-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MEuqI4SxK1pBd3NA8jK9P5KnRG2Wyz3Mz16v1HYJTs9D0BZDFQNfWZCPvy+gRwDU gFJ+kdK57Wk0d54Gp9TjqQ== 0000073887-99-000014.txt : 19990816 0000073887-99-000014.hdr.sgml : 19990816 ACCESSION NUMBER: 0000073887-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OFFSHORE LOGISTICS INC CENTRAL INDEX KEY: 0000073887 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 720679819 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05232 FILM NUMBER: 99688573 BUSINESS ADDRESS: STREET 1: 224 RUE DE JEAN STREET 2: PO BOX 5C CITY: LAFAYETTE STATE: LA ZIP: 70505 BUSINESS PHONE: 3182331221 MAIL ADDRESS: STREET 1: 224 RUE DE JEAN 70508 STREET 2: PO BOX 5C CITY: LAFAYETTE STATE: LA ZIP: 70505 10-Q 1 FORM 10Q 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 PART I - FINANCIAL INFORMATION Item 1. Financial Statements OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES Consolidated Statements of Income (thousands of dollars, except per share amounts)
Three Months Ended June 30, ----------------------- 1999 1998 ---------- --------- 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 ========== =========
2 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (thousands of dollars)
June 30, March 31, 1999 1999 ----------- --------- 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 =========== =========
3 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (thousands of dollars)
Three Months Ended June 30, ----------------------- 1999 1998 ----------- --------- 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
4 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:
Three Months Ended June 30, ---------------------------- 1999 1998 ------------- ----------- 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 ============= ===========
5 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):
Three Months Ended June 30, ------------------- 1999 1998 -------- -------- Net Income........................................................... $ 3,085 $ 6,553 Other Comprehensive Income: Currency translation adjustment................................... (6,491) (588) -------- -------- Comprehensive Income (Loss).......................................... $ (3,406) $ 5,965 ======== ========
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 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):
Three Months Ended June 30, ----------------------- 1999 1998 --------- --------- 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 ========= =========
7 NOTE G - Supplemental Condensed Consolidating Financial Information In connection with the sale of the Company's $100 million 7 7/8% Senior Notes due 2008, certain of the Company's subsidiaries (the "Guarantor Subsidiaries") jointly, severally and unconditionally guaranteed the payment obligations under the Senior Notes. The following supplemental financial information sets forth, on a consolidating basis, the balance sheet, statement of income and cash flow information for Offshore Logistics, Inc. ("Parent Company Only"), for the Guarantor Subsidiaries and for Offshore Logistics, Inc.'s other subsidiaries (the "Non-Guarantor Subsidiaries"). The Company has not presented separate financial statements and other disclosures concerning the Guarantor Subsidiaries because management has determined that such information is not material to investors. The supplemental condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include all disclosures included in annual financial statements, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Certain reclassifications were made to conform all of the financial information to the financial presentation on a consolidated basis. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses. The allocation of the consolidated income tax provision was made using the with and without allocation method. 8 NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued Supplemental Condensed Consolidating Balance Sheet June 30, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents................$ 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 ============ ============ ============ ============ ============
9 NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued Supplemental Condensed Consolidating Statement of Income Three Months Ended June 30, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------- ----------- ------------ ------------ 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 ============ ============= =========== ============ ============
10 NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued Supplemental Condensed Consolidating Statement of Cash Flows Three Months Ended June 30, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ----------- ----------- ----------- ----------- ---------- 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 =========== =========== =========== =========== ==========
11 NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued Supplemental Condensed Consolidating Balance Sheet March 31, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============= ============
12 NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued Supplemental Condensed Consolidating Statement of Income Three Months Ended June 30, 1998
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------- ----------- ------------ ------------ 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 ============ ============= =========== ============= ============
13 NOTE G - Supplemental Condensed Consolidating Financial Statements - Continued Supplemental Condensed Consolidating Statement of Cash Flows Three Months Ended June 30, 1998
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ----------- ----------- ----------- ----------- ---------- 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 =========== =========== =========== =========== ==========
14 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):
Three Months Ended June 30, ----------------------- 1999 1998 --------- ---------- 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 ========= ==========
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
Three Months Ended June 30, -------------------------------------- Current Segment Format Previous Segment Format --------- ------------------------ 1999 1999 1998 --------- --------- -------- (in thousands, except flight hours) 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%
16 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 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 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 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 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 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. 0000073887 Offshore Logistics, Inc. 1,000 3-Mos MAR-31-2000 APR-01-1999 JUN-30-1999 83,802 0 90,427 0 79,830 259,454 554,311 128,265 726,079 107,238 229,649 0 0 211 280,511 726,079 106,418 107,380 84,884 99,878 0 0 4,670 4,938 1,531 3,085 0 0 0 3,085 .15 .15
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