(25,024	)		(2,611	)		—			(27,635	)
Restructuring costs		—			—			(597	)		(1,200	)		—			(1,797	)
Asset impairments		—			—			(9,846	)		—			—			(9,846	)
Loss on disposal of assets		—			—			(3,021	)		(5	)		—			(3,026	)

		6,930			54,175			(178,082	)		(282,075	)		(12,738	)		(411,790	)


Operating income		6,930			54,175			110,154			8,941			(145,204	)		34,996
Financing income (charges)		(78	)		(46,422	)		(99,290	)		76,406			46,422			(22,962	)


Income from continuing operations before income tax		6,852			7,753			10,864			85,347			(98,782	)		12,034

Income tax recovery (expense)		147			(1,224	)		(4,214	)		(955	)		1,224			(5,022	)


Income from continuing operations		6,999			6,529			6,650			84,392			(97,558	)		7,012

Earnings from discontinued operations, net of tax		—			—			467			—			—			467

Net earnings		6,999			6,529			7,117			84,392			(97,558	)		7,479


Net earnings attributable to:
Controlling interest		6,999			6,529			7,117			83,912			(97,558	)		6,999
Non-controlling interests		—			—			—			480			—			480

Net earnings	$	6,999		$	6,529		$	7,117		$	84,392		$	(97,558	)	$	7,479



Comprehensive income	$	30,123		$	28,157		$	30,240		$	97,373		$	(155,580	)	$	30,313

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)


Statements of Operations for the six months ended October 31, 2012 (Expressed in thousands of United States dollars)	Parent			Issuer			Guarantor			Non-guarantor			Eliminations			Consolidated

Revenue	$	—		$	—		$	549,636		$	568,293		$	(255,074	)	$	862,855

Operating expenses:
Direct costs		—			(43	)		(405,207	)		(547,346	)		255,112			(697,484	)
Earnings (loss) from equity accounted investees		(26,075	)		(2,852	)		22,260			1,171			7,333			1,837
General and administration costs		(188	)		(2,816	)		(30,283	)		(6,986	)		2,834			(37,439	)
Depreciation		—			—			(50,551	)		(5,394	)		—			(55,945	)
Restructuring costs		—			—			(1,630	)		(2,097	)		—			(3,727	)
Asset impairments		—			—			(16,347	)		—			—			(16,347	)
Gain (loss) on disposal of assets		—			—			(4,645	)		28						(4,617	)

		(26,263	)		(5,711	)		(486,403	)		(560,624	)		265,279			(813,722	)


Operating income (loss)		(26,263	)		(5,711	)		63,233			7,669			10,205			49,133
Financing income (charges)		13			(17,666	)		(78,413	)		10,000			17,666			(68,400	)


Income (loss) from continuing operations before income tax		(26,250	)		(23,377	)		(15,180	)		17,669			27,871			(19,267	)

Income tax recovery (expense)		144			(1,984	)		(11,707	)		5,260			1,984			(6,303	)


Income (loss) from continuing operations		(26,106	)		(25,361	)		(26,887	)		22,929			29,855			(25,570	)

Earnings from discontinued operations, net of tax		—			—			812			—			—			812

Net earnings (loss)		(26,106	)		(25,361	)		(26,075	)		22,929			29,855			(24,758	)


Net earnings (loss) attributable to:
Controlling interest		(26,106	)		(25,361	)		(26,075	)		21,581			29,855			(26,106	)
Non-controlling interests		—			—			—			1,348			—			1,348

Net earnings (loss)	$	(26,106	)	$	(25,361	)	$	(26,075	)	$	22,929		$	29,855		$	(24,758	)



Comprehensive income (loss)	$	(36,111	)	$	(34,849	)	$	(36,080	)	$	18,390		$	55,353		$	(33,297	)

6922767 HOLDING S.à.r.l.

Notes to Interim Consolidated Financial Statements (Unaudited)

(Tabular amounts expressed in thousands of United States dollars unless otherwise noted)


Cash Flows for the six months ended October 31, 2012 (Expressed in thousands of United States dollars)	Parent			Issuer			Guarantor		Non-guarantor			Eliminations		Consolidated

Cash provided by (used in) operating activities	$	(2,604	)	$	(130,981	)	$	6,099	$	(27,253	)	$	130,981	$	(23,758	)

Financing activities:

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

CHC Helicopter S.A. 10-Q