===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year . . . . . . . . . . . . . .
OR
/x/Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From May 1, 1999 to December 31, 1999
Commission File No. 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
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Voting Common Stock
Non-Voting Common Stock
(Title of Each Class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. /x/
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 29, 2000 was $ 14,723,265 based upon the
last sales price of the Common Stock on February 29, 2000, as reported on
NASDAQ.
The number of shares outstanding of each of the registrant's classes
of common stock, as of February 29, 2000 was:
Voting Common Stock 2,793,386 shares.
Non-Voting Common Stock 2,367,452 shares.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement to be used in
connection with the Annual Meeting of Shareholders, will be, upon filing with
the Commission, incorporated by reference into Part III of this Form 10-K.
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<PAGE>
PETROLEUM HELICOPTERS, INC.
INDEX - FORM 10-K
PART I
Item 1. Business 1
General 1
Risks and Uncertainties of Foreign Operations 2
Weather and Seasonal Aspects 2
Safety and Insurance 2
Government Regulation 2
Competition 3
Employees 3
Customers 3
Environmental Matters 4
Item 2. Properties 4
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 4.A. Executive Officers of the Registrant 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 7.A. Quantitative and Qualitative Disclosures about
Market Risk 16
Item 8. Financial Statements and Supplementary Data 17
Petroleum Helicopters, Inc. and
Consolidated Subsidiaries:
Independent Auditors' Reports 17
Consolidated Balance Sheets
- December 31, 1999, April 30, 1999 and 1998 19
Consolidated Statements of Operations
- Eight months ended December 31, 1999 and
Years ended April 30, 1999, 1998 and 1997 20
Consolidated Statements of Shareholders' Equity
- Eight months ended December 31, 1999 and
Years ended April 30, 1999, 1998 and 1997 21
Consolidated Statements of Cash Flows
- Eight months ended December 31, 1999 and
Years ended April 30, 1999, 1998 and 1997 22
Notes to Consolidated Financial Statements 23
i
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 39
PART III
Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial Owners
and Management 40
Item 13. Certain Relationships and Related Transactions 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 41
Signatures 45
ii
<PAGE>
PART I
ITEM 1. BUSINESS
General
Petroleum Helicopters, Inc. (the "Company" or "PHI"), a Louisiana
corporation, was incorporated as a Delaware corporation in 1949. Since its
inception, the Company's primary business has been to transport personnel
and, to a lesser extent, parts and equipment, to, from and among offshore
platforms for customers engaged in the oil and gas exploration, development
and production industry. Today, the Company maintains its position as the
largest provider of helicopter transportation services in the Gulf of
Mexico ("the Gulf"), providing approximately 43% of all the contracted
aircraft in the Gulf. The Company currently operates 277 aircraft
worldwide and has 1,847 employees. The Company operates 250 aircraft in
the United States; 200 in the Company's Oil and Gas Aviation Services Unit,
and fifty in the Company's Aeromedical Services Unit. Twenty-seven
aircraft are operated internationally in the Company's Oil and Gas Aviation
Services Unit. Effective December 31, 1999, the Company changed its fiscal
year-end to December 31 of each year. As a result, this report covers the
transition period of May 1, 1999 through December 31, 1999 (the "Transition
Period"). See Item 8. "Financial Statements and Supplementary Data - Notes
to Consolidated Financial Statements, Note 9" for information on the
Company's operating revenues, operating profit (loss) and assets by
industry segment and geographical distribution for the eight months ended
December 31, 1999 and the years ended April 30, 1999, 1998 and 1997.
During the Transition Period and the years ended April 30, 1999, 1998 and
1997, approximately 79%, 81%, 84% and 85%, respectively, of the Company's
operating revenues were generated by oil and gas aviation services,
domestically and internationally and by aircraft maintenance services
provided to outside parties. Domestically, oil and gas aviation revenues
are earned in federal and state waters offshore of the States of Louisiana,
Texas, Alabama, Mississippi, and California. The Company's international
operations are currently conducted in Angola, Antarctica, China, Democratic
Republic of the Congo, Kazakhstan, Mexico, Russia (Sakhalin Island) and
Thailand. Aeromedical operations are currently conducted in Arizona,
Arkansas, California, Florida, Illinois, Kentucky, Louisiana, Michigan,
Mississippi, North Dakota, Ohio, South Carolina, and Wisconsin.
The Company also provides air medical transportation services for hospitals
and medical programs which accounted for 21%, 19%, 15% and 14% of operating
revenues for the Transition Period and the years ended April 30, 1999, 1998
and 1997, respectively.
The Company's helicopters provide a safe, reliable, efficient and fast
method of transportation under a broad range of operational and
environmental conditions, especially offshore and in remote areas.
All of the Company's seventeen principal types of aircraft are available
under a variety of contractual arrangements. The Company maintains master
operating agreements with each of its major domestic and international oil
and gas industry customers, which set forth general rights and duties of
the Company and the customer. Although the Company is a party to a number
of oil and gas industry contracts with a term of one year or more, services
are generally provided pursuant to monthly extensions of these operating
agreements, and prices are fixed for each contract extension. Aeromedical
contracts are generally entered into for longer terms.
Charges under operating agreements are generally based on fixed monthly
fees and additional hourly charges for actual flight time. Because the
Company is compensated in part by flight hours, prolonged adverse weather
conditions that result in reduced flight hours can adversely affect results
of operations. See "Weather and Seasonal Aspects."
Demand for the Company's oil and gas aviation services is strongly
influenced by oil and gas exploration, development and production
activities. These activities are greatly affected by federal leasing
policies and regulations and by oil and gas prices. The Company's air
medical services are influenced by certain U. S. Government medical
reimbursement policies which are subject to some degree of change.
1
<PAGE>
Risks and Uncertainties of Foreign Operations
Operations in foreign countries generally are subject to various risks
attendant to doing business outside the United States. This may include
risks of war, general strikes, civil disturbances, currency fluctuations
and devaluations and governmental activities that may limit or disrupt
markets, restrict payments or the movement of funds or result in the
deprivation of contract rights or the taking of property without fair
compensation. No prediction can be made as to what foreign governmental
regulations may be enacted in the future that could be applicable to
helicopter operations.
Weather and Seasonal Aspects
Poor visibility, high winds and heavy precipitation can affect the safe use
of helicopters and result in a reduced number of flight hours. A
significant portion of the Company's operating revenues are dependent on
actual flight hours (46%, 47%, 46% and 44%, respectively, for the
Transition Period and the years ended April 30, 1999, 1998 and 1997) and a
substantial portion of the Company's direct costs are fixed (62%, 62%, 60%
and 60% respectively for Transition Period and the years ended April 30,
1999, 1998 and 1997). Thus, prolonged periods of adverse weather can
materially and adversely affect the Company's operating revenues and net
earnings.
In the Gulf, the months of December through February have more days of
adverse weather conditions and fewer hours of daylight than the other
months of the year. Consequently, flight hours are generally lower at
these times, which typically result in a reduction in operating revenues
during those months.
The Company currently operates seventy-nine aircraft equipped to fly
pursuant to instrument flight rules ("IFR") in the Gulf, which enables
these aircraft, when manned by IFR rated pilots and co-pilots, to operate
at times when poor visibility prevents flights by aircraft that can fly
only by visual flight rules ("VFR"). Poor visibility is the most common of
the adverse weather conditions that affects the Company's operations.
Safety and Insurance
The operation of helicopters inherently involves a degree of risk.
Hazards, such as aircraft accidents, collisions, fire and adverse weather,
are inherent in the business of providing helicopter services and may
result in losses of equipment and revenues. The Company's safety record is
very favorable in comparison to the record for all United States operators
as reflected in industry publications.
The Company is subject to the federal Occupational Safety and Health Act
("OSHA") and similar state statutes. The Company has an extensive safety
and health program. The primary functions of the safety staff are to
develop Company policies that meet or exceed the safety standards set by
OSHA, train Company personnel and make daily inspections of safety
procedures to ensure their compliance with Company policies on safety. All
personnel are required to attend safety training meetings at which the
importance of full compliance with safety procedures is emphasized. The
Company believes that it meets or exceeds all OSHA requirements and that
its operations do not expose its employees to unusual health hazards.
The Company maintains hull and liability insurance on its aircraft, which
generally insures the Company against physical loss of, or damage to, its
aircraft and against certain legal liabilities to others. In addition, the
Company carries war risk, expropriation, confiscation and nationalization
insurance for its aircraft involved in international operations. In some
instances, the Company is covered by indemnity agreements from oil
companies, hospitals and medical programs in lieu of, or in addition to,
its insurance. The Company's aircraft are not insured for loss of use.
While the Company believes it is adequately covered by insurance and
indemnification arrangements, the loss, expropriation or confiscation of,
or severe damage to, a material number of its helicopters could adversely
affect revenues and profits.
Government Regulation
As a commercial operator of helicopters, the Company's flight and
maintenance operations are subject to regulation by the Federal Aviation
Administration (the "FAA") pursuant to the Federal Aviation Act of 1958
(the "Federal Aviation Act", as amended). The FAA has authority to
exercise jurisdiction over personnel, aircraft, ground facilities and other
aspects of the Company's business.
2
<PAGE>
The Company transports personnel and property in its helicopters pursuant
to an Air Taxi Certificate granted by the FAA under Part 135 of the Federal
Aviation Regulations. This certificate contains operating specifications
that allows the Company to conduct its present operations but is subject to
amendment, suspension and revocation in accordance with procedures set
forth in the Federal Aviation Act. The Company is not required to file
tariffs showing rates, fares and other charges with the FAA. The FAA's
regulations, as currently in effect, also require that at least 75% of the
Company's voting securities be owned or controlled by citizens of the
United States or one of its possessions, and that the president and at
least two-thirds of the directors of the Company be United States citizens.
The Company's president and all of its directors are United States
citizens, and its organizational documents provide for the automatic
reduction in voting power of each share of voting common stock owned or
controlled by a non-United States citizen if necessary to comply with these
regulations.
The National Transportation Safety Board is authorized to investigate
aircraft accidents and to recommend improved safety standards.
The Company is also subject to the Communications Act of 1934 because of
its ownership and operation of a radio communications flight following
network throughout the Gulf of Mexico and off the coast of California.
Numerous federal statutes and rules regulate the offshore operations of the
Company and the Company's customers, pursuant to which the federal
government has the ability to suspend, curtail or modify certain or all
offshore operations. A suspension or substantial curtailment of offshore
oil and gas operations for any prolonged period would have an immediate and
materially adverse effect on the Company. A substantial modification of
current offshore operations could adversely affect the economics of such
operations and result in reduced demand for helicopter services.
Competition
The Company's business is highly competitive. Many of the Company's
contracts are awarded after competitive bidding. The principal aspects of
competition are price, reliability, availability, safety and service.
The Company is the largest operator of helicopters in the Gulf of Mexico
and believes there are approximately two major and several small
competitors operating in the Gulf market. Certain of the Company's
customers and potential customers in the oil industry operate their own
helicopter fleets; however, oil companies traditionally contract for most
specialty services associated with offshore operations, including
helicopter services.
The air medical market is becoming increasingly competitive and is
experiencing some hospital program consolidations.
Employees
As of December 31, 1999, the Company employed a total of 1,847 people. The
Company believes its employee relations to be satisfactory, and it has
never experienced a work stoppage. Currently, none of the Company's
employees are covered by union contracts. However, on March 10, 2000, the
Company's pilots voted to become organized under the Office and
Professional Employees International Union. The Company does not believe
that the terms of any pilots' contract will place it at a disadvantage with
its competitors as management believes that pay scales and work rules will
continue to be similar throughout the industry.
Customers
The Company's principal customers are major oil companies. The Company
also serves independent exploration and production concerns, oil and gas
service companies, hospitals and medical programs and government agencies.
The Company's largest customer (Oil and Gas Aviation Services unit)
accounted for 13%, 14%, 16% and 15% of the Company's operating revenues for
the Transition Period and the years ended April 30, 1999, 1998 and 1997,
respectively. The Company's five largest customers accounted for 34%, 30%,
32% and 32% of operating revenues for the Transition Period and for the
years ended April 30, 1999, 1998 and 1997, respectively.
3
<PAGE>
Environmental Matters
The Company is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage recycling
and disposal of toxic and hazardous wastes. The Company believes that
compliance with federal, state and local environmental laws and regulations
will not have a material effect upon the results of operations of the
Company.
The Company employs an environmental staff that includes two registered
environmental managers, one of whom is also a certified environmental
auditor, a certified environmental systems manager and a certified safety
professional in the field of comprehensive practice, and the other of whom
is also a certified safety and health manager, and also a wastewater class
III operator. The environmental staff conducts inspections and field
audits of Company Gulf Coast facilities on an annual basis and other
locations on a less frequent basis in order to determine the effectiveness
of the environmental program. The Company has established reserves for
environmental costs, which are described under Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Environmental Matters."
ITEM 2. PROPERTIES
Fleet Utilization
As of December 31, 1999, 77% of the Company's aircraft were actively
assigned as compared with 78% and 83% as of April 30, 1999 and 1998,
respectively. Demand for the Company's domestic oil and gas aircraft has
slowed due to an activity decline in the Gulf of Mexico.
Equipment
Certain information regarding the Company's owned and leased fleet as of
December 31, 1999 is set forth in the following table:
<TABLE>
<CAPTION>
Cruise Appr.
Number in Speed Range
Manufacturer Type Fleet Engine Passengers (mph) (miles)
- ------------ ----------- --------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Bell 206B-III 13 Turbine 4 120 300
206L-I, III, IV 87 Turbine 6 130 310
407 35 Turbine 6 144 420
212(1) 11 Twin Turbine 13 115 300
214ST(1) 6 Twin Turbine 18 155 450
222 1 Twin Turbine 8 160 370
412(1) 24 Twin Turbine 13 135 335
Boelkow BK-117 10 Twin Turbine 6 135 255
BO-105 32 Twin Turbine 4 135 270
Aerospatiale AS350 B2 9 Turbine 5 140 385
AS350 B3 3 Turbine 5 140 337
Sikorsky S-76(1) 14 Twin Turbine 12 150 400
MIL Design MIL-8 MTV(1) 2 Twin Turbine 28 140 310
---
Total Helicopters 247
---
Beechcraft King Air 200 (1) 5 Turboprop 8 300 1,380
LET L410(1) 2 Turboprop 15 215 620
Conquest Cessna 441 (1) 5 Turboprop 3 330 1,000
Lear Jet 35A(1) 1 Twin Turbo Jet 4 505 2,100
---
Total Fixed Wing 13
---
Total Aircraft 260
===
</TABLE>
- ------------------------------------------------------------------------------
(1) Equipped to fly under instrument flight rules ("IFR"). All
other types listed can only fly under visual flight rules ("VFR").
See Item 1. "Business - Weather and Seasonal Aspects."
4
<PAGE>
The following tables set forth additional information regarding the
aircraft owned and leased by the Company (in thousands, except the number
of aircraft):
Company Owned Aircraft Cost Net Book Value
----------------------- ---------------- --------------
157 $ 214,638(2) $ 114,576(1)
Total Rents Over Remaining
Company Leased Aircraft Life of Lease Rents
----------------------- ---------------- --------------
103 $ 139,949 $ 104,412
-----------------------------
(1) Information regarding the Company's depreciation policy is set
forth under Item 8. "Financial Statements and Supplementary
Data - Notes to Consolidated Financial Statements, Note 1".
(2) Includes cost of leased aircraft improvements.
------------------------------
The Company operates seventeen aircraft that are owned or leased by
customers which are not reflected in the foregoing tables.
As of December 31, 1999, the Company's commitment for principal payments
and lease payments for its present helicopter fleet averages $ 24.6 million
each year for the next five years and an aggregate of $ 59.2 million
thereafter.
Under most leases the Company is responsible for all insurance, taxes and
maintenance expenses associated with the aircraft, and within certain
limitations, the Company can either substitute equipment or terminate the
leases in the event the leased equipment becomes obsolete or is no longer
suited for the Company's needs. All of the Company's leases are considered
operating leases for accounting and tax purposes.
The Company also maintains an inventory of fuel and an inventory of spare
parts and components for use in the repair and maintenance of the Company's
fleet. This inventory had a book value of approximately $ 37.3 million on
December 31, 1999. The Company is a distributor or dealer for many of these
parts and components, thereby allowing it to realize significant cost
savings on its purchases.
Equipment Sales
The Company sells aircraft whenever they (i) become obsolete, (ii) do not
fit into future fleet plans, or (iii) are surplus to the Company's needs.
The Company typically sells its aircraft for more than their book value.
The Company cannot predict, however, whether these results will continue or
whether such prices would be realized if the Company were to sell a large
number of aircraft in a short period of time.
Facilities
The Company currently leases its executive office space in Metairie,
Louisiana (Metropolitan New Orleans). The lease covers approximately 8,107
square feet and expires on July 31, 2005.
The Company's principal operating facility is located on property leased
from The Lafayette Airport Commission at the Lafayette Regional Airport in
Lafayette, Louisiana. The lease covers approximately twenty-eight acres
and seventeen buildings, with an aggregate of approximately 135,000 square
feet, housing the Company's main operational and administrative offices and
the main repair and maintenance facility. The Company has extended this
lease until completion of a new facility to be leased from The Lafayette
Airport Commission at the Lafayette Regional Airport. The lease term for
this new facility is for 20 years with three five-year renewal options.
The new 253,000 square foot facility is scheduled for completion in
September 2001. This move will not have a material effect on operating
costs. Under the terms of this lease, there is a potential commitment by
the Company to fund $ 4 million of construction costs, in which case the
monthly lease payments for the first ten years of the lease will be reduced
by the amortization of $ 4 million over ten years at 7% per annum.
5
<PAGE>
The Company also leases property for thirteen additional bases to service
the oil and gas industry throughout the Gulf and one base in California.
Those bases that represent a significant investment by the Company in
leasehold improvements or which are particularly important to the Company's
operations are:
A. Morgan City Base (Louisiana) - containing approximately fifty-
three acres, is under a lease that expires June 30, 2003, with
options to extend through June 30, 2013. The Company has built a
variety of operational and maintenance facilities on this property,
including landing pads for forty-six helicopters. The Company
believes that this facility is the largest commercial heliport in
the world.
B. Intracoastal City Base (Louisiana) - containing approximately
twenty-three acres under several leases in Vermilion Parish, all
with options to extend through July 31, 2001. The Company has
built a variety of operational and maintenance facilities on this
property, including landing pads for forty-five helicopters.
C. Houma-Terrebonne Airport (Louisiana) - containing approximately
fourteen acres and certain buildings leased under four leases from
the Houma-Terrebonne Airport Commission, which expire on August 31,
2000. The Company is in the process of renegotiating these leases.
The Company has landing pads for thirty helicopters on this
property.
D. Sabine Pass (Texas) - containing approximately thirty-six
acres under two leases, one of which, for two acres, renews monthly,
and the other of which, for thirty-four acres, will expire October
31, 2001, with options to extend through October 31, 2011. The
Company has built a variety of operational and maintenance
facilities on this property, including landing pads for twenty-four
helicopters.
E New Orleans (Louisiana) - containing approximately two acres,
is under a lease through April 30, 2004. The Company has made
significant leasehold improvements on this property, including
landing pads for fourteen helicopters.
F. Fourchon (Louisiana) - containing approximately eight acres, is
under original lease expiring April 30, 2006. The Company has
landing pads for ten helicopters on this property.
The Company's other operations related bases in the United States are
located along the Gulf in Louisiana at Boothville, Cameron and Lake
Charles; in Texas at Galveston, Port O'Connor and Rockport; in Mississippi
at Pascagoula; in Alabama at Theodore; in New Jersey at Edison; and in
California at Santa Barbara.
The Company operates from offshore platforms which are provided without
charge by the owners of the platforms, although in certain instances the
Company is required to indemnify the owners against loss in connection with
the Company's use thereof.
Bases for the Company's international and air medical operations are
generally furnished by the customer.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Company is not a party to, and its property is not the subject of, any
material pending legal proceedings, other than ordinary routine litigation
incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
6
<PAGE>
ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT
- ----------------------------------------------
Certain information about the executive officers of PHI is set forth in the
following table and accompanying text:
<TABLE>
<CAPTION>
Name Age Position
- ------------------ --- --------------------------------------------------------------------------
<S> <C> <C>
Carroll W. Suggs 61 Chairman of the Board of Directors, President and Chief Executive Officer
Ben Schrick 59 Chief Operating Officer
Robert D. Cummiskey 57 Director of Risk Management and Corporate Secretary
Michael J. McCann (1) 52 Chief Financial Officer and Treasurer
Richard A. Rovinelli (2) 51 Chief Administrative Officer and Director of Human Resources
William P. Sorenson (3) 51 Director of Corporate Marketing / New Business
R. J. Wallace(4) 49 Director Maintenance / FAR145
Kenneth Alan Townsend (5) 61 General Manager - Domestic Oil and Gas Aviation Services
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. McCann has served as Chief Financial Officer ("CFO") and
Treasurer since November 1998. From January 1998, he was the CFO for
Global Industries Ltd. and Chief Administrative Officer ("CAO") from
July 1996. Prior to that, he was CFO for Sub Sea International, Inc.
Mr. McCann is a Certified Public Accountant and holds a Masters of
Business Administration from Loyola University.
(2) Mr. Rovinelli joined the Company in February 1999 as Director of Human
Resources. From January 1996 to February 1999, he was self-employed.
Prior to this time, he was Manager, Human Resources for Arco Alaska,
Inc., Headquarters Staff Manager, Human Resource Services, Arco Oil and
Gas Company, as well as numerous other positions within Arco. Mr.
Rovinelli holds a Bachelor of Science Degree in Industrial Psychology
from the University of Houston.
(3) Mr. Sorenson became Director of Corporate Marketing/New Business
in March 1999 after serving as General Manager of Aeromedical Services
since November 1995. Mr. Sorenson joined the Company in 1976.
(4) Mr. Wallace joined the Company in August 1997. Prior to this
time, he was a Colonel in the U. S. Marine Corps, having served twenty-
five years as an aircraft maintenance officer for several squadrons, a
program officer and an engineering officer. Mr. Wallace also served on
The Joint Chiefs of Staff, The Pentagon.
(5) Mr. Townsend has served as General Manager - Domestic Oil and Gas
Aviation Services since February 1998 and Director of the Oil and Gas
Division since August 1997. During his thirty-three year career with
PHI, he has served as area manager, offshore supervisor and sector
manager.
- -----------------------------------------------------------------------------
7
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- ------------------------------------------------------------------------------
The Company's voting and non-voting common stock trades on The NASDAQ Stock
Market, Small Cap Issuers ("NASDAQ") under the symbols PHEL and PHELK,
respectively. The following table sets forth the range of high and low per
share bid prices, as reported by NASDAQ, and dividend information for the
Company's voting and non-voting common stock for the fiscal quarters
indicated. Effective December 31, 1999, the Company changed its fiscal
year end from April 30 to December 31.
<TABLE>
<CAPTION>
Voting Non-Voting
Common Stock Common Stock Dividends
Fiscal Quarter High Low High Low Per Share
- ----------------------------------- --------------- -------------- ---------
<S> <C> <C> <C>
Quarter Ended
July 31, 1999 15 11 1/4 15 10 3/4 .05
October 31, 1999 13 3/4 9 12 1/2 9 3/8 -
Two Months Ended December 31, 1999 9 7/8 9 9 7/8 8 3/4 -
Quarter Ended
July 31, 1998 23 16 1/2 21 1/2 17 7/8 .05
October 31, 1998 18 7/8 14 19 14 1/2 .05
January 31, 1999 18 15 1/2 18 7/8 15 1/2 .05
April 30, 1999 16 12 16 12 .05
Quarter Ended
July 31, 1997 18 3/4 14 1/2 17 1/2 14 .05
October 31, 1997 30 1/2 14 29 13 7/8 .05
January 31, 1998 25 1/2 20 24 1/4 19 1/2 .05
April 30, 1998 24 1/16 19 24 1/2 19 1/4 .05
</TABLE>
The declaration and payment of dividends is at the discretion of the Board
of Directors. Future dividends are dependent upon, among other things, the
Company's results of operations, financial condition, cash requirements,
future prospects and other factors deemed relevant by the Board. On
October 29, 1999, the Board of Directors voted to suspend PHI's quarterly
cash dividend payments. A credit agreement to which the Company is a party
generally restricts the declaration or payment of dividends to 20% of net
earnings for the previous four fiscal quarters. See Item 8. "Financial
Statements and Supplementary Data - Notes to Consolidated Financial
Statements, Note 3."
As of March 1, 2000, there were approximately 1,072 holders of record of
the Company's voting common stock and 121 holders of record of the
Company's non-voting common stock.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Eight Months Year
Ended December 31, Ended April 30,
---------------------- -----------------------------------------------------------
1999 1998 (3) 1999 1998 1997 1996 1995
--------- ---------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data (Thousands of Dollars, except per share data)
Operating revenues $ 146,308 $ 170,607 $ 247,339 $ 236,582 $ 211,663 $ 185,865 $ 174,397
Net earnings (loss) (2,699) 5,194 2,988 (1) 7,417 6,470 6,466 5,182
Net earnings (loss)
per share (basic) (0.52) 1.01 0.58 1.45 1.27 1.28 0.96
Net earnings (loss)
per share (diluted) (0.52) 0.99 0.57 1.43 1.25 1.27 0.96
Cash dividends
declared per share .05 0.10 0.20 0.20 0.20 0.17 0.06
Balance Sheet Data (2)
Total assets $ 223,056 $ 238,011 $ 231,575 $ 227,021 $ 196,631 $ 161,315 $ 147,108
Total debt 77,640 81,836 80,296 72,619 62,460 37,332 35,815
Working capital 54,699 52,486 51,030 47,971 41,247 26,543 29,809
Shareholders' equity 93,623 99,440 96,581 94,705 87,416 81,401 75,707
</TABLE>
- -----------------------------
(1) See Item 8. "Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements, Note 2 - Special Charges."
(2) As of the end of the period.
(3) Information for the eight months ended December 31, 1998 is unaudited
and presented for comparison purposes only.
------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the Company's
Consolidated Financial Statements for the Transition Period and the years
ended April 30, 1999, 1998 and 1997 and the related Notes to Consolidated
Financial Statements.
Forward-Looking Statements
All statements other than statements of historical fact contained in this
Form 10-K and 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", "goals", "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 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. PHI undertakes no obligation
to update publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.
9
<PAGE>
Results of Operations
REVENUES
Operating Revenues
The following table reflects the distribution of the Company's operating
revenues by business unit:
<TABLE>
<CAPTION>
Eight Months Ended December 31, Year Ended April 30,
------------------------------- --------------------------------
1999 1998 (1) 1999 1998 1997
--------- ---------- --------- -------- ---------
(in 000's)
<S> <C> <C> <C> <C> <C>
Oil and Gas Aviation Unit $ 116,124 $ 138,133 $ 199,846 $ 198,875 $ 180,121
Aeromedical Services Unit 30,249 31,982 46,838 35,879 30,302
Other 7 492 655 1,828 1,240
--------- --------- --------- --------- ---------
$ 146,380 $ 170,607 $ 247,339 $ 236,582 $ 211,663
========= ========= ========= ========= =========
</TABLE>
- ------------------------------
(1) Information for the eight months ended December 31, 1998 is presented
for comparison purposes only.
------------------------------
Oil and Gas Aviation Unit
United States Aviation Operations. Demand for the Company's domestic oil
and gas aviation services is directly influenced by offshore oil and gas
exploration, development and production activities in the areas in which it
operates, which in turn is affected primarily by oil and gas prices. A
decline in oil and gas prices in 1998 and 1999 resulted in a reduction in
exploration and production activities, which, in turn affects aviation
activity. These conditions have adversely impacted helicopter
transportation operations. The Company expects this situation to continue
for the first half of fiscal 2000. Oil and gas prices have steadily
increased during the eight months ended December 31, 1999, but this has not
yet translated into increased exploration and production activities or
increased aviation activity.
During the years ended April 30, 1998 and 1997, improved economic
conditions in the Gulf of Mexico resulted in substantial increases in oil
and gas activity. However, in January 1998, oil prices began to decline,
causing a decrease in oil and gas activity. This decline did not
materially impact the results of the year ended April 30, 1998. However,
the year ended April 30, 1999 and the Transition Period were adversely
affected by the decline in exploration and production activities which
resulted in a decline in flight hours.
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Operating revenues for the eight months ended
December 31, 1999 were $ 91.0 million compared to $ 112.7 million for
the same period in 1998, a decrease of $ 21.7 million or 19%. In 1999,
flight hours declined 23% to 89,346 compared to 115,346 for 1998.
Year ended April 30, 1999 compared to year ended April 30, 1998.
Operating revenues were $ 158.5 million in 1999 compared to $ 162.3
million for 1998, a decrease of $ 3.8 million, or 2%. In 1999, flight
hours declined 15% to 160,102 compared to 187,930 for 1998. The
decrease in flight hours accounted for approximately $ 11.1 million of
the revenue decrease. A rate increase which went into effect in the
third quarter of 1998 offset the decline in flight hour revenue by
approximately $ 7.3 million.
Year ended April 30, 1998 compared to year ended April 30, 1997.
Operating revenues increased 12% from 1997 to 1998. In 1998, flight
hours increased 5% to 187,930 from the 1997 amount of 178,262.
International Operations. For the eight months ended December 31, 1999,
international operating revenues decreased 11% to $ 14.7 million from
$ 16.5 million in the 1998 comparable period. The decrease was due
to reduction in activity. For the year ended April 30, 1999, international
operating revenues increased 6% to $ 24.1 million from $ 22.8 million in
1998. This increase was due to activity in West Africa. Revenues remained
relatively constant during the year ended April 30, 1997 to 1998.
10
<PAGE>
Technical Services Operations. Technical Services Operations is an
airframe and component maintenance and repair facility whose experienced
staff performs a range of maintenance tasks under an FAA-approved repair
station. The repair station ratings include airframe, powerplant,
accessories, radio, instrument and specialized service. PHI Technical
Services Operations is also an authorized service center for Bell
Helicopter Textron, Inc., American Eurocopter Corporation and Turbomeca
Engine Corporation, and has extensive experience and capabilities in
Sikorsky Aircraft Corporation S-76 maintenance and repair.
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Technical Services operating revenues were $ 10.5
million in the eight months ended December 31, 1999 compared to $ 9.0
million in the comparable period in 1998, an increase of $ 1.5 million,
or 17%. This increase was related to an increase in third party
maintenance work.
Year ended April 30, 1999 compared to year ended April 30, 1998.
Technical Services operating revenues were $ 17.2 million in 1999
compared to $ 13.8 million in 1998, an increase of $ 3.4 million. This
increase was related to one contract for the refurbishment and upgrade
of two helicopters.
Year ended April 30, 1998 compared to year ended April 30, 1997.
Technical Services operating revenues increased 6%, or $ 0.8 million,
from $ 13.0 million in 1997.
Aeromedical Services Unit
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Aeromedical revenues decreased $ 1.8 million to
$ 30.2 million, compared to 1998 revenues of $ 32.0 million. Flight hours
decreased 3% from 13,091 in 1998 to 12,715 in 1999.
Year ended April 30, 1999 compared to year ended April 30, 1998.
Aeromedical revenues increased $ 10.9 million to $ 46.8 million,
compared to 1998 revenues of $ 35.9 million. Flight hours increased 21%
from 16,063 in 1998 to 19,496 in 1999. The increase in aeromedical
revenue is due to an increase in activity and the effect of the
acquisition of Air Evac. The increase in Air Evac revenue is due
primarily to twelve months of operation in 1999 versus four months of
operation in 1998.
Year ended April 30, 1998 compared to year ended April 30, 1997.
Aeromedical revenues increased $ 5.6 million, or 18%, to $ 35.9 million
in 1998 as compared to 1997. Flight hours increased 8% to 16,063 in
1998. The 1998 increases resulted primarily from the acquisition of Air
Evac which generated revenues of approximately $ 5.7 million and flight
hours of 1,450 for the four months ended April 30, 1998. (See Item 8.
"Financial Statements and Supplementary Data - Notes to Consolidated
Financial Statements, Note 11" for a more detailed discussion of this
transaction.)
Other Income, Net
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Other income, net, increased $ 6.8 million to $ 5.9
million, compared to a 1998 loss of $ 0.9 million. The increase
resulted primarily from gains recorded relating to the sale of aircraft
in 1999, and the 1998 results being negatively impacted by a charge of
$ 1.3 million related to the discontinuance of a joint venture in South
America.
Year ended April 30, 1999 compared to year ended April 30, 1998. Other
income, net, increased $ 1.2 million to $ 3.5 million in 1999, compared
to $ 2.3 million in 1998, due to gains recorded on sale of aircraft in
1999, partially offset by a charge of $ 1.3 million related to the
discontinuance of a joint venture in South America.
Year ended April 30, 1998 compared to year ended April 30, 1997. Other
income, net, increased $ 1.6 million to $ 2.3 million in 1998, compared
to $ 0.7 million in 1997, due to gains recorded on sale of aircraft in
1998.
11
<PAGE>
EXPENSES
Direct Expenses
The following table highlights certain critical operating factors which are
helpful in analyzing direct expense relationships:
<TABLE>
<CAPTION>
December 31, April 30,
---------------- ---------------------------
1999 1998 1999 1998 1997
------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Number of aircraft
owned/leased/operated at year end 277 309 290 307 314
Fleet utilization 77% 75% 78% 83% 84%
Number of employees at year end 1,847 2,144 2,051 2,135 (1) 1,851
</TABLE>
------------------------------
(1) The acquisition of the AirEvac division of Samaritan Health Systems
("Air Evac") added 196 employees effective December 31, 1997.
------------------------------
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Direct expenses were $ 139.9 million for the
Transition Period compared to $ 144.9 million in the comparable period
in 1998, a decrease of $ 5.0 million, primarily due to decreased
activity levels. Due to the recent slow down in activity, the Company
implemented cost reductions in all areas. Although the Company recently
made further reductions in its labor force, the expected human resource
cost reduction will not be reflected until subsequent periods. On
September 1, 1999, the Company reduced its personnel complement which is
expected to result in an annual human resource expense reduction of
approximately $ 3.5 million. Severance costs totaling $ 1.2 million
related to this action were recorded in the Transition Period and are
included in "Selling, General and Administrative expenses." The Company
also reduced its fleet size to 277 aircraft as of October 31, 1999,
closed certain of Air Evac's unprofitable locations, reduced personnel
and disposed of certain aircraft operated by Air Evac. As these actions
were only recently implemented, the full impact will not be reflected
until subsequent periods.
Aircraft depreciation decreased by $ 1.3 million from $ 9.2 million to
$ 8.0 million due primarily to a change in accounting estimate of the
useful lives on the Company's aircraft from ten to fifteen years and a
residual value increase from 25% to 30%.
Human Resource costs, including employee benefit costs, decreased in the
period by $ 1.1 million. The Company began reducing its cost structure
in January 1999, and by June 30, 1999 had reduced its personnel complement
by 166 and made reductions in other cash expenditures. In July,
due to competitive industry pressures, the Company implemented a
compensation increase primarily for its pilots and mechanics. The
increase in July 1999 more than offset what cost reductions were
previously implemented.
Spare parts usage and repair and maintenance costs declined $ 0.8
million, or 2%, to $ 31.9 million due to a reduction in the number of
aircraft and flight hours. Although the number of aircraft has declined,
spare parts usage and repair and maintenance costs declined at a lesser
rate as the Company continues to refurbish and maintain its fleet of aircraft
under a prescribed refurbishment schedule. Aircraft are refurbished based
on specific time tables and, thus, costs are to a certain extent incurred
on a basis unrelated to flight activity.
Insurance costs and helicopter rent declined $ 2.0 million primarily due
to the disposition of aircraft that no longer met the Company's needs.
Included in direct expenses for the Transition Period is a charge of
$ 1.5 million related to environmental remediation.
12
<PAGE>
Year ended April 30, 1999 compared to year ended April 30, 1998. Direct
expenses were $ 214.5 million in 1999 compared to $ 203.4 million in
1998, an increase of $ 11.1 million. Included in 1999 direct expense is
a charge of $ 1.7 million related to inventory as discussed in Notes to
the Consolidated Financial Statements, Note 2 - "Special Charges." Air
Evac was purchased on December 31, 1997; four months of operating
results are included in 1998 compared to twelve months of operating
results in 1999, which resulted in an increase in direct expenses
(including increases in depreciation expense, human resource costs and
other aircraft costs) of $ 6.8 million.
Aircraft depreciation increased by $ 2.8 million due to the acquisition
of additional aircraft during 1998.
Aircraft rental expense decreased $ 0.4 million primarily as a result of
the restructure of thirteen aircraft leases in the first quarter of
1999.
Year ended April 30, 1998 compared to year ended April 30, 1997. Direct
expenses increased $ 19.0 million, or 10%, to $ 203.4 million primarily
as a result of increased flight activity levels. Included in the above
increase is the direct expense (including depreciation expense, human
resource costs and other aircraft costs) of Air Evac of $ 3.8 million
for the four months of 1998. Excluding the Air Evac acquisition
activity, the increase in direct expense is related to increased flight
activity.
Aircraft depreciation increased by $ 1.7 million to $ 10.7 million as
PHI's owned fleet size expanded in 1998. The Company incurred $ 25.5
million in capital expenditures in 1998, which included seven additional
aircraft.
Aircraft rental expense increased by $ 2.4 million to $ 14.8 million due
to additional leased aircraft. There were ninety-one leased aircraft as
of April 30, 1998, as compared to seventy-four at April 30, 1997.
Selling, General and Administrative Expenses
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Selling, general and administrative expenses for the
eight months ended December 31, 1999 increased $ 0.4 million to $ 12.4
million. The increase was due to severance costs of $ 1.2 million,
partially offset by a decline in legal and professional fees.
Year ended April 30, 1999 compared to year ended April 30, 1998.
Selling, general and administrative expenses for 1999 increased $ 0.2
million to $ 18.0 million. The increase in selling, general and
administrative expenses in 1999 was due to Air Evac selling, general and
administrative expenses for twelve months compared to four months in
1998, an increase of $ 1.8 million. This was offset by a decline in
computer software costs. During 1999, the Company implemented SOP 98-1
resulting in approximately $ 1.2 million of costs being capitalized
during 1999 that would have been expensed under the Company's previous
accounting method for such costs. There was a reduction in bad debt
expense of $ 0.3 million in 1999 compared to 1998.
Year ended April 30, 1998 compared to year ended April 30, 1997.
Selling, general and administrative expenses for 1998 increased $ 5.0
million to $ 17.8 million. This increase was primarily due to legal and
professional fees increasing and the associated selling, general and
administrative costs of Air Evac.
Interest Expense
Interest expense decreased $ 0.1 million in the eight months ended December
31, 1999 from the comparable period in 1998 due to a reduction in debt
levels. Interest expense increased $ 0.9 million from the year ended April
30, 1998 to the year ended April 30, 1999 and $ 0.8 million from the year
ended April 30, 1997 to the year ended April 30, 1998. This is a result of
increased debt levels due to the Company's acquisition of AirEvac and the
purchase of aircraft during 1999 and 1998.
13
<PAGE>
Taxes
PHI's effective tax rate was (32%), 41%, 41%, and 40%, respectively, for
the Transition Period and the years ended April 30, 1999, 1998 and 1997.
See Item 8. "Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements, Note 4."
Earnings per share
Eight months ended December 31, 1999 compared to eight months ended
December 31, 1998. Diluted earnings (loss) per share for the eight
months ended December 31, 1999 was a loss of $ 0.52 compared to positive
diluted earnings of $ 0.99 in the comparable period in 1998. The
decrease was primarily due to decreased activity in aviation services in
the Gulf of Mexico, partially offset by gains on the disposition of
aircraft.
Year ended April 30, 1999 compared to year ended April 30, 1998.
Diluted earnings per share for the year ended April 30, 1999 was $ 0.57
compared to $ 1.43 in 1998. The decrease was primarily due to Special
Charges of $ 7.3 million and an inventory charge of $ 1.7 million. (See
Item 8. "Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements, Note 2 - Special Charges" for a more
detailed discussion of these transactions.) There was a decrease in
earnings related to the decrease in flight activity offset in part by
the rate increase discussed previously.
Year ended April 30, 1998 compared to year ended April 30, 1997.
Diluted earnings per share for the year ended April 30, 1998 increased
14% compared to the prior year. The increase was primarily due to
increased activity.
Liquidity and Capital Resources
The Company's December 31, 1999 year end cash position was $ 1.7 million
compared to $ 3.0 million at April 30, 1999.
Working capital at December 31, 1999 was $ 54.7 million compared to $ 51.0
million at April 30, 1999, an increase of $ 3.7 million. Long-term debt
decreased $ 2.4 million to $ 72.0 million at December 31, 1999. The
Company's current debt obligations for the year ended December 31, 2000
total $ 5.6 million, due in equal quarterly installments, which the Company
intends to pay with cash flow from operations.
The Company's primary credit facility consists of a $ 45.0 million
revolving credit facility available through October 31, 2005 (the
"revolving loan") and a capital loan facility of up to $ 46.25 million
(subject to compliance with certain collateral coverage ratios) (the "term
loan"). The term loan is payable in fixed quarterly principal payments of
$ 1.2 million until maturity on November 10, 2005. The term and revolving
loan agreements permit both prime rate based borrowings and London
InterBank Offered Rate ("LIBOR") borrowings plus a floating spread. The
spread for LIBOR borrowings will float up or down based on the Company's
performance as determined by a leverage ratio. The spread can range from
1.0% to 1.5% above LIBOR.
At March 1, 2000, the Company had $ 8.0 million of credit capacity
available under its credit facilities. As there are no plans to make
significant capital expenditures in 2000, the Company does not anticipate
any additional borrowings under its facilities. At December 31, 1999, the
Company was in compliance with the provisions of its loan agreements or had
received the appropriate waiver. 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.
Cash used in operating activities during the eight months ended December
31, 1999 was $ 3.8 million compared to cash generated from operating
activities of $ 16.5 million, $ 10.5 million and $ 8.5 million for the
years ended April 30, 1999, 1998 and 1997, respectively. The decrease
of $ 20.3 million in the eight months ended December 31, 1999 is primarily
attributable to a decrease in earnings before depreciation and special
charges. The $ 6.0 million increase in for the year ended April 30, 1999
is primarily attributable to a decrease in accounts receivable.
Cash provided by investing activities for the eight months ended December
31, 1999 was $ 5.6 million. The Company sold aircraft that no longer met
the Company's needs netting proceeds of $ 16.3 million. Cash used in
14
<PAGE>
investing activities increased to $ 22.8 million for the year ended
April 30, 1999, as compared to $ 20.2 million for the year ended
April 30, 1998 and $ 32.3 million for the year ended April 30, 1997.
For the year ended April 30, 1999, investing activities totaling $ 42.3
million primarily included the purchase and completion of ten aircraft,
aircraft refurbishments, and other related items. In addition, the
Company sold aircraft that no longer met the Company's requirements; the
net proceeds were $ 19.9 million.
Investing activities for the year ended April 30, 1998 were $ 20.2 million.
Cash used was primarily attributed to the purchase of seven aircraft and
expenditures related to the Company's aircraft refurbishment program.
Proceeds from the sale and disposition of aircraft were $ 14.0 million. In
addition, the Company purchased the assets of Samaritan AirEvac in 1998 for
$ 8.8 million.
Year 2000
In order to minimize or eliminate the effect of the Year 2000 risk on its
business systems and applications, the Company identified, evaluated,
implemented and tested changes to its computer systems, applications and
software necessary to achieve Year 2000 with no significant issues.
Management continues to keep its Year 2000 project management in place to
monitor latent problems that could surface at key dates or events in the
future. Management does not anticipate any significant problems related to
these events. The total direct cost of Year 2000 compliance plan was
approximately $ 0.4 million, of which $ 40,000 was incurred during the
Transition Period. These costs were expensed.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS 133 establishes
new accounting and reporting standards for derivative financial instruments
and for hedging activities. SFAS No. 133 requires the Company to measure
all derivatives at fair value and to recognize them in the balance sheet as
an asset or liability, depending on the Company's rights or obligations
under the applicable derivative contract. In June 1999, the FASB issued
SFAS No. 137, which deferred the effective date of adoption of SFAS No. 133
for one year. The Company will adopt SFAS No. 133 no later than the first
quarter of fiscal year 2001. The Company has considered the implications
of adopting the new method of accounting for derivatives and hedging
activities and has concluded that its implementation will not have a
material effect on the Company's consolidated financial statements.
Environmental Matters
The Company is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage and disposal
of toxic and hazardous wastes.
The Company has policies and procedures in effect to strictly monitor its
compliance with environmental regulations at its operating locations. In
the first quarter of fiscal 1996, the Company began an environmental review
at selected domestic bases, and known or suspected fuel contamination has
been identified at all the bases reviewed.
The Company expensed, including provisions for environmental costs, $ 1.5
million, $ 0.4 million, $ 0.7 million and $ 1.3 million for the Transition
Period and years ended April 30, 1999, 1998, and 1997, respectively,
related to remediation efforts. The Company is currently conducting
assessments at additional bases to determine the extent of remediation
required at these locations. Management believes that reasonably possible
upper range of exposure for environmental remediation matters is $ 3.6
million. The aggregate recorded provision for environmental related costs
at December 31, 1999 was $ 3.0 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.
15
<PAGE>
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks associated with interest rates. The
Company makes limited use of derivative financial instruments to manage
risks associated with existing or anticipated transactions. All
derivatives used for risk management are closely monitored by the Company's
senior management. The Company does not hold derivatives for trading
purposes and it does not use derivatives with leveraged or complex
features. Derivative instruments are traded either with creditworthy major
financial institutions or over national exchanges.
At December 31, 1999, the Company was a party to interest rate swaps with
notional amounts totaling $ 40.0 million that were designed to convert a
similar amount of variable-rate debt to fixed rates. The swaps mature in
2003. The swaps require the Company to pay an average interest rate of
5.78% plus a maximum spread of 1.5% which was the percentage at December
31, 1999 over their composite lives, and at December 31, 1999, the interest
rate to be received by the Company averaged 6.22% plus a spread of 1.5%.
The variable interest rate received by the Company under each swap contract
is repriced quarterly. The Company considers these swaps to be a hedge
against potentially higher future interest rates. As described in Note 7
to the consolidated financial statements, the estimated fair value of these
interest rate swaps was $ 1.5 million at December 31, 1999.
At December 31, 1999, $ 75.0 million of the Company's long-term debt had
variable interest rates. Based on debt outstanding and interest rate swap
agreements in place at December 31, 1999, a 10% increase in variable
interest rates would increase the Company's interest expense in the year
ending 2000 by $ 0.6 million.
At April 30, 1999, $ 75.6 million of the Company's long-term debt had
variable interest rates. Based on debt outstanding and interest rate swap
agreements in place at April 30, 1999, a 10% increase in variable interest
rates would increase the Company's interest expense for the following year
by $ 0.6 million.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
Independent Auditors' Report
----------------------------
To the Board of Directors and Shareholders of
Petroleum Helicopters, Inc.
We have audited the accompanying consolidated balance sheet of Petroleum
Helicopters, Inc. and subsidiaries as of December 31, 1999 and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the eight months ended December 31, 1999. Our audit also included the
financial statement schedule for the eight months ended December 31, 1999
listed in the Index at Item 14. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Petroleum Helicopters,
Inc. and subsidiaries at December 31, 1999 and the results of their
operations and their cash flows for the eight months ended December 31,
1999 in conformity with generally accepted accounting principles. Also in
our opinion, such financial statement schedule for the eight months ended
December 31, 1999, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New Orleans, Louisiana
February 25, 2000
17
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Shareholders
Petroleum Helicopters, Inc.:
We have audited the accompanying consolidated balance sheets of Petroleum
Helicopters, Inc. and subsidiaries as of April 30, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended April 30,
1999. In connection with our audits of the consolidated financial
statements, we also have audited the accompanying financial statement
schedule, "Valuation and Qualifying Accounts," for the three-year period
ended April 30, 1999. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Petroleum Helicopters, Inc. and subsidiaries as of April 30, 1999 and 1998,
and the results of their operations and their cash flows for each of the
years in the three-year period ended April 30, 1999, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in fiscal
1999 the Company adopted the method of accounting for computer software
costs prescribed by Statement of Position 98-1.
/s/ KPMG LLP
KPMG LLP
New Orleans, Louisiana
June 11, 1999
18
<PAGE>
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
December 31, April 30, April 30,
1999 1999 1998
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,663 $ 3,025 $ 2,753
Accounts receivable - net of allowance:
Trade 36,917 39,724 41,447
Other 3,558 2,511 8,823
Inventory 37,277 34,902 34,016
Prepaid expenses 2,987 1,658 1,478
Refundable income taxes 3,922 3,368 -
----------- ----------- -----------
Total current assets 86,324 85,188 88,517
----------- ----------- -----------
Investments in affiliates and other 1,685 1,827 3,385
Property and equipment, at cost:
Flight equipment 214,638 231,300 221,263
Other 42,231 41,030 34,779
----------- ----------- -----------
256,869 272,330 256,042
----------- ----------- -----------
Less accumulated depreciation (121,822) (127,770) (120,923)
----------- ----------- -----------
135,047 144,560 135,119
----------- ----------- -----------
Total Assets $ 223,056 $ 231,575 $ 227,021
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 20,013 $ 22,210 $ 28,004
Accrued vacation payable 6,020 6,057 5,672
Current maturities of long-term debt 5,592 5,891 5,824
Income taxes payable - - 1,046
----------- ----------- ----------
Total current liabilities 31,625 34,158 40,546
----------- ----------- ----------
Long-term debt, net of current maturities 72,048 74,405 66,795
Deferred income taxes 17,776 19,411 19,172
Other long-term liabilities 7,984 7,020 5,803
Commitments and Contengencies (Note 8)
Shareholders' Equity
Voting common stock - par value of $ 0.10;
authorized shares of 12,500,000 279 279 280
Non-voting common stock - par value of
$ 0.10; authorized shares of 12,500,000 237 237 236
Additional paid-in capital 11,729 11,717 11,706
Retained earnings 81,378 84,348 82,483
----------- ----------- ----------
Total shareholders' equity 93,623 96,581 94,705
----------- ----------- ----------
Total Liabilities and
Shareholders' Equity $ 223,056 $ 231,575 $ 227,021
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars and shares, except per share data)
<TABLE>
<CAPTION>
Eight Months Year Ended April 30,
Ended ------------------------------------
December 31, 1999 1999 1998 1997
----------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Operating revenues $ 146,380 $ 247,339 $ 236,582 $ 211,663
Other income, net 5,909 3,543 2,264 725
---------- --------- --------- ---------
152,289 250,882 238,846 212,388
Expenses:
Direct expenses 139,902 214,516 203,421 184,456
Selling, general and administrative 12,359 18,017 17,798 12,778
Special charges - 7,298 - -
Interest expense 3,978 6,017 5,118 4,297
---------- --------- --------- ---------
156,239 245,848 226,337 201,531
---------- --------- --------- ---------
Earnings (loss) before income taxes (3,950) 5,034 12,509 10,857
Income taxes (1,251) 2,046 5,092 4,387
---------- --------- --------- ---------
Net earnings (loss) $ (2,699) $ 2,988 $ 7,417 $ 6,470
========== ========= ========= =========
Basic earnings (loss) per common share $ (0.52) $ 0.58 $ 1.45 $ 1.27
========== ========= ========= =========
Diluted earnings (loss)
per common share $ (0.52) $ 0.57 $ 1.43 $ 1.25
========== ========= ========= =========
Weighted average
common shares outstanding 5,160 5,167 5,115 5,080
Incremental common shares - 60 81 92
---------- --------- --------- ---------
Weighted average
common shares and equivalents 5,160 5,227 5,196 5,172
========== ========= ========= =========
Dividends declared per common share $ 0.05 $ 0.20 $ 0.20 $ 0.20
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Thousands of dollars and shares)
<TABLE>
<CAPTION>
Voting Non-Voting
Common Stock Common Stock Additional
--------------- ---------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------ ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
April 30, 1996 2,800 $ 280 2,276 $ 227 $ 10,220 $ 70,674
====== ======= ====== ====== ========= =========
Stock Options Exercised 5 - 16 2 405 -
Other (4) - 2 - 185 (31)
Net Earnings - - - - - 6,470
Dividends - - - - - (1,016)
------ ------- ------ ------ --------- ---------
BALANCE
April 30, 1997 2,801 $ 280 2,294 $ 229 $ 10,810 $ 76,097
====== ======= ====== ====== ========= =========
Stock Options Exercised - - 65 7 888 -
Other - - - - 8 -
Net Earnings - - - - - 7,417
Dividends - - - - - (1,031)
------ ------- ------ ------ --------- ---------
BALANCE
April 30, 1998 2,801 $ 280 2,359 $ 236 $ 11,706 $ 82,483
====== ======= ====== ====== ========= =========
Stock Options Exercised - - 9 1 78 -
Other (8) (1) (2) - (67) (67)
Net Earnings - - - - - 2,988
Dividends - - - - - (1,056)
------ ------- ------ ------ --------- ---------
BALANCE
April 30, 1999 2,793 $ 279 2,366 $ 237 $ 11,717 $ 84,348
====== ======= ====== ====== ========= =========
Other - - 1 - 12 -
Net Loss - - - - - (2,699)
Dividends - - - - - (271)
------ ------- ------ ------ --------- ---------
BALANCE
December 31, 1999 2,793 $ 279 2,367 $ 237 $ 11,729 $ 81,378
====== ======= ====== ====== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
<TABLE>
<CAPTION>
Eight Months Year Ended April 30,
Ended ------------------------------------
December 31, 1999 1999 1998 1997
----------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (2,699) $ 2,988 $ 7,417 $ 6,470
Adjustments to reconcile net earnings
(loss)to net cash provided by (used in)
operating activities:
Depreciation 9,655 16,193 12,534 9,977
Deferred income taxes (1,635) 239 933 3,273
Gain on asset dispositions (6,595) (3,583) (3,313) (1,285)
Special charges - 6,172 - -
Equity in net (earnings) losses of
investee companies 806 40 (242) 560
Changes in operating assets and
liabilities:
Accounts receivable 1,516 3,633 (12,042) (6,822)
Inventory (2,375) (859) (3,682) (4,088)
Refundable income taxes (554) (3,368) 1,344 (607)
Prepaid and other (875) (505) (127) 395
Accounts payable, accrued
liabilities and vacation payable (1,992) (4,326) 5,800 1,616
Income taxes payable - (1,046) 1,046 -
Other long-term liabilities 933 917 840 (1,000)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities (3,815) 16,495 10,508 8,489
--------- --------- --------- ---------
Cash flows from investing activities:
Investments in affiliates (580) (424) (8,730) (957)
Purchase of property and equipment (10,047) (42,271) (25,475) (40,835)
Proceeds from asset dispositions 16,254 19,881 13,982 6,583
Proceeds from sale of investment - - - 2,935
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities 5,627 (22,814) (20,223) (32,274)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 12,000 30,000 31,150 42,425
Payments on long-term debt (14,656) (22,324) (20,991) (17,295)
Proceeds from exercise of stock
options and other - (50) 895 209
Dividends paid (518) (1,035) (1,023) (1,016)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (3,174) 6,591 10,031 24,323
--------- --------- --------- ---------
Increase (decrease) in cash and
cash equivalents (1,362) 272 316 538
Cash and cash equivalents,
beginning of year 3,025 2,753 2,437 1,899
--------- --------- --------- ---------
Cash and cash equivalents,
end of year $ 1,663 $ 3,025 $ 2,753 $ 2,437
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Other General Principles
The consolidated financial statements include the accounts of
Petroleum Helicopters, Inc. and its wholly-owned subsidiaries ("PHI"
or the "Company") after the elimination of all significant
intercompany accounts and transactions. Since its inception, the
Company's primary business has been to transport personnel and, to a
lesser extent, parts and equipment, to, from and among offshore
platforms for customers engaged in the oil and gas exploration,
development and production industry. The Company provides aircraft
maintenance services to third parties. The Company also provides air
medical transportation services for hospitals and medical programs.
Investments in twenty to fifty percent owned affiliates are accounted
for by the equity method and consist primarily of investments in
foreign affiliates.
The Company recognizes revenue on the accrual basis, generally during
the month in which the services are rendered. Revenues related to
emergency flights generated by the Company's subsidiary, Air Evac
Services, Inc. ("Air Evac") are recorded net of contractual allowances
under agreements with third party payors.
Foreign currency transactions are not material.
Fiscal Year Change
Effective December 31, 1999, the Company changed its fiscal year-end
to December 31 of each year. The consolidated statements of
operations, shareholders' equity and cash flows for the period from
May 1, 1999 to December 31, 1999 represent a transition period of
eight months which is referred to as the eight months ended December
31, 1999.
The following is a comparative summary of the operating results for
the eight month periods ended December 31, 1999 and December 31, 1998:
Eight Months Ended December 31,
1999 1998
----------- -----------
(Unaudited)
(in thousands, except per share amounts)
Revenues:
Operating revenues $ 146,380 $ 170,607
Other income, net 5,909 (930)
----------- -----------
152,289 169,677
Expenses:
Direct expenses 139,902 144,852
Selling, general and administrative 12,359 11,915
Interest expense 3,978 4,105
----------- -----------
156,239 160,872
----------- -----------
Earnings (loss) before income taxes (3,950) 8,805
Income taxes (1,251) 3,611
----------- -----------
Net earnings (loss) $ (2,699) $ 5,194
=========== ===========
Net earnings (loss) per common share
Basic $ (0.52) $ 1.01
=========== ===========
Diluted $ (0.52) $ 0.99
=========== ===========
23
<PAGE>
Use of Estimates
In preparing the Company's financial statements management makes
informed estimates and assumptions that affect the amounts reported in
the financial statements and related disclosures. Actual results may
differ from these estimates.
Cash Equivalents
The Company considers cash equivalents to include demand deposits and
investments with original maturity dates of three months or less.
Inventories
Inventories are stated at the lower of average cost or market and
consist primarily of spare parts and aviation fuel. The valuation
reserve related to obsolete and excess inventory was $ 2.2 million,
$ 2.2 million and $ 1.9 million at December 31, 1999, and April 30, 1999
and 1998, respectively.
Change in Accounting Estimate
Effective May 1, 1999 the Company changed the estimated useful lives
on its aircraft from ten years to fifteen years. The residual value
was increased from 25% to 30%. The Company believes the revised
estimated useful lives and residual values will more appropriately
reflect its financial results by better matching costs over the
estimated useful lives of these assets. The effect of this change on
net income for the eight months ended December 31, 1999 was a
reduction in depreciation expense of approximately $ 1.7 million
($ 1.1 million after tax or $ .21 per diluted share).
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. For financial reporting purposes, depreciation is
computed using the straight-line method based upon estimated useful
lives of fifteen years for flight equipment and three to ten years for
other equipment. Accelerated methods are used for tax purposes. A
residual value of 30% of cost is used in the calculation of
depreciation of flight equipment and other equipment. When property
and equipment is sold or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in earnings at the time of sale or
other disposition.
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset
exceeds its fair value. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
Self-Insurance
The Company maintains a self-insurance program for a portion of its
health care costs. Self-insurance costs are accrued based upon the
aggregate of the liability for reported claims and the estimated
liability for claims incurred but not reported.
The Company does not presently have any significant obligations for
post employment benefits.
24
<PAGE>
Concentration of Credit Risk
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. The allowance for doubtful accounts was
$ 0.8 million, $ 1.7 million and $ 2.0 million at December 31, 1999 and
April 30, 1999 and 1998, respectively. The Company does not believe
significant credit risk exists with respect to these securities at
December 31, 1999.
A majority of the Company's business is conducted with major oil and
gas exploration companies with operations in the Gulf of Mexico. The
Company continually evaluates the financial strength of its customers
but does not require collateral to support the customer receivables.
The Company establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, current
market conditions and other information. The Company's largest
customer (Oil and Gas Aviation Services business unit) accounted for
13%, 14%, 16% and 15% of the Company's operating revenues for the
eight months ended December 31, 1999 and years ended April 30, 1999,
1998 and 1997, respectively. The Company's five largest customers
accounted for 34%, 30%, 32% and 32% of operating revenues for the
eight months ended December 31, 1999 and for the years ended April 30,
1999, 1998 and 1997, respectively.
Stock Compensation
The Company uses the intrinsic value method of accounting for stock-
based compensation prescribed by Accounting Principles Board (APB)
Opinion No. 25 and, accordingly, follows the disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
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. 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 the year ended April 30,
1999 that would have been expensed under the Company's previous
accounting method for such costs. This increased net earnings by
$ 0.7 million or $ 0.13 per diluted share for the year ended April 30,
1999. Post-implementation costs are being expensed in accordance with
the SOP and capitalized costs are being amortized over their estimated
useful life.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that included the enactment date.
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 diluted share base for the eight months ended
December 31, 1999 excludes incremental shares of 34,972 related to
employee stock options and restricted stock awards. These shares are
excluded due to their antidilutive effect as a result of the Company's
net loss for the eight months ended December 31, 1999.
25
<PAGE>
Derivative Financial Instruments
The Company uses interest rate swap agreements to manage its interest
rate exposure. The Company specifically designates these agreements as
hedges of debt instruments and recognizes interest differentials as
adjustments to interest expense in the period the differentials occur.
Under interest rate swap agreements, the Company agrees with other
parties to exchange, at specific intervals, the difference between
fixed-rate and variable-rate interest amounts calculated by reference
to an agreed-upon notional principal amount. The fair value of the
interest rate swap agreements is estimated using quotes from
counterparties and represents the cash effect if the existing
agreements had been settled at December 31, 1999 and April 30, 1999
and 1998.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS
133 establishes new accounting and reporting standards for derivative
financial instruments and for hedging activities. SFAS No. 133
requires the Company to measure all derivatives at fair value and to
recognize them in the balance sheet as an asset or liability,
depending on the Company's rights or obligations under the applicable
derivative contract. In June 1999, the FASB issued SFAS No. 137,
which deferred the effective date of adoption of SFAS No. 133 for one
year. The Company will adopt SFAS No. 133 no later than the first
quarter of fiscal year 2001. The Company has considered the
implications of adopting the new method of accounting for derivatives
and hedging activities and has concluded that its implementation will
not have a material effect on the Company's consolidated financial
statements.
(2) SPECIAL CHARGES
In April 1999, in connection with management's decision to reduce
costs and to recognize the impairment of assets as a result of
decreased activity, the Company recorded Special Charges of $ 7.3
million ($ 4.4 million on an after tax basis or $ 0.84 per diluted
share). Additionally, a charge of $ 1.7 million was recognized during
the year-ended April 30, 1999 for the disposition of slow
moving inventories and is included in direct expenses. The combined
effect of these two amounts is $ 9.0 million before tax.
The Special Charges are as follows:
Description (Millions of dollars)
-------------------------------- ---------------------
Severance and related costs (37 employees) $ 1.3
Impairment of property and equipment 1.6
Impairment of certain foreign based joint venture 3.8
Other 0.6
--------------
Special Charges $ 7.3
==============
At April 30, 1999, $ 0.8 million of these charges remained in accrued
liabilities, which was comprised of $ 0.3 million for employee
severance / benefits and $ 0.5 million for other charges;
substantially all of which was paid by December 31, 1999.
26
<PAGE>
(3) LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31, 1999 April 30, 1999 April 30, 1998
----------------- -------------- --------------
(Thousands of dollars)
<S> <C> <C> <C>
Secured term loan notes due
November 10, 2003 and 2005,
due in quarterly installments
of $ 1,223,214, bearing
interest (at rates varying
between 7.7% and 8.0% on
December 31, 1999) $ 40,465 $ 44,134 $ 42,027
Secured notes due October
31, 2005 and November 10,
2005, under revolving credit
facilities totaling
$ 45,000,000 bearing interest
(at rates varying between 7.7%
and 8.0% on December 31, 1999) 34,500 31,500 25,000
Secured 10 year promissory
notes due in monthly
installments of $ 72,000
commencing July 9, 1993 with
a fixed interest rate of 7.0% 2,675 4,662 5,592
---------- ---------- ---------
Total debt 77,640 80,296 72,619
Less current maturities 5,592 5,891 5,824
---------- ---------- ---------
Long-term debt $ 72,048 $ 74,405 $ 66,795
========== ========== =========
</TABLE>
Maturities of long-term debt are as follows:
(Thousands of dollars)
2000 $ 5,592
2001 12,542
2002 12,596
2003 13,109
2004 10,900
Thereafter 22,901
---------
$ 77,640
=========
At December 31, 1999, the following assets and their related book
values are pledged as collateral on long-term debt aggregating $ 77.6
million:
(Thousands of dollars)
Equipment, net of depreciation $ 69,371
Inventory 31,555
Accounts receivable, net 32,670
---------
$133,596
=========
Term Loans and Revolving Credit Facilities
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 provided a
$ 40.0 million revolving credit facility and a $ 40.0 million term
credit facility. The loan is secured by substantially all of the
Company's assets. The term loan is payable in fixed quarterly
principal payments of $ 1.0 million until maturity on November 10,
2005. The secured term and revolving loan agreement permits both
prime rate based borrowings and London InterBank Offered Rate
("LIBOR") borrowings plus a floating spread. The spread for LIBOR
borrowings will float up or down based on the Company's performance as
determined by a leverage ratio. The spread can range from 1.0% to 1.5%
above LIBOR. At December 31, 1999 and April 30, 1999 and 1998,
27
<PAGE>
$ 29.5 million, $ 26.5 million and $ 25.0 million, respectively, was
outstanding on the revolving credit facility which matures October 31,
2005. At December 31, 1999 and April 30, 1999 and 1998, $ 36.0
million, $ 39.0 million and $ 36.0 million, respectively, was
outstanding on the term loan notes.
On January 29, 1999, the Company's wholly-owned subsidiary, Air Evac
and the Company's principal lending group amended its original loan
agreement dated December 31, 1997. This agreement provides $ 5.0
million and $ 6.25 million revolver and term credit facilities,
respectively. This loan is secured by certain assets of Air Evac and
is guaranteed by the Company. The term loan is payable in fixed
quarterly principal payments of $ 0.2 million until maturity on
November 10, 2003. The secured term and revolving loan agreement
permits both prime rate based borrowings and London InterBank Offered
Rate ("LIBOR") borrowings plus a floating spread. The spread for
LIBOR borrowings will float up or down based on the Company's
performance as determined by a leverage ratio. The spread can range
from 1.0% to 1.5% above LIBOR. At December 31, 1999 and April 30,
1999, $ 5.0 million was outstanding on the revolving credit facility
which matures November 10, 2005. At December 31, 1999 and April 30,
1999 and 1998, $ 4.5 million, $ 5.1 million and $ 6.0 million,
respectively, was outstanding on the term notes.
Both the term loans and the revolving credit facilities are subject to
certain financial covenants with which the Company was in compliance
at December 31, 1999 or had received the appropriate waiver. These
covenants include maintaining certain levels of working capital and
shareholders' equity and contain other provisions some of which
restrict purchases of the Company's stock, capital expenditures and
payment of dividends. The declaration or payment of dividends is
restricted to 20% of net earnings for the previous four fiscal
quarters. At April 30, 1999, the Company received a waiver allowing
the $ 9.0 million in special charges and inventory writedowns (see
Notes to Consolidated Financial Statements, Note 2) to be excluded
from the dividend restriction calculation, thus allowing the payment
of dividends in May 1999. Such agreements also limit the creation,
incurrence or assumption of Funded Debt (as defined, which includes
long-term debt) and the acquisition of investments in unconsolidated
subsidiaries.
Cash paid for interest on the secured and promissory notes was $ 3.0
million, $ 5.7 million $ 4.6 million and $ 4.5 million for the eight
months ended December 31, 1999 and the years ended April 30, 1999,
1998 and 1997, respectively.
(4) INCOME TAXES
Income tax expense (benefit) is composed of the following:
Eight Months Year Ended April 30,
Ended -----------------------------
December 31, 1999 1999 1998 1997
----------------- -------- -------- --------
(Thousands of dollars)
Current:
Federal $ (185) $ 544 $ 3,264 $ 765
State (8) 271 644 296
Foreign 577 992 251 53
Deferred -
principally Federal (1,635) 239 933 3,273
-------- ------- ------- -------
$(1,251) $ 2,046 $ 5,092 $ 4,387
======== ======= ======= =======
28
<PAGE>
Deferred income tax expense (benefit) results from the following:
Eight Months Year Ended April 30,
Ended -----------------------------
December 31, 1999 1999 1998 1997
----------------- -------- -------- --------
(Thousands of dollars)
Accelerated
depreciation $ 45 $ 2,797 $ 2,023 $ 2,911
Accrued expenses and
other liabilities (1,658) (1,352) (1,090) 407
Effect of tax credits (22) (1,206) - (45)
--------- -------- -------- --------
$ (1,635) $ 239 $ 933 $ 3,273
========= ======== ======== ========
Income tax expense (benefit) as a percentage of pre-tax earnings
varies from the effective Federal statutory rate of 34% as a result of
the following:
<TABLE>
<CAPTION>
Eight Months Year Ended April 30,
Ended -----------------------------------------
December 31, 1999 1999 1998 1997
----------------- ------------ ------------ ------------
(Thousands of dollars, except percentages)
Amount % Amount % Amount % Amount %
--------- ---- -------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income taxes at
statutory rate $(1,343) (34) $1,712 34 $4,253 34 $3,691 34
Increase (decrease)
in taxes resulting from:
Effect of state
income taxes (158) (4) 179 4 514 4 195 2
Other items - net 250 6 155 3 325 3 501 4
-------- ---- ------ --- ------ --- ------ ---
$(1,251) (32) $2,046 41 $5,092 41 $4,387 40
======== ==== ====== === ====== === ====== ===
</TABLE>
The tax effects of temporary differences which give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1999 and April 30, 1999 and 1998 are
presented below:
April 30,
December 31, -----------------------
1999 1999 1998
------------ --------- ----------
(Thousands of dollars)
Deferred tax assets:
Tax credits $ 1,874 $ 1,896 $ 690
Vacation accrual 2,088 2,134 1,919
Inventory valuation 657 880 696
Workman's compensation reserve 313 448 396
Allowance for uncollectible accounts 293 620 723
Deferred gains 971 1,253 -
Other 4,121 3,458 3,521
Net operating loss 1,524 - -
-------- -------- --------
Total deferred tax assets 11,841 10,689 7,945
-------- -------- --------
Deferred tax liabilities:
Tax depreciation in excess
of book depreciation 28,616 28,571 25,774
Other 1,001 1,529 1,343
-------- -------- --------
Total deferred
tax liabilities 29,617 30,100 27,117
-------- -------- --------
Net deferred
tax liabilities $ 17,776 $ 19,411 $ 19,172
======== ======== ========
29
<PAGE>
No valuation allowance was recorded against the deferred tax assets
because management believes that the deferred tax assets will more
than likely be realized in full through future operating results and
the reversal of taxable temporary differences.
Income taxes paid were approximately $ 0.6 million for the eight
months ended December 31, 1999 and $ 4.9 million, $ 3.5 million and
$ 2.4 million for the years ended April 30, 1999, 1998 and 1997,
respectively.
(5) EMPLOYEE BENEFIT PLANS
Savings and Retirement Plans
The Company established, effective July 1, 1989, an Employee Savings
Plan under Section 401(k) of the Internal Revenue Code. Effective
July 1999, the plan provides that the Company match 200% of up to 3%
of employee contributions. Previously, the Company matched 100% of the
first 3% of their contributions. The Company's contribution was $ 2.4
million, $ 2.1 million, $ 1.7 million, and $ 1.6 million for the
eight months ended December 31, 1999, and the years ended April 30,
1999, 1998 and 1997, respectively.
Effective September 1, 1994, the Company adopted a Supplemental
Executive Retirement Plan ("SERP"). The nonqualified and unfunded
plan provides senior management with supplemental retirement and death
benefits at age 65. Life insurance policies, of which the Company is
the sole owner and beneficiary, were purchased on the lives of each of
the participants. Supplemental retirement benefits were based on one-
third (1/3) of the participants' monthly income at the time of
adoption. Currently, there are no SERP provisions for an increase in
benefits, partial vesting or early retirement. The assumed discount
rate was 7.5%. Expenses for the plan were $ 267,000, $ 284,000,
$ 326,000 and $ 275,000 for the eight months ended December 31, 1999,
and the years ended April 30, 1999, 1998 and 1997, respectively.
During fiscal 1996, the Board of Directors approved an Officer
Deferred Compensation Plan and a Director Deferred Compensation Plan.
Both plans were effective May 31, 1995. The plans permit key officers
and all directors to defer a portion of their compensation. The plans
are nonqualified and unfunded.
Stock Option Plans
Effective May 1, 1992, the Company's Board of Directors adopted the
Petroleum Helicopters, Inc. 1992 Non-Qualified Stock Option and Stock
Appreciation Rights Plan (the "Plan"). The Company is authorized to
grant non-qualified stock options and stock appreciation rights to
selected employees to purchase up to 100,000 shares of the Company's
non-voting common stock at an exercise price of not less than 25% of
their fair market value at the date of grant. The options may be
exercised any time after one year from the date of grant until their
expiration at five years from such date.
Under the PHI 1995 Incentive Plan (the "1995 Plan"), the Company is
authorized to issue a total of 175,000 shares of voting common stock
and 325,000 shares of non-voting common stock. The Compensation
Committee of the Board of Directors is authorized under the 1995 Plan
to grant stock options, restricted stock, stock appreciation rights,
performance shares, stock awards and cash awards. The exercise price
of the stock option grants is equal to the fair market value of the
underlying stock at the date of grant.
During the eight months ended December 31, 1999, 30,000 voting and
142,000 non-voting stock options were granted under the 1995 Plan.
During the year ended April 30, 1999, 13,084 non-voting restricted
shares and 19,000 non-voting stock options were granted under the 1995
Plan. The restricted shares will become unrestricted on July 31,
2001. The non-voting options, in the event they become vested, are
exercisable over the next five years, expiring in 2007 and 2008.
During the year ended April 30, 1997, 24,000 non-voting restricted
shares and 23,200 non-voting stock options were granted under the 1995
Plan. The restricted shares and the options granted during the year
ended April 30, 1997 vested on July 31, 1997 and the restricted shares
will become unrestricted on July 31, 2000. These options are all
exercisable and expire on July 30, 2006. The Company recorded no
compensation expense related to the 1995 Plan during the eight months
ended December 31, 1999 and the years ended April 30, 1999 and 1998,
and $ 0.4 million during the year ended April 30, 1997.
30
<PAGE>
On October 30, 1998, the shareholders of PHI adopted the Directors
Stock Compensation Plan (the "Plan") to (i) substitute for the annual
cash retainer to non-employee directors ("Directors") an annual award
of PHI's non-voting common stock ("Common Stock"), and (ii) provide
for the automatic annual grant to Directors of options to purchase
2,000 shares of Common Stock. The Plan also provides for the
voluntary deferral of all or a portion of the stock awards or fees
otherwise payable annually to each Director. All non-employee members
of the Board of Directors of PHI participate in the Plan. Up to
150,000 shares of Common Stock may be issued under the Plan, subject
to adjustment in the event of any recapitalization, stock dividend,
stock split, combination of shares or other change in the Common
Stock. During the eight months ended December 31, 1999, and the
fiscal year ended April 30, 1999, 10,000 and 6,000 options,
respectively, were issued under the Plan.
A summary of the Plans' activities for the eight months ended December
31, 1999, and the years ended April 30, 1999, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1992 Plan Other Director 1995 Plan Options
Options Options Plan
---------- -------- ---------- ---------------------
Non-Voting Voting Non-Voting Voting Non-Voting Total
---------- -------- ---------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance outstanding
at April 30, 1996 75,000 5,000 - 23,200 116,000 219,200
========== ======== ========== ======= ========== =========
Options granted at
$ 14.88 (non-voting) - - - - 23,200 23,200
Options
lapsed/cancelled - - - (2,720) (21,304) (24,024)
Options exercised (16,500) (5,000) - - (2,527) (24,027)
---------- -------- ---------- ------- ---------- ---------
Balance outstanding
at April 30, 1997 58,500 - - 20,480 115,369 194,349
========== ======== ========== ======= ========== =========
Options granted - - - - - -
Options
lapsed/cancelled (9,000) - - - (23,550) (32,550)
Options exercised (49,500) - - - (12,369) (61,869)
---------- -------- ---------- ------- ---------- ---------
Balance outstanding
at April 30, 1998 - - - 20,480 79,450 99,930
========== ======== ========== ======= ========== =========
Options granted at
a price range of
$ 16.25 to $ 16.75 - - 6,000 - 19,000 25,000
Options
lapsed/cancelled - - - - (5,493) (5,493)
Options exercised - - - - (9,240) (9,240)
---------- -------- ---------- ------- ---------- ---------
Balance outstanding
at April 30, 1999 - - 6,000 20,480 83,717 110,197
========== ======== ========== ======= ========== =========
31
<PAGE>
1992 Plan Other Director 1995 Plan Options
Options Options Plan
---------- -------- ---------- ---------------------
Non-Voting Voting Non-Voting Voting Non-Voting Total
---------- -------- ---------- ------- ---------- ---------
Options granted at
a price range of
$ 9.81 to $ 13.25 - - 10,000 30,000 142,000 182,000
---------- -------- ---------- ------- ---------- ---------
Balance outstanding
at December 31, 1999 - - 16,000 50,480 225,717 292,197
========== ======== ========== ======= ========== =========
Shares exercisable
at April 30, 1997
at a price range of
$ 8.50 to $ 15.50
(weighted average
exercise price of
$12.22) 58,500 - - 10,240 44,821 113,561
========== ======== ========== ======= ========== =========
Shares exercisable
at April 30, 1998
at a price range of
$ 8.50 to $15.50
(weighted average
exercise price of
$ 8.93) - - - 20,480 77,130 97,610
========== ======== ========== ======= ========== =========
Shares exercisable
at April 30, 1999
at a price range of
$ 8.50 to $16.31
(weighted average
exercise price of
$ 9.15) - - - 20,480 66,717 87,197
========== ======== ========== ======= ========== =========
Shares exercisable
at December 31, 1999
at a price range of
$ 8.50 to $16.31
(weighted average
exercise price of
$ 9.62) - - - 20,480 71,717 92,197
========== ======== ========== ======= ========== =========
Shares available
for future grant
at December 31, 1999 34,000 - 134,000 124,520 58,432 350,952
========== ======== ========== ======= ========== =========
</TABLE>
32
<PAGE>
The following table summarizes information about stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-----------------------------------------------------------------
Weighted-Avg.
Remaining Weighted- Weighted-
Range of As of Contractual Avg. Exercise As of Avg. Exercise
Exercise Prices 12/31/99 Life-Yrs. Price 12/31/99 Price
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.50 - $ 9.75 81,197 5.00 $ 8.77 81,197 $ 8.77
$ 9.81 - $ 13.25 182,000 9.58 12.67 - -
$ 14.88 4,000 6.00 14.88 4,000 14.88
$ 16.25 - $ 16.75 25,000 7.84 16.38 7,000 16.31
-------- --------
292,197 8.11 $ 11.93 92,197 $ 9.62
======== ========
</TABLE>
The Company's 1995 Incentive Plan also authorizes the granting of
restricted stock awards. Under this plan during the years ended April
30, 1999 and 1997, 11,690 shares and 5,025 shares, respectively of
restricted stock (net of forfeitures) were awarded to Company
executive officers and other key employees that will vest over two
years based upon the completion of specified periods of future service
with the Company. Compensation is charged to income over the vesting
period for these awards which resulted in expense recognition of
$ 55,000, $ 97,000, $ 21,000 and $ 89,000 for the eight months ended
December 31, 1999 and the years ended April 30, 1999, 1998 and 1997,
respectively.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123), encourages the use of a
fair value based method of accounting for compensation expense
associated with stock option and similar plans. However, SFAS No. 123
permits the continued use of the intrinsic value based method
prescribed by Opinion No. 25 but requires additional disclosures,
including pro forma calculations of net earnings and earnings per
share as if the fair value method of accounting prescribed by SFAS No.
123 had been applied.
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended April 30,
December 31, 1999 1999 1998 1997
----------------- ------- -------- ---------
<S> <C> <C> <C> <C>
Net earnings (loss) -
as reported $ (2,699) $ 2,988 $ 7,417 $ 6,470
Net earnings (loss) -
pro forma (2,868) 2,967 7,516 6,366
Diluted earnings (loss)
per share - as reported (0.52) 0.57 1.43 1.25
Diluted earnings (loss)
per share - pro forma (0.56) 0.57 1.45 1.25
Average fair value of
grants during the year 1.95 5.87 N/A 7.45
Black-Sholes option pricing
model assumptions:
Risk-free interest rate 6.5% 6.5% N/A 6.5%
Expected life (years) 4 4 N/A 4
Volatility 27% 27% N/A 12%
Dividend yield 0.53% 1.39% N/A 1.11%
</TABLE>
33
<PAGE>
(6) SUPPLEMENTAL CASH FLOW INFORMATION AND FINANCING ACTIVITIES
For the eight months ended December 31, 1999, the Company recorded
proceeds from equipment sales of $ 16.3 million. The original cost
and accumulated depreciation associated with these transactions were
$ 26.4 million and $ 15.6 million, respectively. Gains of $ 1.2 million
recognized on sale-leaseback transactions were deferred and are being
credited to income over the lease terms. The book values of the
equipment totaling $ 2.3 million were removed from the balance sheet.
For the year ended April 30, 1999, the Company recorded proceeds from
equipment sales of $ 19.9 million. The original cost and accumulated
depreciation associated with these transaction were $ 27.0 million and
$ 10.2 million, respectively. Gains of $ 0.6 million recognized on
sale-leaseback transactions were deferred and are being credited to
income over the lease terms. The book values of the equipment
totaling $ 2.2 million were removed from the balance sheet.
For the year ended April 30, 1998, the Company reported proceeds from
equipment sales of $ 14.0 million. The original cost and accumulated
depreciation associated with these transactions were $ 19.9 million
and $ 10.9 million, respectively. Gains of $ 1.7 million recognized
on sale-leaseback transactions were deferred.
For the year ended April 30, 1997, the Company reported proceeds from
equipment sales of $ 6.6 million. The original cost and accumulated
depreciation associated with these transactions were $ 9.6 million and
$ 4.3 million, respectively.
(7) FINANCIAL INSTRUMENTS
Derivative Instruments - As discussed in Note 1, the Company utilizes
derivative instruments on a limited basis to manage risks related to
interest rates. At December 31, 1999 and April 30, 1999 and 1998, the
Company had interest rate swap agreements with notional amounts
totaling $ 40.0 million, $ 40.0 million and $ 20.0 million,
respectively, that serve to convert an equal amount of variable rate
long-term debt to fixed rates. The swaps mature in 2003. The swaps
require the Company to pay a weighted-average interest rate of 5.78%
(plus the maximum spread of 1.5% at December 31, 1999) over their
composite lives and to receive a variable rate, which averaged 5%
(plus the maximum spread of 1.5% at December 31, 1999) at December 31,
1999. Based upon the current spread, the effect of these agreements
is to limit interest rate exposure to 7.08% on $ 20.0 million of the
Company's revolving credit facility, 7.69% on $ 10.0 million and 7.27%
on $ 10.0 million of the Company's term loan. Using the
accrual/settlement method of accounting, the Company records the net
amount to be received or paid under the swap agreements as part of
"Interest Expense" in the Consolidated Statements of Operations. As a
result of these swap agreements, interest expense was increased by
$ 0.1 million, $ 0.2 million and $ 28,000 for the eight months ended
December 31, 1999 and for the years ended April 30, 1999 and 1998.
Fair Value - The following table presents the carrying amounts and
estimated fair values of financial instruments held by the Company at
December 31, 1999, and April 30, 1999 and 1998. The fair value of a
financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties. The table
excludes cash and cash equivalents, accounts receivable, accounts
payable, and accrued liabilities, all of which had fair values
approximating carrying amounts.
<TABLE>
<CAPTION>
December 31, 1999 April 30, 1999 April 30, 1998
-------------------- -------------------- --------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Amount Fair Value
-------- --------- -------- ---------- -------- ----------
(Millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Financial Liabilities
Current and long-term debt $ 77.6 $ 77.6 $ 80.3 $ 80.3 $ 72.6 $ 72.6
Off-Balance-Sheet Exposures
Interest rate swaps - $ 1.5 - $ (0.2) - $ (0.1)
</TABLE>
34
<PAGE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments shown in the table.
Current and long-term debt: the fair value is estimated based on
current rates offered the Company for debt of the same maturities.
Interest rate swaps: the fair value is an estimate of the amounts,
based on quotes from counterparties, that the Company would receive
(pay) at the reporting date to cancel the contracts.
(8) COMMITMENTS AND CONTINGENCIES
Leases - The Company leases certain aircraft and facilities used in
its operations. The Company generally pays all insurance, taxes and
maintenance expenses associated with these aircraft and some of these
leases contain renewal and purchase options.
The Company is leasing a new principal operating facility for twenty
years, effective September 2001. Under the terms of this lease, there
is a potential commitment by the Company to fund $ 4 million of
construction costs, in which case the monthly lease payments for the
first ten years of the lease will be reduced by the amortization of
$ 4 million over ten years at 7% per annum.
Aggregate rental commitments under noncancellable operating leases are
due in years subsequent to December 31, 1999, as follows:
Aircraft Other
------------ ---------
(Thousands of dollars)
2000 $ 15,207 $ 1,078
2001 14,662 1,133
2002 13,884 1,262
2003 12,505 1,157
2004 11,878 1,083
Thereafter 36,276 14,090
--------- --------
$ 104,412 $ 19,803
========= ========
Rental expense incurred under these leases consisted of the following:
Eight Months Year Ended April 30,
Ended -------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- ---------- ----------
(Thousands of dollars)
Aircraft $ 8,902 $ 14,522 $ 15,080 $ 12,328
Other 1,383 2,064 1,836 1,730
-------- -------- -------- --------
$ 10,285 $ 16,586 $ 16,916 $ 14,058
======== ======== ======== ========
Environmental Matters - The Company has policies and procedures in
effect to strictly monitor its compliance with environmental
regulations at its operating locations. In the first quarter of
fiscal 1996, the Company began an environmental review at selected
domestic bases, and known or suspected fuel contamination has been
identified at all the bases reviewed.
The Company expensed, including provisions for environmental costs,
$ 1.5 million, $ 0.4 million, $ 0.7 million and $ 1.3 million for the
eight months ended December 31, 1999, and the years ended April 30,
1999, 1998 and 1997, respectively, related to remediation efforts.
The Company is currently conducting assessments at additional bases to
determine the extent of remediation required at these locations. The
reasonably possible upper range of exposure for environmental matters
is $ 3.6 million. The aggregate recorded liability for environmental
related costs at December 31, 1999 is $ 3.0 million, which the Company
35
<PAGE>
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.
Legal Matters - The Company is named as a defendant in various legal
actions which have arisen in the ordinary course of its business and
have not been finally adjudicated. The amount, if any, of ultimate
liability with respect to such matters cannot be determined; however,
after consulting with legal counsel, the Company has established
accruals which it believes adequately provide for the settlement of
such litigation. In the opinion of management, the amount of the
ultimate liability with respect to these actions will not have a
material adverse effect on results of operations, cash flow or
financial position of the Company.
(9) BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
During the year ended April 30, 1999, the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise and Related
Information," which requires that companies disclose segment data
based on how management makes decisions about allocating resources to
segments and measuring their performance.
The Company operates principally in two segments: Oil and Gas
Aviation and Aeromedical Services. The Oil and Gas Aviation segment
includes domestic and international helicopter services provided to
oil and gas customers, as well as technical services and maintenance
work. The Aeromedical Services segment includes all services provided
to the Company's air medical customers including hospitals and medical
programs.
The accounting policies of the operating segments are the same as
those described in Note 1 to the Consolidated Financial Statements.
Segment operating profit is based on operating revenues less direct
expenses, indirect operating costs, selling, general and
administrative costs and special charges, if any, applicable to the
operating segment. Segment assets are those assets used exclusively
in the operations of each operating segment or which are allocated
when used jointly. Corporate assets are principally cash and cash
equivalents, short term investments, other current assets, and certain
property, plant and equipment. Unallocated costs consist primarily of
the non-allocable portion of certain indirect operating costs and
selling, general and administrative costs which are not allocated to
the operating segments.
Summarized financial information concerning the Company's operating
segments is shown in the following tables (in thousands):
Eight Months Year Ended April 30,
Ended -------------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- ---------- ----------
Operating revenues:
Oil and Gas $ 116,124 $ 199,846 $ 198,875 $ 180,121
Aeromedical 30,249 46,838 35,879 30,302
Other 7 655 1,828 1,240
----------- ---------- ---------- ----------
Total $ 146,380 $ 247,339 $ 236,582 $ 211,663
=========== ========== ========== ==========
Operating profit:
Oil and Gas $ 745 $ 11,081 (1) $ 17,573 $ 15,021
Aeromedical 55 2,688 2,931 2,879
----------- ---------- ---------- ----------
Total Segment
operating profit 800 13,769 20,504 17,900
Unallocated costs (7,262) (6,574) (6,141) (3,471)
Other income, net 6,490 3,856 3,264 725
Interest expense (3,978) (6,017) (5,118) (4,297)
----------- ---------- ---------- ----------
Earnings (loss)
before taxes $ (3,950) $ 5,034 $ 12,509 $ 10,857
=========== ========== ========== ==========
(1) Includes special charges of $ 7.3 million as discussed in Note 2 -
Special Charges of the Consolidated Financial Statements
36
<PAGE>
Capital Expenditures
Eight Months Year Ended April 30,
Ended -------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- --------- ---------
Oil and Gas $ 7,976 $ 40,521 $ 22,469 $ 35,299
Aeromedical 1,368 203 1,937 2,762
Corporate 703 1,547 1,069 2,774
---------- --------- --------- ---------
Total $ 10,047 $ 42,271 $ 25,475 $ 40,835
========== ========= ========= =========
Depreciation and Amortization
Eight Months Year Ended April 30,
Ended -------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- --------- ---------
Oil and Gas $ 6,965 $ 11,993 $ 9,228 $ 7,354
Aeromedical 1,772 3,486 2,773 2,497
Corporate 918 714 533 126
---------- --------- --------- ---------
Total $ 9,655 $ 16,193 $ 12,534 $ 9,977
========== ========= ========= =========
Assets
Eight Months Year Ended April 30,
Ended -------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- --------- ---------
Oil and Gas $ 191,880 $ 194,461 $ 189,300 $ 164,080
Aeromedical 25,541 30,113 31,918 27,367
Corporate 5,635 7,001 5,803 5,184
---------- --------- --------- ---------
Total $ 223,056 $ 231,575 $ 227,021 $ 196,631
========== ========= ========= =========
GEOGRAPHIC INFORMATION
Operating Revenues
Eight Months Year Ended April 30,
Ended -------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- --------- ---------
United States $ 131,704 $ 223,227 $ 213,781 $ 189,221
Angola 9,333 14,541 12,891 11,469
Other Foreign 5,343 9,571 9,910 10,973
---------- --------- --------- ---------
Total $ 146,380 $ 247,339 $ 236,582 $ 211,663
========== ========= ========= =========
Long-lived Assets
Eight Months Year Ended April 30,
Ended -------------------------------
December 31, 1999 1999 1998 1997
----------------- --------- --------- ---------
United States $ 121,583 $ 128,541 $ 121,161 $ 109,543
Angola 4,097 5,240 2,120 2,258
Other Foreign 9,367 10,779 11,838 10,026
---------- --------- --------- ---------
Total $ 135,047 $ 144,560 $ 135,119 $ 121,827
========== ========= ========= =========
37
<PAGE>
(10) QUARTERLY FINANCIAL DATA (UNAUDITED)
The summarized quarterly results of operations for the eight months
ended December 31, 1999, and the years ended April 30, 1999 and April
30, 1998 (in thousands of dollars, except per share data) are as
follows:
Quarter Ended Two Months Ended
------------------------------- -----------------
July 31, 1999 October 31, 1999 December 31, 1999
------------- ---------------- -----------------
Revenues $ 57,675 $ 56,265 $ 38,349
Gross profit 2,279 2,376 1,823
Net earnings (loss) 535 (2,071) (1,163) (1)
Net earnings (loss)
per share-basic 0.10 (0.40) (0.23) (1)
Net earnings (loss)
per share-diluted 0.10 (0.40) (0.23) (1)
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------
July 31, 1998 October 31, 1998 January 31, 1999 April 30, 1999
------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 62,377 $ 65,478 $ 62,276 $ 60,751
Gross profit 8,929 11,201 7,685 5,008
Net earnings (loss) 2,002 1,954 1,202 (2,170) (2)
Net earnings (loss)
per share-basic 0.39 0.38 0.23 (0.42) (2)
Net earnings (loss)
per share-diluted 0.38 0.37 0.23 (0.42) (2)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------
July 31, 1997 October 31, 1997 January 31, 1997 April 30, 1998
------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 56,360 $ 57,591 $ 59,482 $ 65,413
Gross profit 7,661 7,871 8,103 9,526
Net earnings 1,775 1,554 1,820 2,268
Net earnings per
share-basic 0.35 0.30 0.36 0.44
Net earnings per
share-diluted 0.34 0.30 0.35 0.44
</TABLE>
(1) Includes the effect of an environmental remediation charge
recorded in the two month period of $ 1.5 million ($ 1.0 million
after tax or $ 0.20 per diluted share).
(2) Includes the effect of special charges recognized in the fourth
quarter of $ 4.9 million ($ 2.9 million after tax or $ 0.56 per
diluted share). Also includes a charge of $ 1.7 million ($ 1.0
million after tax or $ 0.19 per diluted share) for slow moving
inventory.
(11) AIR EVAC ACQUISITION
On December 31, 1997, PHI purchased the net assets of Samaritan
AirEvac for approximately $ 8.8 million. The purchase involved all of
the operating assets and business of Samaritan AirEvac, an air medical
services division of Samaritan Health System based in Arizona and a
customer of PHI's since June 12, 1993.
The cost of the acquisition was recorded under the purchase method of
accounting. The results of Air Evac's operations have been
consolidated with the Company's results effective January 1, 1998.
The following unaudited pro forma information presents a summary of
consolidated results of operations as if the acquisition had occurred
on May 1, 1996 with pro forma adjustments to give effects to
depreciation, interest expense and certain other adjustments together
with related income tax effects (in thousands, except per share
amounts):
38
<PAGE>
Year Ended April 30,
--------------------------
1998 1997
---------- ----------
Revenues $ 248,886 $ 227,448
Net earnings 7,849 7,118
Basic earnings per share 1.53 1.40
Diluted earnings per share 1.51 1.38
The above pro forma financial information is not necessarily
indicative of the results of operations as they would have been had
the acquisition been effected on the assumed date.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Reference is made to the Company's Form 8-K and Form 8-K/A filed
December 1, 1999 and December 8, 1999, respectively, which are
incorporated herein by reference.
39
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors required by this item will be
included in the Company's definitive proxy statement in connection
with its Annual Meeting of Shareholders and is incorporated herein by
reference. Information concerning Executive Officers is included as
Item 4.(a) "Executive officers of the registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item will be included in the Company's
definitive proxy statement in connection with its Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required by this item will be included in the Company's
definitive proxy statement in connection with its Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item will be included in the Company's
definitive proxy statement in connection with its Annual Meeting of
Shareholders and is incorporated herein by reference.
40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Independent Auditors' Reports
Consolidated Balance Sheets - December 31, 1999, April 30, 1999
and 1998 Consolidated Statements of Operations for the eight
months ended December 31, 1999, and three years ended April 30,
1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity for the eight
months ended December 31, 1999, and three years ended April 30,
1999, 1998 and 1997
Consolidated Statements of Cash Flows for the eight months
ended December 31, 1999, and three years ended April 30, 1999,
1998 and 1997.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying accounts for the eight
months ended December 31, 1999, and three years ended April 30,
1999, 1998 and 1997
3. Exhibits
3 Articles of Incorporation and By-laws
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 as amended on August 18, 1996
(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 Material Contracts
10.1 Master Helicopter Lease Agreement dated May 29, 1991 between AT&T
Systems Leasing Corporation and PHI (incorporated by reference to
Exhibit No. 10.1 (2) to PHI's Report on Form 10-K dated April 30,
1992).
10.2 Master Helicopter Lease Agreement dated February 14, 1991 between
General Electric Capital Corporation and PHI (incorporated by
reference to Exhibit No. 10.1 (1) to PHI's Report on Form 10-K
dated April 30, 1991).
10.3 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, First National Bank of Commerce and NationsBank of Texas,
N.A., as agent (incorporated by reference to Exhibit No. 10.3 to
PHI's Report on Form 10-K dated April 30, 1997).
41
<PAGE>
10.4 Installment promissory note dated June 4, 1993 by PHI payable to
debis Financial Services, Inc. in the original principal amount
of $ 3,122,441.56, secured by Aircraft Security Agreement dated
June 4, 1993 between PHI and debis Financial Services, Inc.
(incorporated by reference to Exhibit No. 10.4 to PHI's Report on
Form 10-K dated April 30, 1993).
10.5 Installment Promissory Note dated June 4, 1993 by PHI payable to
debis Financial Services, Inc. in the original principal amount
of $ 3,078,695.58, secured by Aircraft Security Agreement dated
June 4, 1993 between PHI and debis Financial Services, Inc.
(incorporated by reference to Exhibit No. 10.5 to PHI's Report on
Form 10-K dated April 30, 1993).
10.6 Installment Promissory Note dated June 4, 1993 by PHI payable to
debis Financial Services, Inc. in the original principal amount
of $ 3,078,695.58, secured by Aircraft Security Agreement dated
June 4, 1993 between PHI and debis Financial Services, Inc.
(incorporated by reference to Exhibit No. 10.6 to PHI's Report on
Form 10-K dated April 30, 1993).
10.7 The Petroleum Helicopters, Inc. 401(k) Retirement Plan effective
July 1, 1989 (incorporated by reference to Exhibit No. 10.4 to PHI's
Report on Form 10-K dated April 30, 1990).
10.8 Petroleum Helicopters, Inc. 1992 Non-Qualified Stock Option and
Stock Appreciation Rights Plan adopted by PHI's Board effective
May 1, 1992 and approved by the shareholders of PHI on September 30,
1992 (incorporated by reference to Exhibit No. 10.8 to PHI's Report
on Form 10-K dated April 30, 1993).
10.9 Form of Stock Option Agreement for the Grant of Non-Qualified
Stock Options Under the Petroleum Helicopters, Inc. 1992
Non-Qualified Stock Option and Stock Appreciation Rights Plan
dated June 2, 1993 between PHI and certain of its key employees
(incorporated by reference to Exhibit No. 10.9 to PHI's Report on
Form 10-K dated April 30, 1993).
10.10 Amended and Restated Petroleum Helicopters, Inc. 1995 Incentive
Compensation Plan adopted by PHI's Board effective July 11, 1995
and approved by the shareholders of PHI on September 22,1995
(incorporated by reference to Exhibit No. 10.12 to PHI's Report
on Form 10-K dated April 30, 1996).
10.11 Form of Non-Qualified Stock Option Agreement under the Petroleum
Helicopters, Inc. 1995 Incentive Compensation Plan between PHI and
certain of its key employees (incorporated by reference to Exhibit
No. 10.13 to PHI's Report on Form 10-K dated April 30, 1996).
10.12 Form of Restricted Stock Agreement under the Amended and Restated
Petroleum Helicopters, Inc. 1995 Incentive Compensation Plan, as
amended (incorporated by reference to Exhibit No. 10.2 to PHI's
Report on Form 10-Q dated October 31, 1996).
10.13 Non-qualified Stock Option Agreement under the Amended and
Restated Petroleum Helicopters, Inc. 1995 Incentive Compensation
Plan, as amended between PHI and Carroll W. Suggs(incorporated by
reference to Exhibit 10.3 to PHI's Report on Form 10-Q dated
October 31, 1996).
10.14 Loan Agreement dated as of December 31, 1997 among Air Evac
Services Inc., Whitney National Bank, First National Bank of
Commerce and NationsBank of Texas, N.A. (incorporated by
reference to Exhibit No. 10.1 to PHI's Report on Form 10-Q dated
January 31, 1998).
10.15 Asset Purchase Agreement between Samaritan Health
System and Air Evac Services, Inc. (incorporated by reference
to Exhibit No. 10.2 to PHI's Report on Form 10-Q dated January
31, 1998).
42
<PAGE>
10.16 Second Amendment (dated November 30, 1998) 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
(incorporated by reference to Exhibit No. 10.1 to PHI's Report on
Form 10-Q dated January 31, 1999).
10.17 Directors Stock and Deferred Compensation Plan
(incorporated by reference to Exhibit A to PHI's Proxy Statement
originally filed on August 28, 1998, and amended on September 18,
1998).
10.18 Director Deferred Compensation Plan adopted by PHI's Board
effective May 31, 1995 (incorporated by reference to Exhibit
10.18, to PHI's Report on Form 10-K dated April 30, 1999).
10.19 Officer Deferred Compensation Plan adopted by PHI's Board
effective May 31, 1995 (incorporated by reference to Exhibit
10.19, to PHI's Report on Form 10-K dated April 30, 1999).
10.20 Supplemental Executive Retirement Plan adopted by PHI's
Board effective September 1, 1994, (incorporated by reference
to Exhibit 10.20 to PHI's Report on Form 10-K dated April 30,
1999).
21 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of KPMG LLP
27.1 Financial Data Schedule
(b) Reports on Form 8-K and Form 8-K/A
The Registrant filed the following current reports on Form
8-K (8-K/A) during the two months ended December 31, 1999.
Date Item Reported
---- -------------
December 1, 1999 Change in Certifying Accountants
December 8, 1999 (8-K/A) Change in Certifying Accountants
December 22, 1999 Change in Certifying Accountants
43
<PAGE>
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
Schedule II Valuation and Qualifying Accounts
(Thousands of dollars)
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Year Expenses Accounts Deductions of Year
- --------------------------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C>
Eight months ended December 31, 1999
Allowance for doubtful accounts $ 1,684 $ 110 $ - $ 1,000 $ 794
Allowance for obsolete inventory 2,169 527 - 488 2,208
Year ended April 30, 1999:
Allowance for doubtful accounts $ 1,962 $ 182 $ - $ 460 $ 1,684
Allowance for obsolete inventory 1,889 280 - - 2,169
Year ended April 30, 1998:
Allowance for doubtful accounts $ 1,160 $ 1,038 $ - $ 236 $ 1,962
Allowance for obsolete inventory 2,389 - - 500 1,889
Year ended April 30, 1997:
Allowance for doubtful accounts $ 923 $ 415 $ - $ 178 $ 1,160
Allowance for obsolete inventory 2,389 - - - 2,389
</TABLE>
44
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PETROLEUM HELICOPTERS, INC.
By: /s/ Carroll W. Suggs
---------------------------------
Carroll W. Suggs
Chairman of the Board, President,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
----------- ------- ------
/s/Carroll W. Suggs Chairman of the Board, President March 30, 2000
- ---------------------- Chief Executive Officer
Carroll W. Suggs and Director
(Principal Executive Officer)
/s/Michael J. McCann Chief Financial Officer March 30, 2000
- ---------------------- (Principal Financial and
Michael J. McCann Accounting Officer)
/s/Arthur J. Breault, Jr. Director March 30, 2000
- ----------------------
Arthur J. Breault, Jr.
/s/Leonard M. Horner Director March 30, 2000
- ----------------------
Leonard M. Horner
/s/James W. McFarland Director March 30, 2000
- ----------------------
James W. McFarland
/s/Thomas H. Murphy Director March 30, 2000
- ----------------------
Thomas H. Murphy
/s/Bruce N. Whitman Director March 30, 2000
- ----------------------
Bruce N. Whitman
45
<PAGE>
Exhibit 21
Petroleum Helicopters Inc.
Subsidiaries of the Registrant at December 31, 1999
<TABLE>
<CAPTION>
PLACE OF % OF VOTING
COMPANY INCORPORATION STOCK OWNED
- ------- ------------- -------------
<S> <C> <C>
International Helicopter Transport, Inc. Louisiana 100%
Evangeline Airmotive, Inc. Louisiana 100%
Petroleum Helicopters De Bolivia, Inc. Delaware 100%
Heli-Tours, Inc. Louisiana 100%
Acadian Composites, Inc. Louisiana 100%
Transnational Transit LTD Trinidad 20%
Asia Aircraft Overseas Philippines Philippines 30%
Siam Aerospace Technology Thailand 48%
Clintondale Aviation New York 50%
Air Evac Services, Inc. Louisiana 100%
PHI Aeromedical Services, Inc. Louisiana 100%
Petroleum Helicopters International,Inc Louisiana 100%
</TABLE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 33-51617 and 333-02025 of Petroleum Helicopters, Inc. on Form S-8 of
our report dated February 25, 2000, appearing in this Transition Report on
Form 10-K of Petroleum Helicopters, Inc. for the eight month transition
period ended December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
- ----------------------------
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 28, 2000
Exhibit 23.2
The Board of Directors
Petroleum Helicopters, Inc.:
We consent to incorporation by reference in the registration
statements No. 33-51617 and No. 333-02025 on Form S-8 of Petroleum
Helicopters, Inc. of our report dated June 11, 1999, relating to the
consolidated balance sheets of Petroleum Helicopters, Inc. and
subsidiaries as of April 30, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended
April 30, 1999, and the related schedule, which report appears in
the December 31, 1999 transition report on Form 10-K of Petroleum
Helicopters, Inc.
/s/ KPMG LLP
- -------------------
KPMG LLP
New Orleans, Louisiana
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from condensed financial
statements for the eight month transition period ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000350403
<NAME> GEOFF JONES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,663
<SECURITIES> 0
<RECEIVABLES> 41,269
<ALLOWANCES> 794
<INVENTORY> 37,277
<CURRENT-ASSETS> 86,324
<PP&E> 256,869
<DEPRECIATION> 121,822
<TOTAL-ASSETS> 223,056
<CURRENT-LIABILITIES> 31,625
<BONDS> 72,048
0
0
<COMMON> 516
<OTHER-SE> 93,107
<TOTAL-LIABILITY-AND-EQUITY> 223,056
<SALES> 146,380
<TOTAL-REVENUES> 152,289
<CGS> 139,902
<TOTAL-COSTS> 139,902
<OTHER-EXPENSES> 12,359
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,978
<INCOME-PRETAX> (3,950)
<INCOME-TAX> (1,251)
<INCOME-CONTINUING> (2,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,699)
<EPS-BASIC> (0.52)
<EPS-DILUTED> (0.52)
</TABLE>
