<PAGE>
================================================================================
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 June 30, 1997
[ ] 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
incorporation or organization) Identification Number)
224 Rue de Jean
P.O. Box 5C, Lafayette, Louisiana 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 June 30, 1997.
21,251,633 shares of Common Stock, $.01 par value
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OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(thousands of dollars, except per share amounts)
Three Months Ended
June 30,
------------------------
1997 1996
---- ----
GROSS REVENUE
Operating revenue................................. $ 100,211 $ 30,492
Gain (loss) on disposal of equipment.............. (230) (343)
----------- -----------
99,981 30,149
OPERATING EXPENSES
Direct cost....................................... 72,455 22,061
Depreciation and amortization..................... 8,029 2,248
General and administrative........................ 6,542 2,248
----------- -----------
87,026 26,557
----------- -----------
OPERATING INCOME.................................. 12,955 3,592
Earnings from unconsolidated entities............. 1,001 1,101
Interest income................................... 878 1,034
Interest expense.................................. 5,070 65
----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES........................ 9,764 5,662
Provision for income taxes........................ 2,929 1,629
Minority interest................................. (242) --
----------- -----------
INCOME FROM CONTINUING OPERATIONS................. 6,593 4,033
Discontinued operations:
Income (Loss) from CPS operations............... (15) 17
----------- -----------
NET INCOME $ 6,578 $ 4,050
=========== ===========
PRIMARY:
Income (Loss) per common share:
Continuing operations........................... $ 0.31 $ 0.20
Discontinued operations......................... -- --
----------- -----------
Net income per common share and common
equivalent share................................. $ 0.31 $ 0.20
=========== ===========
Common shares and common equivalent
shares outstanding............................... 21,536,513 19,820,657
=========== ===========
FULLY DILUTED:
Income (Loss) per common share:
Continuing operations........................... $ 0.29 $ 0.20
Discontinued operations......................... -- --
----------- -----------
Net income per common share and common
equivalent share................................. $ 0.29 $ 0.20
=========== ===========
Common shares and common equivalent
shares outstanding............................... 25,853,590 19,820,657
=========== ===========
2
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OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(thousands of dollars)
JUNE 30, MARCH 31,
1997 1997
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 15,402 $ 29,829
Accounts receivable................................. 109,697 88,268
Inventories 73,052 70,827
Net assets of discontinued operations............... 6,714 6,686
Prepaid expenses.................................... 995 887
---------- ----------
Total current assets........................... 205,860 196,497
Investments in unconsolidated entities................ 9,237 9,250
Property and equipment - at cost:
Land and buildings.................................. 12,990 13,175
Aircraft and equipment.............................. 538,104 497,672
---------- ----------
551,094 510,847
Less: accumulated depreciation and amortization....... (79,616) (74,465)
---------- ----------
471,478 436,382
Other assets, primarily goodwill...................... 31,915 32,084
---------- ----------
$ 718,490 $ 674,213
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.................................... $ 33,414 $ 31,166
Accrued liabilities................................. 36,602 38,592
Deferred taxes...................................... 18,237 17,968
Current maturities of long-term debt................ 53,669 51,240
---------- ----------
Total current liabilities...................... 141,922 138,966
Long-term debt, less current maturities............. 227,484 199,631
Deferred credits.................................... 2,375 622
Deferred taxes...................................... 92,115 91,445
Minority interest................................... 9,028 8,643
Stockholders' Investment:
Common Stock, $.01 par value, authorized
35,000,000 shares; outstanding 21,251,633
and 21,081,133 at June 30 and March 31,
respectively (exclusive of 517,550 treasury
shares)............................................ 213 211
Additional paid-in capital.......................... 116,701 115,346
Retained earnings................................... 127,364 120,786
Cumulative translation adjustment................... 1,288 (1,437)
---------- ----------
245,566 234,906
---------- ----------
$ 718,490 $ 674,213
========== ==========
3
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OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(thousands of dollars)
Three Months Ended
June 30,
1997 1996
---------- ----------
Cash flows from operating activities:
Net income......................................... $ 6,578 $ 4,050
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 8,028 2,419
Increase in deferred taxes......................... 1,976 533
(Gain) loss on asset dispositions.................. 230 379
Equity in earnings from unconsolidated entities
over dividends received........................... 40 --
Minority interest in earnings...................... 242 (18)
Discontinued operations............................ 15 (17)
Increase in accounts receivable.................... (21,797) (1,459)
(Increase) Decrease in inventories................. (1,754) 19
(Increase) Decrease in prepaid expenses and other.. (182) 1,339
Increase (Decrease) in accounts payable............ 1,828 (1,413)
Decrease in accrued liabilities.................... (2,685) (1,641)
Increase in deferred credits....................... 1,753 1,862
---------- ----------
Net cash provided by (used in ) operating
activities.......................................... (5,728) 6,053
---------- ----------
Cash flows from investing activities:
Capital expenditures................................. (37,839) (496)
Proceeds from asset dispositions..................... 527 34
---------- ----------
Net cash used in investing activities................ (37,312) (462)
---------- ----------
Cash flows from financing activities:
Proceeds from borrowings........................... 27,746 --
Repayment of debt.................................. (506) (2,000)
Issuance of common stock........................... 1,357 75
---------- ----------
Net cash provided by (used in) financing activities.. 28,597 (1,925)
---------- ----------
Effect of exchange rate changes in cash.............. 16 --
Net increase (decrease) in cash and cash
equivalents......................................... (14,427) 3,666
Cash and cash equivalents at beginning of period..... 29,829 53,273
---------- ----------
Cash and cash equivalents at end of quarter.......... $ 15,402 $ 56,939
========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest........................................... $ 6,159 $ 173
Income taxes....................................... 193 1,103
4
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OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
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 three months ended June 30, 1997, are not necessarily indicative
of the results that may be expected for the year ending March 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the nine
month period ended March 31, 1997.
NOTE B - INVESTMENT IN BRISTOW
On December 19, 1996, OLOG acquired 49% of the common stock and a
significant amount of Bristow Aviation Holdings, Ltd. ("Bristow") subordinated
debt as detailed below. Bristow is incorporated in England and holds all of the
outstanding shares in Bristow Helicopter Group Limited ("BHGL"). Bristow
provides helicopter services to the North Sea oil and gas industry. Services
consist of short and long range crew change flights, offshore-based and inter-
platform shuttle operations, and search and rescue missions. Bristow also
operates aircraft in Australia, Brunei, Cambodia, China, Nigeria, South
America, and Vietnam among others.
The investment was accounted for by the purchase method of accounting
under Accounting Principals Board Opinion No. 16, as amended, and accordingly,
the results of operations of Bristow for the three months ended June 30, 1997
are included in the accompanying consolidated financial statements. The total
consideration has been allocated to Bristow's assets and liabilities based on
the estimated fair market value as of December 19, 1996. The purchase price
allocation is based on preliminary estimates of fair value and may be revised at
a later date.
The following unaudited pro forma financial information for the Company
gives effect to the Bristow investment as if it had occurred on April 1, 1996.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually would
have resulted had the acquisitions occurred on the date indicated, or which may
result in the future. The pro forma results follow (in thousands, except per
share data):
THREE MONTHS ENDED
JUNE 30, 1996
------------------
(unaudited)
Gross revenue...................................... $ 91,063
==========
Income from continuing operations.................. $ 4,885
==========
Earnings per common share and common
equivalent share
Income from continuing operations:
Primary........................................ $ 0.23
==========
Fully diluted.................................. $ 0.23
==========
5
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NOTE C - DISCONTINUED OPERATIONS
On July 16, 1997, the Company finalized the sale of its investment in
Cathodic Protection Services to Corrpro Companies, Inc. As a result of the
sale, the consolidated financial statements of the Company have been adjusted
and restated to reflect the results of operations and net assets of CPS as a
discontinued operation in accordance with generally accepted accounting
principles. The Company expects to recognize a small gain on the sale during
the quarter ended September 30, 1997.
NOTE D - COMMITMENTS AND CONTINGENCIES
On August 6, 1997, the domestic pilots at Air Logistics ("Air Log") voted
to become members of the Office and Professional Employees International Union
("OPEIU"). The Company expects to enter into good faith negotiations with the
pilots' representative for collective bargaining purposes. During the three
months ended June 30, 1997, $24.5 million of operating revenues were from Air
Log's domestic operations. An application for representation by OPEIU was also
filed against Air Log's principal competitor, and that election will take place
on September 4, 1997.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, through its Air Logistics division ("Air Log") and with its
investment in Bristow Aviation Holdings Limited ("Bristow"), is a major supplier
of helicopter transportation services to the worldwide offshore oil and gas
industry. The Company also provides production personnel and medical support
services to the worldwide oil and gas industry.
A summary of operating results for the applicable periods is as follows:
THREE MONTHS ENDED
JUNE 30,
1997 1996
-------- --------
Gross revenue........................................ $ 99,981 $ 30,149
Operating expenses................................... 87,026 26,557
-------- --------
Operating income..................................... 12,955 3,592
Earnings from unconsolidated entities................ 1,001 1,101
Interest income (expense), net....................... (4,192) 969
-------- --------
Income before provision for income taxes............. 9,764 5,662
Provision for income taxes........................... 2,929 1,629
(Income) loss of minority interest................... (242) --
Discontinued operations.............................. (15) 17
-------- --------
Net income........................................... $ 6,578 $ 4,050
======== ========
RESULTS OF OPERATIONS
HELICOPTER ACTIVITIES
Air Log and Bristow conduct helicopter activities principally in the
Gulf of Mexico and the North Sea, respectively, where they provide support to
the production, exploration, and construction activities of oil and gas
companies. Air Log also charters helicopters to governmental entities involved
in regulating offshore oil and gas operations in the Gulf of Mexico. Bristow
also provides search and rescue work for the British Coast Guard. Air Log's
Alaskan activity is primarily related to providing helicopter services to the
Alyeska Pipeline. Air Log has service agreements with, and equity interests in,
entities that operate aircraft in Egypt and Mexico ("unconsolidated entities").
Air Log and Bristow also operate in various other international areas (including
Australia, Bolivia, Brazil, Brunei, China, Colombia, the Falklands, Mexico,
Nigeria, and Trinidad). These international operations are subject to local
governmental regulations and to uncertainties of economic and political
conditions in those areas.
7
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The following table sets forth certain operating data related to helicopter
activities.
THREE MONTHS
ENDED JUNE 30,
--------------------
1997 1996
-------- --------
(in thousands,
except flight hours)
Flight hours (excludes unconsolidated entities):
Air Log............................................. 35,777 29,109
Bristow............................................. 24,259 --
-------- --------
Total Helicopter Activities..................... 60,036 29,109
======== ========
Operating revenues:
Air Log............................................. $ 29,853 $ 23,976
Bristow............................................. 61,511 --
Eliminations........................................ (142) --
-------- --------
Total Helicopter Activities..................... $ 91,222 $ 23,976
-------- --------
Operating income, excluding gain or loss on
disposal of equipment:
Air Log............................................. $ 8,488 $ 4,927
Bristow............................................. 5,390 --
-------- --------
Total Helicopter Activities..................... $ 13,878 $ 4,927
======== ========
Gross margin, excluding gain or loss on
disposal of equipment:
Air Log............................................. 28.4% 20.5%
Bristow............................................. 8.8% --%
Total Helicopter Activities..................... 15.2% 20.5%
The results of operations in the Gulf of Mexico for the first quarter
of fiscal 1998 reflect the strong levels of activity in that area as well as
rate increases that were effective during this period. The increase in flight
operations in the Gulf of Mexico resulted in an increase in operating revenues
and corresponding operating expenses. Gulf of Mexico flight hours and operating
revenues for the three months ended June 30, 1997 increased over 25% compared to
the same period in the prior year. Gulf of Mexico operating expenses were $19.0
million for the three months ended June 30, 1997, a 14% increase from the prior
year. Gulf of Mexico operating income for the three months ended June 30, 1997
was $6.1 million, a 93% increase over the prior year.
Bristow's flight hours were 24,259 for the three months ended June 30, 1997
and operation revenues for that period were $61.5 million. Bristow operating
expenses for the three months ended June 30, 1997 was $56.1 million. Operating
income attributable to Bristow was $5.4 million for the three months ended
June 30, 1997.
International flight hours and operating revenues from Air Log increased by
19% and 25%, respectively for the three months ended June 30, 1997.
International operating income from Air Log was $1.6 million for the three
months ended June 30, 1997, a 28% increase from the prior year.
8
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PRODUCTION MANAGEMENT SERVICES
Operating revenues for GPM were $10.0 million for the three months ended
June 30, 1997, compared to prior year revenues of $7.3 million, a 38% increase.
Operating expenses for GPM were $9.3 million and $7.3 million for the three
months ended June 30, 1997 and 1996, respectively. GPM operating income was $0.7
million and ($0.1) million for the three months ended June 30, 1997 and 1996,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $15.4 million as of June 30, 1997, a $14.4
million decrease from March 31, 1997. Working capital as of June 30, 1997 was
$63.9 million, a $6.4 million increase from March 31, 1997. In May 1997, the
Company acquired five aircraft (including four Super Pumas which had previously
been leased by Bristow under short-term operating leases) for $32.3 million. The
Company used existing cash and incurred an additional $20.0 million of 7.9%
fixed rate financing, that amortizes over five years, to complete this
transaction. Total debt was $281.1 million as of June 30, 1997.
As of June 30, 1997, Bristow had a (Pounds)15 million ($24.5 million)
revolving credit facility with a syndicate of United Kingdom banks that matures
on June 30, 1999. Bristow had (Pounds)9.7 million ($16.2 million) drawn under
this facility as of June 30, 1997.
As of June 30, 1997, OLOG had a $20 million unsecured working capital
line of credit with a bank that expires on January 31, 1998. Management
believes that normal operations, as well as the expected refinancing, will
provide sufficient working capital and cash flow to meet debt service in the
foreseeable future.
The effective income tax rates from continuing operations were 30% and
29% for the three months ended June 30, 1997 and 1996, respectively. The
variance between the Federal statutory rate and the effective rate for these
periods is due primarily to non-taxable foreign source income.
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 one site
in Louisiana, and a PRP at one 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.
FORWARD LOOKING
This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements
included herein other than statements of historical fact are forward-looking
statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") may include, but are not limited to, demand for Company services,
worldwide activity levels in oil and natural gas exploration, development and
production, fluctuations in oil and
9
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natural gas prices, unionization and the response thereto of the Company's
customers, currency fluctuations, and international political conditions. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
10
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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 Statement
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated May 1, 1997. Information reported
was under Item 5 - Other Events related to the First Amendment to the
Rights Agreement and Item 8 - Change in Fiscal year.
The Company filed a Form 8- K dated July 30, 1997. Information
reported was under Item 5 - Other Events Disclosure of Certain
Information with respect to directors and executive officers of the
registrant, executive compensation, security ownership of certain
beneficial owners and management and certain relationships and related
transactions.
11
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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
Chairman of the Board, President,
and Chief Executive Officer,
DATE: August 14, 1997
BY: /s/ GEORGE M. SMALL
-------------------------------------
GEORGE M. SMALL
Vice President and Chief
Financial Officer
DATE: August 14, 1997
12
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EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
----------- -----------
PRIMARY:
Net income....................................... $ 6,578,000 $ 4,050,000
=========== ===========
Weighted average shares outstanding.............. 21,102,611 19,494,449
Net effect of dilutive stock warrants based
on the Treasury Stock method using average
market price.................................... -- 27,174
Net effect of dilutive stock options based on
the Treasury Stock method using average
market price.................................... 433,902 299,034
----------- -----------
21,536,513 19,820,657
=========== ===========
Primary earnings per common share................ $ 0.31 $ 0.20
=========== ===========
FULLY DILUTED:
Net income....................................... $ 6,578,000 $ 4,050,000
Interest expense on convertible notes,
net of tax...................................... 1,029,000 --
----------- -----------
$ 7,607,000 $ 4,050,000
=========== ===========
Weighted average shares outstanding.............. 21,102,611 19,494,449
Net effect of dilutive stock warrants based
on the Treasury Stock method using end of
period market price............................. -- 27,174
Net effect of dilutive stock options based
on the Treasury Stock method using end of
period market price............................. 464,459 299,034
Shares from assumed conversion of
convertible notes............................... 4,286,520 --
----------- -----------
25,853,590 19,820,657
=========== ===========
Fully diluted earnings per common share.......... $ 0.29 $ 0.20
=========== ===========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The June 30, 1996 financial information has been restated to reflect CPS as
discontinued operations. Balance sheet data is not disclosed in the
accompanying financial statements and thus a value of zero has been shown for
purposes of this financial data schedule.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 15,402 0
<SECURITIES> 0 0
<RECEIVABLES> 109,697 0
<ALLOWANCES> 0 0
<INVENTORY> 73,052 0
<CURRENT-ASSETS> 205,860 0
<PP&E> 551,094 0
<DEPRECIATION> 79,616 0
<TOTAL-ASSETS> 718,490 0
<CURRENT-LIABILITIES> 141,922 0
<BONDS> 227,484 0
0 0
0 0
<COMMON> 213 0
<OTHER-SE> 245,353 0
<TOTAL-LIABILITY-AND-EQUITY> 718,490 0
<SALES> 100,211 30,492
<TOTAL-REVENUES> 99,981 30,149
<CGS> 72,455 22,061
<TOTAL-COSTS> 87,026 26,557
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,070 65
<INCOME-PRETAX> 9,764 5,662
<INCOME-TAX> 2,929 1,629
<INCOME-CONTINUING> 6,593 4,033
<DISCONTINUED> (15) 17
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,578 4,050
<EPS-PRIMARY> .31 .20
<EPS-DILUTED> .29 .20
</TABLE>
