United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 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: October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-9827
PETROLEUM HELICOPTERS, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0395707
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2121 Airline Highway, Suite 400
P. O. Box 578
Metairie, Louisiana 70001-5979
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 828-3323
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 29, 1996
Voting Common Stock 2,799,761
Non-Voting Common Stock 2,278,093
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands October 31, April 30,
(Current period unaudited) 1996 1996 (1)
----------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,009 $ 1,899
Accounts receivable - net of allowance 35,829 28,725
Refundable income taxes - 737
Inventory 29,737 25,947
Prepaid expenses 1,444 1,159
Notes receivable - investee companies 585 1,166
------- --------
Total current assets 70,604 59,633
------- --------
Notes receivable 358 358
Investments 5,753 4,890
Property and equipment:
Cost 238,335 212,801
Less accumulated depreciation (120,928) (116,469)
-------- --------
117,407 96,332
-------- --------
Other 215 102
-------- --------
$ 194,337 $ 161,315
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 20,643 $ 19,467
Accrued vacation pay 4,796 4,813
Income taxes payable 703 -
Current portion of long-term debt 8,839 8,810
-------- --------
Total current liabilities 34,981 33,090
-------- --------
Long-term debt 55,034 28,522
Deferred income taxes 14,966 14,966
Other long-term liabilities 3,698 3,336
Shareholders' equity:
Voting common stock 280 280
Non-voting common stock 228 227
Additional paid-in capital 10,402 10,220
Retained earnings 74,748 70,674
-------- --------
85,658 81,401
-------- --------
$ 194,337 $ 161,315
======== ========
(1)The balance sheet at April 30, 1996 is condensed from the audited
financial statements at that date. See accompanying notes to condensed
consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Six Months
In thousands, except per Ended October 31, Ended October 31,
share amounts 1996 1995 1996 1995
(unaudited) ---- ---- ---- ----
REVENUES:
Operating revenues $ 55,161 $ 47,901 $ 105,401 $ 94,280
Gain on equipment
disposals 46 417 50 748
Equity in net earnings 171 100 200 100
------- ------- ------- -------
55,378 48,418 105,651 95,128
------- ------- ------- -------
EXPENSES:
Direct expenses 47,086 41,495 89,489 82,567
Selling, general and
administrative expenses 3,425 2,907 6,567 5,364
Interest expense 1,152 758 2,019 1,535
------- ------- ------- -------
51,663 45,160 98,075 89,466
------- ------- ------- -------
Earnings before income taxes 3,715 3,258 7,576 5,662
Income taxes 1,430 1,324 3,013 2,337
------- ------- ------- -------
Net earnings $ 2,285 $ 1,934 $ 4,563 $ 3,325
======= ======= ======= =======
Net earnings per share $ 0.45 $ 0.39 $ 0.90 $ 0.66
======= ======= ======= =======
Weighted average common
shares outstanding 5,076 5,065 5,076 5,065
======= ======= ======= =======
Dividends declared per common
share $ 0.05 $ 0.05 $ 0.10 $ 0.07
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands Six Months Ended October 31,
(unaudited) 1996 1995
---- ----
OPERATING ACTIVITIES:
Net earnings $ 4,563 $ 3,325
Depreciation 4,717 4,026
Gain on equipment disposals (50) (748)
Equity in net earnings
of investee companies (200) (100)
Changes in operating assets
and liabilities (7,239) 3,725
Other 108 118
------- -------
Net cash provided by operating
activities 1,899 10,346
------- -------
INVESTING ACTIVITIES:
Investments (657) (3,003)
Purchases of property and equipment (26,445) (7,142)
Proceeds from asset dispositions 280 1,413
------- -------
Net cash used in investing activities (26,822) (8,732)
------- -------
FINANCING ACTIVITIES:
Proceeds from long-term debt 30,925 7,000
Payments on long-term debt (4,384) (8,406)
Dividends paid (508) (355)
------- -------
Net cash provided (used) by
financing activities 26,033 (1,761)
------- -------
Increase (decrease) in cash
and cash equivalents 1,110 (147)
Cash and cash equivalents
at beginning of period 1,899 2,506
------- -------
Cash and cash equivalents
at end of period $ 3,009 $ 2,359
======= =======
See accompanying notes to condensed consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED OCTOBER 31, 1996 AND 1995
(UNAUDITED)
A. These financial statements, except for the April 30, 1996 condensed
consolidated balance sheet, have been prepared without audit as
permitted by the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in the financial statements have been condensed or omitted
pursuant to such rules and regulations; however, the Company believes
that this information is fairly presented. These condensed
consolidated financial statements should be read in conjunction
with the financial statements contained in the Company's Annual
Report on Form 10-K for the year ended April 30, 1996 and the
accompanying notes and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
B. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting
of only normal, recurring adjustments, necessary to fairly present
the financial results for the interim periods presented.
C. The Company's financial results, particularly as it relates to its
domestic oil and gas operations, are influenced by seasonal
fluctuations. During the winter, there are more days of adverse
weather conditions and fewer hours of daylight than the other months
of the year. Consequently, flight hours are generally lower during
the Company's third fiscal quarter than at other times of the year.
This produces a seasonal aspect to the Company's business and
typically results in reduced revenues from operations during those
months. Therefore, the results of operations for interim periods are
not necessarily indicative of the operating results that may be
expected for the full fiscal year.
D. Primary earnings per share are computed based on the weighted average
number of shares and dilutive equivalent shares of common stock
(stock options) outstanding during each year using the treasury stock
method.
E. Certain reclassifications have been made to the prior year's
financial statements in order to conform with the classifications
adopted for reporting in fiscal 1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is engaged in providing helicopter transportation and related
services. The predominant portion of its revenue is derived from
transporting offshore oil and gas production and drilling workers on a
worldwide basis. The Company also performs helicopter transportation
services for a variety of hospital and medical programs and aircraft
maintenance to outside parties.
RESULTS OF OPERATIONS
The following is a comparison of the second quarter and the first six months
of the fiscal year ending April 30, 1997 with the comparable period of the
prior fiscal year.
Second Quarter Fiscal 1997 to Fiscal 1996
Revenues
The Company generates revenues from both ongoing service contracts with
established customers and non-contract flights referred to as Specials.
Domestic Oil and Gas contracts are generally on a month to month basis and
consist of a fixed fee plus an hourly charge for actual flight time.
Specials are customer flights, primarily domestic oil and gas, provided on an
as needed basis that are not provided pursuant to ongoing contracts and which
generally carry higher rates.
International and aeromedical contracts also provide for fixed and hourly
charges, but are generally for longer terms. These contracts impose early
cancellation fees to encourage customers to fulfill the contract term and
cover the Company's additional upfront costs in the event of early
termination.
The following table summarizes and compares the Company's revenues by certain
market segments for the quarters ended October 31, 1996 and 1995:
(Thousands of dollars, except Revenues for the Quarter Ended October 31,
percentages and flight hours) ------------------------------------------
Increase
1996 1995 $ %
---- ---- - --
Domestic Oil and Gas $ 37,608 $ 34,594 $ 3,014 9
Aeromedical Services 7,479 6,581 898 14
International and Technical 10,074 6,726 3,348 50
Services ------ ------ ------
Total Operating Revenues $ 55,161 $ 47,901 $ 7,260 15
====== ====== ====== ===
Total Flight Hours 64,948 56,243 8,705 15
====== ====== ====== ===
Domestic Oil and Gas
Domestic Oil and Gas revenues increased $3 million, or 9%, to $ 37.6
million for the quarter.The Company attributes this increase to better
economic conditions in the Gulf of Mexico. As of October 31, 1996 the
Company had thirty more aircraft under contract than last year at
October 31, 1995. Domestic flight hours increased 10% to 48,072 hours from
43,724 hours, as compared to the quarter ended October 31, 1995.
Aeromedical Services
Aeromedical revenues increased to $ 7.5 million, or 14%, from $ 6.6
million. This increase is due primarily to the addition of two new programs
and the utilization of five additional aircraft bringing the total
Aeromedical contracts and aircraft to fourteen and thirty-eight, respectively.
EMS flight hours increased 12% to 3,739 hours from 3,344 hours.
International and Technical Services
International Oil and Gas revenues increased $ 2.6 million, or 68%, to
$ 6.4 million.International flight hours increased 60% to 7,951 hours from
4,984 hours. The increase in revenue and flight hours is due primarily to
the addition of two new contracts which utilize thirteen dedicated aircraft.
Technical Services and other revenues increased $ 0.8 million from
$ 2.9 million to $ 3.7 million.
Direct Expenses
Direct expenses increased $ 5.6 million, or 13%, to $ 47.1 million
primarily as a result of increased activity levels. Direct expenses did not
increase proportionately with the increase in revenues which improved the
Company's operating margin to 15% compared to 13% in the prior years
comparable quarter. Direct expenses that did not show a proportional increase
were primarily spare parts usage, depreciation expense, and helicopter rent.
Human Resources costs, including employee benefit costs, increased $ 2.7
million, or 16%.This increase is due primarily to the hiring of additional
personnel which were needed to support higher levels of flight activity.
Helicopter expenses increased $ 0.9 million, or 5%, to $ 20.4 million.
Fuel expense, spare parts usage, and depreciation expense increased $ 0.8
million, $ 0.2 million, and $ 0.2 million, respectively. These increases
were primarily the result of increased fuel costs, increased flight activity,
and the purchase of additional aircraft, respectively. The average fuel cost
per gallon increased by $ 0.18 which accounted for $ 0.5 million of the fuel
cost increase. These costs were offset by a decrease in insurance costs and
helicopter rent of $ 0.3 million and $ 0.2 million, respectively.
Other expenses and Technical Services cost of goods sold increased $ 1.1
million and $0.7 million, respectively.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased by $ 0.5 million
to $ 3.4 million for the quarter. This increase was primarily a result of
consultant fees related to information system upgrades.
First Six Months Fiscal 1997 to First Six Months Fiscal 1996
The following table summarizes and compares the Company's revenues by certain
market segments for the six months ended October 31, 1996 and 1995:
Revenues
(Thousands of dollars, except Revenues for the Six Months Ended
percentages and flight hours) October 31,
----------------------------------
Increase
1996 1995 $ %
---- ---- - --
Domestic Oil and Gas $ 73,110 $ 67,088 $ 6,022 9
Aeromedical Services 15,115 12,884 2,231 17
International and Technical 17,176 14,308 2,868 20
Services
------- ------- -------
Total Operating Revenues $ 105,401 $ 94,280 $ 11,121 12
======= ======= ======= ==
Total Flight Hours 127,824 111,757 16,067 14
======= ======= ======= ==
Domestic Oil and Gas
For the first six months Domestic Oil and Gas revenues increased 9%,
or $ 6 million, to $ 73 million due primarily to increased activity in the
Gulf of Mexico. The Company attributes the increase to better economic
conditions in the Gulf of Mexico; a result of rising crude oil and natural
gas prices and increased drilling activity. These factors produced a 10%
increase in Domestic Oil and Gas flight hours. The company maintained its
market share at 52% for the current and prior year period.
Aeromedical Services
Aeromedical revenues increased to $ 15.1 million, or 17%, from $ 12.9
million. This increase is due primarily to the addition of two new programs
and the utilization of five additional aircraft bringing the total
Aeromedical contracts and aircraft to fourteen and thirty-eight,
respectively. EMS flight hours increased 18% to 7,691 hours from 6,518
hours.
International and Technical Services
International Oil and Gas revenues increased substantially to $ 11.4
million, or 39%, due primarily to the addition of two new contracts which
utilize thirteen aircraft. Flight hours increased 42% to 14,650 hours.
Technical Services and other revenues decreased slightly to $ 5.8 million
from $ 6.1 million, or 5%.
Direct Expenses
Direct expenses increased $ 6.9 million, or 8%, to $ 89.5 million
primarily as a result of increased flight activity. Direct expenses did not
increase proportionately with the increase in revenues which improved the
Company's operating margin to 15% compared to 12% in the prior years
comparable period. Direct expenses that did not show a proportional
increase were primarily spare parts usage and helicopter rent.
Human resources costs increased $ 3.3 million from $ 33.2 million to
$ 36.5 million. This increase is due primarily to the hiring of additional
personnel which were needed to support higher levels of flight activity.
Helicopter expenses increased $ 1.2 million, or 3%, to $ 39.5 million from
$ 38.3 million. Fuel expense, depreciation expense, and spare parts usage
increased $ 1.2 million, $ 0.4 million, and $ 0.1 million, respectively.
Fuel costs increased due to a $ 0.15 average cost per gallon increase and an
increase in flight activity. Depreciation expense and spare parts usage
increased due to the purchase of additional aircraft and higher maintenance
requirements associated with increased flight activity, respectively.
These costs were partially offset by a decrease in insurance expense of $ 0.6
million and a decrease in helicopter rent of $ 0.2 million.
Other expenses and Technical Services cost of goods sold increased $ 1.9
million and $ 0.2 million, respectively.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased $ 1.2 million
from $ 5.4 million to $ 6.6 million. The increase was primarily a result of
consultant fees related to information systems upgrades.
LIQUIDITY AND CAPITAL RESOURCES
The following is comparison of the first six months of the fiscal year
ending April 30, 1997 with the period ending April 30, 1996.
The Company's cash position as of October 31, 1996 was $ 3 million
compared to $ 1.9 million at April 30, 1996, the Company's fiscal year end.
Working capital increased $ 9.1 million from $ 26.5 million at fiscal year
end to $ 35.6 million. The increase was primarily related to an increase in
accounts receivable of $ 7.1 million and an increase in inventory of $ 3.8
million, offset by an increase in accounts payable of $ 1.2 million.
Total long-term debt increased $ 26.5 million to $ 55 million. On
August 13, 1996 the Company and its principal lending group ratified a loan
agreement that amended and restated its original loan agreement dated January
1, 1986. The new agreement increased the Company's credit capacity to $ 65
million from $ 55 million. In addition, the new agreement lowers the
Company's effective interest rate on its outstanding debt under this
facility. The annual projected interest expense reduction for the fiscal
year ended April 30, 1997, using the total debt outstanding under this
facility at October 31, 1996, is $0.1 million. The Company's current debt
obligation totals $ 8.8 million, due in equal quarterly installments, which
the Company intends to pay with cash flow from operations. At
November 29, 1996, the Company had $ 10 million credit capacity available
under its revolving credit facility. The Company is in compliance with all
provisions of its loan agreement.
Cash generated from operating activities and financing activities was
$ 1.9 million and $ 26 million, respectively. The Company utilized its cash
flow from operating activities and financing activities to fund $ 26.8
million in investing activities. Investing activities primarily included
the purchase of twenty-two aircraft for $ 17.7 million, and $ 5.2 million
in aircraft capital improvements. The Company paid dividends totaling
$ 0.5 million or $ 0.10 per share.
The Company continues to review selected domestic bases for possible
fuel contamination resulting from routine flight operations, and to date the
company has identified known or suspected fuel contamination at five of its
bases. Although the full extent of contamination has not been determined,
based on this preliminary information, a provision of $ 1.7 million was made
for remediation costs through the fiscal year ended April 30, 1996 and an
additional $ 0.8 million provision was made in the first six months of fiscal
1997. The company will make additional provisions to the extent necessary as
reliable estimates of these costs become available.
In the first quarter of fiscal year 1996, the Company acquired a 49%
interest in Irish Helicopters Limited (IHL) based in Dublin Ireland. IHL
was recently notified that its principal service contract will not be renewed
and will therefore terminate on December 31, 1996. As a result, IHL is
reviewing a number of alternatives including the possibility that it will
not continue as a going concern. Based on the final determination of IHL's
plans, PHI will evaluate and adjust, as necessary its investment which
currently aggregates $3.7 million.
RESULTS AT A GLANCE (Unaudited)
The following table provides a summary of critical operating and financial
statistics (thousands of dollars, except per share amounts, financial ratios,
flight hours and general statistics):
Six Months Ended October 31,
Operations 1996 1995
---- ----
Operating revenues $ 105,401 $ 94,280
Net earnings 4,563 3,325
Net earnings per share .90 .66
Annualized return on
shareholders' equity 10.9% 8.6%
Total flight hours 127,824 111,757
Financial Summary October 31, 1996 April 30, 1996
----------------- ---------------
Net working capital $ 35,623 $ 26,543
Net book value of
property and equipment 117,407 96,332
Long-term debt 55,034 28,522
General Statistics
Helicopters Operated 294 266
Employees 1,757 1,677
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 (i) Articles of Incorporation of the Company
(incorporated by reference to Exhibit No. 3.1(i) to PHI's
Report on Form 10-Q for the quarterly period ended
October 31, 1994).
(ii) By-laws of the Company (incorporated by reference to Exhibit
No. 3.1 (ii) to PHI's Report on Form 10-Q for the quarterly
period ended July 31, 1996).
10.1 Amended and restated Loan Agreement originally dated as of
January 31, 1986 amended and restated in its entirety as of
August 13, 1996.
10.2 Form of Restricted Stock Agreement under the Amended and
Restated Petroleum Helicopters, Inc. 1995 Incentive
Compensation Plan, as amended.
10.3 Non-qualified Stock Option Agreement under the amended and
Restated Petroleum Helicopters, Inc. 1995 Incentive
compensation Plan, as amended between PHI and
Carroll W. Suggs.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ending
October 31, 1996.
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.
Petroleum Helicopters, Inc.
December 2, 1996 By: /s/ Carroll W. Suggs
--------------------
Carroll W. Suggs
Chairman of the Board, President
and Chief Executive Officer
(duly authorized officer)
December 2 , 1996 By: /s/ John H. Untereker
--------------------
John H. Untereker
Vice President and
Chief Financial Officer
(principal financial
officer)