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 December 31, 1995
/ / 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 ID Number)
incorporation or organization)
224 Rue de Jean
P. O. Box 5C, Lafayette, LA 70505
- ------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
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 December 31, 1995.
19,487,535 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 Six Months Ended
December 31, December 31,
------------------ ----------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue $ 39,878 $ 41,519 $ 78,869 $ 67,741
Gain (loss) on disposal of
equipment 66 176 (158) 179
--------- --------- --------- ---------
39,944 41,695 78,711 67,920
OPERATING EXPENSES
Direct cost 31,608 30,962 61,480 47,467
Depreciation and amortization 2,184 2,606 4,337 4,635
General and administration 3,152 2,872 6,252 4,620
--------- --------- --------- ---------
36,944 36,440 72,069 56,722
--------- --------- --------- ---------
OPERATING INCOME 3,000 5,255 6,642 11,198
Earnings from unconsolidated
entities 1,109 1,775 1,734 2,400
Interest income 1,050 609 2,051 1,308
Interest expense 192 268 400 445
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR
INCOME TAXES 4,967 7,371 10,027 14,461
Provision for income taxes 1,436 2,138 2,908 4,210
(Income) Loss of minority
interest (75) (13) (4) (13)
--------- --------- --------- ---------
NET INCOME $ 3,456 $ 5,220 $ 7,115 $ 10,238
========= ========= ========= =========
Earnings per common share and
common equivalent share $ 0.18 $ 0.27 $ 0.36 $ 0.54
========= ========= ========= =========
Common share and common
equivalent shares outstanding 19,728,422 19,644,684 19,748,084 18,927,082
========== ========== ========== ==========
</TABLE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(thousands of dollars)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
------------ --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 52,637 $ 47,973
Investment in marketable securities 19,960 19,978
Accounts receivable 30,201 29,756
Inventories 28,001 26,710
Prepaid expenses 1,167 524
--------- ---------
Total current assets 131,966 124,941
Investments in unconsolidated entities 8,811 8,829
Property and equipment - at cost:
Land and buildings 2,977 2,868
Aircraft and equipment 128,384 125,393
--------- ---------
131,361 128,261
Less: accumulated depreciation and amortization (61,391) (58,558)
--------- ---------
69,970 69,703
Other assets, primarily goodwill 25,220 25,878
--------- ---------
$ 235,967 $ 229,351
========= =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable $ 6,784 $ 4,647
Accrued liabilities 9,218 11,633
Current maturities of long-term debt 6,850 2,000
--------- ---------
Total current liabilities 22,852 18,280
Long-term debt - less current maturities 900 5,600
Deferred credits 1,250 2,500
Deferred taxes 18,458 18,030
Minority interest 1,094 1,090
STOCKHOLDERS' INVESTMENT:
Common Stock, $.01 par value, authorized 35,000,000
shares; outstanding 19,487,535 and 19,442,114 at
December 31 and June 30, respectively (exclusive of
517,550 treasury shares) 195 194
Paid in capital 95,825 95,379
Retained earnings 95,393 88,278
--------- ---------
191,413 183,851
--------- ---------
$ 235,967 $ 229,351
========= =========
</TABLE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,115 $ 10,238
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,337 4,635
Increase in deferred taxes 428 959
Loss (Gain) on asset dispositions 158 (179)
Equity in earnings from unconsolidated entities
(over) under dividends received 0 (41)
Minority interest in earnings 4 13
Decrease (Increase) in accounts receivable (445) 2,653
Increase in inventories (885) (140)
Increase in prepaid expenses and other (681) (70)
Increase in accounts payable 2,137 861
Decrease in accrued liabilities (2,429) (1,857)
Decrease in deferred credits (1,250) (1,250)
-------- ---------
Net cash provided by operating activities 8,489 15,822
-------- ---------
Cash flows from investing activities:
Capital expenditures (4,608) (1,038)
Proceeds from assets dispositions 150 277
Investment in marketable securities (11,952) 0
Proceeds from sale or maturity of marketable securities 11,988 0
Acquisitions, net of cash received 0 (8,153)
-------- ---------
Net cash used in investing activities (4,422) (8,914)
-------- ---------
Cash flows from financing activities:
Repayment of debt 0 (3,224)
Proceeds from borrowings 150 0
Issuance of common stock 447 1,776
-------- ---------
Net cash provided by (used in) financing activities 597 (1,448)
Net increase in cash 4,664 5,460
Cash and cash equivalents at beginning of year 47,973 27,225
-------- ---------
Cash and cash equivalents at end of quarter $ 52,637 $ 32,685
======== =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 319 $ 282
Income taxes 4,148 2,641
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
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 six months ended December 31, 1995, 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>
Proforma Results for the
Six Months Ended December 31, 1994
----------------------------------
<S> <C>
Gross revenue $76,555
=======
Net income $ 9,766
=======
Earnings per common share and
common equivalent share $ .50
=======
</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
proforma 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.
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 Six Months Ended
December 31, December 31,
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross revenue $39,944 $41,695 $78,711 $67,920
Operating expenses 36,944 36,440 72,069 56,722
------- ------- ------- -------
Operating income 3,000 5,255 6,642 11,198
Earnings from unconsolidated
entities 1,109 1,775 1,734 2,400
Interest income 1,050 609 2,051 1,308
Interest expense 192 268 400 445
------- ------- ------- -------
Income before provision for
income taxes 4,967 7,371 10,027 14,461
Provision for income taxes 1,436 2,138 2,908 4,210
(Income) Loss of minority
interest (75) (13) (4) (13)
------- ------- ------- -------
Net income $3,456 $5,220 $7,115 $10,238
======= ======= ======= =======
</TABLE>
Results of Operations
- ---------------------
Consolidated:
Consolidated operating revenues and expenses for the six months ended
December 31, 1995 were $78.9 million and $72.1 million, respectively, an
$11.1 million and $15.3 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 December 31, 1995 were $39.9 million and $36.9 million, respectively,
a $1.6 million decrease and $0.5 million increase compared to the prior year.
Helicopter flight activity and GPM revenues decreased $0.8 million and $2.9
million respectively, offset by an increase in CPS revenues of $1.7 million.
Operating expenses for helicopter services and CPS increased $1.6 million and
$1.5 million, respectively, offset by a decrease in GPM expenses of $2.8
million.
Helicopter Services:
Total flight hours were approximately 26,400 and 54,000 for the three months
and six months ended December 31, 1995, respectively, an 8% and 10% decrease
compared to the same period in the prior year. Operating revenues from
helicopter services were $22.1 million and $43.8 million for the three and
six months ended December 31, 1995, respectively, a 4% and 8% decrease
compared to the same period in the prior year. The decrease in flight
activity and operating revenues is primarily related to activity in the Gulf
of Mexico. Alaska activity has had some decrease compared to the prior year
which is offset by an increase in International activity. Operating expenses
for helicopter services were $18.8 million and $35.9 million for the three
months and six months ended December 31, 1995, a 9% and 3% increase compared
to the same period in the prior year.
Gulf of Mexico flight activity was down approximately 2,500 and 6,000 hours
for the three months and six months ended December 31, 1995, respectively,
an 11% and 12% decrease compared to the same period in the prior year.
Operating revenues for the Gulf of Mexico were $18.7 million and $37.0 million
for the three months and six months ended December 31, 1995, respectively,
a decrease of approximately $0.7 million and $2.5 million, respectively,
compared to the same period in the prior year. Significant reduction in
activity levels by several of the Company's larger customers has caused this
decrease in flight hours and operating revenues. Operating expenses for the
Gulf of Mexico for the three months and six months ended December 31, 1995
were $16.9 million and $32.4 million, respectively, a $1.9 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
significantly below prior year. Gross margins, excluding asset dispositions,
for the three months and six months ended December 31, 1995 were 9.6% and
12.3%, respectively. Prior year gross margins were 22.0% and 22.8%,
respectively.
Alaska flight activity, revenues, and expenses for the three months and six
months ended December 31, 1995 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 revenue for the three months and six months ended
December 31, 1995 were $1.5 million and $3.6 million, respectively. Alaska
operating expenses for the same periods were $1.2 million and $2.5 million,
respectively. Operating income from Alaska was $0.3 million and $1.1
million, for the three months and six months ended December 31, 1995,
respectively, relatively unchanged from the prior year.
International activity has increased from the prior year. International
flight hours for the three months and six months ended December 31, 1995 were
approximately 4,500 hours and 8,200 hours, respectively, an 11% and 14%
increase from the prior year. International operating revenues were $4.1
million and $7.4 million for the three months and six months ended December
31, 1995. International operating expenses for the same periods were $2.8
million and $5.0 million, respectively. International operating income was
$1.3 million and $2.4 million, for the three months and six months ended
December 31, 1995, respectively, relatively unchanged from the prior year.
Production Management Services:
Operating revenues from GPM were approximately $7.9 million and $16.6 million
for the three months and six months ended December 31, 1995, respectively.
Prior year operating revenues were $10.8 million and $12.8 million for the
three months ended December 31, 1994 and for the period from consolidation
(September 16, 1994) to December 31, 1994, respectively. The decrease in
operating revenues for the three months ended December 31, 1995 compared to
the prior year relates primarily to the concentration on pricing policies
which temporarily reduced activity levels from GPM. Operating expenses from
GPM were approximately $7.9 million and $16.4 million for the three months
and six months ended December 31, 1995, respectively. Prior year operating
expenses were $10.8 million and $12.7 million for the three months ended
December 31, 1994 and for the period from consolidation (September 16, 1994)
to December 31, 1994, respectively. Overall, GPM operations were break-even
for current and prior year periods.
Cathodic Protection Services:
Operating revenues from CPS were approximately $10.8 million and $20.6
million for the three months and six months ended December 31, 1995,
respectively. Prior year operating revenues were $9.1 million for the three
months and six months ended December 31, 1994. The increase in operating
revenues for the three months ended December 31, 1995 compared to the prior
year relates primarily to increased sales effort and increased prices in
certain raw materials sold. Operating expenses from CPS were approximately
$10.4 million and $20.3 million for the three months and six months ended
December 31, 1995, respectively. Prior year operating expenses were $8.9
million for the three months and six months ended December 31, 1994. CPS
gross margins for the three months and six months ended December 31, 1995
were $0.4 million and $0.3 million, respectively.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents (including marketable securities) were $72.6
million as of December 31, 1995, a $4.6 million increase from fiscal year end
1995. Total debt was $7.8 million as of December 31, 1995. The increase in
current maturities of long-term debt is due to the CPS revolving credit
facility expiring in less than 12 months.
As of December 31, 1995, 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.
Subsequent to December 31, 1995, 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.
Subsequent to December 31, 1995, 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. 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 $50.00. The Rights
will be distributed to stockholders of record on February 29, 1996, and will
trade with the Company's Common Stock until exercisable. The Rights extend
for ten years and will expire on February 28, 2006.
The effective income tax rates from continuing operations were 29% for the
six months ended December 31, 1995 and 1994, 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 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
(a) The Annual meeting of Stockholders was held on December 6, 1995.
(c) Matters voted on at the meeting included:
1. For the election of directors, all nominees were approved.
The results were as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
--------- ----- --------
<S> <C> <C>
James B. Clement 15,663,516 1,530
Louis F. Crane 15,664,473 573
David S. Foster 15,660,746 4,300
David M. Johnson 15,664,526 520
Kenneth M. Jones 15,665,026 20
Homer L. Luther, Jr. 14,846,043 819,003
Harry C. Sager 15,659,246 5,800
George M. Small 15,664,111 935
Howard Wolf 15,664,526 520
</TABLE>
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) No reports on Form 8-K were filed during the quarter ended
December 31, 1995.
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: February 9, 1996
BY: /s/ George M. Small
-----------------------------
GEORGE M. SMALL
Vice President
Chief Financial Officer
DATE: February 9, 1996
EXHIBIT 11
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average shares
outstanding 19,487,534 19,316,826 19,469,989 18,574,587
Net effect of dilutive
stocks warrants based on
the Treasury Stock method
using average market price 15,767 25,946 22,396 54,458
Net effect of dilutive
stock options based on the
Treasury Stock method
using average market price 225,121 301,912 255,699 298,037
---------- ---------- ---------- ----------
19,728,422 19,644,684 19,748,084 18,927,082
========== ========== ========== ==========
FULLY DILUTED:
Weighted average shares
outstanding 19,487,534 19,316,826 19,469,989 18,574,587
Net effect of dilutive
stock warrants based on
the Treasury Stock method
using end of period market
price 17,908 25,946 24,466 55,280
Net effect of dilutive
stock options based on the
Treasury Stock method
using end of period market
price 231,346 301,912 264,911 300,827
---------- ---------- ---------- ----------
19,736,788 19,644,684 19,759,366 18,930,694
========== ========== ========== ==========
(thousands of dollars, except per share data)
Net income $ 3,456 $ 5,220 $ 7,115 $ 10,238
=========== =========== =========== ===========
Per share amount-Primary $ 0.18 $ 0.27 $ 0.36 $ 0.54
=========== =========== =========== ===========
Per share amount-Fully
diluted $ 0.18 $ 0.27 $ 0.36 $ 0.54
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 52,637
<SECURITIES> 19,960
<RECEIVABLES> 30,201
<ALLOWANCES> 0
<INVENTORY> 28,001
<CURRENT-ASSETS> 131,966
<PP&E> 131,361
<DEPRECIATION> 61,391
<TOTAL-ASSETS> 235,967
<CURRENT-LIABILITIES> 22,852
<BONDS> 900
0
0
<COMMON> 195
<OTHER-SE> 191,218
<TOTAL-LIABILITY-AND-EQUITY> 235,967
<SALES> 78,869
<TOTAL-REVENUES> 78,711
<CGS> 61,480
<TOTAL-COSTS> 72,069
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 400
<INCOME-PRETAX> 10,027
<INCOME-TAX> 2,908
<INCOME-CONTINUING> 7,115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,115
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
