SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period to
Commission File Number 0-5232
Offshore Logistics, Inc.
- ----------------------------------------------------------------------
Exact name of registrant as specified in its charter)
Delaware 72-0679819
- -------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
224 Rue de Jean
P. O. Box 5C, Lafayette, LA 70505
- -------------------------------- ------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 318-233-1221
- ----------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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, and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number shares outstanding of each of the issuer's classes of
Common Stock, as of March 31, 1996.
19,491,351 shares of Common Stock, $.01 par value
- ----------------------------------------------------------------------------
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statement of Income
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue $37,800 $36,352 $116,669 $104,093
Gain (loss) on disposal
of equipment -- 162 (158) 341
--------------------------------------------
37,800 36,514 116,511 104,434
OPERATING EXPENSES
Direct cost 28,472 27,359 89,952 74,826
Depreciation and amortization 2,474 2,734 6,811 7,369
General and administration 3,085 2,859 9,337 7,479
--------------------------------------------
34,031 32,952 106,100 89,674
--------------------------------------------
OPERATING INCOME 3,769 3,562 10,411 14,760
Earnings from unconsolidated
entities 1,221 1,025 2,955 3,425
Interest income 966 727 3,017 2,035
Interest expense 197 205 597 650
--------------------------------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,759 5,109 15,786 19,570
Provision for income taxes 1,670 1,480 4,578 5,690
(Income) Loss of minority
interest 22 251 18 238
--------------------------------------------
NET INCOME $4,111 $3,880 $11,226 $14,118
============================================
Earnings per common share
and common equivalent share $ 0.21 $ 0.20 $ 0.57 $ 0.74
============================================
Common shares and common
equivalent shares outstanding 19,751,332 19,722,682 19,749,167 19,187,309
==============================================
</TABLE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(thousands of dollars)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 54,232 $ 47,973
Investment in marketable securities 19,963 19,978
Accounts receivable 28,285 29,756
Inventories 27,693 26,710
Prepaid expenses 1,238 524
-------------------------
Total current assets 131,411 124,941
Investments in unconsolidated entities 8,801 8,829
Property and equipment - at cost:
Land and buildings 2,977 2,868
Aircraft and equipment 135,814 125,393
-------------------------
138,791 128,261
Less: accumulated depreciation
and amortization (63,516) (58,558)
-------------------------
75,275 69,703
Other assets, primarily goodwill 24,775 25,878
-------------------------
$240,262 $229,351
=========================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 6,285 $ 4,647
Accrued liabilities 10,234 11,633
Current maturities of long-term debt 6,850 2,000
-------------------------
Total current liabilities 23,369 18,280
Long-term debt -- less current maturities 900 5,600
Deferred taxes 18,738 18,030
Deferred credits 625 2,500
Minority interest 1,072 1,090
STOCKHOLDERS' INVESTMENT:
Common Stock, $.01 par value, authorized
35,000,000 shares; outstanding 19,491,351
and 19,442,114 at March 31 and June 30,
respectively (exclusive of 517,550
treasury shares) 195 194
Additional paid in capital 95,859 95,379
Retained earnings 99,504 88,278
-------------------------
195,558 183,851
-------------------------
$240,262 $229,351
=========================
</TABLE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,226 $ 14,118
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,811 7,369
Increase in deferred taxes 708 490
Loss (Gain) on asset dispositions 158 (341)
Equity in earnings from unconsolidated
entities over dividends received -- (41)
Minority interest in earnings (18) (238)
Decrease in accounts receivable 1,471 3,459
Increase in inventories (577) (732)
Decrease (Increase) in prepaid expenses
and other (648) 47
Increase in accounts payable 1,638 449
Decrease in accrued liabilities (1,414) (323)
Decrease in deferred credits (1,875) (1,875)
-----------------------
Net cash provided by operating activities 17,480 22,382
-----------------------
Cash flows from investing activities:
Capital expenditures (12,039) (3,076)
Proceeds from asset dispositions 151 2,216
Investment in marketable securities (11,952) --
Proceeds from sale or maturity of
marketable securities 11,988 --
Acquisitions, net of cash received -- (8,231)
-----------------------
Net cash used in investing activities (11,852) (9,091)
-----------------------
Cash flows from financing activities:
Proceeds from borrowings 150 --
Repayment of debt -- (3,730)
Issuance of common stock 481 2,026
-----------------------
Net cash provided by (used in)
financing activities 631 (1,704)
Net increase in cash 6,259 11,587
Cash and cash equivalents at beginning of year 47,973 27,225
-----------------------
Cash and cash equivalents at end of quarter $ 54,232 $38,812
=======================
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 570 $ 611
Income taxes 4,553 3,453
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. In the opinion of management,
any adjustments considered necessary for a fair presentation have been
included. Operating results for the nine months ended March 31, 1996, are
not necessarily indicative of the results that may be expected for the year
ending June 30, 1996. For further information, refer to the consolidated
financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1995.
NOTE B - Production Management Services
The Company expanded its operations in July 1992 to include production
management services. During fiscal 1993 and until October 29, 1993, the
Company owned 50% of Seahawk Services, Inc. ("Seahawk"), a company
which provided platform and production management services, offshore
medical support services, and temporary personnel to the oil and gas
industry. On October 29, 1993, the Company further expanded its interest
in production management services when the Company exchanged its 50%
investment in Seahawk for a 27.5% interest in Grasso Corporation whose
wholly-owned subsidiary, Grasso Production Management, Inc. ("GPM"),
also was engaged in the production management service business.
On September 16, 1994, GPM became a wholly-owned subsidiary of the
Company in a merger in which the Company acquired the remaining
72.5% interest in Grasso Corporation by issuing .49 of a share of the
Company's Common Stock for each share of Grasso Corporation Common
Stock owned. In addition, holders of Grasso Corporation Class B warrants
received similar warrants for shares of the Company's Common Stock.
The merger was treated as a purchase for accounting purposes which
resulted in goodwill of approximately $22.3 million after stepping up the
assets and liabilities of Grasso Corporation. The goodwill is being
amortized over a 20 year period.
The following summarized income statement data reflects the impact the
GPM merger would have had on the Company's results of operations had
the transactions taken place on July 1, 1994:
<TABLE>
<CAPTION>
Pro forma Results for the Nine Months
Ended March 31, 1995
-------------------------------------
<S> <C>
Gross revenue $113,069
========
Net income $ 13,646
========
Earnings per common share and
common equivalent share $ .69
========
</TABLE>
NOTE C - Cathodic Protection Services
In October 1994, the Company acquired 75% of Cathodic Protection
Services Company ("CPS"). CPS manufactures, installs and maintains
cathodic protection systems to arrest corrosion in oil and gas drilling and
production facilities, pipelines, oil and gas well casings, hydrocarbon
processing plants, and other metal structures. The acquisition was treated
as a purchase for accounting purposes which resulted in goodwill of
approximately $3.8 million. The goodwill is being amortized over a 20
year period. The pro forma effect of this acquisition as though it had been
acquired at the beginning of fiscal 1995 is not material to the operating
results of the Company.
NOTE D - Preferred Share Purchase Rights Plan
On February 9, 1996, the Company adopted a Preferred Share Purchase
Rights Plan designed to assure that all of the Company's stockholders
receive fair and equal treatment in the event of any proposed takeover of
the Company and to guard against partial tender offers and other abusive
tactics to gain control without paying all stockholders a fair price. Under
the rights plan, the Company declared a dividend of one Preferred Share
Purchase Right on each outstanding share of Common Stock. Under
certain circumstances, each Right will entitle its holder to purchase one
one-hundredth of a share of a new series of junior participating preferred
stock, at an exercise price of $50. The Rights were distributed to
stockholders of record on February 29, 1996 and trade with the
Company's Common Stock until exercisable. The Rights extend for ten
years and will expire on February 28, 2006.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A summary of operating results for the applicable periods is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Gross revenue $37,800 $36,514 $116,511 $104,434
Operating expenses 34,031 32,952 106,100 89,674
--------------------------------------------
Operating income 3,769 3,562 10,411 14,760
Earnings from unconsolidated
entities 1,221 1,025 2,955 3,425
Interest income 966 727 3,017 2,035
Interest expense 197 205 597 650
--------------------------------------------
Income before provision for
income taxes 5,759 5,109 15,786 19,570
Provision for income taxes 1,670 1,480 4,578 5,690
(Income) Loss of minority
interest 22 251 18 238
--------------------------------------------
Net income $ 4,111 $ 3,880 $ 11,226 $ 14,118
============================================
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
Consolidated --
Consolidated operating revenues and expenses for the nine months ended
March 31, 1996 were $116.7 million and $106.1 million, respectively, a
$12.6 million and $16.4 million increase from the prior year. The increase
is primarily attributable to the consolidation of GPM and CPS during the
prior year. Consolidated operating revenues and expenses for the three
months ended March 31, 1996 were $37.8 million and $34.0 million,
respectively, a $1.4 million and $1.1 million increase compared to the prior
year. Operating revenues for helicopter services and CPS increased $1.1
million and $2.9 million, respectively, offset by a decrease in GPM
revenues of $3.0 million. Operating expenses for helicopter services and
CPS increased $1.3 million and $1.9 million, respectively, offset by a
decrease in GPM expenses of $2.7 million.
Helicopter Services --
Total flight hours were approximately 25,200 and 79,200 for the three
months and nine months ended March 31, 1996, respectively, a 1% and
7% decrease compared to the same period in the prior year. Operating
revenues from helicopter services were $22.0 million and $65.9 million for
the three and nine months ended March 31, 1996, respectively, a 5%
increase and 4% decrease compared to the same period in the prior year.
The decrease in flight hours with the contrasting increase, or smaller
decrease, in operating revenues is primarily due to a change in the mix of
aircraft operating. Operating expenses for helicopter services were $17.2
million and $53.1 million for the three months and nine months ended
March 31, 1996, an 8% and 4% increase compared to the same period in
the prior year.
Gulf of Mexico flight activity was down approximately 900 and 6,900
hours for the three months and nine months ended March 31, 1996,
respectively, a 4% and 10% decrease compared to the same period in the
prior year. Operating revenues for the Gulf of Mexico were $18.7 million
and $55.6 million for the three months and nine months ended March 31,
1996, respectively, an increase of approximately $0.9 million and a
decrease of approximately $1.6 million, respectively, compared to the same
period in the prior year. Although total Gulf of Mexico flight hours are
down from the prior year, operating revenues have begun to show
improvement as more flight time was logged by larger aircraft. Operating
expenses for the Gulf of Mexico for the three months and nine months
ended March 31, 1996 were $15.6 million and $48.0 million, respectively,
a $1.5 million and $3.5 million increase compared to the same periods in
the prior year. The increase in operating expenses is primarily attributable
to increases in maintenance and repair expenditures. Due to the reductions
in operating revenues and the increase in expenditures, gross margins from
Gulf of Mexico operations were below prior year. Gross margins,
excluding asset dispositions, for the three months and nine months ended
March 31, 1996, were 16.4% and 13.7%, respectively. Prior year gross
margins were 20.8% and 22.2%, respectively.
Alaska flight activity, revenues, and expenses for the three months and
nine months ended March 31, 1996 were down in comparison with the
same periods in the prior year as a result of decreased activity from
Alaska's major customer. Alaska operating revenues for the three months
and nine months ended March 31, 1996 were $1.6 million and $5.1
million, respectively. Alaska operating expenses for the same periods were
$1.1 million and $3.6 million, respectively. Operating income from Alaska
was $0.5 million and $1.5 million, for the three months and nine months
ended March 31, 1996, respectively, relatively unchanged from the prior
year.
International activity has increased from the prior year. International flight
hours for the three months and nine months ended March 31, 1996 were
approximately 3,900 hours and 12,100 hours, respectively, a 23% and 17%
increase from the prior year. International operating revenues were $3.8
million and $11.2 million for the three months and nine months ended
March 31, 1996. International operating expenses for the same periods
were $2.5 million and $7.5 million, respectively. International operating
income was $1.3 million and $3.6 million, for the three months and nine
months ended March 31, 1996, respectively, a $0.4 million increase from
the prior year.
Production Management Services --
Operating revenues from GPM were approximately $7.4 million and $24.0
million for the three months and nine months ended March 31, 1996,
respectively. Prior year operating revenues were $10.4 million and $23.2
million for the three months ended March 31, 1995 and for the period
from consolidation (September 16, 1994) to March 31, 1995, respectively.
The decrease in operating revenues for the three months ended March 31,
1996 compared to the prior year relates to reductions in activity levels.
Operating expenses from GPM were approximately $7.7 million and $24.1
million for the three months and nine months ended March 31, 1996,
respectively. Prior year operating expenses were $10.4 million and $23.0
million for the three months ended March 31, 1995 and for the period
from consolidation (September 16, 1994) to March 31, 1995, respectively.
GPM gross margins for the three months ended March 31, 1996 was a loss
of $0.3 million. Management has implemented several cost containment
measures which should have a positive impact on GPM's future
performance.
Cathodic Protection Services --
Operating revenues from CPS were approximately $9.2 million and $29.9
million for the three months and nine months ended March 31, 1996,
respectively. Prior year operating revenues were $6.3 million and $15.5
million for the three months ended March 31, 1995 and for the period
from consolidation to March 31, 1995, respectively. The increase in
operating revenues for the three months ended March 31, 1996 compared
to the prior year relates primarily to increased sales effort and increased
prices in certain raw material sold. Operating expenses from CPS were
approximately $9.2 million and $29.5 million for the three months and
nine months ended March 31, 1996, respectively. Prior year operating
expenses were $7.3 million and $16.2 million for the three months ended
March 31, 1995 and for the period from consolidation to March 31, 1995,
respectively. CPS gross margins for the three months and nine months
ended March 31, 1996 were break-even and $0.4 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and cash equivalents (including marketable securities) were $74.2
million as of March 31, 1996, a $6.2 million increase from fiscal year
end 1995. Total debt was $7.8 million as of March 31, 1996. The
increase in current maturities of long-term debt is due to the CPS revolving
credit facility expiring in less than 12 months. CPS Management expects
to renew this credit facility with similar terms before its expiration.
As of March 31, 1996, the Company had $10 million of credit available
under an unsecured working capital line of credit from a bank.
Management believes that normal operations will provide sufficient
working capital and cash flow to meet debt service for the foreseeable
future.
On February 8, 1996, the Board of Directors authorized management of the
Company to repurchase up to 1,000,000 shares of the Company's
Common Stock when warranted by market conditions.
On March 27, 1996, the Company announced that it entered into a letter
of intent to purchase up to fifty percent of the capital stock of Bristow
Helicopters Group Limited ("Bristow"). The seller of the Bristow capital
stock is a syndicate of investors led by Morgan Grenfell Development
Capital Limited of London. Completion of the transaction is conditional
upon the satisfaction of several conditions, including the execution of a
definitive agreement, completion of a due diligence investigation by the
Company and various regulatory approvals.
The effective income tax rates from continuing operations were 29% for
the nine months ended March 31, 1996 and 1995, and is based on the
Company's projected effective tax rate for the fiscal year then ended.
The Company has received notices from the United States Environmental
Protection Agency that it is one of approximately 160 potentially
responsible parties ("PRP") at one Superfund site in Texas, one of over
300 PRPs at two sites in Louisiana, and a PRP at a site in Rhode Island.
The Company believes, based on presently available information, that its
potential liability for clean-up and other response costs in connection with
these sites is not likely to have a material adverse effect on the Company's
business or financial condition.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Listed below are the documents filed as exhibits to this
report.
Exhibit 11
Computation of Earnings Per Share
Exhibit 27
Financial Data Schedule
(b) The Company filed a form 8-K dated February 29, 1996.
Information reported was under Item 5 - Other Events
Related to the Shareholder Rights Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OFFSHORE LOGISTICS, INC.
BY: /s/ James B. Clement
-----------------------------
JAMES B. CLEMENT
President
Chief Executive Officer
DATE: May 15, 1996
BY: /s/ George M. Small
------------------------------
GEORGE M. SMALL
Vice President
Chief Financial Officer
DATE: May 15, 1996
EXHIBIT 11
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average shares
outstanding 19,489,188 19,417,742 19,476,389 18,855,639
Net effect of dilutive stock
warrants based on the
Treasury Stock method using
average market price 19,859 17,162 21,550 40,947
Net effect of dilutive
options based on the Treasury
Stock method using average
market price 242,285 287,778 251,228 290,723
------------------------------------------------
19,751,332 19,722,682 19,749,167 19,187,309
================================================
FULLY DILUTED:
Weighted average shares
outstanding 19,489,188 19,417,742 19,476,389 18,855,639
Net effect of dilutive stock
warrants based on the
Treasury Stock method using
end of period market price 21,706 18,021 23,546 42,662
Net effect of dilutive stock
options based on the Treasury
Stock method using end of
period market price 254,640 292,524 261,487 297,157
------------------------------------------------
19,765,534 19,728,287 19,761,422 19,195,458
================================================
(thousands of dollars, except per share data)
Net income $ 4,111 $ 3,880 $ 11,226 $ 14,118
================================================
Per share amount - Primary $ 0.21 $ 0.20 $ 0.57 $ 0.74
================================================
Per share amount - Fully
diluted $ 0.21 $ 0.20 $ 0.57 $ 0.74
================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 54,232
<SECURITIES> 19,963
<RECEIVABLES> 28,285
<ALLOWANCES> 0
<INVENTORY> 27,693
<CURRENT-ASSETS> 131,411
<PP&E> 138,791
<DEPRECIATION> 63,516
<TOTAL-ASSETS> 240,262
<CURRENT-LIABILITIES> 23,369
<BONDS> 900
0
0
<COMMON> 195
<OTHER-SE> 195,363
<TOTAL-LIABILITY-AND-EQUITY> 240,262
<SALES> 116,669
<TOTAL-REVENUES> 116,511
<CGS> 89,952
<TOTAL-COSTS> 106,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 597
<INCOME-PRETAX> 15,786
<INCOME-TAX> 4,578
<INCOME-CONTINUING> 11,226
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,226
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
</TABLE>
