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: January 31, 1999
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 (Zip Code)
offices)
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 March 1, 1999
_____ ____________________________
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)
January 31, April 30,
1999 1998(1)
ASSETS ________ ________
Current assets:
Cash and cash equivalents $ 2,260 $ 2,753
Accounts receivable - net of allowance 47,829 49,119
Inventory 35,976 34,016
Prepaid expenses 1,939 1,478
Notes receivable - investee companies 1,375 1,151
________ ________
Total current assets 89,379 88,517
________ ________
Investments 2,756 2,705
Property and equipment:
Cost 273,493 256,042
Less accumulated depreciation (129,040) (120,923)
________ ________
144,453 135,119
________ ________
Other 602 680
________ ________
$ 237,190 $ 227,021
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 25,549 $ 28,004
Accrued vacation pay 5,818 5,672
Income taxes payable 102 1,046
Current maturities of long-term debt 5,874 5,824
________ ________
Total current liabilities 37,343 40,546
________ ________
Long-term debt, net of current maturities 75,884 66,795
Deferred income taxes 18,685 19,172
Other long-term liabilities 6,135 5,803
Shareholders' equity:
Voting common stock - par value of $ 0.10;
authorized 12,500,000; issued shares of
2,800,886 at January 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
January 31 and April 30, respectively 237 236
Additional paid-in capital 11,777 11,706
Retained earnings 86,849 82,483
________ ________
99,143 94,705
________ ________
$ 237,190 $ 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 Nine Months Ended
January 31, January 31,
__________________ _________________
1999 1998 1999 1998
______ ______ _______ _______
REVENUES:
Operating revenues $61,841 $58,803 $191,070 $172,238
Other income (deductions) 435 679 (939) 1,195
______ ______ _______ _______
62,276 59,482 190,131 173,433
______ ______ _______ _______
EXPENSES:
Direct expenses 54,156 51,081 163,255 149,065
Selling, general and
administrative 4,382 4,021 13,491 11,906
Interest expense 1,631 1,325 4,616 3,751
______ ______ _______ _______
60,169 56,427 181,362 164,722
______ ______ _______ _______
Earnings before income taxes 2,107 3,055 8,769 8,711
Income taxes 905 1,235 3,611 3,562
______ ______ _______ _______
Net earnings $ 1,202 $ 1,820 $ 5,158 $ 5,149
====== ====== ======= =======
BASIC:
Earnings per common share $ 0.23 $ 0.36 $ 1.00 $ 1.01
====== ====== ======= =======
DILUTED:
Earnings per common share $ 0.23 $ 0.35 $ 0.99 $ 0.99
====== ====== ======= =======
Weighted average common shares
outstanding 5,169 5,118 5,166 5,106
Incremental common shares from
stock options 57 84 65 87
______ ______ _______ _______
Weighted average common shares
and equivalents 5,226 5,202 5,231 5,193
====== ====== ======= =======
Dividends declared per
common share $ 0.05 $ 0.00 $ 0.15 $ 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)
Nine Months Ended January 31,
____________________________
1999 1998
_______ _______
Cash flows from operating activities:
Net earnings $ 5,158 $ 5,149
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 12,011 9,210
Deferred income taxes (487) -
Gain on equipment disposals (368) (2,027)
Equity in net earnings of
investee companies (37) (167)
Loss from operations disposals 1,344 1,000
Changes in operating assets and liabilities (6,217) (9,211)
_______ _______
Net cash provided by operating activities 11,404 3,954
_______ _______
Cash flows from investing activities:
Investments (383) (8,754)
Purchases of property and equipment (31,626) (19,568)
Proceeds from asset dispositions 11,670 12,063
_______ _______
Net cash used in investing activities (20,339) (16,259)
_______ _______
Cash flows from financing activities:
Proceeds from long-term debt 24,000 30,150
Payments on long-term debt (14,861) (16,395)
Dividends paid (775) (767)
Other, net 78 304
_______ _______
Net cash provided by financing activities 8,442 13,292
_______ _______
(Decrease) Increase in cash and cash
equivalents (493) 987
Cash and cash equivalents at beginning
of period 2,753 2,437
_______ _______
Cash and cash equivalents at end of period $ 2,260 $ 3,424
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JANUARY 31, 1999 AND 1998
(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 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) 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 $ 1.2 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 $ 0.7 million
or $ 0.13 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 of fiscal 1999. Post-implementation costs will be
expensed in accordance with the SOP and Development Stage
costs will be amortized over their estimated useful life.
(5) 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
issued Statement of Financial Accounting Standards No. 133
("FAS 133"), "Accounting for Derivative Instruments and
Hedging Activities". FAS 133 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.
The discussion that follows 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
Third Quarter Fiscal 1999 to Third 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. The Oil and Gas
Aviation Services Unit's transportation 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. Revenues from
Technical Services is included in revenues of the Oil and
Gas Aviation Services Unit.
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
January 31, 1999 and 1998:
Operating Revenues for the Quarter
Ended January 31,
_________________________________________
(Thousands of dollars, except percentages
and flight hours)
_________________________________________
Increase(Decrease)
________ ________ __________________
1999 1998 $ %
________ ________ _______ _______
Oil and Gas Aviation
Services Unit $ 49,995 $ 49,839 $ 156 0
Aeromedical Services Unit 11,648 8,367 3,281 39
Other 198 597 (399) (67)
________ ________ _______
Total Operating Revenues $ 61,841 $ 58,803 $ 3,038 5
======== ======== ======= =======
Total Flight Hours 52,516 60,201 (7,685) (13)
======== ======== ======= =======
Overall flight activity for the third quarter of fiscal
1999 declined by 13% as demand for domestic oil and gas
aviation services has slowed due to an economic downturn in
the Gulf of Mexico. Despite these declines, oil and gas
flight revenues were slightly higher primarily due to rate
increases which went into effect late in the third quarter
of fiscal 1998. The Company is currently reviewing
strategies to reduce costs in light of the economic downturn
in the Gulf of Mexico which may result in a charge to
earnings in the near term.
Oil and Gas Aviation Services Unit
Revenues for the quarter ended January 31, 1999
remained relatively constant at $ 50.0 million. The slight
increase in revenues is primarily attributable to rate
increases which occurred late in the third quarter of fiscal
1998 offset by activity declines. Flight hours declined 15%
to 46,628 hours from 54,894 hours, for the quarter ended
January 31, 1999 due primarily to decreased activity in the
Gulf of Mexico.
Aeromedical Services Unit
Aeromedical revenues increased 39% to $ 11.6 million
from $ 8.4 million. Air Evac accounted for $ 2.1 million of
this increase. Total Aeromedical programs and aircraft as
of January 31, 1999 were seventeen and forty-five,
respectively, including the aircraft acquired with the Air
Evac acquisition versus fourteen Aeromedical programs and
forty-six aircraft at January 31, 1998. Of the forty-five
Aeromedical aircraft at January 31, 1999, thirty-nine are
helicopters and six are fixed wing aircraft. Aeromedical
flight hours for the quarter increased 668 hours to 5,040
hours. Of the increase in flight hours, Air Evac accounted
for 465 hours.
Direct Expenses
Direct expenses increased $ 3.1 million, or 6%, to
$ 54.2 million primarily as a result of the addition of Air
Evac which accounted for $ 1.6 million of the increase.
Direct expenses as a percentage of operating revenues
increased, decreasing the Company's operating margin to
12.4% from 13.1% in the prior year comparable quarter.
Human Resource costs, including employee benefit costs,
increased $ 1.0 million, or 5%, to $ 20.9 million. Salary
expense increased by $ 2.0 million due to wage increases
effective January 1, 1998, the addition of approximately 200
employees with the purchase of Air Evac and a new
compensation plan implemented in February 1998. The human
resource cost increases were partially offset by a decline
in workers compensation insurance expense.
Spare parts usage and repairs and maintenance costs
decreased $ 0.1 million to $ 12.3 million.
Aircraft depreciation increased $ 1.0 million, or 32%,
to $ 4.1 million due to the purchase of additional aircraft
and equipment. The Air Evac acquisition resulted in the
addition of six aircraft late in the third quarter of fiscal
year 1998. During fiscal 1999, the Company purchased nine
aircraft; four of which were converted to leases during the
second quarter and one of which was sold during the second
quarter. Additionally, nine aircraft were sold which were
purchased prior to fiscal year 1999.
Helicopter rental expense decreased $ 0.2 million to
$ 3.6 million from $ 3.8 million. There were ninety-three
leased aircraft as of January 31, 1999 as compared to ninety-
one at January 31, 1998. During June 1998, thirteen leased
aircraft were refinanced resulting in monthly lease expense
reductions of $ 75,000.
All other aircraft costs increased $ 0.3 million, or
3%, to $ 9.9 million.
Technical Services cost of sales increased $ 1.1
million, or 50%, to $ 3.3 million. This increase is
consistent with an increase in third party maintenance work
performed by the Oil and Gas Aviation Services Unit.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses increased
$ 0.4 million, or 10%, to $ 4.4 million. Of this increase,
$ 0.4 million related to an increase in human resource costs
and $ 0.4 million related to other costs. Partially
offsetting this increase was a decline in computer software
costs which were capitalized in the third quarter of fiscal
1999 versus expensed in the prior year's comparable quarter.
The Company implemented SOP 98-1 during fiscal 1999
resulting in approximately $ 0.3 million of costs being
capitalized during the quarter.
Interest Expense
Interest expense increased $ 0.3 million, or 23%, to
$ 1.6 million. This was primarily related to an increase in
the Company's long-term debt. Average long-term debt
increased $ 11.9 million, or 16%, over the prior year's
third quarter.
First Nine Months Fiscal 1999 to First Nine Months Fiscal 1998
______________________________________________________________
The following table summarizes and compares the
Company's operating revenues by unit for the nine months
ended January 31, 1999 and 1998:
Operating Revenues for the Nine Months
Ended January 31,
_________________________________________
(Thousands of dollars, except percentages
and flight hours)
_________________________________________
Increase (Decrease)
_________ _________ __________________
1999 1998 $ %
_________ _________ _______ _______
Oil and Gas Aviation
Services Unit $ 155,179 $ 146,715 $ 8,464 6
Aeromedical Services Unit 35,376 24,016 11,360 47
Other 515 1,507 (992) (66)
_________ _________ _______
Total Operating Revenues $ 191,070 $ 172,238 $18,832 11
========= ========= ======= =======
Total Flight Hours 178,347 194,750 (16,403) (8)
========= ========= ======= =======
Overall flight activity for the first nine months of
fiscal 1999 declined by 8% as demand for domestic oil and
gas aviation services has slowed due to an economic downturn
in the Gulf of Mexico. Despite these declines, oil and gas
flight revenues were higher due primarily to rate increases,
which went into effect late in 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 $ 0.25 per diluted
share for the nine months ended January 31, 1998 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 by the discontinuance of a
joint venture in South America, which included a non-cash
charge of $ 1.3 million ($ 0.15 per diluted share).
Oil and Gas Aviation Services Unit
Revenues for the nine months ended January 31, 1999
increased 6% to $ 155.2 million from $ 146.7 million. The
increase in revenues is primarily attributable to rate
increases as discussed above and aircraft fleet mix changes.
The effect of these rate increases for the nine months ended
January 31, 1999 was approximately a $ 10.0 million increase
in revenues. Flight hours declined 10% to 158,809 hours
from 177,300 hours for the nine months ended January 31,
1999 due primarily to decreased activity in the Gulf of
Mexico.
Aeromedical Services Unit
Aeromedical revenues increased $ 11.4 million, or 47%,
to $ 35.4 million. Total Aeromedical programs and aircraft
as of January 31, 1999 were seventeen and forty-five,
respectively, including the aircraft acquired with the Air
Evac acquisition, versus fourteen Aeromedical programs and
forty-six aircraft at January 31, 1998. Of the forty-five
aeromedical aircraft at January 31, 1999, thirty-nine are
helicopters and six are fixed wing aircraft. Aeromedical
flight hours for the nine months increased 2,972 hours to
16,809 hours. Of the increase in flight hours and revenues,
Air Evac accounted for 2,081 additional hours and $ 9.5
million in additional revenues, respectively.
Direct Expenses
Direct expenses increased $ 14.2 million, or 10%, to
$ 163.3 million primarily as a result of the addition of Air
Evac which accounted for $ 7.3 million of the increase.
However, direct expenses as a percentage of operating
revenues declined, improving the Company's operating margin
to 14.6% from 13.5% in the prior year period.
Human Resource costs, including employee benefit costs,
increased $ 8.9 million, or 15%, to $ 66.8 million. Salary
expense increased by $ 8.4 million due to wage increases
effective January 1, 1998, the addition of approximately 200
employees with the purchase of Air Evac and a new
compensation plan implemented in February 1998. The human
resource cost increases were partially offset by a decline
in worker's compensation insurance expense.
Spare parts usage and repairs and maintenance costs
declined $ 0.7 million, or 2%, to $ 36.2 million.
Aircraft depreciation increased $ 2.7 million, or 31%,
to $ 11.4 million due to the purchase of additional aircraft
and equipment. The Air Evac acquisition resulted in the
addition of six aircraft in the third quarter of fiscal year
1998. During fiscal 1999, the Company purchased nine
aircraft; four of which were converted to leases during the
second quarter and one of which was sold during the second
quarter. Additionally, nine aircraft were sold which were
purchased prior to fiscal year 1999.
Helicopter rental expense increased $ 0.2 million, or
2%, to $ 11.1 million. The average number of aircraft
leased for the nine months ended January 31, 1999 increased
by six aircraft over the prior year period, thereby
increasing rental expense. Partially offsetting this
increase was a decline in rental expense for thirteen
aircraft which were refinanced in June 1998.
All other aircraft costs increased $ 1.3 million, or
5%, to $ 29.4 million.
Technical Services cost of sales increased $ 1.8
million, or 27%, to $ 8.4 million. This increase is
consistent with an increase in third party maintenance work
performed by the Oil and Gas Aviation Services Unit.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses increased
$ 1.6 million, or 13%, to $ 13.5 million. Of this increase,
$ 1.1 million related to an increase in human resource costs
($ 0.5 million of which related to Air Evac), $ 0.9 million
related to legal and other business consulting fees and
$1.0 million primarily related to supplies, depreciation and
occupancy costs ($ 0.5 million of which related to Air
Evac). 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 nine months of fiscal
1999 resulting in approximately $ 1.2 million of costs being
capitalized.
Interest Expense
Interest expense increased $ 0.9 million, or 24%, to
$ 4.6 million. This was primarily related to the increase in
the Company's long-term debt. Average long-term debt
increased $ 13.1 million, or 20%, over the prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
The following is a comparison of the first nine months
of the fiscal year ending April 30, 1999 with the year ended
April 30, 1998.
The Company's cash position as of January 31, 1999 was
$ 2.3 million compared to $ 2.8 million at April 30, 1998,
the Company's fiscal year end. Working capital increased
$ 4.0 million from $48.0 million at fiscal year end to $52.0
million at January 31, 1999.
Total long-term debt, net of current maturities,
increased $ 9.1 million to $ 75.9 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 March
15, 1999, the Company had $ 18.5 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 $ 11.4
million. Investing activities primarily included the
purchase and completion of nine aircraft, aircraft
improvements, and engines for $ 31.6 million. The Company
also converted the purchases of four of these aircraft into
leases receiving proceeds of approximately $ 5.7 million in
the second quarter. Additional proceeds of $ 4.2 million
were received from the sale of ten aircraft during the
year. As a result of the declining activity levels in the
Gulf of Mexico, the Company recently implemented certain
cost reductions which include the sale of aircraft which no
longer meet the Company's needs. Additional sales of
aircraft will occur during the fourth quarter of fiscal
1999. 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, second, and
third 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, $ 0.4 million for the
nine months ended January 31, 1999 as compared to $ 1.2
million for the comparable period in fiscal year 1998. The
aggregate liability recorded for environmental related costs
at January 31, 1999 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.
YEAR 2000 MATTERS
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 by June 30, 1999.
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
radio 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, of which $ 0.2 million has
been spent during fiscal 1999, 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 May 31, 1999.
The compliance plan includes evaluating the Company's
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 address Year 2000 issues, the Company
is in the process of developing appropriate contingency
plans, which the Company expects to have completed by May
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):
Nine Months Ended January 31,
___________________________________
Operations 1999 1998
___________________________________
Operating revenues $ 191,070 $ 172,238
Net earnings 5,158 5,149
Net earnings per basic share 1.00 1.01
Net earnings per diluted share 0.99 0.99
Book value per diluted share 18.95 17.79
Annualized return on shareholders' equity 7.1% 7.6%
Total flight hours - operated 178,347 194,750
Financial Summary January 31, 1999 April 30, 1998
___________________________________
Net working capital $ 52,036 $ 47,971
Net book value of property
and equipment 144,453 135,119
Long-term debt, net of current maturities 75,884 66,795
General Statistics
Aircraft operated 305 307
Employees 2,117 2,135
PART II - OTHER INFORMATION
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).
10.1 Second Amendment to Amended and Restated Loan Agreement
originally dated as of January 31, 1986, Amended and
Restated in its entirety as of March 31, 1997, among
Petroleum Helicopters, Inc., Whitney National Bank, Bank
One, Louisiana, N.A., and NationsBank of Texas, N.A., as agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ending
January 31, 1999.
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.
March 16, 1999 By: /s/ Carroll W. Suggs
________________________________
Carroll W. Suggs
Chairman of the Board, President
and Chief Executive Officer
(duly authorized officer)
March 16, 1999 By: /s/ Michael J. McCann
________________________________
Michael J. McCann
Chief Financial Officer and
Treasurer (principal financial
and accounting officer)
SECOND AMENDMENT TO AMENDED AND
RESTATED LOAN AGREEMENT
This SECOND AMENDMENT TO AMENDED AND RESTATED LOAN
AGREEMENT (this "Amendment") is being entered into as of the
30th day of November, 1998, by and among PETROLEUM
HELICOPTERS, INC., a Louisiana corporation (the "Company"),
NATIONSBANK OF TEXAS, N.A., a national banking association
("NationsBank"), WHITNEY NATIONAL BANK, a national banking
association ("Whitney"), BANK ONE, LOUISIANA, N.A., a
national banking association ("Bank One" (as successor by
merger to First National Bank of Commerce, a national
banking association ("FNBC")) and together with NationsBank
and Whitney, being hereinafter referred to collectively as
the "Banks", and NationsBank as agent for the Banks (in such
capacity, the "Agent").
PRELIMINARY STATEMENTS
(1) The Company, NationsBank, Whitney, FNBC
and the Agent have entered into that certain Loan Agreement,
originally dated as of January 31, 1986, as amended and
restated in its entirety as of March 31, 1997, and as
amended by that certain First Amendment to Amended and
Restated Loan Agreement, dated as of December 31, 1997 (such
Loan Agreement, as so amended and restated and as the same
may be further amended from time to time, being hereinafter
referred to as the "Loan Agreement"). Terms used herein,
unless otherwise defined herein, shall have the meanings set
forth in the Loan Agreement.
(2) FNBC has merged with and into Bank One.
(3) The Company, the Banks and the Agent now
wish to amend the Loan Agreement to provide, among other
things, (a) for a conversion of $7,000,000 of principal
amount of the Revolving Credit Loans outstanding to
$7,000,000 principal outstanding of Term Loans, (b) for an
extension of the Conversion Date and the Termination Date
with respect to Revolving Credit Loans under the Loan
Agreement and (c) for a change in the principal payment
dates and principal payment amounts with respect to Term
Loans under the Loan Agreement to reflect the increase in
principal amount of Term Loans outstanding and the extension
of the Termination Date of the Term Loans.
NOW, THEREFORE, in consideration of the premises
and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the
Company, the Banks and the Agent hereby agree as follows:
1. Section 1.01 of the Loan Agreement is
amended by adding the following definitions after the
definition of 1988 Loan Agreement:
"1997 Term Loan" shall have the meaning set
forth in Section 2.01(a).
"1997 Term Loan Note" shall have the meaning
set forth in Section 2.01(a).
2. The definition of "Conversion Date" in
Section 1.01 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"Conversion Date" shall mean
October 31, 2000.
3. The definition of "Termination Date" in
Section 1.01 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"Termination Date", in the case of
the Term Loans, shall have the meaning
given such term in Subsection 2.01(b)
and, in the case of the Revolving Credit
Loans, shall mean October 31, 2005.
4. Section 2.01(a) of the Loan Agreement is
hereby amended in its entirety to read as follows:
(i) Upon the terms and
conditions set forth in this Agreement as
then in effect, each Bank agreed,
effective as of March 31, 1997, to renew,
modify and extend the loans made by it to
the Company pursuant to the Prior Amended
and Restated Loan Agreement and converted
$40,000,000 of such loans to principal
outstanding under a term facility (the
"1997 Term Loans"). After giving effect
to the foregoing, each Bank's 1997
Term Loan was evidenced by a Term Loan
Note (a "1997 Term Loan Note"), payable to
the order of such Bank in installments and
bearing interest payable ( as provided in
therein and in this Agreement, as then in
effect.) The conversion of the
indebtedness due to each Bank under the
loans made to the Company pursuant to the
Prior Amended and Restated Loan Agreement
into the 1997 Term Loans did not effect a
novation of, but was, to the fullest
extent applicable, in modification,
renewal, extension, rearrangement and
replacement of, the loans made by the
Banks to the Company pursuant to the Prior
Amended and Restated Loan Agreement.
(ii) Upon the terms and
conditions set forth in this Agreement, as
of November 30, 1998, each Bank has agreed
to, and does hereby, renew, modify and
extend its Ratable Share of the
$33,000,000 principal amount of the 1997
Term Loans outstanding as of such and to
convert its Ratable Share of the
$7,000,000 of the aggregate principal
amount of the Revolving Credit Loans
outstanding as of such date to $7,000,000
principal outstanding under the term
facility of this Agreement. The
$40,000,000 aggregrate principal amount of
term loans resulting from such renewal,
modification and extension, and from such
conversion, are herein referred to as the
"Term Loans". After giving effect to the
foregoing, each Bank's Term Loan shall be
evidenced by a Term Loan Note, which shall
replace the 1997 Term Loan Note held by
such Bank and shall be payable to the
order of such Bank in installments and
bearing interest payable (except as
otherwise provided in Article 3 of this
Agreement) on each Interest Payment Date
and on the date when such Term Loan is
paid in full at the rate or rates set
forth in Section 2.04 of this Agreement.
The conversion of each Bank's Ratable
Share of the $7,000,000 aggregate
principal amount of Revolving Credit Loans
made to the Company pursuant to this
Agreement prior to November 30, 1998 into
an equal principal amount of Term Loans
hereunder shall not effect a novation of,
but shall be, to the fullest extent
applicable, in modification, renewal,
extension, rearrangement and replacement
of, such Revolving Credit Loans made by
the Banks to the Company pursuant to this
Agreement. Such conversion shall not
result in a reduction in the Commitment
of any Bank
5. Section 2.01(b) of the Loan Agreement is
hereby amended in its entirety to read as follows:
The aggregate principal amount of
the Term Loans shall be payable in
quarterly installments each in an amount
equal to (i) for all quarterly
installments prior to November 10, 2005
(the "Termination Date"), $1,000,000 and
(ii) for the quarterly installment due
on the Termination Date, $13,000,000,
which quarterly installments shall be
payable on the tenth day of each
February, May, August and November of
each year commencing February 10, 1999
and ending on the first such date on
which the aggregate unpaid principal
amount of the Term Loans shall be paid
in full by reason of quarterly
installments paid as aforesaid and any
prepayments made pursuant to Article 3
or otherwise (but in any event no later
than the Termination Date).
6. Subsection 2.02(b) of the Loan Agreement
is amended by deleting "January 31, 2000" and replacing it
with "January 31, 2001".
7. Exhibit A-1 to the Loan Agreement is
hereby deleted and replaced by Exhibit A-1 attached hereto.
8. Each reference in the Loan Agreement to
"this Agreement", "hereunder", "herein" or words of like
import shall mean and be a reference to the Loan Agreement
as amended to date. Unless otherwise indicated, terms used
in this Amendment have the same meanings herein as in the
Loan Agreement.
9. The Loan Agreement, as amended to date,
is in all respects ratified and confirmed, and all of the
rights and powers created thereby or thereunder shall be and
remain in full force and effect.
10. The Company hereby represents that (a)
after giving effect to the amendments contemplated herein,
the representations and warranties contained in the Loan
Agreement, the Notes, the Security Documents, and any other
documents or instruments executed in connection with the
Loan Agreement (collectively, the "Loan Documents") are true
and correct on and as of the date hereof as though made on
and as of such date, (b) upon execution of this Amendment,
the Company will not be in default in the due performance of
any covenant on its part in the Loan Documents, and (c) no
Default or Event of Default has occurred and is continuing
or is imminent.
11. The Company acknowledges, confirms, and
warrants that the Security Documents and any other security
instruments executed at any time in connection with the Loan
Agreement continue to secure, inter alia, the payment of all
Indebtedness at any time created pursuant to the Loan
Agreement, as amended to date, and all obligations of the
Company in respect of Swap Agreements.
12. The effectiveness of this Amendment is
subject to (i) the Company's delivery to the Agent, for the
account of the Banks, of the following items:
(a) an Officers' Certificate of the Company with directors'
resolutions attached;
(b) the favorable signed opinion of counsel to the Company
satisfactory to the Agent and addressing the due
authorization of this Second Amendment and the Term Loan
Notes by the Company, the enforceability of the Loan
Agreement, the Term Loan Notes and the Revolving Credit
Notes as amended by this Second Amendment and such other
matters as the Agent may reasonably request;
(c) the favorable signed opinion of special Federal
Aviation Act counsel to the Company satisfactory to the
Agent and addressing whether any filing with the Federal
` Aviation Administration is required in order to give
effective notice to third parties that the security interest
in the Aircraft, the Engines and the Spare Parts created by
the Security Agreement, as amended and restated, secures the
Term Loan Notes and the Revolving Credit Notes as renewed,
extended or otherwise modified by this Second Amendment, and
such other matters as the Agent may reasonably request;
(d) a counterpart of this Second Amendment executed by the
Company; and
(e) a Term Loan Note payable to the order of each
Bank in the principal amount of its Ratable Share of
$40,000,000; and
(ii) the delivery to the Agent of counterparts of this
Amendment executed by each of the Banks.
13. The Company agrees to do, execute,
acknowledge, and deliver, all and every such further acts
and instruments as the Agent may request for the better
assuring and confirming unto the Agent and the Banks all and
singular the rights granted or intended to be granted hereby
or hereunder.
14. The Company agrees to pay on demand all
reasonable costs and expenses of the Banks in connection
with the preparation, reproduction, execution, and delivery
of this Amendment and the other instruments and documents to
be delivered hereunder (including the reasonable fees and
out-of-pocket expenses of counsel for the Agent, and with
respect to advising the Agent as to its rights and
responsibilities under the Loan Agreement, as hereby to
date). In addition, the Company shall pay any and all stamp
and other taxes and fees payable or determined to be payable
in connection with the execution and delivery, filing, or
recording of this Amendment and the other instruments and
documents to be delivered hereunder, and agrees to save each
Bank harmless from and against any and all liabilities with
respect to and resulting from any delay in paying or
omission to pay such taxes or fees.
15. This Amendment may be executed in any
number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same
instrument.
16. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas
and shall be binding upon the Company, the Agent, and the
Banks and their respective successors and assigns.
17. FINAL AGREEMENT. THIS SECOND AMENDMENT
TOGETHER WITH THE FIRST AMENDMENT, THE LOAN AGREEMENT, THE
NOTES, THE SECURITY DOCUMENTS AND ANY OTHER DOCUMENTS OR
INSTRUMENTS EXECUTED IN CONNECTION WITH THE LOAN AGREEMENT
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused
this Second Amendment to Amended and Restated Loan Agreement
to be executed by their respective officers thereunto duly
authorized as of the date first above written.
PETROLEUM HELICOPTERS, INC.
By:
Name:
Title:
NATIONSBANK OF TEXAS, N.A.,
individually and as Agent
By:
Name:
Title:
WHITNEY NATIONAL BANK
By:
Name:
Title:
BANK ONE, LOUISIANA, N.A.
By:
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from condensed financial
statements for the period ending January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000350403
<NAME> GEOFF STANFORD
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 2,260
<SECURITIES> 0
<RECEIVABLES> 47,829
<ALLOWANCES> 0
<INVENTORY> 35,976
<CURRENT-ASSETS> 89,379
<PP&E> 273,493
<DEPRECIATION> 129,040
<TOTAL-ASSETS> 237,190
<CURRENT-LIABILITIES> 37,343
<BONDS> 0
0
0
<COMMON> 517
<OTHER-SE> 98,626
<TOTAL-LIABILITY-AND-EQUITY> 237,190
<SALES> 191,070
<TOTAL-REVENUES> 190,131
<CGS> 163,255
<TOTAL-COSTS> 163,255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,616
<INCOME-PRETAX> 8,769
<INCOME-TAX> 3,611
<INCOME-CONTINUING> 5,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,158
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0.99
</TABLE>
