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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: July 31, 1997
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
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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 September 10, 1997
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Voting Common Stock 2,800,886
Non-Voting Common Stock 2,294,066
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
July 31, April 30,
------- --------
1997 1997(1)
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ASSETS
Current assets:
Cash and cash equivalents $ 632 $ 2,437
Account receivable - net of allowance 36,916 35,547
Inventory 31,608 30,202
Prepaid expenses 1,092 1,115
Refundable income taxes 120 1,344
Notes receivable - investee companies 797 1,313
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Total current assets 71,165 71,958
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Notes receivable 22 22
Investments 2,576 2,480
Property and equipment:
Cost 249,526 244,047
Less accumulated depreciation (123,584) (122,220)
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125,942 121,827
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Other 522 344
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$ 200,227 $ 196,631
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 19,011 $ 21,059
Accrued vacation pay 4,786 4,784
Current portion of long-term debt 4,884 4,868
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Total current liabilities 28,681 30,711
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Long-term debt 61,365 57,592
Deferred income taxes 18,239 18,239
Other long-term liabilities 3,022 2,673
Shareholders' equity:
Voting common stock 280 280
Non-voting common stock 229 229
Additional paid-in capital 10,793 10,810
Retained earnings 77,618 76,097
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88,920 87,416
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$ 200,227 $ 196,631
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(1)The balance sheet at April 30, 1997 is condensed from the
audited financial statements at that date. The accompanying
notes are an integral part of these condensed consolidated
financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands of dollars, except per share data)
(Unaudited)
Three Months Ended July 31,
--------------------------
1997 1996
---- ----
REVENUES
Operating revenues $ 55,914 $ 50,240
Gain on equipment
disposals 352 4
Equity in net earnings
of investee companies 94 29
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56,360 50,273
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EXPENSES:
Direct expenses 48,297 42,565
Selling, general and
administrative expenses 3,900 2,980
Interest expense 1,182 867
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53,379 46,412
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Earnings before income taxes 2,981 3,861
Income taxes 1,206 1,583
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Net earnings $ 1,775 $ 2,278
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Net earnings per share $ 0.35 $ 0.45
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Weighted average common
shares outstanding 5,095 5,076
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Dividends declared per common
share $ 0.05 $ 0.05
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The accompanying notes are an integral part of these
condensed consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Three Months Ended July 31,
--------------------------
1997 1996
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Cash flows from operating activities:
Net earnings $ 1,775 $ 2,278
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 2,859 2,265
Gain on equipment disposals (352) (4)
Equity in net earnings of investee companies (94) (29)
Changes in operating assets and liabilities (2,738) (5,179)
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Net cash provided by (used in) operating
activities 1,448 (669)
Cash flows from investing activities:
Investments - (657)
Purchase of property and equipment (8,164) (12,425)
Proceeds from asset dispositions 1,398 12
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Net cash used in investing activities (6,766) (13,070)
Cash flows from financing activities:
Proceeds from long-term debt 11,000 16,675
Payments on long-term debt (7,209) (2,197)
Dividends paid (254) (254)
Other, net (24) -
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Net cash provided by financing activities 3,513 14,224
Increase (decrease) in cash and cash
equivalents (1,805) 485
Cash and cash equivalents at beginning of
period 2,437 1,899
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Cash and cash equivalents at end of period $ 632 $ 2,384
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The accompanying notes are an integral part of these
condensed consolidated financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1997 AND 1996
(1) General
The accompanying unaudited condensed consolidated
financial statements, have been prepared in accordance with
Form 10-Q instructions of the Securities and Exchange
Commission ("SEC") from the books and records of Petroleum
Helicopters, Inc. ("PHI" or the "Company").
In the opinion of management, these financial statements
reflect all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly the financial
results for the interim periods presented. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations of the SEC; 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, 1997 and the accompanying notes and
Management's Discussion and Analysis of Financial Condition
and Results of Operations. Certain reclassifications have
been made to the prior year's financial statements in order
to conform with the classifications adopted for reporting in
fiscal 1998. These reclassifications had no impact on net
income or shareholders' equity.
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.
(2) Commitments and Contingencies
On Monday, June 2, 1997, the Company was notified by the
National Mediation Board ("NMB") that the Office and Professional
Employees International Union (OPEIU) filed an application to
represent flight deck crew members (helicopter pilots) of
PHI. On September 4, 1997 the NMB reported that the Company's
helicopter pilots voted to reject union representation. The OPEIU
has recently filed objections with the NMB seeking to require a new
election. The Company will vigorously contest the OPEIU's objections.
On August 6, 1997, the domestic pilots of one of the
Company's chief competitors voted to become members of this
union.
(3) New Accounting Pronouncements
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
128, Earnings Per Share ("FAS 128"). FAS 128 will change the
computation, presentation and disclosure requirements for
earnings per share amounts. FAS 128 requires presentation of "basic"
and "diluted" earnings per share, as defined,
on the face of the income statement for all entities with
complex capital structures. FAS 128 is effective for
financial statements issued for periods ending after December
15, 1997 and requires restatement of all prior period
earnings per share amounts. Management does not believe that
this pronouncement will have a material impact on the Company's
calculation or presentation of its earning per share amounts.
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, referred to herein as
"Technical Services".
This discussion should be read in conjunction with the
accompanying financial statements and with the financial
statements for the year ended April 30, 1997 and the related
notes and Management's Discussion and Analysis.
RESULTS OF OPERATIONS
The following is a comparison of the first quarter of
the fiscal year ending April 30, 1998 with the comparable
period of the prior fiscal year.
Revenues
The Company generates flight revenues from both ongoing
service contracts with established customers and non-contract
flights referred to as Specials. Domestic Oil and Gas and
International 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 contractual commitments and which
generally carry higher rates.
Aeromedical contracts also provide for fixed and hourly
charges, but are generally for longer terms and impose early
cancellation fees to encourage customers to fulfill the
contract term and cover the Company's additional up-front
costs in the event of early termination.
The following table summarizes and compares the
Company's operating revenues by certain markets for
the quarters ended July 31, 1997 and 1996:
(Thousands of dollars, except percentages and flight hours)
Operating Revenues for the Quarter Ended July 31,
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Increase
---------
1997 1996 $ %
---- ---- -- --
Domestic Oil and Gas $ 39,540 $ 35,409 $ 4,131 12
Aeromedical Services 7,897 7,636 261 3
International 5,203 5,002 201 4
Technical Services and Other 3,274 2,193 1,081 49
------ ------ ----- --
Total Operating Revenues $ 55,914 $ 50,240 $ 5,674 11
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Total Flight Hours 67,114 62,876 4,238 7
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Earnings were adversely impacted by flood damage caused
by Hurricane Danny to twenty-six aircraft located at one of
the Company's field bases. The estimated effect of this
damage was $ .05 per share and primarily relates to the
incremental effect of lost revenue. Although most of the
damaged aircraft were repaired and generating revenue by the
end of the quarter, the ensuing quarter could be negatively
impacted as well, as four of these aircraft will not be fully
operational until October, 1997 at the earliest.
Domestic Oil and Gas
Domestic Oil and Gas revenues for the quarter ended July
31, 1997 increased 12% to $ 39.5 million from $ 35.4 million.
The Company primarily attributes the increase to better
economic conditions in the Gulf of Mexico. Flight hours
increased 7% to 54,088 hours from 50,456 hours for the
quarter ended July 31, 1996.
Aeromedical Services
Aeromedical revenues increased slightly to $ 7.9
million, or 3%, from $ 7.6 million. The total Aeromedical
contracts and aircraft as of July 31, 1997 are 14 and 37,
respectively, with no change from July 31, 1996. EMS flight
hours for the quarter decreased 15 hours to 4,707 hours.
International
International Oil & Gas revenues increased 4% to $ 5.2
million from $ 5.0 million due primarily to increased flight
hours and the addition of one new contract. Flight hours
rose 68 hours to 6,728 hours.
Technical Services and Other
Technical Services and other revenues increased $ 1.1
million, to $ 3.3 million due primarily to an
increase in engine and component overhaul work.
Direct Expenses
Direct expenses increased $ 5.7 million, or 13%, to
$48.3 million primarily as a result of increased activity
levels. Direct expenses as a percentage of operating
revenues increased which reduced the Company's operating
margin to 13.6% from 15.3% in the prior year's comparable
quarter. The Company is incurring higher than expected
maintenance costs as rapid fleet expansion caused more
maintenance to be performed at outside vendors.
Human Resources costs including employee benefit costs,
increased $ 0.8 million, or 4% to $ 19 million. This
increase is due primarily to the hiring of additional
personnel which were needed due to increased flight and
flight related activity.
Spare parts usage and repairs and maintenance increased
$ 2.3 million, or 24% to $ 11.8 million. The Company is
incurring higher than expected maintenance costs due to the
increase in fleet size over the past year. The Company has
significantly increased the amount of work sent for outside
repair, which is more costly than performing the work in-
house, in order to meet current aircraft utilization
requirements.
Aircraft depreciation increased $ 0.5 million, or 23% to
$ 2.7 million, due to the purchase of additional aircraft.
The Company purchased twenty-eight aircraft in fiscal year
1997 and has purchased four aircraft during fiscal year 1998.
Helicopter rent increased $ 0.4 million, or 13%, to
$ 3.5 million, due to the addition of several new leased
aircraft. There were seventy-nine leased aircraft as of
July 31, 1997 as compared to sixty-five at July 31,1996.
All other aircraft costs increased $ 1.1 million, or
13%, to $ 9.4 million. These increases were primarily due to
increased flight activity and additional costs incurred for
the Company's training program. The Company incurred an
additional $0.4 million in outside training costs in the
first quarter of fiscal year 1998 as compared to the same
period in the prior year.
Technical Services cost of sales increased $ 0.6
million, or 43% to $ 2.0 million. This increase is
consistent with the increase in revenues noted above.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses increased
$ 0.9 million, or 30%, to $ 3.9 million. This increase was
primarily ascribable to the following: $ 0.3 million due to
consulting fees related to the information system upgrade
programs, which commenced in 1996 and will continue through
fiscal 1998; and $ 0.4 million due to legal and other consulting
fees.
Interest Expense
Interest expense increased $ 0.3 million or 33% to $ 1.2
million. This was primarily related to the increase in the
Company's long-term debt. Average long-term debt increased
$ 19.8 million over the prior year first quarter.
LIQUIDITY AND CAPITAL RESOURCES
The following is a comparison of the first quarter of
the fiscal year ending April 30, 1998 with the year ending
April 30, 1997.
The Company's cash position as of July 31, 1997 was
$ 0.6 million compared to $ 2.4 million at April 30, 1997, the
Company's fiscal year end. Working capital increased $ 1.3
million from $ 41.2 million at fiscal year end to $ 42.5
million. The increase was primarily related to an increase
in accounts receivable and inventory of $ 1.4 million and
$ 1.4 million, respectively, and a decrease in accounts payable
and accrued expenses of $ 2.0 million. This was partially
offset by the combined changes in refundable income taxes and
notes receivable of $ 1.7 million and a $ 1.8 million decline
in the Company's cash position.
Total long-term debt increased $ 3.8 million to $ 61.4
million as a result of the investing activities described
below. The Company's current debt obligation for fiscal 1998
totals $ 4.9 million, payable in equal quarterly
installments, which the Company intends to pay with cash flow
from operations. At July 31, 1997, the Company had $ 20.0
million of credit capacity available under its credit
facility. The Company believes its cash flow from operations
in conjunction with its credit capacity is sufficient to meet
its planned requirements for the foreseeable future. The
Company is in compliance with the provisions of its loan
agreement.
Cash provided by operating activities was $ 1.4 million
for the quarter. Investing activities primarily included the
purchase and completion of several aircraft, aircraft
improvements, and engines for $ 8.2 million. Proceeds from
asset dispositions were primarily due to the sale of two
aircraft that no longer met PHI fleet requirements. A gain
of $ 0.3 million was recognized relating to the sale
transactions. Investing activities were primarily funded
through increased borrowings under the Company's credit
facility. The Company also paid a dividend of $ 0.05 per
share during the first quarter of fiscal 1998.
The Company continues to review selected domestic bases
for possible fuel contamination resulting from routine flight
operations. The Company has expensed, including provisions
for environmental costs, $ 0.3 million for the quarter
ending July 31, 1997 as compared to $ 0.4 million for the
comparable quarter in fiscal year 1997. The aggregate
liability for environmental related costs at July 31, 1997 is
$ 1.7 million which the Company believes is adequate for
probable and estimable environmental costs. The Company will
make additional provisions in future periods to the extent
appropriate as further information regarding these costs
becomes available.
FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact
contained in this Form 10-Q, other periodic reports filed by
the Company under the Securities Act of 1933 and other
written or oral statements made by it or on its behalf, are
forward looking statements. When used herein, the words
"anticipates", "expects", "believes", "intends", "plans", or
"projects" and similar expressions are intended to identify
forward looking statements. It is important to note that
forward looking statements are based on a number of
assumptions about future events and are subject to various
risks, uncertainties and other factors that may cause the
Company's actual results to differ materially from the views,
beliefs and estimates expressed or implied in such forward
looking statements. Although the Company believes that the
assumptions reflected in forward looking statements are
reasonable, no assurance can be given that such assumptions
will prove correct. Factors that could cause the Company's
results to differ materially from the results discussed in
such forward looking statements include but are not limited
to the following: flight variances from expectations,
volatility of oil and gas prices, the substantial capital
expenditures required to fund its operations, environmental
risks, competition, government regulation, unionization and
the ability of the Company to implement its business
strategy. All forward looking statements in this document
are expressly qualified in their entirety by the cautionary
statements in this paragraph. PHI undertakes no obligation
to update publicly any forward looking statements, whether as
a result of new information, future events or otherwise.
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):
Three Months Ended July 31,
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Operations 1997 1996
---- -----
Operating revenues $ 55,914 $ 50,240
Net earnings 1,775 2,278
Net earnings per share .35 .45
Book value per share 17.30 16.24
Annualized return on
shareholders' equity 8.0% 11.0%
Total flight hours - operated 67,114 62,876
Financial Summary July 31, 1997 April 30, 1997
-------------- ---------------
Net working capital $ 42,484 $ 41,247
Net book value of
property and equipment 125,942 121,827
Long-term debt 61,365 57,592
General Statistics
Aircraft Operated 318 314
Employees 1,868 1,851
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).
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ending
July 31, 1997.
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.
September 10, 1997 By: /s/ Carroll W. Suggs
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Carroll W. Suggs
Chairman of the Board,
President and Chief Executive Officer
(duly authorized officer)
September 10, 1997 By: /s/ John H. Untereker
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John H. Untereker
Vice President and Chief
Financial Officer (principal financial and
accounting officer)