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, 1998
OR
[ ] 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 0-9827
PETROLEUM HELICOPTERS, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0395707
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2121 Airline Drive, Suite 400
P.O. Box 578, Metairie, Louisiana 70001-5979
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(504)828-3323
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 the number of shares outstanding of each of the
Issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at December 1, 1998
_____ _______________________________
Voting Common Stock 2,800,886 shares
Non-Voting Common Stock 2,368,175 shares
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
October 31, April 30,
1998 1998(1)
ASSETS _________ ________
Current assets:
Cash and cash equivalents $ 1,569 $ 2,753
Accounts receivable - net of allowance 54,441 49,119
Inventory 35,237 34,016
Prepaid expenses 1,853 1,478
Notes receivable - investee companies 1,724 1,151
_________ ________
Total current assets 94,824 88,517
_________ ________
Investments 2,689 2,705
Property and equipment:
Cost 272,269 256,042
Less accumulated depreciation (127,777) (120,923)
_________ ________
144,492 135,119
_________ ________
Other 741 680
_________ ________
$ 242,746 $ 227,021
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 26,064 $ 28,004
Accrued vacation pay 5,875 5,672
Income taxes payable 602 1,046
Current maturities of long-term debt 5,857 5,824
_________ ________
Total current liabilities 38,398 40,546
_________ ________
Long-term debt, net of current maturities 81,358 66,795
Deferred income taxes 18,685 19,172
Other long-term liabilities 6,099 5,803
Shareholders' equity:
Voting common stock-par value of $ 0.10;
authorized 12,500,000; issued shares of
2,800,866 at October 31 and April 30 280 280
Non-voting common stock-par value of $ 0.10;
authorized 12,500,000; issued shares of
2,368,175 and 2,358,935 at October 31 and
April 30, respectively 237 236
Additional paid-in capital 11,777 11,706
Retained earnings 85,912 82,483
_________ ________
98,206 94,705
_________ ________
$ 242,746 $ 227,021
========= ========
(1)The balance sheet at April 30, 1998 is condensed from the
audited financial statements at that date. The accompanying
notes are an integral part of these condensed consolidated
financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
October 31, October 31,
__________________ ___________________
1998 1997 1998 1997
REVENUES: _______ _______ ________ ________
Operating revenues $67,009 $57,521 $129,229 $113,435
Other income (deductions) (1,531) 70 (1,374) 516
_______ _______ ________ ________
65,478 57,591 127,855 113,951
_______ _______ ________ ________
EXPENSES:
Direct expenses 55,704 49,687 109,099 97,984
Selling, general & administrative 4,948 3,985 9,109 7,885
Interest expense 1,536 1,244 2,985 2,426
_______ _______ ________ ________
62,188 54,916 121,193 108,295
_______ _______ ________ ________
Earnings before income taxes 3,290 2,675 6,662 5,656
Income taxes 1,336 1,121 2,706 2,327
_______ _______ ________ ________
Net earnings $ 1,954 $ 1,554 $ 3,956 $ 3,329
======= ======= ======== ========
BASIC:
Earnings per common share $ 0.38 $ 0.30 $ 0.77 $ 0.65
======= ======= ======== ========
DILUTED:
Earnings per common share $ 0.37 $ 0.30 $ 0.76 $ 0.64
======= ======= ======== ========
Weighted average common shares
outstanding 5,169 5,104 5,165 5,099
Incremental common shares from
stock options 59 97 66 98
_______ _______ ________ ________
Weighted average common shares
and equivalents 5,228 5,201 5,231 5,197
======= ======= ======== ========
Dividends declared per common
share $ 0.05 $ 0.05 $ 0.10 $ 0.10
======= ======= ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended
October 31,
______________________
1998 1997
________ ________
Cash flows from operating activities:
Net earnings $ 3,956 $ 3,329
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 7,680 5,931
Deferred income taxes (487) -
(Gain)loss on equipment disposals 113 (417)
Equity in net earnings of investee companies (83) (99)
Loss from operations disposals 1,344 -
Changes in operating assets and liabilities (10,617) (6,047)
________ ________
Net cash provided by operating activities 1,906 2,697
________ ________
Cash flows from investing activities:
Investments (270) -
Purchases of property and equipment (26,654) (13,223)
Proceeds from asset dispositions 9,676 2,895
________ ________
Net cash used in investing activities (17,248) (10,328)
________ ________
Cash flows from financing activities:
Proceeds from long-term debt 24,000 16,000
Payments on long-term debt (9,404) (9,426)
Proceeds from exercise of stock options 78 -
Dividends paid (516) (511)
Other, net - 273
________ ________
Net cash provided by financing activities 14,158 6,336
________ ________
Decrease in cash and cash equivalents (1,184) (1,295)
Cash and cash equivalents at beginning of period 2,753 2,437
________ ________
Cash and cash equivalents at end of period $ 1,569 $ 1,142
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED OCTOBER 31, 1998 AND 1997
(Unaudited)
(1) General
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with
Form 10-Q instructions of the Securities and Exchange
Commission ("SEC") from the books and records of Petroleum
Helicopters, Inc. and Subsidiaries ("PHI" or the "Company").
In the opinion of management, these financial statements
reflect all adjustments, consisting of only normal,
recurring adjustments, necessary to present fairly the
financial results for the interim periods presented.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations of the
SEC; however, the Company believes that this information is
fairly presented. These condensed consolidated financial
statements should be read in conjunction with the financial
statements contained in the Company's Annual Report on Form
10-K for the year ended April 30, 1998 and the accompanying
notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations. Certain
reclassifications have been made to the prior year's
financial statements in order to conform to the
classifications adopted for reporting in fiscal 1999. These
reclassifications had no impact on net income or
shareholders' equity.
The Company's financial results, particularly as it
relates to its domestic oil and gas aviation services, are
influenced by seasonal fluctuations. During the winter,
there are more days of adverse weather conditions and fewer
hours of daylight than the other months of the year.
Consequently, flight hours are generally lower during the
Company's third fiscal quarter than at other times of the
year. This produces a seasonal aspect to the Company's
business and typically results in reduced revenues from
operations during those months. Therefore, the results of
operations for interim periods are not necessarily
indicative of the operating results that may be expected for
the full fiscal year.
(2) Commitments and Contingencies
On Monday, June 2, 1997, the Company was notified by
the National Mediation Board ("NMB") that the Office and
Professional Employees International Union ("OPEIU") filed
an application to represent flight deck crew members
(helicopter pilots) of PHI. On September 4, 1997, the NMB
reported that the Company's helicopter pilots voted to
reject union representation. The OPEIU filed objections
with the NMB seeking a new election. This reelection
request was granted on January 30, 1998. On March 31, 1998,
the NMB reported that the Company's helicopter pilots voted
to again reject union representation. On April 2, 1998, the
OPEIU filed objections with the NMB to set aside the results
of the rerun election. On October 28, 1998, the NMB
dismissed the OPEIU's objections and certified the March 31,
1998 election.
(3) Comprehensive Income
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130
("FAS 130"), "Reporting Comprehensive Income." FAS 130
establishes standards for reporting and display of
comprehensive income and its components in a full set of
general purpose financial statements. The Company adopted
this standard in the quarter ended July 31, 1998. Such
adoption had no effect on the Company's financial statement
presentation as the Company has no items of other
comprehensive income.
(4) Earnings Per Share
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
128 ("FAS 128"), "Earnings Per Share," effective for the
periods ending after December 15, 1997. FAS 128 changes the
computation and presentation requirements for earnings per
share for entities with publicly held common stock or
potential common stock. Under such requirements, the
Company is required to present both basic and diluted
earnings per share. Basic earnings per share is computed by
dividing income available to common stockholders by the
weighted average number of common shares outstanding during
the period. Diluted earnings per share is computed in the
same manner as basic earnings per share except that the
denominator is increased to include the number of additional
common shares that could have been outstanding assuming the
exercise of stock options and the potential shares that
would have a dilutive effect on earnings per share. The
Company adopted FAS 128 effective with the quarter ended
January 31, 1998 on a retroactive basis, accordingly,
earnings per share amounts have been restated to conform to
the requirements of FAS 128.
(5) Accounting for Computer Software
In March 1998, the American Institute of Certified
Public Accountants issued Statement of Position (SOP) No. 98-
1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use," which establishes criteria
for when these types of costs should be expensed as incurred
or capitalized. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15,
1998, earlier adoption is permitted in fiscal years for
which annual financial statements have not been issued. The
Company has implemented SOP 98-1 on a prospective basis as
of May 1, 1998 resulting in approximately $ 0.9 million of
costs being capitalized during fiscal 1999 that would have
been expensed under the Company's previous accounting method
for such costs. This increased net income by $0.5 million
or $0.10 per diluted share in fiscal 1999. This
capitalization of costs will decline in future periods as
the Company has completed the Application Development Stage
of its new Workorder and Billing System during the third
quarter. Post-implementation costs will be expensed in
accordance with the SOP and Development Stage costs will be
amortized over the estimated useful life.
(6) New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131
("FAS 131"), "Disclosures about Segments of an Enterprise
and Related Information." FAS 131 establishes standards for
the way that a public enterprise reports information about
operating segments in annual financial statements and
requires that those enterprises report selected information
about operating segments in interim financial reports issued
to shareholders. FAS 131 is effective for fiscal years
beginning after December 15, 1997 and requires restatement
of earlier periods presented. Management is currently
evaluating the requirements of FAS 131.
In June 1998, the Financial Accounting Standards Board
(FASB) issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). The
Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999 and establishes
accounting and reporting standards for derivative
instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities.
FAS 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the
fair value of derivatives are to be recorded each period in
current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction.
Earlier application of the provisions of the Statement is
encouraged and is permitted as of the beginning of any
fiscal quarter that begins after the issuance of the
Statement. The Company believes that, due to its current
limited use of derivative instruments, adoption of the
Statement will not have a material effect on the Company's
results of operations, financial position, or liquidity.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is engaged in providing helicopter
transportation and related services. The predominant
portion of its revenue is derived from transporting offshore
oil and gas production and drilling workers on a worldwide
basis. The Company also performs helicopter transportation
services for a variety of hospital and medical programs and
aircraft maintenance to outside parties.
This discussion should be read in conjunction with the
accompanying financial statements and with the financial
statements for the year ended April 30, 1998 together with
the related notes and Management's Discussion and Analysis
of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS
Second Quarter Fiscal 1999 to Second Quarter Fiscal 1998
Revenues
The Company generates flight revenues from both ongoing
service contracts with established customers and non-
contract flights referred to as Specials. Oil and Gas
Aviation Services Unit's transportation service contracts,
both domestic and international, are generally on a month to
month basis and consist of a fixed fee plus an hourly charge
for actual flight time. Specials are customer flights,
primarily domestic oil and gas, provided on an as needed
basis that are not provided pursuant to ongoing contracts
and which generally carry higher rates. The Company's
technical service contracts are generally provided on an
actual cost plus negotiated mark-up basis.
Aeromedical contracts also provide for fixed and hourly
charges, but are generally for longer terms and impose early
cancellation fees to encourage customers to fulfill the
contract term and cover the Company's additional up-front
costs in the event of early termination. On December 31,
1997, PHI acquired the assets of Samaritan AirEvac ("Air
Evac"), which it operates as a division within its
Aeromedical Services Unit. Air Evac which operates in
Arizona, primarily derives its revenues from third party
payors based on per hour or per seat charges. These
contracts are predominantly short-term in nature.
The following table summarizes and compares the
Company's operating revenues by unit for the quarters ended
October 31, 1998 and 1997:
Operating Revenues for the Quarter
Ended October 31,
_________________________________________
(Thousands of dollars, except percentages
and flight hours)
_________________________________________
Increase(Decrease)
__________________
1998 1997 $ %
_______ _______ ______ ____
Oil and Gas Aviation Services Unit $54,867 $49,247 $5,620 11
Aeromedical Services Unit 11,987 7,752 4,235 55
Other 155 522 (367) (70)
_______ _______ ______
Total Operating Revenues $67,009 $57,521 $9,488 16
======= ======= ====== ====
Total Flight Hours 62,511 67,435 (4,924) (7)
======= ======= ====== ====
Overall flight activity for the second quarter of
fiscal 1999 declined by 7% as demand for domestic oil and
gas aviation services has slowed due to an "economic
softening" in the Gulf of Mexico. The Company anticipates
flight activity to continue to decline for the remainder of
the fiscal year. Despite these declines, oil and gas
revenues were higher due to rate increases, which went into
effect during the third quarter of fiscal 1998, and an
increase in Specials due to several tropical storm and
hurricane evacuations.
Fiscal year 1998 second quarter earnings were adversely
impacted by flood damage caused by Hurricane Danny to twenty-
six aircraft located at one of the Company's field bases.
The approximate effect of this damage was $ 0.21 per share
for the quarter and primarily relates to the incremental
effect of lost revenue. All of these aircraft are back in
service.
In addition, results for the second quarter of fiscal
1999 were adversely impacted ($ 0.15 per diluted share) by
the discontinuance of a joint venture in South America.
Oil and Gas Aviation Services Unit
Revenues for the quarter ended October 31, 1998
increased 11% to $ 54.9 million from $ 49.2 million. The
increase in revenues is primarily attributable to rate
increases which occurred in the third quarter of fiscal 1998
and an increase in hurricane evacuation Specials. The
effect of these rate increases for the quarter ended October 31,
1998 was approximately a $ 3.0 million increase in revenues.
Flight hours declined 9% to 55,762 hours from 61,589 hours
for the quarter ended October 31, 1998, due primarily to
decreased activity in the Gulf of Mexico.
Aeromedical Services Unit
Aeromedical revenues increased 55% to $ 12.0 million
from $ 7.8 million. Total Aeromedical programs and
aircraft as of October 31, 1998 were seventeen and forty-
four, respectively, including the aircraft acquired
with the Air Evac acquisition versus fifteen Aeromedical
programs and thirty-eight aircraft at October 31, 1997. Of
the forty-four Aeromedical aircraft at October 31, 1998,
thirty-eight are helicopters and six are fixed wing aircraft.
Aeromedical flight hours for the quarter increased 1,076 hours
to 5,834 hours. Of the increase in flight hours and revenues,
Air Evac accounted for 826 hours and $ 3.6 million, respectively.
Direct Expenses
Direct expenses increased $ 6.0 million, or 12%, to
$ 55.7 million primarily as a result of the addition of Air
Evac which accounted for $ 2.8 million of the increase.
However, direct expenses as a percentage of operating
revenues decreased, improving the Company's operating margin
to 16.9% from 13.6% in the prior year comparable quarter.
The Company completed a significant number of aircraft
refurbishments during the quarter thereby increasing the
amount of capitalized labor. This reduced direct expenses
during the quarter, thus improving the operating margin.
Human Resource costs, including employee benefit costs,
increased $ 3.7 million, or 20%, to $ 22.6 million. Salary
expense increased by $ 3.0 million due to wage increases
effective January 1, 1998, the addition of approximately 200
employees with the purchase of Air Evac and a new pay plan
implemented in February 1998. The Company's gain sharing
program expense was $ 0.4 million higher than the previous
year period due to increased earnings. In addition, other
employee benefit costs, including medical insurance,
increased $ 0.3 million primarily due to an increase in
premiums and claim costs.
Spare parts usage and repairs and maintenance costs
remained constant at $ 12.8 million.
Aircraft depreciation increased $ 0.9 million, or 31%,
to $ 3.8 million due to the purchase of additional aircraft
and equipment. The Company acquired six aircraft ascribable
to the Air Evac acquisition in the third quarter of fiscal
year 1998. The Company made net purchases of two aircraft
during fiscal year 1999. This included nine aircraft
purchases; four of which were converted to leases during the
quarter and one of which was sold during the quarter.
Additionally, two aircraft were sold which were purchased
prior to fiscal year 1999.
Helicopter rental expense remained constant at $ 3.6
million. There were ninety-one leased aircraft as of
October 31, 1998 as compared to eighty-six at October 31,
1997. During June 1998, thirteen leased aircraft were
refinanced resulting in monthly lease expense reductions of
$ 75,000.
All other aircraft costs increased $ 0.9 million, or
10%, to $ 10.0 million.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses increased
$ 1.0 million, or 26% to $ 4.9 million. Of this increase,
$ 0.5 million was related to an increase in human resource
costs and $ 0.6 million was related to legal and other
business consulting fees. Offsetting this increase was a
decline in computer software costs which were capitalized in
the second quarter of fiscal 1999 versus expensed in the
prior year's comparable quarter. The Company implemented SOP
98-1 during this quarter resulting in approximately $ 0.5
million of costs being capitalized.
Interest Expense
Interest expense increased $ 0.3 million, or 25%, to
$ 1.5 million. This was primarily related to the increase in
the Company's long-term debt. Average long-term debt
increased $ 16.8 million, or 25%, over the prior year's
second quarter.
First Six Months Fiscal 1999 to First Six Months Fiscal 1998
The following table summarizes and compares the
Company's operating revenues by unit for the six months
ended October 31, 1998 and 1997:
Operating Revenues for the Six Months
Ended October 31,
_________________________________________
(Thousands of dollars, except percentages
and flight hours)
_________________________________________
Increase(Decrease)
__________________
1998 1997 $ %
________ _______ ______ ____
Oil and Gas Aviation Services Unit $105,184 $96,876 $8,308 9
Aeromedical Services Unit 23,728 15,649 8,079 52
Other 317 910 (593) (65)
________ ________ _______
Total Operating Revenues $129,229 $113,435 $15,794 14
======== ======== ======= ====
Total Flight Hours 125,831 134,549 (8,718) (6)
======== ======== ======= ====
Overall flight activity for the first six months of
fiscal 1999 declined by 6% as demand for domestic oil and
gas aviation services has slowed due to an "economic
softening" in the Gulf of Mexico. The Company anticipates
flight activity to continue to decline for the remainder of
the fiscal year. Despite these declines, oil and gas
revenues were higher due primarily to rate increases, which
went into effect during the third quarter of fiscal 1998,
and an increase in Specials due to several tropical storm
and hurricane evacuations.
Fiscal year 1998 earnings were adversely impacted by
flood damage caused by Hurricane Danny to twenty- six
aircraft located at one of the Company's field bases.
The approximate effect of this damage was $ 0.21 per share
for the six months ended October 31, 1997 and primarily
relates to the incremental effect of lost revenue. All of
these aircraft are back in service.
In addition, results for the second quarter of fiscal
1999 were adversely impacted ($ 0.15 per diluted share) by
the discontinuance of a joint venture in South America.
Oil and Gas Aviation Services Unit
Revenues for the six months ended October 31, 1998
increased 9% to $ 105.2 million from $ 96.9 million. The
increase in revenues is primarily attributable to rate
increases discussed above. The effect of these rate increases
for the six months ended October 31, 1998 was approximately
a $ 6.0 million increase in revenues. Flight hours declined
8% to 112,181 hours from 122,406 hours for the six months
ended October 31, 1998 due primarily to decreased activity in
the Gulf of Mexico.
Aeromedical Services Unit
Aeromedical revenues increased $ 8.1 million, or 52%,
to $ 23.7 million. Total Aeromedical programs and aircraft
as of October 31, 1998 were seventeen and forty-four,
respectively, including the aircraft acquired with the
Air Evac acquistion, versus fifteen Aeromedical programs and
thirty-eight aircraft at October 31, 1997. Of the forty-four
Aeromedical aircraft at October 31, 1998, thirty-eight are
helicopters and six are fixed wing aircraft. Aeromedical flight
hours for the six months increased 2,304 hours to 11,769
hours. Of the increase in flight hours and revenues, Air
Evac accounted for 1,617 additional hours and $ 7.4 million
in additional revenues, respectively.
Direct Expenses
Direct expenses increased $ 11.1 million, or 11%, to
$ 109.1 million primarily as a result of the addition of Air
Evac which accounted for $ 5.7 million of the increase.
However, direct expenses as a percentage of operating
revenues declined, improving the Company's operating margin
to 15.6% from 13.6% in the prior year period. The Company
completed a significant number of aircraft refurbishments
during the second quarter thereby increasing the amount of
capitalized labor. This reduced direct expenses for the six
months, thereby improving the operating margin.
Human Resource costs, including employee benefit costs,
increased $ 7.9 million, or 21%, to $ 45.9 million. Salary
expense increased by $ 6.4 million due to wage increases
effective January 1, 1998, the addition of approximately 200
employees with the purchase of Air Evac and a new pay plan
implemented in February. The Company's gain sharing program
expense was $0.6 million higher than the previous year period due to
increased earnings. In addition, other employee benefit
costs, including medical insurance, increased $ 0.9 million
primarily due to an increase in premiums and claim costs.
Spare parts usage and repairs and maintenance costs
declined $ 0.6 million, or 2%, to $ 24.0 million.
Aircraft depreciation increased $ 1.6 million, or 28%,
to $ 7.3 million due to the purchase of additional aircraft
and equipment. The Company acquired six aircraft ascribable
to the Air Evac acquisition in the third quarter of fiscal
year 1998. The Company made net purchases of two aircraft
during fiscal year 1999. This included nine aircraft
purchases, four of which were converted to leases during the
second quarter and one of which was sold during the second
quarter. Additionally, two aircraft were sold which were
purchased prior to fiscal year 1999.
Helicopter rental expense increased $ 0.4 million, or
6%, to $ 7.5 million. There were ninety-one leased aircraft
as of October 31, 1998 as compared to eighty-six at October
31, 1997.
All other aircraft costs increased $ 1.1 million, or
6%, to $ 19.5 million.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses increased
$ 1.2 million, or 15%, to $ 9.1 million. Of this increase,
$ 0.7 million related to an increase in human resource costs
and $ 1.0 million related to legal and other business
consulting fees. Offsetting this increase was a decline in
computer software costs which were capitalized in fiscal
1999 versus expensed in the prior year's comparable period.
The Company implemented SOP 98-1 during the first six months
of fiscal 1999 resulting in approximately $ 0.9 million of
costs being capitalized.
Interest Expense
Interest expense increased $ 0.6 million, or 25%, to
$ 3.0 million. This was primarily related to the increase in
the Company's long-term debt. Average long-term debt
increased $ 14.8 million, or 22%, over the prior year's six
month period.
LIQUIDITY AND CAPITAL RESOURCES
The following is a comparison of the first six months
of the fiscal year ending April 30, 1999 with the year ended
April 30, 1998.
The Company's cash position as of October 31, 1998 was
$ 1.6 million compared to $ 2.8 million at April 30, 1998,
the Company's fiscal year end. Working capital increased
$ 8.4 million from $ 48.0 million at fiscal year end to $ 56.4
million at October 31, 1998.
Total long-term debt, net of current maturities,
increased $ 14.6 million to $ 81.4 million as a result of
the investing activities described below. The Company's
current debt obligation totals $ 5.9 million, payable in
equal quarterly installments, which the Company intends to
pay with cash flow from operations. On November 30, 1998,
the Company and its principal lending group entered into a
loan agreement that amended and restated its original loan
agreement dated January 1, 1986. The new agreement increased
the Company's credit capacity by $ 7.0 million. At December
10, 1998, the Company had $ 13.5 million of credit capacity
available under its credit facilities. The Company believes
its cash flow from operations in conjunction with its credit
capacity is sufficient to meet its planned requirements for
the foreseeable future. The Company is in compliance with
the provisions of its loan agreements.
Cash provided by operating activities was $ 1.9
million. Investing activities included the purchase and
completion of nine aircraft, aircraft improvements, and
engines for $ 26.7 million. The Company also converted the
purchases of four of these aircraft into leases receiving
proceeds of approximately $ 5.7 million. Additional proceeds
of $ 1.8 million were received on an aircraft which was
purchased and sold during the quarter. Investing activities
were primarily funded through proceeds from asset
dispositions and increased borrowings under the Company's
credit facilities. The Company paid dividends of $ 0.05 per
share during the first and second quarters of fiscal 1999.
The Company continues to review selected domestic bases
for possible fuel contamination resulting from routine
flight operations. The Company has expensed, including
provisions for environmental costs, $ 0.2 million for the
six months ended October 31, 1998 as compared to $ 0.7
million for the comparable period in fiscal year 1998. The
aggregate liability recorded for environmental related costs
at October 31, 1998 is $ 1.7 million which the Company
believes is adequate for probable and estimable
environmental costs. The Company will make additional
provisions in future periods to the extent appropriate as
further information regarding these costs becomes available.
The Company has considered the impact of Year 2000
("Y2K") issues on its computer systems and applications. A
committee consisting of members of senior management from
various disciplines within the Company has been formed and
is meeting regularly to discuss and outline the appropriate
course of action that must be taken to deal with any
potential Year 2000 issues. A compliance plan has been
developed and conversion activities are in process in
conjunction with the current information systems upgrades
and is expected to be completed and tested in 1998.
The Company has committed to purchase software and
upgrade its hardware to address the Year 2000 issues.
Management does not expect that this project will have a
significant effect on the Company's operations primarily due
to the significant expenditures for new information
technology systems during fiscal 1998, 1997 and 1996.
The Company is currently undertaking an inventory of
all equipment used in the transmission and reception of all
signals to identify items that need to be upgraded or
replaced. The Company has retained the consulting firm of
BrightStar Information Technology Group, Inc. for an
estimated cost of $ 0.3 million to assist with a wide range
of Year 2000 services, including a complete hardware and
software inventory and Year 2000 compliance analysis. This
review is expected to be completed by March 31, 1999.
This assessment includes evaluating our position with
significant suppliers, lenders, large customers and others
to ensure that those parties have appropriate plans to
address Year 2000 issues where they may otherwise impact the
operations of the Company. The Company does not have any
significant suppliers, lenders and/or large customers that
directly interface with the Company's information technology
systems. There is no guarantee that the systems of the
Company's suppliers and customers will be Year 2000
compliant in time or that any such non-compliance will not
have an adverse effect on the Company's financial condition
or results of operations. Concurrent with the Company's
efforts to correct Year 2000 issues, the Company is in the
process of developing appropriate contingency plans, which
the Company expects to have completed by March 31, 1999, to
help prevent the Company's operations from being materially
impacted by a failure to correct a Year 2000 problem.
FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact
contained in this Form 10-Q, other periodic reports filed by
the Company under the Securities Exchange Act of 1934 and
other written or oral statements made by it or on its
behalf, are forward looking statements. When used herein,
the words "anticipates", "expects", "believes", "intends",
"plans", or "projects" and similar expressions are intended
to identify forward looking statements. It is important to
note that forward looking statements are based on a number
of assumptions about future events and are subject to
various risks, uncertainties and other factors that may
cause the Company's actual results to differ materially from
the views, beliefs and estimates expressed or implied in
such forward looking statements. Although the Company
believes that the assumptions reflected in forward looking
statements are reasonable, no assurance can be given that
such assumptions will prove correct. Factors that could
cause the Company's results to differ materially from the
results discussed in such forward looking statements include
but are not limited to the following: flight variances from
expectations, volatility of oil and gas prices, the
substantial capital expenditures required to fund its
operations, environmental risks, competition, government
regulation, unionization, Year 2000 issues and the ability
of the Company to implement its business strategy. All
forward looking statements in this document are expressly
qualified in their entirety by the cautionary statements in
this paragraph. The Company undertakes no obligation to
update publicly any forward looking statements, whether as a
result of new information, future events or otherwise.
RESULTS AT A GLANCE (Unaudited)
The following table provides a summary of critical
operating and financial statistics (thousands of dollars,
except per share amounts, financial ratios, flight hours and
general statistics):
Six Months Ended October 31,
_______________________________
Operations 1998 1997
_______________________________
Operating revenues $ 129,229 $ 113,435
Net earnings 3,956 3,329
Net earnings per basic share 0.77 0.65
Net earnings per diluted share 0.76 0.64
Book value per diluted share 18.77 17.42
Annualized return on shareholders' equity 8.2% 7.5%
Total flight hours - operated 125,831 134,549
Financial Summary October 31, 1998 April 30, 1998
________________ ______________
Net working capital $ 56,426 $ 47,971
Net book value of property and equipment 144,492 135,119
Long-term debt, net of current maturities 81,358 66,795
General Statistics
Aircraft operated 309 307
Employees 2,186 2,135
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was
held on October 30, 1998, at which time the stockholders
elected the following directors:
Nominees For Withheld
________ ___ ________
Carroll W. Suggs 2,692,502 516
Leonard M. Horner 2,693,018 0
James W. McFarland 2,692,990 28
Bruce N. Whitman 2,692,988 30
The proposal for the Directors Stock Compensation Plan (the
"Plan") was approved. The following number of shares of
voting common stock were cast on the proposal to approve the
Plan, as shown below:
For Against Abstain
___ _______ _______
2,591,329 118,300 1,790
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 (i) Articles of Incorporation of the Company
(incorporated by reference to Exhibit No. 3.1
(i) to PHI's Report on Form 10-Q for the quarterly
period ended October 31, 1994).
(ii) By-laws of the Company (incorporated by reference
to Exhibit No. 3.1 (ii) to PHI's Report on Form
10-Q for the quarterly period ended July 31, 1996).
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter
ending October 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
Petroleum Helicopters, Inc.
December 15, 1998 By: /s/ Carroll W. Suggs
________________________________
Carroll W. Suggs
Chairman of the Board, President
and Chief Executive Officer
(duly authorized officer)
December 15, 1998 By: /s/ Michael J. McCann
________________________________
Michael J. McCann
Chief Financial Officer and
Treasurer
(principal financial and
accounting officer)
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This schedule contains summary financial information from condensed financial
statements for the period ending October 31, 1998 and is qualified in its
entirety by reference to such financial statements.
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<NAME> GEOFF STANFORD
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