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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: March 31, 2001
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 Identification No.)
incorporation or organization)
2121 Airline Drive 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 April 30, 2001
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Voting Common Stock 2,793,386 shares
Non-Voting Common Stock 2,404,147 shares
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PETROLEUM HELICOPTERS, INC.
INDEX - FORM 10-Q
Part I - Financial Information
Item 1. Financial Statements - Unaudited
Consolidated Balance Sheets - March 31, 2001 and
December 31, 2000 ...................................... 3
Consolidated Statements of Operations - Three Months
Ended March 31, 2001 and 2000 ......................... 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2001 and 2000 .......................... 5
Notes to Consolidated Financial Statements ................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ............................................... 14
Part II - Other Information
Item 1. Legal Proceedings ............................................. 14
Item 6. Exhibits and Reports on Form 8-K .............................. 15
Signature ..................................................... 15
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,132 $ 863
Accounts receivable -- net of allowance:
Trade 40,268 39,399
Other 3,224 3,490
Inventory 33,937 35,175
Other current assets 5,457 5,112
Refundable income taxes 2,444 3,852
------------ ------------
Total current assets 89,462 87,891
Property and equipment, net 127,224 131,856
Other 4,000 3,008
------------ ------------
Total Assets $ 220,686 $ 222,755
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 25,901 $ 30,047
Accrued vacation payable 6,792 6,553
Current maturities of long-term debt and capital lease
obligations 11,121 9,744
------------ ------------
Total current liabilities 43,814 46,344
------------ ------------
Long-term debt and capital lease obligations, net of current
maturities 65,929 65,075
Deferred income taxes 17,411 17,600
Other long-term liabilities 12,727 12,114
Commitments and contingencies (Note 4)
Shareholders' Equity:
Voting common stock -- par value of $0.10;
authorized shares of 12,500,000 279 279
Non-voting common stock -- par value of $0.10;
authorized shares of 12,500,000 238 237
Additional paid-in capital 12,086 12,045
Accumulated other comprehensive income (loss) (897) --
Retained earnings 69,099 69,061
------------ ------------
Total shareholders' equity 80,805 81,622
------------ ------------
Total Liabilities and Shareholders' Equity $ 220,686 $ 222,755
============ ============
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
QUARTER ENDED
MARCH 31,
-----------------------
2001 2000
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REVENUES AND OTHER
INCOME:
Operating revenues $ 63,259 $ 52,659
Other income, net 2,031 147
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65,290 52,806
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EXPENSES:
Direct expenses 58,816 49,514
Selling, general, and
administrative expenses 4,680 4,021
Interest expense 1,721 1,510
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65,217 55,045
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Income (loss) before income taxes 73 (2,239)
Income taxes 27 (811)
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Net income (loss) $ 46 $ (1,428)
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Weighted average common shares outstanding:
Basic 5,167 5,161
Diluted 5,226 5,161
Net income (loss) per common share:
Basic $ 0.01 $ (0.28)
Diluted $ 0.01 $ (0.28)
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 46 $ (1,428)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 4,036 3,195
Deferred income taxes (189) (385)
Gain on asset dispositions (2,031) (162)
Other 273 --
Changes in operating assets and liabilities (1,450) 2,230
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Net cash provided by operating activities 685 3,450
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in and advances to affiliates 63 7
Purchase of property and equipment (8,157) (6,874)
Proceeds from asset dispositions 8,447 3,703
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Net cash provided by (used in) investing activities 353 (3,164)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 2,500 6,000
Payments on long-term debt (269) (5,894)
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Net cash provided by financing activities 2,231 106
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Increase in cash and cash equivalents 3,269 392
Cash and cash equivalents, beginning of period 863 1,663
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Cash and cash equivalents, end of period $ 4,132 $ 2,055
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The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited condensed consolidated financial statements include
the accounts of Petroleum Helicopters, Inc. and subsidiaries ("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. 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 December 31, 2000 and the accompanying notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
The Company's financial results, particularly as they relate to the Company's
domestic oil and gas operations, are influenced by seasonal fluctuations as
discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. Therefore, the results of operations for interim periods are
not necessarily indicative of the operating results that may be expected for a
full fiscal year.
2. SEGMENT INFORMATION
The Company has identified four principal segments: Domestic Oil and Gas and
Other, International, Aeromedical, and Technical Services. The Domestic Oil and
Gas and Other segment provides helicopter services to oil and gas customers
operating in the Gulf of Mexico. The Domestic Oil and Gas and Other segment also
provides helicopter services to certain domestic governmental agencies involved
with forest-fire fighting activities. The International segment provides
helicopters in various foreign countries to oil and gas customers, including
national oil companies, and certain U.S. and foreign governmental agencies. The
Aeromedical segment provides helicopter services to hospitals and medical
programs in several U.S. states. The Company's AirEvac subsidiary is included in
the Aeromedical segment. The Technical Services segment provides helicopter
repair and overhaul services for a variety of helicopter owners and operators.
Segment operating income is operating revenues less direct expenses, selling,
general, and administrative costs, and interest expense allocated to the
operating segment. Unallocated overhead consists primarily of corporate selling,
general, and administrative costs that the Company does not allocate to the
operating segments.
Summarized financial information concerning the Company's reportable operating
segments for the quarters ended March 31, 2001 and 2000 is as follows (in
thousands):
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QUARTER ENDED
MARCH 31,
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2001 2000
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Segment operating revenues, excluding
other income:
Domestic Oil and Gas and Other $ 39,966 $ 33,499
International 5,839 5,721
Aeromedical 11,939 11,054
Technical Services 5,515 2,385
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Total operating revenues,
excluding other income $ 63,259 $ 52,659
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Segment operating income (loss), excluding
other income:
Domestic Oil and Gas and Other $ 691 $ 548
International (460) 178
Aeromedical 920 35
Technical Services 632 (31)
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Total segment operating income,
excluding other income 1,783 730
Other income, net 2,031 147
Unallocated overhead (3,741) (3,116)
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Income (Loss) before income
taxes $ 73 $ (2,239)
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3. OTHER ASSETS
Other assets include investments in and advances to affiliates, including a 50%
ownership interest in Clintondale Aviation, Inc. ("Clintondale"), a New York
corporation that operates helicopters and fixed-wing aircraft primarily in
Kazakhstan. PHI also leases four aircraft to Clintondale. In December 2000, the
Company initiated discussions and is currently negotiating an agreement to exit
its ownership interest in Clintondale. In conjunction with the plan to exit from
its ownership interest in Clintondale, the Company recorded an impairment charge
of $1.7 million in December 2000 to its investment in and advances to
Clintondale.
Other assets also includes $1.0 million that the Company funded toward the
construction cost of a new principal operating facility to be leased by the
Company. Any such amounts funded by PHI, up to $4.0 million, will amortize over
10 years at 7% per annum and the resulting monthly amortization amounts will
reduce PHI's monthly lease payments for the first 10 years of the lease.
4. COMMITMENTS AND CONTINGENCIES
Environmental Matters -- The Company has conducted environmental reviews and
assessments at certain of its operating bases. In connection with the
assessments, the Company has recorded an aggregated estimated liability of $3.0
million for environmental remediation costs that were probable and estimable at
March 31, 2001. The Company recorded no additional provisions for the quarter
ended March 31, 2001.
The Company began conducting environmental site surveys in late 2000 at its
Lafayette, Louisiana facility, which will be vacated in 2001 when the Company
moves to its new facility. Initial phases of the
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surveys have identified certain contamination. However, until the surveys are
complete, the Company cannot reasonably estimate the extent of that
contamination and the associated costs of remediation. The Company expects to
complete the survey during the second quarter of 2001. The Company anticipates
that it will also conduct environmental site surveys at certain other Gulf Coast
facilities during 2001. It is expected that the results of the surveys discussed
above will require additional provisions for environmental remediation costs in
2001, but the Company is currently unable to estimate the amount of additional
provisions that may be necessary.
Legal Matters -- The Company is named as a defendant in various legal actions
that have arisen in the ordinary course of its business and have not been
finally adjudicated. The amount, if any, of ultimate liability with respect to
such matters cannot be determined. In the opinion of management, the amount of
the ultimate liability with respect to these actions will not have a material
adverse effect on results of operations, cash flow or financial position of the
Company.
Long-Term Debt -- The Company is subject to certain financial covenants under
its loan agreement with its principal lending group, as amended on March 29,
2001, and was in compliance with those covenants on March 31, 2001 or had
received the appropriate waiver. These covenants include maintaining certain
levels of cash flow, working capital and shareholders' equity and contain other
provisions, some of which restrict the purchases of the Company's stock, capital
expenditures, and payment of dividends. The declaration or payment of dividends
is restricted to 20% of net earnings for the previous four fiscal quarters. The
loan agreement also limits the creation, incurrence, or assumption of Funded
Debt (as defined, which includes long-term debt) and the acquisition of
investments in unconsolidated subsidiaries.
On January 31, 2001, the revolving credit facility portion of the loan agreement
converted to a term loan, thereby increasing total annual principal payments
from $5 million to approximately $13 million. On April 30, 2001, the Company
received an amendment to its loan agreement with its lending group to extend
commencement of the quarterly principal payments on the converted loan to July
31, 2001. The Company is currently negotiating a restatement of its loan
agreement with its lending group, to among other things, reinstate the revolving
credit facility portion of the credit agreement and extend the term of the
credit agreement. The Company currently does not have any additional credit
capacity under its credit facilities with its lending group.
Operating Leases -- The Company will lease a new principal operating facility
for twenty years, including three five-year renewal options, effective September
2001. Under the terms of the new facility lease, there is a commitment by the
Company, under certain circumstances, to fund $4.0 million of construction
costs. Any such amounts funded by PHI will amortize over 10 years at 7% per
annum and the resulting monthly amortization amounts will reduce PHI's monthly
lease payments for the first 10 years of the lease. As of March 31, 2001, the
Company paid $1.0 million of the commitment and paid an additional $1.0 million
in April 2001. The Company expects that it will pay the remaining $2.0 million
also in the second quarter of 2001.
The Company leases certain aircraft, facilities, and equipment used in its
operations. The related lease agreements, which include both non-cancelable and
month-to-month terms, generally provide for fixed monthly rentals and, for
certain real estate leases, renewal options. The Company has approximately
$128.9 million in aggregate lease commitments under operating leases of which
approximately $19.8 million is payable during the next twelve months.
Purchase Commitments -- At March 31, 2001, the Company had purchase commitments
to purchase property and equipment for approximately $1.4 million.
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5. INTEREST RATE SWAPS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133. SFAS No. 133 establishes new
accounting and reporting standards for derivative financial instruments and for
hedging activities. SFAS No. 133 requires the Company to measure all derivatives
at fair value and to recognize them in the balance sheet as an asset or
liability, depending on the Company's rights or obligations under the applicable
derivative contract.
The Company uses interest rate swaps to hedge its cash flow related to interest.
Effective January 1, 2001, the Company began accounting for its interest rate
swaps in accordance with SFAS No. 133, as amended, and has designated the
interest rate swaps as cash flow hedges. The cumulative effect of adopting SFAS
No. 133, as amended, on January 1, 2001 resulted in an increase of $38,000 to
other comprehensive income. As of March 31, 2001, the fair market value of these
interest rate swaps was a $0.9 million liability and is included in other
long-term liabilities on the balance sheet.
6. ACCUMULATED OTHER COMPREHENSIVE INCOME
Following is a summary of the Company's comprehensive income (loss) for the
quarters ended March 31, 2001 and 2000 (in thousands):
QUARTER ENDED
MARCH 31,
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2001 2000
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Net income (loss) $ 46 $ (1,428)
Other comprehensive income
(loss):
Cumulative effect of adopting
SFAS No. 133 38 --
Unrecognized loss on interest
rate swaps (935) --
-------- --------
Comprehensive income (loss) $ (851) $ (1,428)
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7. VALUATION ACCOUNTS
The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, current market conditions,
and other information. The allowance for doubtful accounts was $1.9 million and
$2.2 million at March 31, 2001 and December 31, 2000, respectively.
The Company also establishes valuation reserves related to obsolescent and
excess inventory. The inventory valuation reserves were $3.9 million and $3.7
million at March 31, 2001 and December 31, 2000, respectively.
8. SEVERANCE LIABILITY
At December 31, 2000, the Company recorded a severance liability of $1.1 million
for a plan of termination for approximately 120 employees. During the quarter
ended March 31, 2001, the Company paid approximately $1.0 million in severance
to terminated employees and related expenses. The Company recorded additional
expenses in selling, general, and administrative expenses of approximately $0.3
million during the quarter ended March 31, 2001 for additional employees added
to the plan and related expenses. The related severance liability at March 31,
2001 was approximately $0.4 million covering five employees and certain other
cost related to the termination of all employees under the plan. The Company
expects to pay the remaining severance liability over the next 24 months.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and the notes thereto as
well as the Company's Annual Report on Form 10-K for the year ended December 31,
2000.
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 Exchange
Act of 1934, 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", "goals", "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 and commitments required to acquire aircraft, environmental risks,
competition, government regulation, unionization, operating hazards, risks
related to international operations, the ability to obtain insurance, 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.
OVERVIEW
Total revenues and activity during the first quarter of 2001 showed improvement
over the first quarter of 2000, but increased costs in areas such as maintenance
and repair, employee compensation and severance, and ownership costs
(depreciation, insurance, aircraft lease, and interest), nearly completely
offset the improvements.
The Company's net profit for the quarter is attributable to gains in asset sales
that the Company pursued aggressively in the quarter to obtain needed cash to
fund operations and debt service and as part of a plan to adjust fleet size and
configuration to current business levels. Excluding gains from asset
dispositions, the Company had a pre-tax loss of $2.0 million, down from $2.4
million in the first quarter of last year.
In late 2000, the Board of Directors approved a plan to restore profitability
that included cost reductions, rate increases for helicopter services,
reductions in the work force, divestiture or discontinuance of marginal or
unprofitable business efforts, and disposition of redundant aircraft. Actions to
date include a 110 person reduction in force since September 30, 2000,
discontinuance of certain operations in Southeast Asia and the sales of aircraft
referred to above.
The Company also announced an increase in its published rates for helicopter
service, effective May 1, 2001 or upon expiration of existing customer
contracts. This increase followed an earlier increase announced by the Company,
which was effective January 1, 2001.
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RESULTS OF OPERATIONS
The following tables present certain non-financial operational statistics for
the quarters ended March 31, 2001 and 2000:
QUARTER ENDED
MARCH 31,
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2001 2000
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FLIGHT HOURS:
Domestic Oil and Gas and Other 36,208 35,472
International 5,693 6,187
Aeromedical 5,281 5,149
Other 141 85
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Total 47,323 46,893
========== ==========
AIRCRAFT OPERATED AT PERIOD END:
Domestic Oil and Gas and Other 196 204
International 28 30
Aeromedical 43 45
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Total 267 279
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QUARTER ENDED MARCH 31, 2001 COMPARED WITH QUARTER ENDED MARCH 31, 2000
Domestic Oil and Gas and Other
Domestic Oil & Gas and Other segment revenues increased 19.3% to $40.0 million
for the quarter ended March 31, 2001 compared to $33.5 million during the same
period in the prior year. A slight increase in domestic activity and rate
increases implemented in January 2001 contributed to the increase.
The Domestic Oil & Gas and Other segment had $0.7 million operating income for
the quarter compared to $0.5 million operating income for the same period in
2000, without taking into account unallocated overhead. Operating margin of 1.7%
for the first quarter compares to 1.6% for the same quarter in the prior year.
Increased repairs and maintenance, labor costs, fuel costs and ownership costs
mostly offset the benefit of increased revenues.
International
International segment revenues increased 2.1% to $5.8 million for the quarter
ended March 31, 2001 compared to $5.7 million during the same period in the
prior year. New activity and operations in Taiwan contributed to the increase,
but was partially offset by decreased activity and revenues in other
international areas including Angola.
The International segment had a $0.5 million operating loss for the quarter
compared to $0.2 million operating income for the same period in 2000, without
taking into account unallocated overhead. Operating margin of (7.9)% for the
first quarter compares to 3.1% for the same quarter in the prior year. Increased
repairs and maintenance, labor costs, fuel costs, and ownership costs, as well
as the lower activity in Angola, worsened profitability during the quarter.
Aeromedical
Aeromedical segment revenues increased 8.0% to $11.9 million for the quarter
ended March 31, 2001 compared to $11.1 million during the same period in the
prior year. The increase in revenues is primarily
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attributable to increased revenue in the Company's AirEvac operations in Arizona
and new operations in Grand Junction, Colorado.
The Aeromedical segment operating income was $0.9 million for the quarter
compared to less than $0.1 million for the same period in 2000, without taking
into account unallocated overhead. Operating margin was 7.7% for the quarter and
compares to 0.3% for the same quarter in 2000. The increase in operating income
is attributable to the increase in revenues.
Technical Services
Technical Services segment revenues for the quarter ended March 31, 2001 were
$5.5 million compared to $2.4 million in the prior year, an increase of 131.2%.
Technical Services operating income improved to $0.6 million for the quarter
compared to a less than $0.1 million loss for the same quarter in 2000, without
taking into account unallocated overhead. The operating margin was 11.5% in the
current year quarter and (1.3)% in the prior year quarter. The increases in
operating revenues and operating income were primarily attributable to ongoing
contracts that began in the second quarter of 2000 to provide maintenance to
certain military aircraft.
OTHER INCOME, NET
Other income, net, was $2.0 million for the quarter ended March 31, 2001 as
compared to other income, net, of $0.1 million for the prior year quarter. The
other income, net, for both periods was primarily attributable to net gains on
aircraft sales and other asset dispositions.
DIRECT EXPENSES
Direct expenses for the quarter ended March 31, 2001 increased by 18.8% to $58.8
million compared to $49.5 million in the same period in the prior year. The
increase was due to the increase in domestic oil and gas and Technical Services
activity and higher maintenance and repair, employee compensation, and ownership
costs.
Depreciation expense included in direct expenses for the quarter ended March 31,
2001 was $3.6 million compared to $2.9 million in the prior year. Total
depreciation expense was $4.0 million and $3.2 million for the same two periods,
respectively. The increase was attributable to depreciation on new aircraft and
refurbishments to older aircraft, along with the acceleration of deprecation on
certain assets that the Company will abandon when it moves to its new operating
facility in Lafayette, Louisiana.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses for the quarter ended March 31,
2001 were $4.7 million compared to $4.0 million in the same period in 2000.
Costs related to the severance of certain employees along with increased labor
and depreciation costs caused the increase.
INTEREST EXPENSE
Interest expense for the quarter ended March 31, 2001 increased $1.7 million to
$1.5 million. The increase is due primarily to higher debt levels in the current
quarter compared to the same quarter in the prior year. Increases in interest
rates charged by the Company's lenders also contributed to the increase.
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INCOME TAXES
Income tax expense for the quarter ended March 31, 2001 was less than $0.1
million compared to a $0.8 million benefit for the quarter ended March 31, 2000.
The effective tax-rates were 37.0% and 36.2% for the March 31, 2001 and 2000
quarters, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position as of March 31, 2001 was $4.1 million compared to
$0.9 million at December 31, 2000. Working capital increased $4.1 million from
$41.5 million at December 31, 2000 to $45.6 million. Net cash provided by
operating activities during the quarter ended March 31, 2001 was $1.7 million.
Net cash provided by operating activities along with $2.2 million of net
borrowings and $8.4 million of aircraft sales funded expenditures for property
and equipment and construction costs on the Company's new operating facility in
Lafayette, Louisiana.
Total long-term debt including capital lease obligations increased $2.2 million
since December 31, 2000 to $77.1 million at March 31, 2001. The current portion
of the long-term debt was $11.1 million at March 31, 2001. On January 31, 2001,
the revolving credit facility portion of the credit agreement converted to a
term loan. On April 30, 2001, the Company received an amendment to its loan
agreement with its lending group to extend commencement of the quarterly
principal payments on the converted loan to July 31, 2001. The Company is
currently negotiating a restatement of its loan agreement with its lending group
to, among other things, reinstate the revolving credit facility portion of the
credit agreement and extend the term of the credit agreement. The Company
currently does not have any additional credit capacity under its credit
facilities with its lending group.
The amount expended for the purchase and completion of aircraft improvements and
engines and other property and equipment was $8.2 million for the quarter ended
March 31, 2001, compared to $6.9 million in the first quarter of 2000. At March
31, 2001, the Company had purchase commitments to purchase property and
equipment for approximately $1.4 million.
The Company will lease a new principal operating facility for twenty years,
effective September 2001. Under the terms of the new facility lease, the Company
has committed to fund $4.0 million of construction costs. As of April 30, 2001,
the Company had funded $2.0 million of the commitment, and expects to fund the
remaining $2.0 million in May and June of 2001. Amounts funded by PHI will
amortize over 10 years at 7% per annum and the resulting monthly amortization
amounts will reduce PHI's monthly lease payments for the first 10 years of the
lease.
The Company believes that the combination of improved cash flow from operations
and planned aircraft sales will fund required debt principal and interest
payments and necessary capital expenditures during 2001. Capital expenditures,
including expenditures for aircraft fleet upgrade, will be limited and will
continue to be so until the Company improves its profitability and generates an
acceptable cash flow from operations.
ENVIRONMENTAL MATTERS
The Company currently has an aggregate estimated liability of $3.0 million for
environmental remediation costs that were probable and estimable at December 31,
2000. The Company recorded no additional provisions for the quarter ended March
31, 2001. However, the Company began conducting environmental site surveys at
its Lafayette facility in late 2000, and anticipates that it will also conduct
environmental site surveys at certain other facilities during 2001. As a result
of information available to date, it is expected that the results of these
surveys will require additional provisions for environmental remediation costs
in the remainder of 2001, but the Company is currently unable to estimate the
amount of additional provisions that may be necessary.
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UNION NEGOTIATIONS
On April 27, 2001, the Company and the Office & Professional Employees
International Union ("OPEIU") reached a tentative agreement on all terms and
conditions of a three-year collective bargaining agreement. The agreement is
subject to ratification by PHI's union employees.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133. SFAS No. 133 establishes new
accounting and reporting standards for derivative financial instruments and for
hedging activities. SFAS No. 133 requires the Company to measure all derivatives
at fair value and to recognize them in the balance sheet as an asset or
liability, depending on the Company's rights or obligations under the applicable
derivative contract.
The Company uses interest rate swaps to hedge its cash flow related to interest.
Effective January 1, 2001, the Company began accounting for its interest rate
swaps in accordance with SFAS No. 133, as amended and has designated the
interest rate swaps as cash flow hedges. The cumulative effect of adopting SFAS
No. 133, as amended on January 1, 2001 resulted in an increase of $38,000 to
other comprehensive income. As of March 31, 2001, the fair market value of these
interest rate swaps was a $0.9 million liability and is included in other
long-term liabilities on the balance sheet.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a result of a decline in market interest rates, the estimated fair value of
the Company's interest rate swaps declined to a liability of $0.9 million. There
were no other material changes to the Company's disclosures regarding
derivatives in its Form 10-K for the year ended December 31, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings primarily involving claims
for personal injury. The Company believes that the outcome of all such
proceedings, even if determined adversely, would not have a material adverse
effect on its consolidated financial statements.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended March 31,
2001.
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.
May 15, 2001 By: /s/ Carroll W. Suggs
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Carroll W. Suggs
Chairman of the Board and
Chief Executive Officer
May 15, 2001 By: /s/ Lance F. Bospflug
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Lance F. Bospflug
President
May 15, 2001 By: /s/ Michael J. McCann
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Michael J. McCann
Chief Financial Officer and Treasurer
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