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 September 30, 1998
|_| 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 September 30, 1998.
21,456,921 shares of Common Stock, $.01 par value
================================================================================
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statement of Income
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue........................... $128,162 $107,581 $245,435 $207,792
Gain (loss) on disposal of equipment........ 1,006 (16) 1,286 (246)
-------- -------- -------- --------
129,168 107,565 246,721 207,546
OPERATING EXPENSES
Direct cost................................. 95,525 77,989 185,494 150,444
Depreciation and amortization............... 8,506 8,050 16,984 16,079
General and administrative.................. 7,645 6,784 13,929 13,326
-------- -------- -------- --------
111,676 92,823 216,407 179,849
-------- -------- -------- --------
OPERATING INCOME............................ 17,492 14,742 30,314 27,697
Earnings from unconsolidated entities....... 1,505 1,716 2,605 2,717
Interest income............................. 801 734 1,690 1,612
Interest expense............................ 5,024 5,457 10,037 10,527
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES........... 14,774 11,735 24,572 21,499
Provision for income taxes.................. 4,435 3,520 7,374 6,449
Minority interest........................... (323) (256) (629) (498)
--------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS........... 10,016 7,959 16,569 14,552
Discontinued operations:
Income (Loss) from CPS operations........ -- (215) -- (230)
Gain on sale of CPS...................... -- 384 -- 384
-------- -------- -------- --------
-- 169 -- 154
-------- -------- -------- --------
NET INCOME.................................. $ 10,016 $ 8,128 $ 16,569 $ 14,706
======== ======== ======== ========
BASIC:
Income per common share:
Continuing operations.................... $ 0.46 $ 0.37 $ 0.76 $ 0.68
Discontinued operations.................. -- 0.01 -- 0.01
-------- -------- -------- --------
Net income per common share................. $ 0.46 $ 0.38 $ 0.76 $ 0.69
======== ======== ======== ========
DILUTED:
Income per common share:
Continuing operations.................... $ 0.43 $ 0.35 $ 0.71 $ 0.64
Discontinued operations.................. -- 0.01 -- 0.01
-------- --------- -------- --------
Net income per common share................. $ 0.43 $ 0.36 $ 0.71 $ 0.65
======== ========= ======== ========
</TABLE>
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(thousands of dollars)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
----------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 56,335 $ 56,076
Accounts receivable................................ 104,347 85,543
Inventories........................................ 81,096 76,139
Prepaid expenses................................... 5,007 5,542
----------- ----------
Total current assets............................ 246,785 223,300
Investments in unconsolidated entities................ 11,409 7,866
Property and equipment - at cost:
Land and buildings................................. 13,346 13,088
Aircraft and equipment............................. 574,393 556,318
----------- ----------
587,739 569,406
Less: accumulated depreciation and amortization...... (114,585) (98,267)
----------- ----------
473,154 471,139
Other assets.......................................... 32,763 33,706
----------- ----------
$ 764,111 $ 736,011
=========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable................................... $ 37,733 $ 31,024
Accrued liabilities................................ 46,223 42,612
Deferred taxes..................................... 18,608 18,335
Current maturities of long-term debt............... 9,524 8,693
----------- ----------
Total current liabilities....................... 112,088 100,664
Long-term debt, less current maturities............... 243,972 251,560
Deferred credits...................................... 1,500 594
Deferred taxes........................................ 98,949 93,455
Minority interest..................................... 10,617 9,853
Stockholders' Investment:
Common Stock, $.01 par value, authorized 35,000,000
shares; outstanding 21,456,921 and 21,854,921
at September 30 and March 31, respectively
(exclusive of 917,550 and 517,550 treasury
shares, respectively)........................... 215 219
Additional paid-in capital......................... 119,216 123,061
Retained earnings.................................. 168,763 152,194
Cumulative translation adjustment.................. 8,791 4,411
----------- ----------
296,985 279,885
----------- ----------
$ 764,111 $ 736,011
=========== ==========
</TABLE>
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
---------------------------
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 16,569 $ 14,706
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization...................... 16,984 16,079
Increase in deferred taxes......................... 4,529 3,506
(Gain) loss on asset dispositions.................. (1,286) 246
Equity in earnings from unconsolidated entities
(over) under dividends received................ (962) (1,573)
Minority interest in earnings...................... 629 498
Discontinued operations............................ -- 230
Increase in accounts receivable.................... (17,516) (1,267)
Increase in inventories............................ (4,276) (1,913)
Increase in prepaid expenses and other............. (1,604) (943)
Increase in accounts payable....................... 6,113 2,017
Increase in accrued liabilities.................... 3,128 1,369
Increase in deferred credits....................... 906 1,159
----------- ----------
Net cash provided by operating activities............. 23,214 34,114
----------- ----------
Cash flows from investing activities:
Capital expenditures............................... (14,185) (44,977)
Proceeds from asset dispositions................... 2,481 2,606
Proceeds from CPS disposal......................... -- 5,700
Acquisitions, net of cash received................. -- (353)
----------- ----------
Net cash used in investing activities................. (11,704) (37,024)
----------- ----------
Cash flows from financing activities:
Proceeds from borrowings........................... -- 27,401
Repayment of debt.................................. (7,106) (27,145)
Repurchase of common stock......................... (3,888) --
Issuance of common stock........................... 39 5,391
----------- ----------
Net cash provided by (used in) financing activities... (10,955) 5,647
----------- ----------
Effect of exchange rate changes in cash............... (296) 396
----------- ----------
Net increase in cash and cash equivalents............. 259 3,133
Cash and cash equivalents at beginning of period...... 56,076 29,829
----------- ----------
Cash and cash equivalents at end of period............ $ 56,335 $ 32,962
=========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest........................................... $ 9,563 $ 9,731
Income taxes....................................... 2,181 819
</TABLE>
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
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 September 30, 1998, are not necessarily
indicative of the results that may be expected for the year ending March 31,
1999. For further information, refer to the consolidated financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1998.
NOTE B - Earnings per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
No. 128 replaced the previously reported primary and fully diluted earnings
per share with basic and diluted earnings per share.
Basic earnings per common share were computed by dividing net income by
the weighted average number of shares of common stock outstanding during the
year. Diluted earnings per common share for the three and six months ended
September 30, 1998 and 1997 were determined on the assumptions that the
convertible debt was converted on April 1, 1997. The Company adopted SFAS No.
128, "Earnings per Share," effective December 15, 1997. All income per share
amounts for all periods have been presented, and where necessary, restated to
conform to the requirements of SFAS No. 128. The following table sets forth the
computation of basic and diluted income from continuing operations per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Income from Continuing Operations (thousands of dollars):
Income available to common stockholders.............. $ 10,016 $ 7,959 $ 16,569 $ 14,552
Interest on convertible debt, net of taxes........... 1,008 1,029 2,037 2,058
----------- ---------- ---------- -----------
Income available to common stockholders,
plus assumed conversions........................ $ 11,024 $ 8,988 $ 18,606 $ 16,610
=========== ========== ========== ===========
Shares:
Weighted average number of common shares outstanding. 21,699,312 21,405,950 21,776,574 21,170,826
Options.............................................. 25,267 315,923 99,141 374,912
Convertible debt..................................... 4,195,522 4,286,520 4,240,772 4,286,520
----------- ---------- ---------- -----------
Weighted average number of common shares outstanding,
plus assumed conversions........................ 25,920,101 26,008,393 26,116,487 25,832,258
=========== ========== ========== ===========
Income from Continuing Operations:
Basic earnings per share............................. $ 0.46 $ 0.37 $ 0.76 $ 0.68
=========== ========== ========== ===========
Diluted earnings per share........................... $ 0.43 $ 0.35 $ 0.71 $ 0.64
=========== ========== ========== ===========
</TABLE>
<PAGE>
NOTE C - Commitments and Contingencies
On August 6, 1997, the domestic pilots at the Company voted to become
members of the Office and Professional Employees International Union ("OPEIU").
The Company commenced contract negotiations with the OPEIU on April 1, 1998 and
it is not certain how long this process may take. During the six months ended
September 30, 1998, $61.4 million of operating revenues were from the Company's
domestic helicopter operations. The Company does not believe that the result of
these organizing efforts will place it at a competitive disadvantage with its
competitors as management believes that pay scales and work rules will continue
to be similar throughout the industry.
NOTE D - Comprehensive Income
In 1998, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". SFAS No. 130 requires an entity to report and
display comprehensive income and its components. Comprehensive income is as
follows (thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income.................................... $ 10,016 $ 8,128 $ 16,569 $ 14,706
Other Comprehensive Income:
Currency translation adjustment............ 4,968 (5,502) 4,380 (2,777)
--------- --------- --------- ---------
Comprehensive Income.......................... $ 14,984 $ 2,626 $ 20,949 $ 11,929
========= ========= ========= =========
</TABLE>
NOTE E - Derivative Financial Instruments
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". The
Statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Changes in a derivative's
fair value are to be recognized currently in earnings unless specific hedge
accounting criteria are met. The company has not yet quantified the impact on
its financial statements that may result from adoption of SFAS No. 133, which is
required no later than April 1, 2000.
<PAGE>
NOTE F - Supplemental Condensed Consolidating Financial Information
On January 27, 1998, the Company completed the sale of $100 million 7 7/8%
Senior Notes due 2008, which were discounted to yield 7.915%. The net proceeds
to the Company were $97.2 million. In connection with the sale of the Senior
Notes, certain of the Company's subsidiaries (the "Guarantor Subsidiaries")
jointly, severally and unconditionally guaranteed the payment obligations under
the Senior Notes. The following supplemental financial information sets forth,
on an unconsolidated basis, the balance sheet, statement of income and cash flow
information for Offshore Logistics, Inc. ("Parent Company Only"), for the
Guarantor Subsidiaries and for Offshore Logistics, Inc.'s other subsidiaries
(the "Non-Guarantor Subsidiaries").
The supplemental condensed consolidating financial information has been
prepared pursuant to the rules and regulations for condensed financial
information and does not include all disclosures included in annual financial
statements, although the Company believes that the disclosures made are adequate
to make the information presented not misleading. Certain reclassifications were
made to conform all of the financial information to the financial presentation
on a consolidated basis. The principal eliminating entries eliminate investments
in subsidiaries, intercompany balances and intercompany revenues and expenses.
During fiscal 1998, the Company formed a new wholly owned subsidiary and
contributed the Company's operating assets, separate from its investment in its
subsidiaries, to the newly formed subsidiary. The subsidiary is a Guarantor
Subsidiary. For purposes of the historical supplemental financial information,
the Company has presented the aforementioned operating assets and related
operating results together with the operating assets and results of other
Guarantor Subsidiaries.
The allocation of the consolidated income tax provision was made using the
with and without allocation method.
<PAGE>
Supplemental Condensed Consolidating Balance Sheet
September 30, 1998
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 24,362 $ 9,351 $ 22,622 $ -- $ 56,335
Accounts receivable................. 1,237 26,154 80,442 (3,486) 104,347
Inventories......................... -- 35,401 45,695 -- 81,096
Prepaid expenses.................... 278 857 3,872 -- 5,007
---------- ----------- ----------- ----------- -----------
Total current assets............. 25,877 71,763 152,631 (3,486) 246,785
Intercompany investment................ 232,005 -- -- (232,005) --
Investments in unconsolidated entities. 1,108 229 10,072 -- 11,409
Intercompany note receivables.......... 238,424 2,529 -- (240,953) --
Property and equipment--at cost:
Land and buildings.................. -- 3,181 10,165 -- 13,346
Aircraft and equipment.............. 3,647 149,224 421,522 -- 574,393
---------- ----------- ----------- ----------- -----------
3,647 152,405 431,687 -- 587,739
Less: Accumulated depreciation
and amortization................. (2,714) (69,051) (42,820) -- (114,585)
---------- ----------- ----------- ----------- -----------
933 83,354 388,867 -- 473,154
Other assets........................... 13,258 19,005 389 111 32,763
---------- ----------- ----------- ----------- -----------
$ 511,605 $ 176,880 $ 551,959 $ (476,333) $ 764,111
========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.................... $ 128 $ 3,661 $ 34,803 $ (859) $ 37,733
Accrued liabilities................. 6,516 11,907 30,732 (2,932) 46,223
Deferred taxes...................... -- -- 18,608 -- 18,608
Current maturities of long-term debt -- -- 9,524 -- 9,524
---------- ----------- ----------- ----------- -----------
Total current liabilities........ 6,644 15,568 93,667 (3,791) 112,088
Long-term debt, less current maturities 194,643 -- 49,329 -- 243,972
Intercompany notes payable............. 2,500 -- 238,147 (240,647) --
Deferred credits....................... -- -- 1,500 -- 1,500
Deferred taxes......................... 863 29,765 68,321 -- 98,949
Minority interest...................... 10,617 -- -- -- 10,617
Stockholders' investment:
Common stock........................ 215 4,048 1,384 (5,432) 215
Additional paid in capital.......... 119,216 58,318 20,041 (78,359) 119,216
Retained earnings................... 168,763 69,181 83,594 (152,775) 168,763
Cumulative translation adjustment... 8,144 -- (4,024) 4,671 8,791
---------- ----------- ----------- ----------- -----------
296,338 131,547 100,995 (231,895) 296,985
---------- ----------- ----------- ----------- -----------
$ 511,605 $ 176,880 $ 551,959 $ (476,333) $ 764,111
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Income
Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue........................ $ 5 $ 75,535 $ 169,895 $ -- $ 245,435
Intercompany revenue..................... -- 5,412 345 (5,757) --
Gain on disposal of equipment............ 3 84 1,199 -- 1,286
---------- ----------- ----------- ----------- -----------
8 81,031 171,439 (5,757) 246,721
OPERATING EXPENSES
Direct cost.............................. 4 61,668 123,822 -- 185,494
Intercompany expense..................... -- 345 5,412 (5,757) --
Depreciation and amortization............ 78 4,919 11,987 -- 16,984
General and administrative............... 3,114 3,110 7,705 -- 13,929
---------- ----------- ----------- ----------- -----------
3,196 70,042 148,926 (5,757) 216,407
---------- ----------- ----------- ----------- -----------
OPERATING INCOME......................... (3,188) 10,989 22,513 -- 30,314
Earnings from unconsolidated entities.... 14,715 -- 2,609 (14,719) 2,605
Interest income.......................... 13,951 223 515 (12,999) 1,690
Interest expense......................... 7,385 -- 15,651 (12,999) 10,037
---------- ----------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES.................... 18,093 11,212 9,986 (14,719) 24,572
Allocation of consolidated income taxes.. 923 3,657 2,794 -- 7,374
Minority interest........................ (601) -- (28) -- (629)
---------- ----------- ----------- ----------- -----------
NET INCOME............................... $ 16,569 $ 7,555 $ 7,164 $ (14,719) $ 16,569
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Cash Flows
Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............... $ (2,759) $ 7,880 $ 18,093 $ -- $ 23,214
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures............... -- (3,865) (10,320) -- (14,185)
Proceeds from asset dispositions... 6 144 2,331 -- 2,481
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities............... 6 (3,721) (7,989) -- (11,704)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Repayment of debt.................. (3,300) -- (3,806) -- (7,106)
Repurchase of common stock......... (3,888) -- -- -- (3,888)
Issuance of common stock........... 39 -- -- -- 39
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............... (7,149) -- (3,806) -- (10,955)
----------- ----------- ----------- ----------- -----------
Effect of exchange rate changes in cash. -- -- (296) -- (296)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents................... (9,902) 4,159 6,002 -- 259
Cash and cash equivalents
at beginning of period............. 34,264 5,192 16,620 -- 56,076
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period.................. $ 24,362 $ 9,351 $ 22,622 $ -- $ 56,335
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Balance Sheet
March 31, 1998
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 34,264 $ 5,192 $ 16,620 $ -- $ 56,076
Accounts receivable................. 599 23,908 63,065 (2,029) 85,543
Inventories......................... -- 31,998 44,141 -- 76,139
Prepaid expenses.................... 304 663 4,575 -- 5,542
---------- ----------- ----------- ----------- -----------
Total current assets............. 35,167 61,761 128,401 (2,029) 223,300
Intercompany investment................ 218,143 -- -- (218,143) --
Investments in unconsolidated entities. 1,108 229 6,529 -- 7,866
Intercompany note receivables.......... 221,130 2,674 1,441 (225,245) --
Property and equipment--at cost:
Land and buildings.................. -- 3,174 9,914 -- 13,088
Aircraft and equipment.............. 3,642 145,648 407,028 -- 556,318
---------- ----------- ----------- ----------- -----------
3,642 148,822 416,942 -- 569,406
Less: Accumulated depreciation
and amortization................. (2,657) (65,050) (30,560) -- (98,267)
---------- ----------- ----------- ----------- -----------
985 83,772 386,382 -- 471,139
Other assets........................... 13,447 19,781 368 110 33,706
---------- ----------- ----------- ----------- -----------
$ 489,980 $ 168,217 $ 523,121 $ (445,307) $ 736,011
========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.................... $ 46 $ 4,389 $ 26,589 $ -- $ 31,024
Accrued liabilities................. 6,027 8,818 30,037 (2,270) 42,612
Deferred taxes...................... -- -- 18,335 -- 18,335
Current maturities of long-term debt 2,569 -- 6,124 -- 8,693
---------- ----------- ----------- ----------- -----------
Total current liabilities........ 8,642 13,207 81,085 (2,270) 100,664
Long-term debt, less current maturities 195,374 -- 56,186 -- 251,560
Intercompany notes payable............. 2,500 -- 222,505 (225,005) --
Deferred credits....................... -- -- 594 -- 594
Deferred taxes......................... (4,077) 27,730 69,802 -- 93,455
Minority interest...................... 9,853 -- -- -- 9,853
Stockholders' investment:
Common stock........................ 219 4,048 1,384 (5,432) 219
Additional paid in capital.......... 123,061 58,318 19,071 (77,389) 123,061
Retained earnings................... 152,194 64,914 72,394 (137,308) 152,194
Cumulative translation adjustment... 2,214 -- 100 2,097 4,411
---------- ----------- ----------- ----------- -----------
277,688 127,280 92,949 (218,032) 279,885
---------- ----------- ----------- ----------- -----------
$ 489,980 $ 168,217 $ 523,121 $ (445,307) $ 736,011
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Income
Six Months Ended September 30, 1997
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue......................... $ 10 $ 70,522 $ 137,260 $ -- $ 207,792
Intercompany revenue...................... -- 5,074 123 (5,197) --
Gain (loss) on disposal of equipment...... -- (489) 243 -- (246)
---------- ----------- ----------- ----------- -----------
10 75,107 137,626 (5,197) 207,546
OPERATING EXPENSES
Direct cost............................... 4 53,986 96,454 -- 150,444
Intercompany expense...................... -- 123 5,074 (5,197) --
Depreciation and amortization............. 268 4,387 11,424 -- 16,079
General and administrative................ 2,743 2,595 7,988 -- 13,326
---------- ----------- ----------- ----------- -----------
3,015 61,091 120,940 (5,197) 179,849
---------- ----------- ----------- ----------- -----------
OPERATING INCOME.......................... (3,005) 14,016 16,686 -- 27,697
Earnings from unconsolidated entities..... 12,959 -- 2,711 (12,953) 2,717
Interest income........................... 8,919 132 862 (8,301) 1,612
Interest expense.......................... 3,025 -- 15,803 (8,301) 10,527
---------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION
FOR INCOME TAXES.................... 15,848 14,148 4,456 (12,953) 21,499
Allocation of consolidated income taxes... 743 4,546 1,160 -- 6,449
Minority interest......................... (506) -- 8 -- (498)
---------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS.......................... 14,599 9,602 3,304 (12,953) 14,552
Discontinued operations:
Income (loss) from CPS operations... 107 -- 47 -- 154
---------- ----------- ----------- ----------- -----------
NET INCOME................................ $ 14,706 $ 9,602 $ 3,351 $ (12,953) $ 14,706
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Cash Flows
Six Months Ended September 30, 1997
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................. $ (14,364) $ 8,613 $ 39,865 $ -- $ 34,114
---------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures................. -- (7,995) (36,982) -- (44,977)
Proceeds from asset dispositions..... -- 769 1,837 -- 2,606
Proceeds from CPS disposal........... -- -- 5,700 -- 5,700
Acquisitions, net of cash received... -- -- (353) -- (353)
---------- ----------- ----------- ----------- -----------
Net cash used in investing activities...... -- (7,226) (29,798) -- (37,024)
---------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings............. -- -- 27,401 -- 27,401
Repayment of debt.................... -- -- (27,145) -- (27,145)
Issuance of common stock............. 5,391 -- -- -- 5,391
---------- ----------- ----------- ----------- -----------
Net cash provided by financing activities.. 5,391 -- 256 -- 5,647
---------- ----------- ----------- ----------- -----------
Effect of exchange rate changes in cash.... -- -- 396 -- 396
---------- ----------- ----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents............ (8,973) 1,387 10,719 -- 3,133
Cash and cash equivalents
at beginning of period............... 21,459 3,545 4,825 -- 29,829
---------- ----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period.................... $ 12,486 $ 4,932 $ 15,544 $ -- $ 32,962
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, through its Air Logistics' subsidiaries ("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.
Results of Operations
A summary of operating results for the applicable periods is as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- -------------------------
1998 1997 1998 1997
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
Gross revenue................................ $ 129,168 $ 107,565 $ 246,721 $ 207,546
Operating expenses........................... 111,676 92,823 216,407 179,849
------------ --------- ----------- ----------
Operating income............................. 17,492 14,742 30,314 27,697
Earnings from unconsolidated entities........ 1,505 1,716 2,605 2,717
Interest income (expense), net............... (4,223) (4,723) (8,347) (8,915)
------------ --------- ----------- ----------
Income before provision for income taxes..... 14,774 11,735 24,572 21,499
Provision for income taxes................... 4,435 3,520 7,374 6,449
Minority interest............................ (323) (256) (629) (498)
Discontinued operations...................... -- 169 -- 154
------------ --------- ----------- ----------
Net income................................... $ 10,016 $ 8,128 $ 16,569 $ 14,706
============ ========= =========== ==========
</TABLE>
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, Brazil, 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.
<PAGE>
The following table sets forth certain operating information from helicopter
activities.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ---------- ----------- -----------
(in thousands, except flight hours)
<S> <C> <C> <C> <C>
Flight hours (excludes unconsolidated entities):
Air Log...................................... 34,867 37,812 65,839 73,589
Bristow...................................... 29,727 24,880 55,692 48,461
----------- ---------- ----------- -----------
Total Helicopter Activities............... 64,594 62,692 121,531 122,050
=========== ========== =========== ===========
Operating revenues:
Air Log...................................... $ 35,926 $ 31,857 $ 66,910 $ 61,710
Bristow...................................... 83,318 65,513 159,148 127,024
Eliminations................................. (286) (152) (418) (294)
----------- ---------- ----------- -----------
Total Helicopter Activities............... $ 118,958 $ 97,218 $ 225,640 $ 188,440
=========== ========== =========== ===========
Operating income, excluding gain or
loss on disposal of equipment:
Air Log...................................... $ 8,768 $ 7,711 $ 13,617 $ 16,199
Bristow...................................... 8,011 6,625 15,400 12,015
----------- ---------- ----------- -----------
Total Helicopter Activities............... $ 16,779 $ 14,336 $ 29,017 $ 28,214
=========== ========== =========== ===========
Gross margin, excluding gain or
loss on disposal of equipment:
Air Log...................................... 24.4% 24.2% 20.4% 26.3%
Bristow...................................... 9.6% 10.1% 9.7% 9.5%
Total Helicopter Activities............... 14.1% 14.7% 12.9% 15.0%
</TABLE>
Results from the September quarter reflect the weakness in commodity
prices that continues to impact the Company and the oil and gas service
industry. Gulf of Mexico flight activity declined 8% and 12% from the same
three-month and six-month periods in the prior year. Activity during the quarter
ended September 30, 1998 was positively impacted by several storm evacuations.
Despite the reduction in flight activity, operating revenues in the Gulf of
Mexico increased by 15% and 10% for the three months and six months ended
September 30, 1998 compared to the prior year, primarily the result of rate
increases obtained during fiscal 1998. Operating cost associated with Gulf of
Mexico operations increased 17% and 21% from the same three-month and six-month
periods in the prior year, as the Company increased aircraft and personnel to
meet expected increased demands in fiscal 1999. Operating costs were also
impacted by the April 1998 pay increase to a significant portion of the
Company's personnel to meet wage levels prevailing in the market.
The reduction in flight activity discussed above occurred rapidly during
the June 30, 1998 quarter due to the decline in commodity prices. As a result,
in July 1998, the Company implemented a cost containment program, including
delayed acceptance of additional aircraft, procedures to reduce maintenance
expense, a hiring freeze and prior approval for overtime. This program was
successful in restoring Air Log's operating margins to near historical levels,
which management hopes, barring any adverse market conditions, to continue in
the future. Operating income from Gulf of Mexico operations were $5.6 million
and $7.9 million for the three months and six months ended September 30, 1998,
respectively; compared to $5.1 million and $11.2 million for the three months
and six months ended September 30, 1997.
Weak commodity prices have not had a significant impact to date on the
North Sea and other Bristow international operations. Bristow's flight hours for
the three months and six months ended September 30, 1998 were 29,727 and 55,692,
respectively, a 20% and 15% increase from the same periods in the prior year.
Operating revenues for the three months and six months ended September 30, 1998
were $83.3 million and $159.1 million, respectively, an increase of over 25%
from the prior year. Operating income attributable to Bristow was $8.0 million
and $15.4
<PAGE>
million for the three months and six months ended September 30, 1998,
respectively, a 21% and 28% increase from the prior year. These increases in
flight hours, revenues, and operating income are due primarily to the start
up of the previously announced contract with Shell UK Exploration and Production
in the North Sea on July 1, 1998.
International operating revenues from Air Log for the three months and
six months ended September 30, 1998 were $5.5 million and $10.7 million,
respectively, relatively unchanged from the prior year. International operating
income from Air Log for the three months and six months ended September 30, 1998
were $2.3 million and $4.1 million, respectively.
Production Management Services
Operating revenues for GPM were $9.9 million and $21.4 million for the
three months and six months ended September 30, 1998, respectively. Operating
expenses for GPM were $9.3 million and $20.0 million for the three months and
six months ended September 30, 1998, respectively. GPM operating income was $0.6
million and $1.4 million for the three months and six months ended September 30,
1998.
Liquidity and Capital Resources
Cash and cash equivalents were $56.3 million as of September 30, 1998, a
$0.3 million increase from March 31, 1998. Working capital as of September 30,
1998 was $134.7 million, a $12.1 million increase from March 31, 1998. Total
debt was $253.5 million as of September 30, 1998.
Capital expenditures during the six months ended September 30, 1998 of
$14.2 million included one AS332L - Super Puma and two new Bell 407's. The
Company used existing cash to purchase these aircraft.
In July 1998, the Board of Directors reaffirmed its February 1996
authorization to repurchase up to 1 million shares of the Company's Common Stock
in the open market or through private transactions. The authorization has no
time limit and authorizes management to effect repurchases of common stock
and/or debt securities, as they deem prudent. During the quarter ended September
30, 1998, the Company repurchased 400,000 shares of Common Stock and $3.3
million face value of 6% Convertible Subordinated Notes in the open market for a
total purchase price of $6.7 million.
As of September 30, 1998, Bristow had a (pound)15 million ($25.5
million) revolving credit facility with a syndicate of United Kingdom banks that
matures on December 31, 2000. Bristow had no funds drawn under this facility as
of September 30, 1998.
As of September 30, 1998, OLOG had a $20 million unsecured working
capital line of credit with a bank that expires on September 30, 1999.
Management believes that normal operations and other available financing 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
approximately 30% for the six months ended September 30, 1998 and 1997. The
variance between the Federal statutory rate and the effective rate for these
periods is due primarily to non-taxable foreign source income and foreign tax
credits available to reduce domestic taxable 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.
<PAGE>
Year 2000 Matters
The Company is in the process of addressing its year 2000 exposure. The
scope of management's efforts include both information technology (IT) systems,
such as accounting and financial ledgers and aircraft and pilot records, and
non-IT systems (which incorporate embedded technology), such as onboard
navigational, communication and safety systems. The Company is currently in the
replacement and remediation phase of its efforts and expects (based on
management's best estimates) to have year 2000 compliant IT and non-IT systems
operating by July, 1999. There can be no guarantee however, that this estimated
timetable will be achieved. Management is also investigating the year 2000
exposure posed by its significant vendors and customers. Currently, the Company
does not have any IT or non-IT systems which directly interface with either its
vendors' or customers' systems. Accordingly, the Company's exposure will result
from its significant vendors and customers potential inability to achieve year
2000 compliance. Were this to occur, the Company could experience a disruption
in the supply of needed parts and repair services, and or diminished demand for
the Company's aircraft, either of which could have a material impact on the
Company's business. Management has begun a process to contact its significant
vendors and customers to ascertain their state of readiness, and expects to
conclude this process by December, 1998. No assurances can be given that the
Company's significant vendors and customers will not cause disruption to the
Company's operations. To date, the Company has spent $138,000 on its replacement
and remediation efforts, and expects to incur an additional $360,000 before its
efforts are complete. The Company has not developed a contingency plan for the
prospect that it or any of its significant vendors and customers may be unable
to achieve year 2000 compliance. Management will determine the need for such a
plan as more information is obtained from the efforts in progress.
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 natural gas prices, unionization and the
response thereto of the Company's customers, currency fluctuations,
international political conditions and ability to achieve Year 2000 compliance.
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.
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of registrant's stockholders that had been called
for September 29, 1998, in New Orleans, Louisiana, was, because of
weather conditions in New Orleans, adjourned until October 1, 1998,
by a vote of 18,866,643 to 0.
(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>
Peter N. Buckley 18,766,679 99,976
Jonathan H. Cartwright 18,774,196 92,459
Louis F. Crane 18,003,209 863,446
David M. Johnson 18,003,709 862,946
Kenneth M. Jones 18,000,885 865,770
Harry C. Sager 18,002,959 863,696
George M. Small 18,773,311 93,344
Howard Wolf 17,915,526 951,129
</TABLE>
2. Proposal to approve an amendment to the Offshore Logistics, Inc.
1994 Long-Term Management Incentive Plan was approved. The
following votes were cast:
For: 15,339,220 Against: 3,488,984 Abstained: 38,451
Item 6. Exhibits and Reports on Form 8-K
(a) Listed below are the documents filed as exhibits to this report:
None
(b) Reports on Form 8-K:
There were no Form 8-K filings during the quarter ended
September 30, 1998.
<PAGE>
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/ George M. Small
-----------------------
GEORGE M. SMALL
President
DATE: November 12, 1998
BY: /s/ Drury A. Milke
-----------------------
DRURY A. MILKE
Chief Financial Officer
DATE: November 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1998 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000073887
<NAME> Offshore Logistics, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 56,335
<SECURITIES> 0
<RECEIVABLES> 104,347
<ALLOWANCES> 0
<INVENTORY> 81,096
<CURRENT-ASSETS> 246,785
<PP&E> 587,739
<DEPRECIATION> 114,585
<TOTAL-ASSETS> 764,111
<CURRENT-LIABILITIES> 112,088
<BONDS> 243,972
0
0
<COMMON> 215
<OTHER-SE> 296,770
<TOTAL-LIABILITY-AND-EQUITY> 296,985
<SALES> 245,435
<TOTAL-REVENUES> 246,721
<CGS> 185,494
<TOTAL-COSTS> 216,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,037
<INCOME-PRETAX> 24,572
<INCOME-TAX> 7,374
<INCOME-CONTINUING> 16,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,569
<EPS-PRIMARY> .76
<EPS-DILUTED> .71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1998 financial statements and is qualified in its entirety by
reference to such financial statements. Balance sheet data for September 30,
1997 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>
<RESTATED>
<CIK> 0000073887
<NAME> Offshore Logistics, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 207,792
<TOTAL-REVENUES> 207,546
<CGS> 150,444
<TOTAL-COSTS> 179,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,527
<INCOME-PRETAX> 21,499
<INCOME-TAX> 6,449
<INCOME-CONTINUING> 14,552
<DISCONTINUED> 154
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,706
<EPS-PRIMARY> .69
<EPS-DILUTED> .65
</TABLE>
