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, 1999
|_| 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, 1999.
21,103,421 shares of Common Stock, $.01 par value
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------
1999 1998
---------- ---------
<S> <C> <C>
GROSS REVENUE
Operating revenue................................................. $ 106,418 $ 117,273
Gain on disposal of equipment..................................... 962 280
---------- ---------
107,380 117,553
OPERATING EXPENSES
Direct cost....................................................... 84,884 89,969
Depreciation and amortization..................................... 8,184 8,478
General and administrative........................................ 6,810 6,284
---------- ---------
99,878 104,731
---------- ---------
OPERATING INCOME.................................................. 7,502 12,822
Earnings from unconsolidated entities............................. 1,102 1,100
Interest income................................................... 1,004 889
Interest expense.................................................. 4,670 5,013
---------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES.......................... 4,938 9,798
Provision for income taxes........................................ 1,531 2,939
Minority interest................................................. (322) (306)
---------- ---------
NET INCOME........................................................ $ 3,085 $ 6,553
========== =========
Net income per common share:
Basic............................................................. $ 0.15 $ 0.30
========== =========
Diluted........................................................... $ 0.15 $ 0.29
========== =========
</TABLE>
2
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars)
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
----------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................$ 83,802 $ 70,594
Accounts receivable............................................. 90,427 89,077
Inventories..................................................... 79,830 82,853
Prepaid expenses................................................ 5,395 5,999
----------- ---------
Total current assets......................................... 259,454 248,523
Investments in unconsolidated entities............................. 10,564 9,998
Property and equipment - at cost:
Land and buildings.............................................. 10,704 10,860
Aircraft and equipment.......................................... 543,607 554,852
----------- ---------
554,311 565,712
Less: accumulated depreciation and amortization................... (128,265) (122,796)
----------- ---------
426,046 442,916
Other assets....................................................... 30,015 30,593
----------- ---------
$ 726,079 $ 732,030
=========== =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable................................................$ 41,545 $ 35,534
Accrued liabilities............................................. 38,495 42,395
Deferred taxes.................................................. 17,278 17,697
Current maturities of long-term debt............................ 9,920 10,037
----------- ---------
Total current liabilities.................................... 107,238 105,663
Long-term debt, less current maturities............................ 229,649 233,615
Other liabilities and deferred credits............................. 4,251 3,000
Deferred taxes..................................................... 93,440 94,908
Minority interest.................................................. 10,779 10,716
Stockholders' Investment:
Common Stock, $.01 par value, authorized 35,000,000 shares;
outstanding 21,103,421 at June 30 and March 31
(exclusive of 1,281,050 treasury shares)..................... 211 211
Additional paid-in capital...................................... 116,053 116,053
Retained earnings............................................... 176,199 173,114
Accumulated other comprehensive income (loss)................... (11,741) (5,250)
----------- ---------
280,722 284,128
----------- ---------
$ 726,079 $ 732,030
=========== =========
</TABLE>
3
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------
1999 1998
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................$ 3,085 $ 6,553
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization................................... 8,184 8,479
Increase in deferred taxes...................................... (50) 505
(Gain) loss on asset dispositions............................... (962) (280)
Equity in earnings from unconsolidated entities
(over) under dividends received.............................. (605) (503)
Minority interest in earnings................................... 322 306
Increase in accounts receivable................................. (2,866) (4,990)
Increase (decrease) in inventories.............................. 1,943 (3,330)
Increase (decrease) in prepaid expenses and other............... 505 (1,518)
Increase (decrease) in accounts payable......................... 6,828 (324)
Increase (decrease) in accrued liabilities...................... (3,341) 1,799
Increase in other liabilities and deferred credits.............. 1,251 1,406
----------- ---------
Net cash provided by operating activities.......................... 14,294 8,103
----------- ---------
Cash flows from investing activities:
Capital expenditures............................................ (1,421) (12,586)
Proceeds from asset dispositions................................ 3,957 788
----------- ---------
Net cash provided (used in) investing activities................... 2,536 (11,798)
----------- ---------
Cash flows from financing activities:
Repayment of debt............................................... (3,231) (3,012)
Issuance of common stock........................................ -- 39
----------- ---------
Net cash used in financing activities.............................. (3,231) (2,973)
----------- ---------
Effect of exchange rate changes in cash............................ (391) (347)
----------- ---------
Net decrease in cash and cash equivalents.......................... 13,208 (7,015)
Cash and cash equivalents at beginning of period................... 70,594 56,076
----------- ---------
Cash and cash equivalents at end of quarter........................$ 83,802 $ 49,061
=========== =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest........................................................$ 4,139 $ 5,339
Income taxes.................................................... 789 676
</TABLE>
4
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
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, 1999, are not necessarily indicative
of the results that may be expected for the year ending March 31, 2000. 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, 1999.
NOTE B - 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 months ended June 30, 1998
was determined on the assumption that the convertible debt was converted on
April 1, 1997. Diluted earnings per share for the three months ended June 30,
1999 excluded 3,976,928 shares related to the convertible debt and 868,500 stock
options, at a weighted average exercise price of $15.05, which were outstanding
during the period but were anti-dilutive. The following table sets forth the
computation of basic and diluted net income per share:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
1999 1998
------------- -----------
<S> <C> <C>
Net Income (thousands of dollars):
Income available to common stockholders................... $ 3,085 $ 6,553
Interest on convertible debt, net of taxes................ -- 1,029
------------- -----------
Income available to common stockholders,
plus assumed conversions............................. $ 3,085 $ 7,582
============= ===========
Shares:
Weighted average number of common shares outstanding...... 21,103,421 21,856,459
Options................................................... 14,580 173,016
Convertible debt.......................................... -- 4,286,520
------------- -----------
Weighted average number of common shares outstanding,
plus assumed conversions............................. 21,118,001 26,315,995
============= ===========
Net Income per share:
Basic..................................................... $ 0.15 $ 0.30
============= ===========
Diluted................................................... $ 0.15 $ 0.29
============= ===========
</TABLE>
5
<PAGE>
NOTE C - Commitments and Contingencies
In January 1998, the Office and Professional Employees International
Union ("OPEIU") petitioned the National Mediation Board ("NMB") to organize the
Company's domestic mechanics and ground support personnel. Certain objections to
this petition were filed and the NMB dismissed the OPEIU application on May 12,
1998. Under the Federal labor law rules, the union is prohibited from
petitioning the NMB for one year from date of dismissal. To date, no subsequent
petitions have been filed with the NMB. The Company does not believe that these
potential organizing efforts will place it at a disadvantage with its
competitors as management believes that pay scales and work rules will continue
to be similar throughout the industry.
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
June 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net Income........................................................... $ 3,085 $ 6,553
Other Comprehensive Income:
Currency translation adjustment................................... (6,491) (588)
-------- --------
Comprehensive Income (Loss).......................................... $ (3,406) $ 5,965
======== ========
</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 will be required to adopt SFAS No. 133
no later than April 1, 2001. The Company has not yet quantified the impact on
its financial statements that may result from adoption of SFAS No. 133, however,
the Company does not use derivative instruments or hedging activities
extensively in its business.
6
<PAGE>
NOTE F - Segment Information
The Company has adopted SFAS No. 131, "Disclosures about Segments of An
Enterprise and Related Information", which requires that companies disclose
segment data based on how management makes decisions about allocating resources
to segments and measuring their performance. The Company operates principally in
two business segments: Helicopter activities and Production management and
related services. The following shows reportable segment information for the
three months ended June 30, 1999 and 1998, reconciled to consolidated totals,
and prepared on the same basis as the Company's consolidated financial
statements (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Segment operating revenue from external customers:
Helicopter activities................................... $ 96,762 $ 105,733
Production management and related services.............. 9,498 11,533
--------- ---------
Total segment operating revenue..................... $ 106,260 $ 117,266
========= =========
Intersegment operating revenue:
Helicopter activities................................... $ 654 $ 949
Production management and related services.............. -- --
--------- ---------
Total intersegment operating revenue................ $ 654 $ 949
========= =========
Consolidated operating revenue reconciliation:
Helicopter activities................................... $ 97,416 $ 106,682
Production management and related services.............. 9,498 11,533
Intersegment eliminations............................... (654) (949)
Corporate............................................... 158 7
--------- ---------
Total consolidated operating revenue................ $ 106,418 $ 117,273
========= =========
Consolidated operating income reconciliation:
Helicopter activities................................... $ 6,064 $ 12,238
Production management and related services.............. 567 808
--------- ---------
Total segment operating income...................... 6,631 13,046
Gains on disposal of equipment.......................... 962 280
Corporate............................................... (91) (504)
--------- ---------
Total consolidated operating income................. $ 7,502 $ 12,822
========= =========
</TABLE>
7
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Information
In connection with the sale of the Company's $100 million 7 7/8% Senior
Notes due 2008, certain of the Company's subsidiaries (the "Guarantor
Subsidiaries") jointly, severally and unconditionally guaranteed the payment
obligations under the Senior Notes. The following supplemental financial
information sets forth, on a consolidating basis, the balance sheet, statement
of income and cash flow information for Offshore Logistics, Inc. ("Parent
Company Only"), for the Guarantor Subsidiaries and for Offshore Logistics,
Inc.'s other subsidiaries (the "Non-Guarantor Subsidiaries"). The Company has
not presented separate financial statements and other disclosures concerning the
Guarantor Subsidiaries because management has determined that such information
is not material to investors.
The supplemental condensed consolidating financial information has been
prepared pursuant to the rules and regulations for condensed financial
information and does not include all disclosures included in annual financial
statements, although the Company believes that the disclosures made are adequate
to make the information presented not misleading. Certain reclassifications were
made to conform all of the financial information to the financial presentation
on a consolidated basis. The principal eliminating entries eliminate investments
in subsidiaries, intercompany balances and intercompany revenues and expenses.
The allocation of the consolidated income tax provision was made using
the with and without allocation method.
8
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued
Supplemental Condensed Consolidating Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................$ 31,141 $ 7,901 $ 44,760 $ -- $ 83,802
Accounts receivable...................... 2,887 20,037 69,188 (1,685) 90,427
Inventories.............................. -- 36,007 43,823 -- 79,830
Prepaid expenses......................... 218 527 4,650 -- 5,395
------------ ------------ ------------ ------------ ------------
Total current assets.................. 34,246 64,472 162,421 (1,685) 259,454
Intercompany investment.................... 211,302 -- -- (211,302) --
Investments in unconsolidated entities..... 1,108 229 9,227 -- 10,564
Intercompany note receivables.............. 247,235 31 -- (247,266) --
Property and equipment--at cost:
Land and buildings....................... -- 3,220 7,484 -- 10,704
Aircraft and equipment................... 3,647 148,459 391,501 -- 543,607
------------ ------------ ------------ ------------ ------------
3,647 151,679 398,985 -- 554,311
Less: Accumulated depreciation
and amortization...................... (2,793) (73,823) (51,649) -- (128,265)
------------ ------------ ------------ ------------ ------------
854 77,856 347,336 -- 426,046
Other assets............................... 12,364 17,845 (305) 111 30,015
------------ ------------ ------------ ------------ ------------
$ 507,109 $ 160,433 $ 518,679 $ (460,142) $ 726,079
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.........................$ 378 $ 6,931 $ 38,039 $ (3,803) $ 41,545
Accrued liabilities...................... 6,785 9,326 22,481 (97) 38,495
Deferred taxes........................... -- -- 17,278 -- 17,278
Current maturities of long-term debt..... -- -- 9,920 -- 9,920
------------ ------------ ------------ ------------ ------------
Total current liabilities.............. 7,163 16,257 87,718 (3,900) 107,238
Long-term debt, less current maturities.... 190,922 -- 38,727 -- 229,649
Intercompany notes payable................. 3,787 -- 241,263 (245,050) --
Other liabilities and deferred credits..... 4 2,364 1,883 -- 4,251
Deferred taxes............................. 7,161 28,830 57,449 -- 93,440
Minority interest.......................... 10,779 -- -- -- 10,779
Stockholders' investment:
Common stock............................. 211 4,048 1,384 (5,432) 211
Additional paid in capital............... 116,053 55,567 15,312 (70,879) 116,053
Retained earnings........................ 176,200 53,367 73,633 (127,001) 176,199
Accumulated other comprehensive
income (loss) ....................... (5,171) -- 1,310 (7,880) (11,741)
------------ ------------ ------------ ------------- ------------
287,293 112,982 91,639 (211,192) 280,722
------------ ------------ ------------ ------------- ------------
$ 507,109 $ 160,433 $ 518,679 $ (460,142) $ 726,079
============ ============ ============ ============ ============
</TABLE>
9
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued
Supplemental Condensed Consolidating Statement of Income
Three Months Ended June 30, 1999
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue............................$ 158 $ 30,540 $ 75,720 $ -- $ 106,418
Intercompany revenue......................... -- 1,900 97 (1,997) --
Gain on disposal of equipment................ 2 741 219 -- 962
------------ ------------- ----------- ------------ ------------
160 33,181 76,036 (1,997) 107,380
OPERATING EXPENSES
Direct cost ................................. -- 25,320 59,564 -- 84,884
Intercompany expense......................... -- 97 1,900 (1,997) --
Depreciation and amortization................ 41 2,554 5,589 -- 8,184
General and administrative................... 1,410 1,434 3,966 -- 6,810
------------ ------------- ----------- ------------ ------------
1,451 29,405 71,019 (1,997) 99,878
------------ ------------- ----------- ------------ ------------
OPERATING INCOME............................. (1,291) 3,776 5,017 -- 7,502
Earnings from unconsolidated entities........ 1,637 -- 1,102 (1,637) 1,102
Interest income.............................. 7,261 130 409 (6,796) 1,004
Interest expense............................. 3,569 -- 7,897 (6,796) 4,670
------------ ------------- ----------- ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES....................... 4,038 3,906 (1,369) (1,637) 4,938
Allocation of consolidated income taxes...... 631 1,311 (411) -- 1,531
Minority interest............................ (322) -- -- -- (322)
------------ ------------- ----------- ------------ ------------
NET INCOME...................................$ 3,085 $ 2,595 $ (958) $ (1,637) $ 3,085
============ ============= =========== ============ ============
</TABLE>
10
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued
Supplemental Condensed Consolidating Statement of Cash Flows
Three Months Ended June 30, 1999
<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.....................$ 7,967 $ (1,095) $ 21,742 $ (14,320) $ 14,294
----------- ----------- ----------- ----------- ----------
Cash flows from investing activities:
Capital expenditures..................... (44) (215) (1,162) -- (1,421)
Proceeds from asset dispositions......... 12 1,378 2,567 -- 3,957
Investments in subsidiaries.............. 2,751 (2,751) -- -- --
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities..................... 2,719 (1,588) 1,405 -- 2,536
----------- ----------- ----------- ----------- ----------
Cash flows from financing activities:
Repayment of debt........................ (14,320) -- (3,231) 14,320 (3,231)
----------- ----------- ----------- ----------- ----------
Net cash used in financing activities.......... (14,320) -- (3,231) 14,320 (3,231)
----------- ----------- ----------- ----------- ----------
Effect of exchange rate changes in cash........ -- -- (391) -- (391)
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents......................... (3,634) (2,683) 19,525 -- 13,208
Cash and cash equivalents
at beginning of period................... 34,775 10,584 25,235 -- 70,594
----------- ----------- ----------- ----------- ----------
Cash and cash equivalents
at end of period........................$ 31,141 $ 7,901 $ 44,760 $ -- $ 83,802
=========== =========== =========== =========== ==========
</TABLE>
11
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued
Supplemental Condensed Consolidating Balance Sheet
March 31, 1999
<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................$ 34,775 $ 10,584 $ 25,235 $ -- $ 70,594
Accounts receivable...................... 3,792 20,752 67,499 (2,966) 89,077
Inventories.............................. -- 36,621 46,232 -- 82,853
Prepaid expenses......................... 220 577 5,202 -- 5,999
------------ ------------ ------------ ------------ ------------
Total current assets.................. 38,787 68,534 144,168 (2,966) 248,523
Intercompany investment.................... 220,575 -- -- (220,575) --
Investments in unconsolidated entities..... 1,108 229 8,661 -- 9,998
Intercompany note receivables.............. 233,444 3,015 86 (236,545) --
Property and equipment--at cost:
Land and buildings....................... -- 3,220 7,640 -- 10,860
Aircraft and equipment................... 3,630 149,544 401,678 -- 554,852
------------ ------------ ------------ ------------ ------------
3,630 152,764 409,318 -- 565,712
Less: Accumulated depreciation
and amortization...................... (2,772) (72,292) (47,732) -- (122,796)
------------ ------------ ------------ ------------ ------------
858 80,472 361,586 -- 442,916
Other assets............................... 12,607 18,200 (325) 111 30,593
------------ ------------ ------------ ------------ ------------
$ 507,379 $ 170,450 $ 514,176 $ (459,975) $ 732,030
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.........................$ 148 $ 4,378 $ 33,764 $ (2,756) $ 35,534
Accrued liabilities...................... 7,033 11,171 24,620 (429) 42,395
Deferred taxes........................... -- -- 17,697 -- 17,697
Current maturities of long-term debt..... -- -- 10,037 -- 10,037
------------ ------------ ------------ ------------ ------------
Total current liabilities.............. 7,181 15,549 86,118 (3,185) 105,663
Long-term debt, less current maturities.... 190,922 -- 42,693 -- 233,615
Intercompany notes payable................. 6,364 -- 229,962 (236,326) --
Other liabilities and deferred credits..... 4 2,364 632 -- 3,000
Deferred taxes............................. 907 32,815 61,186 -- 94,908
Minority interest.......................... 10,716 -- -- -- 10,716
Stockholders' investment:
Common stock............................. 211 4,048 1,384 (5,432) 211
Additional paid in capital............... 116,053 58,318 16,800 (75,118) 116,053
Retained earnings........................ 173,114 57,356 78,628 (135,984) 173,114
Accumulated other comprehensive
income (loss)......................... 1,907 -- (3,227) (3,930) (5,250)
------------ ------------ ------------ ------------ ------------
291,285 119,722 93,585 (220,464) 284,128
------------ ------------ ------------ ------------ ------------
$ 507,379 $ 170,450 $ 514,176 $ (459,975) $ 732,030
============ ============ ============ ============= ============
</TABLE>
12
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued
Supplemental Condensed Consolidating Statement of Income
Three Months Ended June 30, 1998
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue............................$ 3 $ 36,381 $ 80,889 $ -- $ 117,273
Intercompany revenue......................... -- 2,516 51 (2,567) --
Gain on disposal of equipment................ 3 84 193 -- 280
------------ ------------- ----------- ------------ ------------
6 38,981 81,133 (2,567) 117,553
OPERATING EXPENSES
Direct cost .............................. 2 31,048 58,919 -- 89,969
Intercompany expense......................... -- 51 2,516 (2,567) --
Depreciation and amortization................ 38 2,425 6,015 -- 8,478
General and administrative................... 1,292 1,484 3,508 -- 6,284
------------ ------------- ----------- ------------ ------------
1,332 35,008 70,958 (2,567) 104,731
------------ ------------- ----------- ------------ ------------
OPERATING INCOME............................. (1,326) 3,973 10,175 -- 12,822
Earnings from unconsolidated entities........ 5,456 -- 1,104 (5,460) 1,100
Interest income.............................. 6,895 90 292 (6,388) 889
Interest expense............................. 3,672 -- 7,729 (6,388) 5,013
------------ ------------- ----------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES..... 7,353 4,063 3,842 (5,460) 9,798
Allocation of consolidated income taxes...... 506 1,369 1,064 -- 2,939
Minority interest............................ (294) -- (12) -- (306)
------------ ------------- ----------- ------------ ------------
NET INCOME...................................$ 6,553 $ 2,694 $ 2,766 $ (5,460) $ 6,553
============ ============= =========== ============= ============
</TABLE>
13
<PAGE>
NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued
Supplemental Condensed Consolidating Statement of Cash Flows
Three Months Ended June 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.....................$ (8,847) $ 4,799 $ 12,151 $ -- $ 8,103
----------- ----------- ----------- ----------- ----------
Cash flows from investing activities:
Capital expenditures..................... -- (3,295) (9,291) -- (12,586)
Proceeds from asset dispositions......... 8 143 637 -- 788
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities..................... 8 (3,152) (8,654) -- (11,798)
----------- ----------- ----------- ----------- ----------
Cash flows from financing activities:
Repayment of debt........................ -- -- (3,012) -- (3,012)
Issuance of common stock................. 39 -- -- -- 39
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities..................... 39 -- (3,012) -- (2,973)
----------- ----------- ----------- ----------- ----------
Effect of exchange rate changes in cash........ -- -- (347) -- (347)
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents......................... (8,800) 1,647 138 -- (7,015)
Cash and cash equivalents
at beginning of period................... 34,264 5,192 16,620 -- 56,076
----------- ----------- ----------- ----------- ----------
Cash and cash equivalents
at end of period........................$ 25,464 $ 6,839 $ 16,758 $ -- $ 49,061
=========== =========== =========== =========== ==========
</TABLE>
14
<PAGE>
Item 2. 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 management services to the
worldwide oil and gas industry.
Results of Operations
A summary of operating results and other income statement information
for the applicable periods is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------
1999 1998
--------- ----------
<S> <C> <C>
Operating revenue............................................ $ 106,418 $ 117,273
Gain on disposal of equipment................................ 962 280
Operating expenses........................................... (99,878) (104,731)
--------- ----------
Operating income............................................. 7,502 12,822
Earnings from unconsolidated entities........................ 1,102 1,100
Interest income (expense), net............................... (3,666) (4,124)
--------- ----------
Income before provision for income taxes..................... 4,938 9,798
Provision for income taxes................................... 1,531 2,939
Minority interest............................................ (322) (306)
--------- ----------
Net income................................................... $ 3,085 $ 6,553
========= ==========
</TABLE>
The following table sets forth certain operating information which will
form the basis for discussion of each of the Company's two identified segments,
Helicopter Activities and Production Management and Related Services. Beginning
in fiscal year 2000, the Company has changed the basis of segmentation within
its Helicopter Activities segment. The respective international operations of
Air Log (headquartered in the United States) and Bristow (headquartered in the
United Kingdom) will, from this point forward, be combined, managed and reported
as a separate division. The new International division will encompass all
helicopter activities outside of the United States Gulf of Mexico and Alaska
(reported as "Air Log") and the United Kingdom and Europe Sectors of the North
Sea (reported as "Bristow").
15
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------
Current
Segment
Format Previous Segment Format
--------- ------------------------
1999 1999 1998
--------- --------- --------
(in thousands, except flight hours)
<S> <C> <C> <C>
Flight hours (excludes unconsolidated entities):
Helicopter Activities:
Air Log..................................... 24,400 28,210 30,972
Bristow..................................... 16,226 25,382 25,965
International............................... 12,966 -- --
--------- --------- --------
Total.................................... 53,592 53,592 56,937
========= ========= ========
Operating revenues:
Helicopter Activities:
Air Log.................................... $ 21,768 $ 25,863 $ 30,984
Bristow.................................... 51,615 71,648 75,830
International.............................. 24,128 -- --
Less: Intercompany........................ (95) (95) (132)
--------- --------- --------
Total.................................... 97,416 97,416 106,682
Production management and related services..... 9,498 9,498 11,533
Corporate...................................... 158 158 7
Less: Intercompany............................ (654) (654) (949)
--------- --------- --------
Consolidated total....................... $ 106,418 $ 106,418 $117,273
========= ========= ========
Operating income, excluding gain or loss on
disposal of equipment:
Helicopter Activities:
Air Log.................................... $ 2,494 $ 3,905 $ 4,849
Bristow.................................... 1,656 2,159 7,389
International.............................. 1,914 -- --
--------- --------- --------
Total.................................... 6,064 6,064 12,238
Production management and related services..... 567 567 808
Corporate...................................... (91) (91) (504)
--------- --------- --------
Consolidated total....................... $ 6,540 $ 6,540 $ 12,542
========= ========= ========
Gross margin, excluding gain or loss on
disposal of equipment:
Helicopter Activities:
Air Log.................................... 11.5% 15.1% 15.7%
Bristow.................................... 3.2% 3.0% 9.7%
International.............................. 7.9% -- --
Total.................................... 6.2% 6.2% 11.5%
Production management and related services..... 6.0% 6.0% 7.0%
Consolidated total....................... 6.1% 6.1% 10.7%
</TABLE>
16
<PAGE>
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. International's activities include Air Log and Bristow's
respective operations in the following countries: Australia, Brazil, China,
Colombia, Cyprus, India, Kazakastan, Kosovo, Mexico, Nigeria and Trinidad. These
international operations are subject to local governmental regulations and to
uncertainties of economic and political conditions in those areas. International
also includes Air Log's service agreements with, and equity interests in,
entities that operate aircraft in Egypt and Mexico ("unconsolidated entities").
Air Log's flight hours and revenue decreased during the current fiscal
quarter by 8.9% and 16.5%, respectively, from the similar quarter in the prior
year. A decrease in activity was prevalent in both the Gulf of Mexico market and
internationally, with the exception of Brazil, and was primarily due to reduced
demand for helicopter services by the oil and gas industry. The precipitous
decline in oil prices during calendar year 1998 caused oil companies to cancel
or delay exploration and development projects, reducing their need for Air Log's
services. Despite resurgence in the price of oil during the current quarter, oil
companies have not returned to previous activity levels. As a result, Air Log
experienced the decreases discussed above. The disproportionate decrease in
revenue in relation to flight hours was due to a shift in the mix of aircraft
generating revenue. Flight hours and revenue generated from larger, crew change
aircraft in the Gulf of Mexico decreased over 40% from the similar quarter in
the prior year, while smaller, production related aircraft remained relatively
unchanged. Air Log's operating margin of 15.1% is relatively unchanged from the
prior year quarter, and is reflective of cost containment measures put in place
mid calendar 1998 to counter the declining oil and gas industry activity levels,
offset by increased compensation costs for pilots and other employees. Increases
in utilization from late June 1999 through the date of this filing provide a
somewhat more optimistic perspective for Gulf of Mexico activities, although
there is no certainty that this trend will continue.
Bristow's flight hours and revenue decreased by 2.2% and 5.5%,
respectively, during the quarter from the similar period in the prior year. This
decrease in flight activity is the net result of an increase in North Sea flight
hours, offset by decreases in flight hours in international markets, primarily
China, Nigeria and Trinidad. The increase in North Sea activity is primarily
related to the start up of the Shell Expro contract on July 1, 1998, which
accounted for 4,080 flight hours and $9.9 million in revenue during the current
quarter. Apart from this Shell contract activity, North Sea flight activity and
revenue declined by 18.7% and 24.6% respectively from the fiscal 1999 quarter,
as a result of reduced utilization and pricing pressures from customers. These
decreases, along with that of the international markets discussed above, are
reflective of the deteriorating industry fundamentals experienced during the
intervening quarters. The North Sea has been more adversely affected by low oil
prices due to generally higher exploration and production costs in that area
when compared with other production areas around the world. As such, this market
may be slower to rebound from improved commodity prices. Bristow's operating
margin decreased from 9.7% in the quarter ended June 30, 1998 to 3.0% in the
current quarter. This decline in margin is due primarily to the reduced
utilization and pricing pressures discussed above and the limited success of
Bristow in realigning their cost structure. In connection with the previously
reported cessation of contracts with two major customers on August 1, 1999,
Bristow has begun a process to realign its costs, which will involve, among
other things, staff reductions during the fiscal quarter ended September 30,
1999. This realignment of cost structure will be an ongoing process and is vital
to maintaining Bristow's competitive position in the North Sea and European
markets.
17
<PAGE>
Production Management and Related Services
Operating revenues for GPM decreased by 17.6% during the three months
ended June 30, 1999, as compared to the similar period in the prior year. The
decline in revenue is due primarily to a reduction in the scope of work
performed for a major customer in the current quarter as compared to the same
period ago, and other customer turnover. GPM's operating margin decreased from
7% to 6% in the current quarter due to a change in the mix of services provided.
Corporate and Other
Consolidated net interest expense decreased during the current quarter
due to higher invested cash balances and lower debt outstanding. The effective
income tax rates from continuing operations were approximately 31% and 30% for
the three months ended June 30, 1999 and 1998, respectively.
Liquidity and Capital Resources
Cash and cash equivalents were $83.8 million as of June 30, 1999, a
$13.2 million increase from March 31, 1999. Working capital as of June 30, 1999
was $152.2 million, a $9.4 million increase from March 31, 1999. Total debt was
$239.6 million as of June 30, 1999.
As of June 30, 1999, Bristow had a (pound)15 million ($23.5 million)
revolving credit facility with a syndicate of United Kingdom banks that matures
on December 31, 2002. As of June 30, 1999, OLOG had a $20 million unsecured
working capital line of credit with a bank that expires on September 30, 1999.
No funds were drawn under either of these facilities as of June 30, 1999.
Management believes that its normal operations, lines of credit and available
financing will provide sufficient working capital and cash flow to meet debt
service needs for the foreseeable future. Management also believes that credit
facilities with similar terms will be obtained before the expiration of the
above facilities.
During the quarter ended June 30, 1999, the Company received proceeds of
$4.0 million from four separate sales of excess aircraft. Subsequent to June 30,
1999, the Company purchased two Bell 407's for $2.7 million and entered into
agreements to acquire ten to twelve aircraft for a price between $35-40 million.
These aircraft acquisitions were or will be made with existing cash. The Company
has no other material capital commitments outstanding.
Legal Matters
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.
18
<PAGE>
Year 2000 Matters
The Company is addressing its year 2000 exposure. The scope of management's
efforts includes 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 has completed the replacement and remediation
phase of its efforts and is currently in the testing phase. Based on
management's best estimates, the Company expects to have fully tested year 2000
compliant IT and non-IT systems operating by September 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 repairs
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 contacted
significant vendors and customers to ascertain their state of readiness and has
not received any indication of potential noncompliance from this group. No
assurances can be given, however that the Company's significant vendors and
customers will not cause disruption to the Company's operations. To date, the
Company has spent $.3 million on its replacement and remediation efforts and
expects to incur an additional $.1 million before its efforts are complete. The
Company does not separately account for the internal costs incurred for its year
2000 compliance efforts. Such costs consist primarily of salaries and benefits
for the Company's IT personnel. The Company is developing a contingency plan for
the prospect that it or any of its significant vendors and customers may be
unable to achieve year 2000 compliance, and expects to have a plan completed by
September 1999.
Recent Accounting Pronouncements
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 entities recognize all
derivatives as either assets or liabilities in the statements 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 will be required to adopt SFAS No. 133
no later than April 1, 2001. The company has not yet quantified the impact to
its financial statements that may result from adoption of SFAS No. 133, however,
the Company does not use derivative instruments or hedging activities
extensively in its business and therefore the adoption of this new statement
should not materially affect the Company's financial positions or results of
operations. The new statement could however cause volatility in the components
of other comprehensive income.
Forward Looking Statements
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 by the Company's customers, currency fluctuations,
international political conditions, the ability to achieve reduced operating
expenses, the
19
<PAGE>
ability to achieve Year 2000 compliance and the ability to obtain credit
facilities similar to existing credit facility terms. 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
No change from 1999 annual report disclosures.
20
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Listed below are the documents filed as exhibits to this report:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
There were no Form 8-K filings during the quarter ended June 30, 1999.
21
<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: August 13, 1999
BY: /s/ Drury A. Milke
-------------------------
DRURY A. MILKE
Chief Financial Officer
DATE: August 13, 1999
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From The
June 30, 1999 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> 3-Mos
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 83,802
<SECURITIES> 0
<RECEIVABLES> 90,427
<ALLOWANCES> 0
<INVENTORY> 79,830
<CURRENT-ASSETS> 259,454
<PP&E> 554,311
<DEPRECIATION> 128,265
<TOTAL-ASSETS> 726,079
<CURRENT-LIABILITIES> 107,238
<BONDS> 229,649
0
0
<COMMON> 211
<OTHER-SE> 280,511
<TOTAL-LIABILITY-AND-EQUITY> 726,079
<SALES> 106,418
<TOTAL-REVENUES> 107,380
<CGS> 84,884
<TOTAL-COSTS> 99,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,670
<INCOME-PRETAX> 4,938
<INCOME-TAX> 1,531
<INCOME-CONTINUING> 3,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,085
<EPS-BASIC> .15
<EPS-DILUTED> .15
</TABLE>
