SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended December 31, 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 December 31, 1998.
21,466,921 shares of Common Stock, $.01 par value
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
--------------------------------------------
1998 1997 1998 1997
-------- --------- -------- --------
<S> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue........................... $116,099 $ 113,177 $361,534 $320,969
Gain (loss) on disposal of equipment........ 91 (227) 1,377 (473)
-------- --------- -------- --------
116,190 112,950 362,911 320,496
OPERATING EXPENSES
Direct cost................................. 92,194 83,459 277,688 233,903
Depreciation and amortization............... 8,635 8,322 25,619 24,401
General and administrative.................. 6,692 7,191 20,621 20,517
-------- --------- -------- --------
107,521 98,972 323,928 278,821
-------- --------- -------- --------
OPERATING INCOME............................ 8,669 13,978 38,983 41,675
Earnings from unconsolidated entities....... 1,909 2,289 4,514 5,006
Interest income............................. 936 539 2,626 2,151
Interest expense............................ 4,880 5,057 14,917 15,584
-------- --------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES........... 6,634 11,749 31,206 33,248
Provision for income taxes.................. 1,988 3,524 9,362 9,973
Minority interest........................... (325) (262) (954) (760)
-------- --------- -------- --------
INCOME FROM CONTINUING OPERATIONS........... 4,321 7,963 20,890 22,515
Discontinued operations:
Income (Loss) from CPS operations........ -- -- -- (230)
Gain on sale of CPS...................... -- -- -- 384
-------- --------- -------- --------
-- -- -- 154
-------- --------- -------- --------
NET INCOME.................................. $ 4,321 $ 7,963 $ 20,890 $ 22,669
======== ========= ======== ========
BASIC:
Income per common share:
Continuing operations.................... $ 0.20 $ 0.37 $ 0.96 $ 1.05
Discontinued operations.................. -- -- -- .01
-------- --------- -------- ---------
Net income per common share................. $ 0.20 $ 0.37 $ 0.96 $ 1.06
======== ========= ======== =========
DILUTED:
Income per common share:
Continuing operations.................... $ 0.20 $ 0.34 $ 0.92 $ 0.98
Discontinued operations.................. -- -- -- .01
-------- --------- -------- ---------
Net income per common share................. $ 0.20 $ 0.34 $ 0.92 $ 0.99
======== ========= ======== =========
</TABLE>
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 69,850 $ 56,076
Accounts receivable............................ 96,564 85,543
Inventories.................................... 81,353 76,139
Prepaid expenses............................... 7,147 5,542
----------- ----------
Total current assets........................ 254,914 223,300
Investments in unconsolidated entities............ 11,810 7,866
Property and equipment - at cost:
Land and buildings............................. 13,595 13,088
Aircraft and equipment......................... 572,395 556,318
----------- ----------
585,990 569,406
Less: accumulated depreciation and amortization... (121,989) (98,267)
----------- ----------
464,001 471,139
Other assets...................................... 31,757 33,706
----------- ----------
$ 762,482 $ 736,011
=========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable............................... $ 45,347 $ 31,024
Accrued liabilities............................ 45,091 42,612
Deferred taxes................................. 18,191 18,335
Current maturities of long-term debt........... 10,099 8,693
----------- ----------
Total current liabilities................... 118,728 100,664
Long-term debt, less current maturities........... 239,735 251,560
Deferred credits.................................. 1,000 594
Deferred taxes.................................... 97,521 93,455
Minority interest................................. 10,696 9,853
Stockholders' Investment:
Common Stock, $.01 par value, authorized
35,000,000 shares; outstanding 21,466,921
and 21,854,921 at December 31 and March 31,
respectively (exclusive of 917,550 and
517,550 treasury shares, respectively) 215 219
Additional paid-in capital..................... 119,290 123,061
Retained earnings.............................. 173,084 152,194
Cumulative translation adjustment.............. 2,213 4,411
----------- ----------
294,802 279,885
----------- ----------
$ 762,482 $ 736,011
=========== ==========
</TABLE>
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------------------------
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 20,890 $ 22,669
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization................. 25,619 24,401
Increase in deferred taxes.................... 4,629 7,283
(Gain) loss on asset dispositions............. (1,377) 473
Equity in earnings from unconsolidated
entities (over) under dividends received... (1,418) (666)
Minority interest in earnings................. 954 760
Discontinued operations....................... -- 230
(Increase) Decrease in accounts receivable.... (10,887) 9,817
Increase in inventories....................... (5,554) (3,454)
Increase in prepaid expenses and other........ (3,366) (1,581)
Increase (Decrease) in accounts payable....... 14,416 (993)
Increase (Decrease) in accrued liabilities.... 2,005 (2,733)
Increase in deferred credits.................. 406 566
----------- ----------
Net cash provided by operating activities........ 46,317 56,772
----------- ----------
Cash flows from investing activities:
Capital expenditures.......................... (21,074) (59,260)
Proceeds from asset dispositions.............. 2,656 10,540
Proceeds from CPS disposal.................... -- 5,700
Acquisitions, net of cash received............ -- (353)
----------- ----------
Net cash used in investing activities............ (18,418) (43,373)
------------ ----------
Cash flows from financing activities:
Proceeds from borrowings...................... -- 27,120
Repayment of debt............................. (10,347) (55,844)
Repurchase of common stock.................... (3,888) --
Issuance of common stock...................... 113 7,723
----------- ----------
Net cash used in financing activities............ (14,122) (21,001)
------------ -----------
Effect of exchange rate changes in cash.......... (3) 404
------------ ----------
Net increase (decrease) in cash and cash
equivalents................................... 13,774 (7,198)
Cash and cash equivalents at beginning of period. 56,076 29,829
----------- ----------
Cash and cash equivalents at end of period....... $ 69,850 $ 22,631
=========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest...................................... $ 14,316 $ 16,514
Income taxes.................................. 2,910 957
</TABLE>
<PAGE>
OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 nine months ended December 31, 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 nine months ended December 31,
1998 and 1997 and for the three months ended December 31, 1997 were determined
on the assumption that the convertible debt was converted on April 1, 1997.
Diluted earnings per share for the three months ended December 31, 1998 excluded
4,142,178 shares related to the convertible debt which was anti-dilutive for
that period. The Company adopted SFAS No. 128, "Earnings per Share," effective
December 15, 1997. All income per share amounts for all periods have been
presented 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 Nine Months Ended
December 31, December 31,
----------------------- -----------------------
1998 1997 1998 1997
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Income from Continuing Operations (thousands of dollars):
Income available to common stockholders.............. $ 4,321 $ 7,963 $ 20,890 $ 22,515
Interest on convertible debt, net of taxes........... -- 1,029 3,032 3,087
----------- ---------- ---------- -----------
Income available to common stockholders,
plus assumed conversions........................ $ 4,321 $ 8,992 $ 23,922 $ 25,602
=========== ========== ========== ===========
Shares:
Weighted average number of common shares outstanding. 21,463,117 21,811,296 21,671,329 21,355,546
Options.............................................. 54,027 217,005 84,103 322,277
Convertible debt..................................... -- 4,286,520 4,207,788 4,286,520
----------- ---------- ---------- -----------
Weighted average number of common shares outstanding,
plus assumed conversions........................ 21,517,144 26,314,821 25,963,220 25,964,343
=========== ========== ========== ===========
Income from Continuing Operations:
Basic earnings per share............................. $ 0.20 $ 0.37 $ 0.96 $ 1.05
=========== ========== ========== ===========
Diluted earnings per share........................... $ 0.20 $ 0.34 $ 0.92 $ 0.98
=========== ========== ========== ===========
</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 nine months ended
December 31, 1998, $89 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 Nine Months Ended
December 31, December 31,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income.................................... $ 4,321 $ 7,963 $ 20,890 $ 22,669
Other Comprehensive Income:
Currency translation adjustment............ (6,578) 4,102 (2,198) 1,325
--------- --------- --------- ---------
Comprehensive Income (Loss)................... $ (2,257) $ 12,065 $ 18,692 $ 23,994
========= ========= ========= =========
</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, 2000. 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.
<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 wholly owned 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.
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
December 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........... $ 32,088 $ 7,596 $ 30,166 $ -- $ 69,850
Accounts receivable................. 1,083 25,650 72,984 (3,153) 96,564
Inventories......................... -- 36,462 44,891 -- 81,353
Prepaid expenses.................... 268 916 5,963 -- 7,147
---------- ----------- ----------- ----------- -----------
Total current assets............. 33,439 70,624 154,004 (3,153) 254,914
Intercompany investment................ 229,032 -- -- (229,032) --
Investments in unconsolidated entities. 1,108 229 10,473 -- 11,810
Intercompany notes receivable.......... 237,688 2,599 (815) (239,472) --
Property and equipment--at cost:
Land and buildings.................. -- 3,181 10,414 -- 13,595
Aircraft and equipment.............. 3,647 150,651 418,097 -- 572,395
---------- ----------- ----------- ----------- -----------
3,647 153,832 428,511 -- 585,990
Less: Accumulated depreciation
and amortization................. (2,752) (71,226) (48,011) -- (121,989)
---------- ----------- ----------- ----------- -----------
895 82,606 380,500 -- 464,001
Other assets........................... 12,961 18,600 85 111 31,757
---------- ----------- ----------- ----------- -----------
$ 515,123 $ 174,658 $ 544,247 $ (471,546) $ 762,482
========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable.................... $ 277 $ 4,700 $ 43,226 $ (2,856) $ 45,347
Accrued liabilities................. 7,655 10,277 28,279 (1,120) 45,091
Deferred taxes...................... -- -- 18,191 -- 18,191
Current maturities of long-term debt -- -- 10,099 -- 10,099
---------- ----------- ----------- ----------- -----------
Total current liabilities........ 7,932 14,977 99,795 (3,976) 118,728
Long-term debt, less current maturities 194,700 -- 45,035 -- 239,735
Intercompany notes payable............. 2,520 -- 236,129 (238,649) --
Deferred credits....................... -- -- 1,000 -- 1,000
Deferred taxes......................... 1,387 31,950 64,184 -- 97,521
Minority interest...................... 10,696 -- -- -- 10,696
Stockholders' investment:
Common stock........................ 215 4,048 1,384 (5,432) 215
Additional paid-in capital.......... 119,290 58,391 18,557 (76,948) 119,290
Retained earnings................... 173,084 65,292 81,981 (147,273) 173,084
Cumulative translation adjustment... 5,299 -- (3,818) 732 2,213
---------- ----------- ----------- ----------- -----------
297,888 127,731 98,104 (228,921) 294,802
---------- ----------- ----------- ----------- -----------
$ 515,123 $ 174,658 $ 544,247 $ (471,546) $ 762,482
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Income
Nine Months Ended December 31, 1998
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue........................ $ 8 $ 110,511 $ 251,015 $ -- $ 361,534
Intercompany revenue..................... -- 7,756 517 (8,273) --
Gain on disposal of equipment............ 11 85 1,281 -- 1,377
---------- ----------- ----------- ----------- -----------
19 118,352 252,813 (8,273) 362,911
OPERATING EXPENSES
Direct cost.............................. -- 88,210 189,478 -- 277,688
Intercompany expense..................... -- 517 7,756 (8,273) --
Depreciation and amortization............ 118 7,464 18,037 -- 25,619
General and administrative............... 4,466 4,528 11,627 -- 20,621
---------- ----------- ----------- ----------- -----------
4,584 100,719 226,898 (8,273) 323,928
---------- ----------- ----------- ----------- -----------
OPERATING INCOME......................... (4,565) 17,633 25,915 -- 38,983
Earnings from unconsolidated entities.... 17,698 0 4,519 (17,703) 4,514
Interest income.......................... 21,256 361 824 (19,815) 2,626
Interest expense......................... 11,034 0 23,698 (19,815) 14,917
---------- ----------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES.................... 23,355 17,994 7,560 (17,703) 31,206
Allocation of consolidated income taxes.. 1,544 5,842 1,976 -- 9,362
Minority interest........................ (921) -- (33) -- (954)
---------- ----------- ----------- ----------- -----------
NET INCOME............................... $ 20,890 $ 12,152 $ 5,551 $ (17,703) $ 20,890
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Cash Flows
Nine Months Ended December 31, 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............... $ 4,864 $ 7,564 $ 35,448 $ (1,559) $ 46,317
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures............... -- (5,305) (15,769) -- (21,074)
Proceeds from asset dispositions... 15 145 2,496 -- 2,656
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities............... 15 (5,160) (13,273) -- (18,418)
----------- ------------ ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings........... 20 -- -- (20) --
Repayment of debt.................. (3,300) -- (8,626) 1,579 (10,347)
Repurchase of common stock......... (3,888) -- -- -- (3,888)
Issuance of common stock........... 113 -- -- -- 113
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............... (7,055) -- (8,626) 1,559 (14,122)
----------- ----------- ----------- ----------- -----------
Effect of exchange rate changes in cash. -- -- (3) -- (3)
----------- ----------- ------------ ----------- -----------
Net increase (decrease) in cash and
cash equivalents................... (2,176) 2,404 13,546 -- 13,774
Cash and cash equivalents
at beginning of period............. 34,264 5,192 16,620 -- 56,076
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period.................. $ 32,088 $ 7,596 $ 30,166 $ -- $ 69,850
=========== =========== =========== =========== ===========
</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 notes receivable.......... 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
Nine Months Ended December 31, 1997
<TABLE>
<CAPTION>
Parent Non-
Company Guarantor Guarantor
Only Subsidiaries Subsidiaries Eliminations Consolidated
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
GROSS REVENUE
Operating revenue......................... $ 16 $ 106,135 $ 214,818 $ -- $ 320,969
Intercompany revenue...................... -- 7,698 182 (7,880) --
Gain (loss) on disposal of equipment...... -- (688) 215 -- (473)
---------- ----------- ----------- ----------- -----------
16 113,145 215,215 (7,880) 320,496
OPERATING EXPENSES
Direct cost............................... 7 82,724 151,172 -- 233,903
Intercompany expense...................... -- 182 7,698 (7,880) --
Depreciation and amortization............. 402 6,640 17,359 -- 24,401
General and administrative................ 4,518 3,793 12,206 -- 20,517
---------- ----------- ----------- ----------- -----------
4,927 93,339 188,435 (7,880) 278,821
---------- ----------- ----------- ----------- -----------
OPERATING INCOME.......................... (4,911) 19,806 26,780 -- 41,675
Earnings from unconsolidated entities..... 19,945 -- 5,000 (19,939) 5,006
Interest income........................... 13,972 197 1,066 (13,084) 2,151
Interest expense.......................... 4,542 -- 24,126 (13,084) 15,584
---------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION
FOR INCOME TAXES.................... 24,464 20,003 8,720 (19,939) 33,248
Allocation of consolidated income taxes... 1,184 6,449 2,340 -- 9,973
Minority interest......................... (765) -- 5 -- (760)
---------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS......... 22,515 13,554 6,385 (19,939) 22,515
Discontinued operations:
Income (loss) from CPS operations... 154 -- 47 (47) 154
---------- ----------- ----------- ----------- -----------
NET INCOME................................ $ 22,669 $ 13,554 $ 6,432 $ (19,986) $ 22,669
========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Supplemental Condensed Consolidating Statement of Cash Flows
Nine Months Ended December 31, 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................. $ (27,348) $ 18,547 $ 44,134 $ 21,439 $ 56,772
---------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures................. -- (19,569) (39,691) -- (59,260)
Proceeds from asset dispositions..... -- 1,102 9,438 -- 10,540
Proceeds from CPS disposal........... -- -- 5,700 -- 5,700
Acquisitions, net of cash received... -- -- (353) -- (353)
---------- ----------- ----------- ----------- -----------
Net cash used in investing activities...... -- (18,467) (24,906) -- (43,373)
---------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings............. 1,500 -- 47,059 (21,439) 27,120
Repayment of debt.................... -- -- (55,844) -- (55,844)
Issuance of common stock............. 7,723 -- -- -- 7,723
---------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities........................... 9,223 -- (8,785) (21,439) (21,001)
---------- ----------- ----------- ----------- -----------
Effect of exchange rate changes in cash.... -- -- 404 -- 404
---------- ----------- ----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents............ (18,125) 80 10,847 -- (7,198)
Cash and cash equivalents
at beginning of period............... 21,459 3,545 4,825 -- 29,829
---------- ----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period.................... $ 3,334 $ 3,625 $ 15,672 $ -- $ 22,631
========== =========== =========== =========== ===========
</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 Nine Months Ended
December 31, December 31,
-------------------------- -------------------------
1998 1997 1998 1997
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
Gross revenue................................ $ 116,190 $ 112,950 $ 362,911 $ 320,496
Operating expenses........................... 107,521 98,972 323,928 278,821
------------ --------- ----------- ----------
Operating income............................. 8,669 13,978 38,983 41,675
Earnings from unconsolidated entities........ 1,909 2,289 4,514 5,006
Interest income (expense), net............... (3,944) (4,518) (12,291) (13,433)
------------ --------- ----------- ----------
Income before provision for income taxes..... 6,634 11,749 31,206 33,248
Provision for income taxes................... 1,988 3,524 9,362 9,973
Minority interest............................ (325) (262) (954) (760)
Discontinued operations...................... -- -- -- 154
------------ --------- ----------- ----------
Net income................................... $ 4,321 $ 7,963 $ 20,890 $ 22,669
============ ========= =========== ==========
</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 Nine Months Ended
December 31, December 31,
------------------------- -------------------------
1998 1997 1998 1997
----------- ---------- ----------- -----------
(in thousands, except flight hours)
<S> <C> <C> <C> <C>
Flight hours (excludes unconsolidated entities):
Air Log................................... 28,995 33,286 94,834 106,875
Bristow................................... 26,958 24,616 82,650 73,077
----------- ---------- ----------- -----------
Total Helicopter Activities............ 55,953 57,902 177,484 179,952
=========== ========== =========== ===========
Operating revenues:
Air Log................................... $ 30,268 $ 31,133 $ 97,178 $ 92,843
Bristow................................... 76,301 71,963 235,449 198,987
Eliminations.............................. (173) (148) (591) (442)
----------- ---------- ----------- -----------
Total Helicopter Activities............ $ 106,396 $ 102,948 $ 332,036 $ 291,388
=========== ========== =========== ===========
Operating income, excluding gain or loss on
disposal of equipment:
Air Log................................... $ 7,732 $ 6,760 $ 21,349 $ 22,959
Bristow................................... 478 7,301 15,878 19,316
----------- ---------- ----------- -----------
Total Helicopter Activities............ $ 8,210 $ 14,061 $ 37,227 $ 42,275
=========== ========== =========== ===========
Gross margin, excluding gain or loss on
disposal of equipment:
Air Log................................... 25.5% 21.7% 22.0% 24.7%
Bristow................................... 0.6% 10.1% 6.7% 9.7%
Total Helicopter Activities............ 7.7% 13.7% 11.2% 14.5%
</TABLE>
Results from the December quarter reflect reductions in the Company's
activity levels as many customers in both the Gulf of Mexico and the North Sea
re-evaluate their expenditure plans due to the continued low level of
hydrocarbon prices.
Gulf of Mexico flight activity declined 12% from the same three and nine
month periods in the prior year. Operating revenues in the Gulf of Mexico
decreased 4% for the three months ended December 31, 1998 compared to the same
period in the prior year and increased 5% for the nine months then ended. Rate
increases obtained during fiscal 1998 had a positive impact on operating
revenues during the three months and nine months ended December 31, 1998 and
helped reduce the impact of decreased flight activity. Operating costs
associated with Gulf of Mexico operations decreased 7% from the same three-month
period in the prior year and increased 11% from the same nine-month period in
the prior year. Operating costs for the nine months ended December 31, 1998 were
adversely impacted by increased costs due to aircraft and personnel added to
meet expected increased flight activity in fiscal 1999. In addition, the Company
implemented a pay increase to a significant portion of the Company's personnel
in April 1998 to meet wage levels prevailing in the market. The reduction in
flight activity was due to customers discontinuing exploration and production
activities in light of the extended period of low hydrocarbon prices. In July
1998, the Company implemented a cost containment program that included delayed
acceptance of additional aircraft, procedures to reduce maintenance expense, a
hiring freeze and prior approval for overtime. These measures restored Air Log's
operating margins to near historical levels and for the December quarter,
aligned operating costs with the reduction in flight activity. Operating income
from Gulf of Mexico operations was $5.6 million and $13.4 million for the three
months and nine months ended December 31, 1998, respectively, compared to $5.1
million and $16.3 million for the three months and nine months ended December
31, 1997, respectively.
<PAGE>
Bristow's flight hours for the three months and nine months ended
December 31, 1998 were 26,958 and 82,650, respectively - a 9% and 13% increase
from the same periods in the prior year. Operating revenues for the three months
and nine months ended December 31, 1998 were $76.3 million and $235.4 million,
respectively; an increase of 6% and 18% from the same periods in the prior year.
These increases in flight hours and revenues are due primarily to the start of
the previously announced contract with Shell UK Exploration and Production in
the North Sea on July 1, 1998. However, flight activity levels in the North Sea
began to experience the impact of reduced hydrocarbon prices during the December
quarter. Additionally, operating costs for Bristow increased 17% and 22% for the
three months and nine months ended December 31, 1998, respectively, as Bristow
was unable to reduce operating costs during the quarter to adjust to the reduced
demand for its services. In addition, maintenance expense increased sharply due
to the timing of repairs for certain major components. As a result, operating
income attributable to Bristow was $0.5 million and $15.9 million for the three
months and nine months ended December 31, 1998, respectively compared to $7.3
million and $19.3 million in the prior year.
International operating revenues from Air Log for the three months and
nine months ended December 31, 1998 were $4.9 million and $15.6 million,
respectively. International operating income from Air Log for the three months
and nine months ended December 31, 1998 was $1.8 million and $6.0 million,
respectively.
Production Management Services
Operating revenues for GPM were $10.3 million and $31.8 million for the
three months and nine months ended December 31, 1998, respectively. Operating
expenses for GPM were $9.6 million and $29.6 million for the three months and
nine months ended December 31, 1998, respectively. GPM operating income was $0.7
million and $2.2 million for the three months and nine months ended December 31,
1998, respectively.
Liquidity and Capital Resources
Cash and cash equivalents were $69.9 million as of December 31, 1998, a
$13.8 million increase from March 31, 1998. Working capital as of December 31,
1998 was $136.2 million, a $13.6 million increase from March 31, 1998. Total
debt was $249.8 million as of December 31, 1998.
Capital expenditures during the nine months ended December 31, 1998 of
$21.1 million included one AS332L -Super Puma, three new Bell 407's and deposits
on two new AS332L - Super Pumas. 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 nine months ended
December 31, 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 December 31, 1998, Bristow had a (pound)15 million ($24.9 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
December 31, 1998. As of December 31, 1998, the Company 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.
<PAGE>
The effective income tax rates from continuing operations were
approximately 30% for the nine months ended December 31, 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.
Year 2000 Matters
The Company is in the process of 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 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 March, 1999. 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 $186,000 on its replacement
and remediation efforts and expects to incur an additional $300,000 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. 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 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 December 31, 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: February 12, 1999
BY: /s/ Drury A. Milke
---------------------
DRURY A. MILKE
Chief Financial Officer
DATE: February 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 69,850
<SECURITIES> 0
<RECEIVABLES> 96,564
<ALLOWANCES> 0
<INVENTORY> 81,353
<CURRENT-ASSETS> 254,914
<PP&E> 585,990
<DEPRECIATION> 121,989
<TOTAL-ASSETS> 762,482
<CURRENT-LIABILITIES> 118,728
<BONDS> 239,735
0
0
<COMMON> 215
<OTHER-SE> 294,587
<TOTAL-LIABILITY-AND-EQUITY> 294,802
<SALES> 361,534
<TOTAL-REVENUES> 362,911
<CGS> 277,688
<TOTAL-COSTS> 323,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,917
<INCOME-PRETAX> 31,206
<INCOME-TAX> 9,362
<INCOME-CONTINUING> 20,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,890
<EPS-PRIMARY> .96
<EPS-DILUTED> .92
</TABLE>
