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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended April 30, 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 No. 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 70001-5979
P.O. Box 578, Metaire, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 828-3323
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Voting Common Stock
Non-Voting Common Stock
(Title of Each Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. / /
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
Date Amount
July 14, 1997 $ 23,583,000
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Voting Common Stock .....2,800,886 shares outstanding as of July 15, 1997.
Non-Voting Common Stock .2,294,066 shares outstanding as of July 15, 1997.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement to be used in
connection with its 1997 Annual Meeting of Shareholders will be, upon
filing with the Commission, incorporated by reference into Part III of
this Form 10-K.
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PETROLEUM HELICOPTERS, INC.
INDEX - FORM 10-K
PART I
Item 1. Business ... . . . . ................................1
General. . . . . . . . . . . . . . . . . . . . . . . 1
Weather and Seasonal Aspects . . . . . . . . . . . . 2
Safety and Insurance . . . . . . . . . . . . . . . . 2
Government Regulation. . . . . . . . . . . . . . . . 3
Competition. . . . . . . . . . . . . . . . . . . . . 3
Employees. . . . . . . . . . . . . . . . . . . . . . 4
Customers. . . . . . . . . . . . . . . . . . . . . . 4
Environmental Matters. . . . . . . . . . . . . . . . 4
Item 2. Properties .................................. . . . .5
Item 3. Legal Proceedings.................................. .8
Item 4. Submission of Matters to a Vote of Security Holders. 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters. . . . . . . . . . . . . . . . . 9
Item 6. Selected Financial Data.............................10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . .10
Item 8. Financial Statements and Supplementary Data.........18
Petroleum Helicopters, Inc. and Consolidated
Subsidiaries:
Independent Auditors' Report . . . . . . . . . . .18
Consolidated Balance Sheets - April 30, 1997
and 1996.................................... .. . 19
Consolidated Statements of Earnings
- Three years ended April 30,1997. . . . . . . . .21
Consolidated Statements of Shareholders' Equity
- Three years ended April 30, 1997 . . . . . . . .22
Consolidated Statements of Cash Flows
- Three years ended April 30, 1997 . . . . . . . .23
Notes to Consolidated Financial Statements . . . .24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures. . . . . . . .36
PART III
Item 10. Directors and Executive Officers of the Registrant 36
Item 11. Executive Compensation .......... . . . . . . . . .36
Item 12. Security Ownership of Certain Beneficial Owners and
Management . .. . . . . . . . . . . . . . . . . . .37
Item 13. Certain Relationships and Related Transactions......37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . . .37
Signatures . ... . . . . . . . . . . . . . . . . . .41
PART I
Item 1. Business.
General
Petroleum Helicopters, Inc (the "Company" or "PHI") was incorporated
as a Delaware corporation in 1949 and was reincorporated as a Louisiana
corporation in 1994. Since its inception, the Company's primary business
has been to transport personnel, and to a lesser extent parts and
equipment, to, from, and among offshore platforms for customers engaged
in the oil and gas exploration, development, and production industry.
Today the Company maintains its position as the largest provider of
helicopter transportation services in the Gulf of Mexico, providing
approximately 49% of all the contracted aircraft in the Gulf. The
Company has 236 aircraft dedicated to this market. Additionally, the
Company is the fastest growing provider of aeromedical services in the
U.S. and international initiatives for serving the global oil and gas
industry have shown steady growth. The Company currently operates 314
aircraft worldwide and has 1,851 employees. During fiscal 1997, the
Company recorded the highest revenues in its history at $ 212 million.
During the most recent fiscal year, approximately 68% of the
Company's operating revenues were generated by oil and gas transportation
services in federal and state waters offshore of the States of Louisiana,
Texas, Alabama, Mississippi, New Jersey, and California ("Domestic Oil
and Gas Programs"). Approximately 70% and 67% of operating revenues were
derived from Domestic Oil and Gas Programs in fiscal 1996 and 1995,
respectively.
The Company's aeromedical transportation services for hospitals and
medical programs ("Aeromedical Services Programs") accounted for 14% of
operating revenues in fiscal 1997. Aeromedical Services Programs
generated 14% and 15% of operating revenues in fiscal 1996 and 1995,
respectively.
The Company's international business consists of offshore and
onshore helicopter transportation services and fixed wing services to the
global oil and gas industry ("International Oil and Gas Programs").
International Oil and Gas Programs contributed 11% of operating revenues
in fiscal 1997, as compared to 9% and 10% in fiscal 1996 and 1995,
respectively. The Company operates in several countries which are
described under Item 1. "Facilities." Operations in foreign countries
generally are subject to various risks attendant to doing business
outside the United States, including risks of war, general strikes, civil
disturbances, guerilla activity, currency fluctuations and devaluations
and governmental activities that may limit or disrupt markets, restrict
payments or the movement of funds or result in the deprivation of
contract rights or the taking of property without fair compensation. No
prediction can be make as to what foreign governmental regulations may
be enacted in the future that could be applicable to helicopter
operations.
Aircraft maintenance services provided to outside parties
("Technical Services Programs") constituted the majority of the remaining
7%, 7%, and 8% in operating revenues in fiscal 1997, 1996, and 1995,
respectively.
Demand for the Company's helicopter services is strongly influenced
by oil and gas exploration, development, and production activities.
These activities are greatly affected by federal leasing policies and
regulations and by oil and gas prices. The Company's helicopters provide
a safe, reliable, efficient and fast method of transportation under a
broad range of operational and environmental conditions, especially
offshore and in remote areas. All of the Company's eighteen principal
types of helicopters are available under a variety of contractual
arrangements.
The Company maintains master operating agreements with each of its
major domestic and international oil and gas industry customers, which
set forth general rights and duties of the Company and the customer.
Although the Company is a party to a number of oil and gas industry
contracts with a term of one year or more, services are generally
provided pursuant to monthly extensions of these operating agreements,
and prices are fixed for each contract extension. Aeromedical contracts
are generally entered into for longer terms.
Charges under operating agreements are generally based on fixed
monthly fees and additional hourly charges for actual flight time.
Because the Company is compensated in part by flight hour, prolonged
adverse weather conditions that result in reduced flight hours can
adversely affect results of operations. See "Weather and Seasonal
Aspects."
Weather and Seasonal Aspects
Poor visibility, high winds and heavy precipitation can affect the
safe use of helicopters and result in a reduced number of flight hours.
Because a significant portion of the Company's revenues is dependent on
actual flight hours and a substantial portion of the Company's costs is
fixed, prolonged periods of adverse weather can materially and adversely
affect the Company's operating revenues and net earnings.
In the Gulf of Mexico, the months of December through February have
more days of adverse weather conditions and fewer hours of daylight than
the other months of the year. Consequently, flight hours are generally
lower at these times, which typically results in a reduction in revenues
from operations during those months.
The Company currently operates 68 aircraft equipped to fly pursuant
to instrument flight rules ("IFR") in the Gulf of Mexico, which enables
these aircraft, when manned by IFR rated pilots and co-pilots, to operate
at times when poor visibility prevents flights by aircraft that can fly
only by visual flight rules ("VFR"). Poor visibility is the most common
of the adverse weather conditions that affects the Company's operations.
Safety and Insurance
The operation of helicopters inherently involves a high degree of
risk. Hazards, such as aircraft accidents, collisions, fire and adverse
weather, are inherent in the business of providing helicopter services
and may result in losses of equipment and revenues. The Company's safety
record is very favorable in comparison to the record for all United
States operators as reflected in industry publications.
The Company is subject to the federal Occupational Safety and Health
Act ("OSHA") and similar state statutes. The Company has an extensive
safety and health program and employs a safety staff, including a
certified safety professional in the field of comprehensive practice, who
is also a registered environmental manager, a certified environmental
auditor, and a certified environmental quality administrator. The
primary functions of the safety staff are to develop Company policies
that meet or exceed the safety standards set by OSHA, train Company
personnel and make daily inspections of safety procedures to insure their
compliance with Company policies on safety. All personnel are required
to attend safety training meetings at which the importance of full
compliance with safety procedures is emphasized. The Company believes
that it meets or exceeds all OSHA requirements and that its operations
do not expose its employees to unusual health hazards.
The Company maintains hull and liability insurance on its aircraft,
which generally insures the Company against physical loss of, or damage
to, its helicopters and against certain legal liabilities to others. In
addition, the Company carries war risk, expropriation, confiscation and
nationalization insurance for its aircraft involved in international
operations. In some instances, the Company is covered by indemnity
agreements from oil companies, hospitals, and medical programs in lieu
of, or in addition to, its insurance. The Company's helicopters are not
insured for loss of use. While the Company believes it is adequately
covered by insurance and indemnification arrangements, the loss,
expropriation or confiscation of, or severe damage to, a material number
of its helicopters could adversely affect revenues and profits.
Government Regulation
As a commercial operator of helicopters, the Company's flight and
maintenance operations are subject to regulation by the Federal Aviation
Administration (the "FAA") pursuant to the Federal Aviation Act of 1958
(the "Federal Aviation Act", as amended). The FAA has authority to
exercise jurisdiction over personnel, aircraft, ground facilities and
other aspects of the Company's business.
The Company transports personnel and property in its helicopters
pursuant to an Air Taxi Certificate granted by the FAA under Part 135 of
the Federal Aviation Regulations. This certificate contains operating
specifications that allows the Company to conduct its present operations
but are subject to amendment, suspension and revocation in accordance
with procedures set forth in the Federal Aviation Act. The Company is
not required to file tariffs showing rates, fares and other charges with
the FAA. The FAA's regulations, as currently in effect, also require
that at least 75% of the Company's voting securities be owned or
controlled by citizens of the United States or one of its possessions,
and that the president and at least two-thirds of the directors of the
Company are United States citizens. The Company's president and all of
its directors are United States citizens and its organizational documents
provide for the automatic reduction in voting power of each share of
voting common stock owned or controlled by a non-United States citizen
if necessary to comply with these regulations.
The National Transportation Safety Board is authorized to
investigate aircraft accidents and to recommend improved safety
standards.
The Company is also subject to the Communications Act of 1934
because of its ownership and operation of a radio communications flight
following network throughout the Gulf of Mexico and off the coast of
California.
Numerous federal statutes and rules regulate the offshore operations
of the Company and the Company's customers, pursuant to which the federal
government has the ability to suspend, curtail or modify certain or all
offshore operations. A suspension or substantial curtailment of offshore
oil and gas operations for any prolonged period would have an immediate
and materially adverse effect on the Company. A substantial modification
of current offshore operations could adversely affect the economics of
such operations and result in reduced demand for helicopter services.
Competition
The Company's business is highly competitive. Many of the Company's
contracts are awarded after competitive bidding. The principal aspects
of competition are price, reliability, availability, safety, and
service.
The Company believes it operates one of the largest commercial
helicopter fleets in the world. At April 30, 1997, the Company operated
314 aircraft. The Company operated 277 aircraft in the United States,
of which 236 were operated in Domestic Oil and Gas Programs, and 41 were
operated in the Company's Aeromedical Services Programs. Thirty-seven
aircraft were operated internationally.
The Company is the largest operator of helicopters in the Gulf of
Mexico and believes there are approximately five competitors operating
in the Gulf of Mexico market. Certain of the Company's customers and
potential customers in the oil industry operate their own helicopter
fleets; however, oil companies traditionally contract for most specialty
services associated with offshore operations, including helicopter
services.
The Aeromedical market is becoming increasingly competitive and is
experiencing some hospital program consolidations. However, the Company
expects continued growth in this market.
The International market remains strong with significant growth
opportunity. This market remains very competitive.
Employees
As of April 30, 1997, the Company employed a total of 1,851 people.
The Company believes its employee relations to be satisfactory, and it
has never experienced a work stoppage. Currently, none of the Company's
employees are covered by union contracts.
On Monday, June 2, 1997, the Company was notified by the National
Mediation Board that the Office and Professionals Employees International
Union (OPEIU) filed an application to represent flight deck crew members
(helicopter pilots) of PHI. Should the Company's domestic pilots elect
to be represented by a union, the Company believes that this would place
the Company at a competitive disadvantage which could have a material
adverse effect on the Company's revenues and results of operations.
Customers
The Company's principal customers are major oil companies. The
Company also serves independent exploration and production concerns, oil
and gas service companies, hospitals and medical programs, and government
agencies. The Company's largest customer, Shell Oil Company, accounted
for 15%, 14%, and 14% of the Company's operating revenues in fiscal 1997,
1996, and 1995, respectively. The Company's five largest customers
accounted for 32%, 34%, and 33% of operating revenues in fiscal 1997,
1996, and 1995, respectively.
Division managers of customer oil companies, who are responsible for
a majority of contract services in connection with offshore oil
activities, generally contract for helicopter services. Many oil
companies also employ directors of aviation to evaluate the capabilities
and safety performance of companies providing helicopter services and
make recommendations to division managers. Company management and
operations specialists are in regular contact with division managers and
directors of aviation in connection with both existing service contracts
and potential new business.
Environmental Matters
The Company is subject to federal, state, and local environmental
laws and regulations that impose limitations on the discharge of
pollutants into the environment and establish standards for the
treatment, storage, and disposal of toxic and hazardous wastes.
The Company believes that compliance with federal, state, and local
environmental laws and regulations will not have a material effect upon
the capital expenditures, earnings and competitive position of the
Company. The Company has established reserves for environmental costs,
which are discussed under Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Environmental Matters.
Item 2. Properties
Fleet Utilization
As of April 30, 1997, 84% of the Company's aircraft were actively
assigned as compared with 86% and 84% as of April 30, 1996 and 1995,
respectively.
Equipment
Certain information as of April 30, 1997 regarding the Company's
owned and leased fleet is set forth in the following table:
Number Cruise Appr.
Manufacturer Type in Fleet Engine Passengers Speed Range
(mph) (miles)
- ------------ -------- ------ ---------- ---------- ----- ------
Bell 206B-III 25 Turbine 4 120 300
206L-I 51 Turbine 6 130 310
206L-III 66 Turbine 6 130 310
206L-IV 4 Turbine 6 130 310
407 8 Turbine 6 144 420
212(1) 11 Twin Turbine 13 115 300
214ST(1) 6 Twin Turbine 18 155 450
230(1) 1 Twin Turbine 8 160 370
222 1 Twin Turbine 8 160 370
412(1) 24 Twin Turbine 13 135 335
Boelkow BK-117 14 Twin Turbine 6 135 255
BO-105 36 Twin Turbine 4 135 270
Aerospatiale
AS355F/Tw Star 1 Twin Turbine 5 135 385
AS350 B2 9 Turbine 5 140 385
SA315B 2 Turbine 5 115 317
Sikorsky S-76(1) 18 Twin Turbine 12 150 400
McDonnell-
Douglas MD900 2 Twin Turbine 6 155 336
MIL Design MIL-8 MTV(1) 2 Twin Turbine 28 140 310
---
Total Helicopters 281
---
Beechcraft King Air 200(1) 3 Turboprop 8 300 1,380
Sabreliner 80SC(1) 1 Twin Turbo Jet 8 495 1,380
Hawker HS125-700(1) 1 Twin Turbo Jet 8 483 2,185
Sidley
LET L410(1) 1 Turboprop 15 215 620
---
Total Fixed Wing 6
---
Total Aircraft 287
===
______________
(1) Equipped to fly under instrument flight rules
("IFR"). All other types listed can only fly under visual
flight rules ("VFR"). See Item 1. "Business - Weather and
Seasonal Aspects."
The following tables set forth additional information regarding the
helicopters owned and leased by the Company (in thousands, except the
number of helicopters):
Number of
Company Owned Net Book
Helicopters Cost Value
------------- ---------- -----------
213 $ 191,951 $ 96,297(1)
Number of Total Rents
Company Leased Over Life Remaining
Helicopters of Lease Rents
-------------- ------------ -----------
68 $ 103,346 $ 77,269
_____________
(1) Information regarding the Company's depreciation policy is set forth
under Item 8. "Financial Statements and Supplementary Data - Notes
to Consolidated Financial Statements, Note 1."
____________________
The Company operates twenty-seven aircraft that are owned or leased
by customers which are not reflected in the foregoing tables. The
Company also owns six fixed-wing aircraft, four of which are currently
under full or part-time contract to customers.
As of April 30, 1997, the Company's commitment for principal
payments and lease payments for its present helicopter fleet averages $
15.7 million each year for the next five years and an aggregate of $ 61.1
million thereafter.
Under most leases the Company is responsible for all insurance,
taxes and maintenance expenses associated with the helicopters, and
within certain limitations, the Company can either substitute equipment
or terminate the leases in the event the leased equipment becomes
obsolete or is no longer suited for the Company's needs. All of the
Company's leases are considered operating leases for accounting and tax
purposes.
The Company also maintains an inventory of fuel and an inventory of
spare parts and components for use in the repair and maintenance of the
Company's fleet. This inventory had a book value of approximately $ 30.2
million on April 30, 1997. The Company is a distributor or dealer for
many of these parts and components, thereby allowing it to realize
significant cost savings for its purchases.
Equipment on Order
Subsequent to year end, the Company purchased one helicopter for an
aggregate of $ 2.2 million. The Company plans to purchase an additional
seventeen helicopters in fiscal 1998 for a total purchase price estimated
to be $ 22.6 million. These plans may be modified depending upon actual
customer commitments.
Equipment Sales
The Company sells aircraft whenever they (i) become obsolete, (ii)
do not fit into future fleet plans, or (iii) are surplus to the Company's
needs.
The Company typically sells its aircraft for more than their book
value. The Company cannot predict, however, whether these results will
continue or whether such prices would be realized if the Company were to
sell a large number of helicopters in a short period of time.
Facilities
The Company currently leases its executive office space in Metairie,
Louisiana (Metropolitan New Orleans). The lease covers approximately
8,107 square feet and expires on July 31, 2000.
The Company's principal operating facility is located on property
leased from The Lafayette Airport Commission at the Lafayette Regional
Airport in Lafayette, Louisiana. The lease covers approximately 28.2
acres and 17 buildings, with an aggregate of approximately 135,000 square
feet, housing the Company's main operational and administrative offices
and the main repair and maintenance facility. The Company has extended
this lease until 2006.
The Company also leases property for 17 additional bases to service
the oil and gas industry throughout the Gulf of Mexico and one base in
California. Those bases that represent a significant investment by the
Company in leasehold improvements or which are particularly important to
the Company's operations are:
A.Morgan City Base (Louisiana) - containing approximately 53 acres,
is under a lease that expires June 30, 1998. The Company has built a
variety of operational and maintenance facilities on this property,
including landing pads for 46 helicopters. The Company believes that
this facility is the largest commercial heliport in the world. The
Company plans to renegotiate the lease prior to its expiration.
B.Intracoastal City Base (Louisiana) - containing approximately 22.5
acres under several leases in Vermilion Parish, all with options to
extend through July 31, 2001. The Company has built a variety of
operational and maintenance facilities on this property, including
landing pads for 45 helicopters.
C.Houma-Terrebonne Airport (Louisiana) - containing approximately
13.6 acres and certain buildings leased under four leases from the
Houma-Terrebonne Airport Commission, which have options allowing
extension of the leases through 1999. The Company plans to renegotiate
the leases prior to their expiration. The Company has landing pads for
30 helicopters on this property.
D.Sabine Pass (Texas) - containing approximately 36 acres under two
leases, one of which, for 1.6 acres, will expire in July 1998 and will
be renegotiated at that time, and the other of which, for 34.4 acres,
will expire October 31, 1997 with an option to extend through October 31,
2011. The Company has built a variety of operational and maintenance
facilities on this property, including landing pads for 24 helicopters.
E.New Orleans (Louisiana) - containing approximately 1.5 acres, is
under a lease through April 30, 2004. The Company has made significant
leasehold improvements on this property, including landing pads for 14
helicopters.
F.Venice (Louisiana) - containing approximately 8 acres, is under a
lease expiring March 31, 1998. The original lease was executed April 1,
1973 for one year and has been extended annually since that time. The
location has landing pads for 27 helicopters.
G.Fourchon (Louisiana) - containing approximately 8 acres, is under
original lease expiring April 30, 2006. The property has 10 landing
pads.
The Company's other operations-related bases in the United States
are located along the Gulf of Mexico in Louisiana at Cameron and Lake
Charles; in Texas at Brazoria, Corpus Christi, Galveston, Port O'Connor
and Rockport; in Mississippi at Pascagoula; in New Jersey at Edison; and
in California at Santa Barbara.
The Company operates from offshore platforms which are provided
without charge by the owners of the platforms, although in certain
instances the Company is required to indemnify the owners against loss
in connection with the Company's use thereof.
Bases of operations for the Company's foreign and aeromedical
operations are generally furnished by the customer. The Company's
international operations are currently conducted in Angola, Antarctica,
Colombia, French Guiana, Kazakhstan, Peru, Philippines, Thailand,
Venezuela, and Zaire. Aeromedical operations are currently conducted in
Arizona, Arkansas, California, Florida, Illinois, Kentucky, Louisiana,
Mississippi, North Dakota, Ohio, and Wisconsin.
Item 3. Legal Proceedings
The Company is not a party to, and its property is not the subject
of, any material pending legal proceedings, other than ordinary routine
litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended April 30, 1997.
Item 4.(a) Executive officers of the registrant
Certain information about the executive officers of PHI is set forth
in the following table and accompanying text:
Name Age Position
---- --- --------
Carroll W. Suggs(1) 58 Chairman of the Board of
Directors, President
and Chief Executive Officer
Ben Schrick(2) 56 Executive Vice President and
Chief Operating Officer
Robert D. Cummiskey, Jr.(3) 55 Vice President - Risk
Management and Secretary
Edward Gatza (4) 54 Vice President and Director of
Operations
David P. Milling(5) 53 Vice President and General
Manager of IHTI
William P. Sorenson(6) 47 Vice President - Aeromedical
Services
Harold L. Summers(7) 59 Vice President - Engineering/
Quality Assurance
John H. Untereker(8) 47 Vice President, Chief
Financial Officer and
Treasurer
Gary J. Weber(9) 49 Vice President -
International Operations
----------------------------------------
(1) Mrs. Suggs became Chairman of the Board in March 1990, Chief
Executive Officer in July 1992, and President in October 1994.
(2) Mr. Schrick was appointed Executive Vice President in July 1996
and has served as Chief Operating Officer since September 1994, as Vice
President and General Manager since January 1993 and as Vice President
of Maintenance since 1989. Since 1984 Mr. Schrick has also served as
Vice President of Evangeline Airmotive, Inc., a wholly-owned subsidiary.
(3) Mr. Cummiskey has served as Secretary since June 1992 and as
Vice President - Risk Management since October 1991. Prior to that time,
he was a Vice President/Account Executive of Johnson & Higgins (insurance
brokers and consultants).
(4) Mr. Gatza was named Vice President and Director of Operations in
May 1997 after serving as Vice President - Human Resources since
September 1994. Prior to this time he served as Director of Human
Resources.
(5) Mr. Milling has served as Vice President since September 1989
and General Manager of International Helicopter Transport, Inc. (IHTI),
a wholly-owned subsidiary, since 1988.
(6) Mr. Sorenson has served as Vice President - Aeromedical Services
since November 30, 1995, after serving as Director of Aeromedical
Services since August 22, 1994. From 1990 until 1994, Mr. Sorenson
managed the Company's Aeromedical Program.
(7) Mr. Summers has served as Vice President - Engineering/Quality
Assurance since 1994. Prior to this time, he served as Vice President -
Materials.
(8) Mr. Untereker has served as Vice President, Chief Financial
Officer, and Treasurer since July 1992. Prior to that time, Mr.
Untereker served in senior management positions at Lend Lease Trucks,
Inc. and NL Industries, Inc. Mr. Untereker is a Certified Public
Accountant.
(9) Mr. Weber has served as Vice President - International
Operations since September 1989.
Part II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters
The Company's voting and non-voting common stock trades on The
NASDAQ Stock Market ("NASDAQ Small Cap Issuers") under the symbols PHEL
and PHELK, respectively. The following table sets forth the range of
high and low per share bid prices, as reported by NASDAQ, and dividend
information for the Company's voting and non-voting common stock for the
fiscal quarters indicated.
Voting Non-Voting
Common Stock Common Stock Dividends
Fiscal Quarter High Low High Low Per Share
-------------- ---- --- ---- --- ---------
1996-97
1st Quarter 17 13 3/4 16 13 1/2 .05
2nd Quarter 18 1/8 15 17 1/2 14 3/4 .05
3rd Quarter 19 17 17 3/4 15 3/4 .05
4th Quarter 20 17 1/4 18 1/4 16 .05
1995-96
1st Quarter 11 1/2 9 11 8 1/2 .02
2nd Quarter 11 1/2 9 1/4 11 8 3/4 .05
3rd Quarter 14 1/4 10 1/4 14 1/4 10 1/4 .05
4th Quarter 15 12 3/4 15 12 1/2 .05
The declaration and payment of dividends is at the discretion of the
Board of Directors, which evaluates the Company's dividend policy
quarterly. Future dividends are dependent upon, among other things, the
Company's results of operations, financial condition, cash requirements,
future prospects and other factors deemed relevant by the Board. A
credit agreement to which the Company is a party generally restricts the
declaration or payment of dividends to 20% of net earnings for the
previous four fiscal quarters. See Item 8. "Financial Statements and
Supplementary Data - Notes to Consolidated Financial Statements, Note 2."
As of July 15, 1997, there were approximately 1,133 holders of
record of the Company's voting common stock and 115 holders of record of
the Company's non-voting common stock.
Item 6. Selected Financial Data
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Thousands of Dollars, Except Per Share Amounts)
Year Ended April 30:
Operating revenues $ 211,663 $ 185,865 $ 174,397 $ 178,697 $ 177,316
Net earnings $ 6,470 $ 6,466 $ 5,182 $ 3,333 $ 2,049
Net earnings
per share $ 1.27 $ 1.28 $ .96 $ .61 $ .37
Cash dividends
declared per share $ .20 $ .17 $ .06 $ - $ .01
At April 30:
Total assets $ 196,631 $ 161,315 $ 147,108 $ 146,312 $ 141,100
Long-term debt $ 57,592 $ 28,522 $ 27,060 $ 31,849 $ 30,950
Working capital $ 41,247 $ 26,543 $ 29,809 $ 31,601 $ 31,419
Shareholders'equity $ 87,416 $ 81,401 $ 75,707 $ 75,309 $ 71,976
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion of the Company's Results of Operations and
Analysis of Financial Condition should be read in conjunction with the
Company's description of business and consolidated financial statements
and the notes thereto included elsewhere in this Form 10-K.
Results of Operations
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 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 ongoing contracts 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 upfront costs in the event of early termination.
The Company's technical service contracts are generally provided on
an actual cost plus negotiated mark-up basis.
The following table reflects the distribution of the Company's operating
revenues by market area:
Years Ended April 30
( in millions, except %'s)
1997 1996 1995
----------- ----------- -----------
$ % $ % $ %
----- -- ----- -- ----- --
Domestic Oil & Gas. 144.8 68 130.6 70 117.2 67
Aeromedical . . . . 30.3 14 26.7 14 25.3 15
International. . . . . . 22.4 11 16.3 9 17.7 10
Technical Services
and Other. . . . . .. . 14.2 7 12.3 7 14.2 8
Domestic Oil and Gas
Demand for the Company's Domestic Oil and Gas Programs is influenced
by offshore oil and gas exploration, development, and production
activities in the areas in which it operates, which in turn is affected
primarily by oil and gas prices. The following table reflects the three
year trend in the offshore drilling rig count compared to the Company's
domestic oil and gas revenues:
April April April
1997 1996 1995
---- ---- ----
Active Rigs in U.S. Gulf of Mexico 200 135 123
Domestic Oil and Gas Revenues
(millions) $ 144.8 $ 130.6 $ 117.2
Better economic conditions in the Gulf of Mexico resulted in
substantial increases in oil and gas activity during fiscal 1997. Active
rig counts increased to their highest level in six years. These factors
resulted in an 11% increase in revenues and an 10% increase in domestic
flight hours. Revenues and domestic flight hours rose to $ 144.8 million
and 178,262 in fiscal 1997 from $ 130.6 million and 162,377 in fiscal
1996, respectively. The Company's domestic market share decreased to 49%
from 51% in the prior year due primarily to a contract which ended during
the fourth quarter of fiscal 1997, which aggregated $ 5.4 million in
revenues during the initial nine months of the year. The Company has
redeployed the assets and personnel related to this contract in other
activities thereby minimizing the impact on operations.
Activity levels in 1996 were substantially higher than in 1995.
Revenues and domestic flight hours rose to $ 130.6 million and 162,377
in fiscal 1996 from $ 117.2 million and 150,850 in fiscal 1995,
respectively. The $ 13.4 million revenue increase was related to the
surge of activity in the Gulf of Mexico. Active rig counts were at their
highest level in 5 years and the Company's market share was up to 51%.
Management believes that these positive trends will continue and are
in large part attributable to the general market condition in the Gulf
of Mexico.
Aeromedical
Fiscal 1997 also saw positive trends in the Company's Aeromedical
Service Programs. Aeromedical revenues rose $ 3.6 million, or 13%, to
$ 30.3 million. The increase resulted from the addition of four new
programs which utilize four aircraft, and the utilization of three
additional aircraft in existing contracts, bringing the total aeromedical
contracts and aircraft to 16 and 41, respectively. Fiscal 1996 revenues
increased $ 1.4 million, or 6%, over fiscal 1995 due to the addition of
two new contracts and five additional aircraft.
International
International revenues increased by $ 6.1 million, or 37%, to $ 22.4
million. International flight hours increased 28% to 27,323 due
primarily to increased oil and gas exploration activity. The flight hour
increase was produced primarily by the addition of one new contract which
utilizes four aircraft and the utilization of four additional aircraft
on existing contracts. This new contract is seasonal in nature with
operations limited to October through February. During fiscal 1996,
revenues decreased $ 1.4 million, or 8%, over the previous year levels
primarily due to the cessation of one non-recurring contract with high
fixed rates.
Technical Services and Other
Technical Services and other revenues increased $ 1.9 million in
fiscal 1997, to $ 14.2 million, from $ 12.3 million. In fiscal 1996,
Technical Services and other revenues declined to $ 12.3 million from $
14.2 million.
Direct Expenses
The following table highlights certain critical operating factors
which are helpful in analyzing direct expense relationships:
1997 1996 1995
---- ---- ----
Number of helicopters
owned/leased/operated at year end 308 261 254
Fleet utilization . . . . . . . . . 84% 86% 84%
Number of employees at year end 1,851 1,677 1,649
Operating margin. . . . . . . . . 13% 13% 12%
____________________
1997 compared to 1996
Direct expenses increased $ 21.9 million, or 13%, to $ 184.5 million
primarily as a result of increased activity levels. Direct expenses as
a percentage of operating revenues remained relatively constant with the
Company maintaining an operating margin of 13% in fiscal 1997 and 1996.
During the fourth quarter of fiscal 1997, direct expenses as a
percentage of operating revenues were 91%, compared to 86% and 87% in the
prior year's fourth quarter and fiscal year 1997, respectively. The
increase in the fourth quarter of fiscal 1997, as compared to the other
periods, occurred due to higher than expected maintenance costs.
Management believes that this occurred due to the significant increase
in fleet size and hopes that operating margins will return to their
previous trends.
Human resource costs, including salaries and benefits, increased $
6.1 million, or 9%, to $ 72.6 million. The increase was primarily
related to the increase in the number of employees and employee overtime
which is needed to support increased flight activity levels. This
increase was partially offset by a decrease in the Company's gain sharing
program contribution. Under this program, the Company expensed $ 1.5
million in 1997 as compared to $ 2.5 million in 1996. The gain sharing
program enables all employees to earn up to three weeks additional pay
based on the Company's performance against a pre-tax income target.
Helicopter costs, including depreciation, fuel, insurance, and spare
parts usage, increased by $ 9.7 million, or 13%, to $ 83 million as PHI's
fleet increased substantially to accommodate expansion. Depreciation
expense increased $ 1.0 million as the Company incurred $ 40.8 million
in capital expenditures in fiscal 1997, which included twenty-eight
additional aircraft. Fuel costs were $ 2.2 million higher due to an
increase in the average cost per gallon of aircraft fuel coupled with an
increase in flight hours. Helicopter insurance and spare parts usage
increased by $ 1.2 million and $ 4.9 million, respectively, primarily
as a result of the expanded fleet and an increase in flight and flight
related activity.
Other expenses and Technical Services cost of goods sold increased
$ 4.2 million and $ 1.9 million, respectively. The $ 4.2 million
increase in "other expenses" is consistent with increased flight activity
levels.
1996 compared to 1995
Direct expenses increased $ 8.5 million, or 6%, in fiscal 1996 as
compared to fiscal 1995. Human resource costs, including salaries and
benefits, increased $ 1.8 million, or 3%, due primarily to increased
flight activity. Additionally, the Company increased its gain sharing
contribution by $ 1.1 million. The Company expensed $ 2.5 million in
1996 related to this program. Helicopter insurance declined $ 0.5
million primarily as a result of accident free years in 1996 and 1995
which reduced premiums. Spare parts usage increased by $ 4.4 million in
fiscal 1996, due primarily to the increase in flight and flight related
activity in the Company's three major market areas. In addition, a $
1.5 million environmental provision was recorded in fiscal 1996 versus
$ 0.2 million in fiscal 1995. The Company's safety program, implemented
in 1992, combined with its health awareness program have contributed
significantly to reducing helicopter and employee insurance costs and
worker's compensation claims. The Company intends to continue these
programs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal 1997
increased $ 1.7 million, or 15%, primarily ascribable to the information
system upgrade programs which commenced in 1996 and will continue through
fiscal 1998.
In fiscal 1996, these expenses increased 17%, or $ 1.6 million over
fiscal 1995, primarily as a result of costs associated with information
system upgrades. The Company is upgrading its workorder system,
inventory management system, and various other systems to remain a leader
in technological advances in the industry. Legal and accounting fees
decreased $ 0.6 million to $ 0.9 million in fiscal 1996 as compared to
the prior year. The decrease was primarily related to costs incurred in
fiscal 1995 regarding the reincorporation of the Company from Delaware
to Louisiana and the investigation and preliminary negotiation of
strategic acquisitions which were either not successful or which the
Company ultimately determined not to pursue.
Interest Expense
The Company's borrowing cost increased in fiscal 1997. The weighted
average interest rate paid decreased by 0.5% to 7.5% from 8.0%. However,
this rate decline was offset by higher average borrowings in fiscal 1997
as the Company borrowed additional funds to purchase twenty-eight
helicopters during the year.
The Company's borrowing cost remained constant in fiscal 1996 as
compared to fiscal 1995. The weighted average interest rate paid
decreased slightly by 0.4% to 8.0% from 8.4%. The lower interest rate
was offset by higher average borrowings in the fiscal period.
Taxes
PHI's effective tax rate was 40%, 39%, and 41%, respectively, in
1997, 1996, and 1995. Current tax expense as a percent of pre-tax
earnings for the same fiscal periods was 10%, 11%, and 18%, respectively.
The Company anticipates that its effective tax rate will remain at these
rates. See Item 8. "Financial Statements and Supplemental Data - Notes
to Consolidated Financial Statements, Note 3."
Earnings
Earnings per share for the fiscal year ended April 30, 1997 declined
slightly as compared to the prior year period. The higher selling,
general, administrative and interest expenses explained above caused the
Company's earnings to remain essentially constant. In addition, during
fiscal 1997 the Company sold its investment in Irish Helicopters Limited
based in Dublin, Ireland. This resulted in a $ 0.7 million writedown in
the third quarter of fiscal 1997. The Company's revenue expansion and
accountability programs helped to produce period to period increases in
net earnings of 25% and 55%, respectively, for the 1996 and 1995 fiscal
years.
The improved results in 1996 were directly related to better
economic conditions in the Gulf of Mexico and expansion and growth in the
aeromedical and international markets. The Company was able to improve
margins in both 1996 and 1995 by lowering the rate of increase of direct
expenses. Direct expenses as a percentage of operating revenues decreased
from 88% to 87% in fiscal 1996.
The Company plans to continue its programs of diversification and
accountability and will continue to search for opportunities to enhance
earnings and shareholder value.
Liquidity and Capital Resources
The Company's 1997 year end cash position improved to $ 2.4 million
from $ 1.9 million at fiscal year end 1996.
Working capital in fiscal 1997 increased $ 14.7 million from $ 26.5
million in 1996 to $ 41.2 million. The increase is due primarily to the
increase in cash on hand, an overall increase in accounts receivable and
inventory, and a decline in the current portion of long-term debt. The
Company renegotiated the terms of its credit facility reducing its
quarterly payments from $ 2.0 million to $ 1.0 million.
The Company's primary credit facility consists of a $ 40 million
revolving credit facility available through October 31, 1998 (the
"revolving loan") and a capital loan facility of up to $ 40 million
(subject to compliance with certain collateral coverage ratios) (the
"term loan"). The term loan is payable in fixed quarterly principal
payments of $ 1.0 million until maturity on October 31, 2003. The
secured term and revolving loan agreement permit both prime rate based
borrowings and London InterBank Offered Rate ("LIBOR") borrowings plus
a floating spread. The spread for LIBOR borrowings will float up or down
based on the Company's performance as determined by a leverage ratio.
The spread can range from 1.0% to 1.5% above LIBOR.
Total long-term debt increased $ 29.1 million in fiscal 1997 to $
57.6 million at year end. The Company's current debt obligations for
fiscal 1998 total $ 4.9 million, due in equal quarterly installments,
which the Company intends to pay with cash flow from operations. As of
June 30, 1997 the Company had $ 22 million of credit capacity available
under its term and revolving loans, reflecting the purchase, subsequent
to year end, of one aircraft for $ 2.2 million. In addition, the Company
plans to purchase a total of seventeen helicopters in fiscal 1998 for a
purchase price estimated to be $ 22.6 million. These planned purchases
are largely discretionary and subject to the Company obtaining customer
commitments. They can be adjusted by the Company based on operating
results or other factors. Funds available under the Company's credit
facility will be utilized to finance these purchases. At April 30, 1997,
the Company was in compliance with the provisions of its loan agreements.
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.
Cash generated from operating activities in 1997 decreased to $ 8.5
million during the current year, compared to $ 19.3 million and $ 14.7
million in fiscal 1996 and 1995, respectively. The $ 10.8 million
decrease in fiscal 1997 is primarily attributable to the increase in
accounts receivable of $ 6.8 million and increased inventory of $ 4.3
million. Days sales outstanding decreased to 50 days in fiscal 1997 from
55 days in fiscal 1996; however, receivables significantly increased.
Cash used in investing activities increased to $ 32.3 million in
fiscal 1997, up from $ 21 million in fiscal 1996. In response to market
demand, the Company purchased twenty-eight aircraft in fiscal 1997 for
$ 24.5 million as compared to nineteen aircraft for $ 15.2 million in
fiscal 1996. During fiscal 1997, the Company also used $ 13.5 million
primarily for aircraft capital improvements and approximately $ 2.8
million to fund the purchase of new data processing equipment. Also
during fiscal 1997, the Company sold nine aircraft which no longer fit
into the Company's future fleet plans and disposed of its interest in
Irish Helicopters Limited. These sales generated proceeds of
approximately $ 7.5 million.
Cash provided by financing activities primarily funded the investing
activities and $ 1.0 million in dividend payments.
In response to increased earnings during the past three years, the
Company resumed payment of quarterly dividends beginning with the second
quarter of fiscal 1995. The Board declared dividends of $ 0.20 per share
during fiscal 1997, $ 0.17 per share in fiscal 1996 and $ 0.06 per share
in fiscal 1995. The Company anticipates that future dividend payments
will be declared provided that the current earnings trend continues and
as allowed by the Company's agreement with its lenders.
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. 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 its earnings per
share amounts when adopted in fiscal 1998.
On June 30, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("FAS 130"),
"Comprehensive Income." FAS 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. FAS 130 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of
earlier periods presented. Management is currently evaluating the
requirements of FAS 130.
On June 30, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("FAS 131"),
"Disclosures about Segments of an Enterprise and Related Information."
FAS 131 establishes standards for the way that a public enterprise
reports information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued
to shareholders. FAS 131 is effective for fiscal years beginning after
December 15, 1997 and requires restatement of earlier periods presented.
Management is currently evaluating the requirements of FAS 131.
Environmental Matters
The Company is subject to federal, state and local environmental
laws and regulations that impose limitations on the discharge of
pollutants into the environment and establish standards for the
treatment, storage and disposal of toxic and hazardous wastes.
The Company has policies and procedures in effect to strictly
monitor its compliance with environmental regulations at its operating
locations. In the first quarter of fiscal 1996 the Company began an
environmental review at selected domestic bases. Known or suspected fuel
contamination has been identified at all the bases reviewed. Management
now believes it is likely that similar fuel contamination will be found
at additional bases.
The Company has expensed, including provisions for environmental
costs, $ 1,325,000 and $ 1,797,000 in 1997 and 1996, respectively,
related to remediation costs at five bases. The Company is currently
conducting assessments at three additional bases to determine the extent
of remediation required at these locations. The aggregate liability for
environmental related costs, at April 30, 1997, is $ 1.4 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-K, 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 "anticipate", "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 news,
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, 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.
Item 8. Financial Statements and Supplementary Data
Independent Auditors' Report
The Board of Directors and Shareholders
Petroleum Helicopters, Inc. and subsidiaries:
We have audited the consolidated balance sheets of Petroleum Helicopters,
Inc. and subsidiaries as of April 30, 1997 and 1996, and the related
consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended April 30,
1997. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule,
"Valuation and Qualifying Accounts," for the three-year period ended
April 30, 1997. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Petroleum Helicopters, Inc. and subsidiaries as of April 30, 1997 and
1996, and the results of their operations and their cash flows for each
of the years in the three-year period ended April 30, 1997, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
/s/ KPMG Peat Marwick LLP
New Orleans, Louisiana
June 19, 1997
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 1997 and 1996
(Thousands of dollars)
ASSETS 1997 1996
---- ----
Current assets:
Cash and cash equivalents $ 2,437 $ 1,899
Accounts receivable-net of allowance:
Trade 31,201 27,305
Investee companies 2,080 298
Notes and other 2,266 1,122
Inventory 30,202 25,947
Prepaid expenses 1,115 1,159
Refundable income taxes 1,344 737
Notes receivable - investee companies 1,313 1,166
-------- --------
Total current assets 71,958 59,633
-------- --------
Notes receivable 22 358
Investments 2,480 4,890
Property and equipment, at cost:
Flight equipment 215,414 189,956
Other 28,633 22,845
-------- --------
244,047 212,801
Less accumulated depreciation (122,220) (116,469)
-------- --------
121,827 96,332
-------- --------
Other 344 102
-------- --------
$ 196,631 $ 161,315
======== ========
(Continued)
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, continued
April 30, 1997 and 1996
(Thousands of dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
---- ----
Current liabilities:
Accounts payable - trade $ 8,246 $ 8,209
Accrued expenses 12,440 10,869
Accrued vacation pay 4,784 4,813
Current maturities of long-term debt 4,868 8,810
Other 373 389
------- -------
Total current liabilities 30,711 33,090
------- -------
Long-term debt, net of current maturities 57,592 28,522
Deferred income taxes 18,239 14,966
Other long-term liabilities 2,673 3,336
Shareholders' equity:
Voting common stock-par value of $ 0.10;
authorized 12,500,000; issued shares of
2,800,886 and 2,799,761 in 1997 and 1996 280 280
Non-voting common stock-par value of $ 0.10;
authorized 12,500,000; issued shares of
2,294,066 and 2,276,093 in 1997 and 1996 229 227
------- -------
Total common stock 509 507
Additional paid-in capital 10,810 10,220
Retained earnings 76,097 70,674
------- -------
Total shareholders' equity 87,416 81,401
------- -------
$196,631 $161,315
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended April 30, 1997, 1996 and 1995
(Thousands of dollars, except per share data)
1997 1996 1995
---- ---- ----
Revenues:
Operating revenues $ 211,663 $ 185,865 $ 174,397
Gain on equipment disposals 1,285 1,067 1,091
Equity in net earnings (losses)
of investee companies (560) 397 (83)
------- ------- -------
212,388 187,329 175,405
------- ------- -------
Expenses:
Direct expenses 184,456 162,599 154,079
Selling, general and
administrative 12,778 11,079 9,440
Interest expense 4,297 3,098 3,098
------- ------- -------
201,531 176,776 166,617
------- ------- -------
Earnings before income taxes 10,857 10,553 8,788
Income taxes 4,387 4,087 3,606
------- ------- -------
Net earnings $ 6,470 $ 6,466 $ 5,182
======= ======= =======
Net earnings per share $ 1.27 $ 1.28 $ 0.96
======= ======= =======
Weighted average common
shares outstanding 5,080 5,066 5,409
======= ======= =======
Dividends declared per
common share $ 0.20 $ 0.17 $ 0.06
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended April 30, 1997, 1996 and 1995
(Thousands of dollars and shares)
Voting
Voting Non-voting Common Stock Additional
Common Stock Common Stock Held in Treasury Paid-in Retained
Shares Amt. Shares Amt. Shares Amt. Capital Earnings
BALANCE ------ --- ------ --- ------ --- ------- --------
April 30, 1994 4,199 $350 2,200 $183 921 $ 77 $ 11,027 $ 63,826
Change in par
value - 70 - 37 - 15 (92) -
Purchase ONI
shares - - - - 413 42 (824) (3,605)
Retire treasury
stock (1,334) (134) - - (1,334) (134) - -
Other - - 1 - - - 7 -
Net earnings - - - - - - - 5,182
Dividends - - - - - - - (320)
----- --- --- --- ----- ---- ------ ------
BALANCE
April 30, 1995 2,865 $286 2,201 $220 - $ - $ 10,118 $ 65,083
----- --- ----- --- ----- ---- ------ ------
Stock Options
Exercised 10 1 - - - - 99 -
Other (75) (7) 75 7 - - 3 (13)
Net Earnings - - - - - - - 6,466
Dividends - - - - - - - (862)
----- --- ----- --- ----- ---- ------ ------
BALANCE
April 30, 1996 2,800 $280 2,276 $227 - $ - $ 10,220 $ 70,674
----- --- ----- --- ----- ---- ------ ------
Stock Options
Exercised 5 - 16 2 - - 405 -
Other (4) - 2 - - - 185 (31)
Net earnings - - - - - - - 6,470
Dividends - - - - - - - (1,016)
----- --- ----- --- ----- ---- ------ ------
BALANCE
April 30, 1997 2,801 $280 2,294 $229 - $ - $ 10,810 $ 76,097
===== === ===== === ===== ==== ====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30, 1997, 1996 and 1995
(Thousands of dollars)
1997 1996 1995
-------- -------- --------
Cash flows from operating activities:
Net earnings $ 6,470 $ 6,466 $ 5,182
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 9,977 8,344 8,413
Deferred income taxes 3,273 2,900 2,043
Gain on equipment disposals (1,285) (1,067) (1,091)
Equity in net (earnings) losses of
investee companies 560 (397) 83
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (6,822) 1,217 (3,043)
Increase in inventory (4,088) (387) (710)
Decrease (increase) in prepaid expenses,
refundable income taxes,
and notes receivable (475) (2,080) 653
Increase (decrease) in accounts payable
- trade and other accrued expenses 1,645 2,646 2,746
Increase (decrease) in income taxes payable - (325) 331
Other (766) 2,032 59
------- ------- -------
Net cash provided by operating activities 8,489 19,349 14,666
------- ------- -------
Cash flows from investing activities:
Investments (957) (3,303) -
Purchase of property and equipment (40,835) (23,808) (20,326)
Proceeds from asset dispositions 6,583 6,147 12,125
Proceeds from sale of investment 2,935 - -
------- ------- -------
Net cash used in investing activities (32,274) (20,964) (8,201)
------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt 42,425 23,303 13,000
Payments on long-term debt (17,295) (21,787) (17,738)
Issuance of common stock - 100 -
Purchase of treasury stock - - (4,471)
Proceeds from exercise of stock options 282 - -
Repurchase common stock (73) - -
Dividends paid (1,016) (608) (320)
------- ------- -------
Net cash provided by (used in)
financing activities 24,323 1,008 (9,529)
------- ------- -------
Increase (decrease) in cash and cash
equivalents 538 (607) (3,064)
Cash and cash equivalents at beginning of
year 1,899 2,506 5,570
------- ------- -------
Cash and cash equivalents at end of year $ 2,437 $ 1,899 $ 2,506
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Other General Principles
The consolidated financial statements include the accounts of
Petroleum Helicopters, Inc. and its wholly-owned subsidiaries
("PHI" or the "Company") after the elimination of all significant
intercompany accounts and transactions. Investments in 20 to 50
percent owned affiliates are accounted for by the equity method and
consist primarily of investments in foreign affiliates.
The Company recognizes revenue on the accrual basis, generally
during the month in which the services are rendered. Foreign
currency transactions are not material.
Use of Estimates
In preparing the Company's financial statements management makes
informed estimates and assumptions that affect the amounts reported
in the financial statements and related disclosures. Actual
results may differ from these estimates.
Cash Equivalents
The Company considers cash equivalents to include demand deposits
and investments with original maturity dates of three months or
less.
Inventories
Inventories are stated at the lower of average cost or market and
consist primarily of spare parts and aviation fuel. The valuation
reserve related to obsolete and excess inventory was $ 2,389,000
at April 30, 1997 and 1996.
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. For financial reporting purposes, depreciation is
computed using the straight-line method based upon estimated useful
lives of ten years for flight equipment and three to ten years for
other equipment. Accelerated methods are used for tax purposes.
A residual value of 25% of cost is used in the calculation of
depreciation of flight equipment and other equipment. When
property and equipment is sold or otherwise disposed of, the cost
and accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in earnings at the time of sale
or other disposition, except in the case of long-term sale and
leaseback transactions.
On May 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." The adoption had no impact on the Company's results
of operations or financial position.
Income Taxes
A consolidated federal income tax return is filed by the Company
and its subsidiaries. Income taxes have not been provided on the
undistributed net earnings of the investee companies since, among
other things, the amount of taxes involved is not significant.
Income taxes are accounted for in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
included the enactment date.
Self-Insurance
The Company maintains a self-insurance program for a portion of its
health care costs. The Company is liable for claims up to $ 200,000
per covered individual annually, and aggregate claims up to $ 3,556,673
annually. Self-insurance costs are accrued based upon the aggregate of
the liability for reported claims and the estimated liability for claims
incurred but not reported.
The Company does not presently have any significant obligations for
post employment benefits.
Concentration of Credit Risk
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable. The Company places its
cash and temporary cash investments with high credit worthy
financial institutions and currently invests primarily in U.S.
government obligations with maturities of less than three months.
The Company does not believe significant credit risk exists with
respect to these securities at April 30, 1997.
A majority of the Company's business is conducted with major oil
and gas exploration companies with operations in the Gulf of
Mexico. The Company continually evaluates the financial strength
of its customers but does not require collateral to support the
customer receivables. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk
of specific customers, current market conditions and other
information. In each of the statement of earnings presented, Shell
Oil Company accounted for more than 10% of the revenues.
Earnings per Common and Common Equivalent Share
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.
Reclassifications
Certain reclassifications have been made to the prior years
financial statements in order to conform with the classifications
adopted for reporting in 1997.
Fair Value of Financial Instruments
Fair value of cash, cash equivalents, accounts receivable, accounts
payable and debt approximates book value at April 30, 1997.
Stock Compensation
On May 1, 1996, the Company elected to continue to use the
intrinsic value method of accounting for stock-based compensation
prescribed by Accounting Principles Board (APB) Opinion No. 25 and,
accordingly, adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
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.
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 its earnings per share
amounts when adopted in fiscal 1998.
On June 30, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("FAS 130"),
"Comprehensive Income." FAS 130 establishes standards for
reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. FAS 130 is
effective for fiscal years beginning after December 15, 1997 and
requires restatement of earlier periods presented. Management is
currently evaluating the requirements of FAS 130.
On June 30, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("FAS 131"),
"Disclosures about Segments of an Enterprise and Related
Information." FAS 131 establishes standards for the way that a
public enterprise reports information about operating segments in
annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports issued to shareholders. FAS 131 is effective for
fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. Management is currently
evaluating the requirements of FAS 131.
(2) LONG-TERM DEBT
April 30, April 30,
1997 1996
(Thousands of dollars)
--------- ----------
Secured term loan note due
October 31, 2003, due in
quarterly installments of
$ 1,000,000, bearing interest
(at rates varying between 6.84%
and 7.1% at April 30, 1997). $ 39,000 $ 25,562
Secured note due October 31,
1998, under a revolving
credit facility totaling
$ 40,000,000 bearing interest
(at rates varying between 6.93%
and 8.5% at April 30, 1997). 17,000 4,500
Secured 10 year promissory notes
due in monthly installments of
$ 107,747 commencing July 9, 1993
with a fixed interest rate of 7.0%. 6,460 7,270
------ ------
Total Debt 62,460 37,332
Less: Current Maturities 4,868 8,810
------ ------
Total Long-term Debt $ 57,592 $ 28,522
====== ======
Scheduled maturities of debt are as follows:
(Thousands of dollars)
1998 $ 4,868
1999 4,931
2000 4,998
2001 5,070
2002 5,148
Thereafter 37,445
------
$ 62,460
======
At April 30, 1997, the following assets and their related book
values are pledged as collateral on notes aggregating $ 62.5
million:
(Thousands of dollars)
Equipment, net of depreciation $ 85,955
Inventory 29,807
Accounts receivable, net 31,107
-------
$146,869
=======
Term Loan and Revolving Credit Facility
On August 13, 1996 the Company and its principal lending group
entered into 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 reduced the Company's
effective interest rate on its outstanding debt under this
facility. On March 31, 1997, the Company modified the agreement
again which among other things: i) reduced the Company's effective
interest rate, ii) increased the total credit capacity to $ 80
million from $ 65 million, iii) reduced the mandatory quarterly
principal payments to $ 1.0 million from $ 2.0 million, and iv)
provided a fixed rate option for up to $ 40 million of the total
outstanding debt under the facility. The interest rate reduction
was effective January 1, 1997. The interest expense reduction for
this new agreement, for the fiscal year ended April 30, 1998, using
current debt levels at April 30, 1997, is approximately $ 0.1
million. There is a commitment fee of 0.375% per annum on the
unused portion of the credit facility.
Both the term loan and the revolving credit facility are subject
to certain financial covenants with which the Company was in
compliance at April 30, 1997. These covenants include maintaining
certain levels of working capital and shareholders' equity and
contain other provisions some of which restrict purchases of the
Company's stock, capital expenditures and payment of dividends.
Such agreements also limit the creation, incurrence or assumption
of Funded Debt (as defined, which includes long-term debt), and the
acquisition of investments. At April 30, 1997, the Company's
working capital exceeded the amount required by approximately
$ 18.3 million, and shareholders' equity exceeded the required
level by approximately $ 8.7 million. Dividends are generally
limited to 20% of net earnings.
The secured term and revolving loan agreement permit both prime
rate based borrowings and London InterBank Offered Rate ("LIBOR")
borrowings plus a floating spread. The spread for LIBOR borrowings
will float up or down based on the Company's performance as
determined by a leverage ratio. The spread can range from 1.0% to
1.5% above LIBOR. The average amounts of borrowings outstanding
during 1997 and 1996 were approximately $ 57.4 million and $ 38.9
million, respectively. The weighted average interest rates during
1997 and 1996 were approximately 7.5% and 8.0%, respectively, on
these borrowings.
Cash paid for interest was $ 4,054,000, $ 3,351,000, and
$ 2,970,000 for the years ended April 30, 1997, 1996 and 1995,
respectively.
(3) INCOME TAXES
Income tax expense for the three years ended April 30, 1997, is
composed of the following:
1997 1996 1995
---- ---- ----
Current: (Thousands of dollars)
Federal $ 765 $ 757 $ 1,234
State 296 344 270
Foreign 53 85 59
Deferred - principally Federal 3,273 2,901 2,043
----- ----- -----
$ 4,387 $4,087 $ 3,606
===== ===== =====
Deferred income tax expense (benefit) results from the following:
1997 1996 1995
---- ---- ----
(Thousands of dollars)
Accelerated depreciation $ 2,911 $ 1,408 $ 2,564
Accrued expenses and other
liabilities 407 (138) (2,353)
Effect of tax credits (45) 1,631 1,832
----- ----- -----
$ 3,273 $ 2,901 $ 2,043
===== ===== =====
Income tax expense as a percentage of pre-tax earnings varies from
the effective Federal statutory rate of 34% as a result of the
following:
Years ended April 30
1997 1996 1995
Amount % Amount % Amount %
------- -- ------- -- ------ --
(Thousands of dollars, except percentages)
Income taxes at
statutory rate $ 3,691 34 $ 3,588 34 $ 2,988 34
Increase (decrease) in
taxes resulting from:
Equity in net (earnings)
losses of consolidated
investee companies (108) (1) (134) (1) 28 -
Effect of state income
taxes 195 2 227 2 178 2
Other items - net 609 5 406 4 412 5
----- -- ----- -- ----- --
$ 4,387 40 $ 4,087 39 $ 3,606 41
===== == ===== == ===== ==
For income tax purposes, the Company had approximately $126,000 of
general business tax credit carryforwards. These general business tax
credit carryforwards will expire between 1998 and 2001. The Company also
has approximately $564,000 of alternative minimum tax credit
carryforwards available to reduce future Federal regular income taxes
over an indefinite period.
The tax effects of temporary differences which give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at April 30, 1997 and 1996 are presented below:
1997 1996
---- ----
(Thousands of dollars)
Deferred tax assets:
Tax credits $ 690 $ 645
Vacation accrual 1,763 1,774
Inventory valuation 880 881
Workman's compensation reserve 381 381
Other 2,494 2,678
----- -----
Total deferred tax assets 6,208 6,359
----- -----
Deferred tax liabilities:
Tax depreciation in excess of book
depreciation 23,751 20,840
Other 696 485
------ ------
Total deferred tax liabilities 24,447 21,325
------ ------
Net deferred tax liability $18,239 $ 14,966
====== ======
No valuation allowance was recorded against the deferred tax assets
because management believes that the deferred tax assets will more
than likely be realized in full through future operating results
and the reversal of taxable temporary differences.
Income taxes paid were approximately $ 2,355,000, $ 2,267,000, and
$ 1,168,000 for the years ended April 30, 1997, 1996 and 1995,
respectively.
(4) EMPLOYEE BENEFIT PLANS
Savings and Retirement Plans
The Company established, effective July 1, 1989, an Employee
Savings Plan under Section 401(k) of the Internal Revenue Code.
The Plan provides that the Company match up to 3% of employee
contributions. The Company's contribution was $ 1,585,000,
$ 1,616,000, and $ 1,586,000 for the years ended April 30, 1997,
1996, and 1995, respectively.
Effective September 1, 1994, the Company adopted a Supplemental Executive
Retirement Plan ("SERP"). The nonqualified and unfunded plan provides
senior management with supplemental retirement and death benefits at age
65. Life insurance policies, of which the Company is the sole owner and
beneficiary, were purchased on the lives of each of the participants.
Supplemental retirement benefits were based on one-third (1/3) of the
participants' monthly income at the time of adoption. Currently, there
are no SERP provisions for an increase in benefits, partial vesting or
early retirement. The assumed discount rate was 7.5%. Expenses related
to the plan were $ 275,000, $ 308,000 and $ 197,000 for 1997, 1996, and
1995, respectively.
During fiscal 1996, the Board of Directors approved an Officer Deferred
Compensation Plan and a Director Deferred Compensation Plan. Both plans
were effective May 31, 1995. The plans permit key officers and all
directors to defer a portion of their compensation. The plans are
nonqualified and unfunded.
Stock Option Plans
Effective May 1, 1992, the Company's Board of Directors adopted the
Petroleum Helicopters, Inc. 1992 Non-Qualified Stock Option and Stock
Appreciation Rights Plan (the "Plan"). The Plan was approved at the
Annual Meeting of Shareholders on September 30, 1992. The Company is
authorized to grant non-qualified stock options and stock appreciation
rights to selected employees to purchase up to 100,000 shares of the
Company's non-voting common stock at an exercise price of not less than
25% of their fair market value at the date of grant. The options may be
exercised any time after one year from the date of grant until their
expiration at five years from such date.
During fiscal 1993 an officer of the Company was granted non-qualified
options to purchase 15,000 shares of voting common stock at the fair
market value of the stock at the date of grant.
Effective May, 1995 the Company's Board of Directors adopted the PHI 1995
Incentive Plan (the "1995 Plan"). The 1995 Plan was approved at the
Annual Meeting of Shareholders on September 22, 1995. The Company is
authorized to issue a total of 175,000 shares of voting common stock and
325,000 shares of non-voting common stock under the 1995 Plan. The
Compensation Committee of the Board of Directors is authorized under the
1995 Plan to grant stock options, restricted stock, stock appreciation
rights, performance shares, stock awards and cash awards. During fiscal
1997, 23,960 non-voting restricted shares and 23,200 non-voting stock
options were granted under the 1995 Plan. The exercise price of the
stock option grants is equal to the fair market value of the underlying
stock at the date of grant. The restricted shares and the options vest
on July 31, 1997 only to the extent certain 1997 performance targets are
met. To the extent the restricted shares become vested they will become
unrestricted on July 31, 2000. The restricted shares expire on May 31,
2005. The non-voting options, in the event they become vested, are one-
half exercisable on July 31, 1997 and one-half excercisable on July 31,
1998. These options expire on July 30, 2006. During fiscal 1996, 23,200
and 116,000 non-qualified stock options for voting and non-voting common
stock, respectively, were granted under the 1995 Plan. The exercise
price of the grants is equal to the fair market value of the underlying
stock at the date of grant. These options vested on July 31, 1996 to the
extent certain 1996 performance targets were met. One half of all vested
stock options became exercisable on July 31, 1996 and one half will
become exercisable on July 31, 1997. The stock options expire on May 31,
2005.
Under the Company's stock option plans, there were 615,000 shares of
common stock reserved for issue at April 30, 1997. The Company recorded
compensation expense related to the 1995 Plan of $ 0.4 million during
fiscal 1997.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123), which encourages the use of
a fair value based method of accounting for compensation expense
associated with stock option and similar plans. However, SFAS No. 123
permits the continued use of the intrinsic value based method prescribed
by Opinion No. 25 but requires additional disclosures, including pro
forma calculations of net earnings and earning per share as if the fair
value method of accounting prescribed by SFAS No. 123 had been applied
in fiscal 1997 and fiscal 1996. The pro forma data presented below is
not representative of the effects on reported amounts for future years
because SFAS No. 123 does not apply to awards prior to fiscal 1995 and
additional awards are expected in the future.
As Reported Pro Forma
1997 1996 1997 1996
------- ------- ------- -------
Net earnings $ 6,470 $ 6,466 $ 6,470 $ 6,090
Earnings per share $ 1.27 $ 1.28 $ 1.27 $ 1.20
Average shares outstanding 5,080 5,066 5,080 5,066
Avg. fair value of grants
during the year $ 7.45 $ 4.50
Black-Sholes option pricing model assumptions:
Risk-free interest rate 6.5% 6.5%
Expected life (years) 4 4
Volatility 12% 19%
Dividend yield 1.11% 1.24%
The following table summarized information about stock options
outstanding as of April 30, 1997:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-Avg
Remaining Weighted- Weighted-
Range of As of Contractual Avg. Exercise As of Avg. Exercise
Exercise Prices 4/30/97 Life-Yrs. Price 04/30/97 Price
------------ ------ -------- ----- -------- -----
$8.50 - $9.99 112,649 8.0 $ 8.73 55,061 $ 8.73
$10.00 - $15.50 105,660 3.3 $ 15.50 58,500 $ 15.50
------- -------
218,309 5.7 $ 12.01 113,561 $ 12.22
======= =======
A summary of the Plans' activities for the years ended April 30, 1997,
1996, and 1995 is as follows:
1992 Plan Other 1995 Plan
Options Options Options
--------- ------- ---------
Non- Non-
Total Voting Voting Voting Voting
Balance outstanding at ------ ------ ------ ------ ------
April 30, 1994 96,000 81,000 15,000 - -
Options lapsed/cancelled (6,000) (6,000) - - -
------ ------ ------ ------ -------
Balance outstanding at
April 30, 1995 90,000 75,000 15,000 - -
------ ------ ------ ------ -------
Options granted at $ 9.75
(voting) and $ 8.50
(non-voting) 139,200 - - 23,200 116,000
Options exercised (10,000) - (10,000) - -
------ ------ ------ ------ -------
Balance outstanding at
April 30, 1996 219,200 75,000 5,000 23,200 116,000
======= ====== ====== ====== =======
Options granted at $ 15.50
(non-voting) 47,160 - - - 47,160
Options lapsed/cancelled (24,024) - - (2,720) (21,304)
Options exercised (24,027)(16,500) (5,000) - (2,527)
Balance outstanding at
April 30, 1997 218,309 58,500 - 20,480 139,329
======= ====== ====== ====== =======
Shares exercisable at
April 30, 1995 at a price
range of $10.00 to $15.50 30,000 25,000 5,000 - -
Shares exercisable at ======= ====== ====== ====== =======
April 30, 1996 at a price
range of $10.00 to $15.50 50,000 50,000 5,000 - -
Shares exercisable at ======= ====== ====== ====== =======
April 30, 1997 at a price
range of $8.50 to $15.50 113,561 58,500 - 10,240 44,821
======= ====== ====== ====== =======
Shares available for future
grant at April 30, 1997 338,640 25,000 - 151,800 161,840
======= ====== ====== ======= =======
(5) SUPPLEMENTAL CASH FLOW INFORMATION AND FINANCING ACTIVITIES
In 1997, the Company reported proceeds from equipment sales of
$ 6.6 million. The original cost and accumulated depreciation
associated with these transactions were $ 9.6 and $ 4.3 million,
respectively. In 1996, the Company reported proceeds from
equipment sales of $ 6.1 million. The original cost and
accumulated depreciation associated with these transactions were
$ 10.8 and $ 5.5 million, respectively.
In 1996, the Company entered into agreements for the sale and
leaseback of two helicopters. The book values of the equipment
totalling $ 3.5 million were removed from the balance sheet, and
the gains realized on the sale transactions totalling $ 0.3 million
were deferred and are being credited to income as rent expense
adjustments over the lease term. Rentals on these transactions
average $ 0.4 million annually.
On July 13, 1995 the Company purchased 49% of Irish Helicopters
Limited (IHL) based in Dublin Ireland for $ 3 million. IHL
operated five aircraft which were engaged primarily in search and
rescue missions off the Irish Coast. In the third quarter of
fiscal year 1997, the Company recorded a $ 0.7 million writedown
on this investment. The Company sold this investment in the fourth
quarter of fiscal year 1997 and received proceeds which
approximated the initial cost.
(6) SHAREHOLDERS' EQUITY
During fiscal 1997, the Company offered its shareholders who owned
either of record or beneficially in a single account, twenty-five
or fewer shares of PHI common stock, the opportunity to sell their
common stock through a purchase program. Approximately 3,900
shares were repurchased by the Company at a purchase price of
between $ 18.00 and $ 19.00 a share.
On February 28, 1995 the Company purchased 413,308 shares of the
Company's common voting stock at market value for $ 4.5 million
from Offshore Navigation, Inc. ("ONI"), an affiliate of the
Company. Prior to the acquisition, these shares represented
approximately 12.6% of the Company's outstanding voting common
stock. The shares were placed in the Company's treasury and
subsequently retired.
(7) COMMITMENTS AND CONTINGENCIES
The Company leases certain aircraft used in its operations. The
Company generally pays all insurance, taxes and maintenance
expenses associated with these aircraft and some of these leases
contain renewal and purchase options.
Aggregate rental commitments to lease aircraft under noncancellable
operating leases are due in years subsequent to April 30, 1997, as
follows:
(Thousands of dollars)
1998 $ 11,447
1999 11,086
2000 10,799
2001 10,555
2002 9,714
Thereafter 23,668
------
$ 77,269
======
Rental expense incurred under these leases consisted of the
following:
(Thousands of dollars)
(Years ended April 30)
1997 1996 1995
Aircraft $ 12,328 $ 12,145 $ 11,364
Other 1,730 1,690 1,745
------ ------ ------
$ 14,058 $ 13,835 $ 13,109
====== ====== ======
Subsequent to year end, the Company purchased one aircraft for an
aggregate of $ 2.2 million. In addition, the Company plans to
purchase seventeen helicopters in 1998. The total purchase price
is estimated to be $ 22.6 million. These purchases are subject to
obtaining customer commitments.
The Company has policies and procedures in effect to strictly
monitor its compliance with environmental regulations at its
operating locations. In the first quarter of fiscal 1996 the
Company began an environmental review at selected domestic bases.
Known or suspected fuel contamination has been identified at all
the bases reviewed. Management now believes it is likely that
similar fuel contamination will be found at additional bases.
The Company has expensed, including provisions for environmental
costs, $ 1,325,000 and $ 1,797,000 in 1997 and 1996, respectively,
related to remediation costs at five bases. The Company is
currently conducting assessments at three additional bases to
determine the extent of remediation required at these locations.
The aggregate liability for environmental related costs, at April
30, 1997, is $ 1.4 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.
The Company is named as a defendant in various legal actions which
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;
however, after consulting with legal counsel, the Company has
established accruals which it believes adequately provide for the
settlement of such litigation which have not had a material effect
on the Company's financial condition.
On Monday, June 2, 1997, the Company was notified by the National
Mediation Board that the Office and Professionals Employees
International Union (OPEIU) filed an application to represent
flight deck crew members (helicopter pilots) of PHI. Should the
Company's domestic pilots elect to be represented by a union, the
Company believes that this would place the Company at a competitive
disadvantage which could have a material adverse effect on the
Company's revenues and results of operations.
(8) QUARTERLY FINANCIAL DATA (UNAUDITED)
The summarized quarterly results of operations for the years ended
April 30, 1997 and 1996 (in thousands of dollars, except per share
data) are as follows:
Quarter Ended
----------------------------------------------
July 31, October 31, January 31, April 30,
1996 1996 1997 1997
------- ---------- ---------- --------
Revenues $50,273 $55,378 $52,568 $54,169
Gross profit $ 7,675 $ 7,915 $ 7,088 $ 4,529
Net earnings $ 2,278 $ 2,285 $ 1,314 $ 593
Net earnings
per share $ .45 $ .45 $ .26 $ .12
Quarter Ended
-----------------------------------------------
July 31, October 31, January 31, April 30,
1995 1995 1996 1996
------- ---------- ---------- --------
Revenues $46,710 $48,418 $45,712 $46,489
Gross profit $ 5,134 $ 6,233 $ 5,486 $ 6,413
Net earnings $ 1,391 $ 1,934 $ 1,339 $ 1,802
Net earnings
per share $ .27 $ .39 $ .26 $ .36
The unaudited quarterly financial data above have been restated
from the Company's previously filed Forms 10-K and 10-Q to reflect
certain reclassifications from selling, general and administrative
costs to direct expenses.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
There have been no change in and there are no disagreements
between the Company and its independent certified public
accountants on accounting and financial disclosure matters.
Part III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Directors required by this item will
be included in the Company's definitive proxy statement in
connection with its 1997 Annual Meeting of Shareholders and is
incorporated herein by reference. Information concerning Executive
Officers is included as Item 4.(a) Executive officers of the
registrant.
Item 11. Executive Compensation
Information required by this item will be included in the
Company's definitive proxy statement in connection with its 1997
Annual Meeting of Shareholder and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item will be included in the
Company's definitive proxy statement in connection with its 1997
Annual Meeting of Shareholders and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information required by this item will be included in the
Company's definitive proxy statement in connection with its 1997
Annual Meeting of Shareholders and is incorporated herein by
reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Independent Auditors' Report
Consolidated Balance Sheets - April 30, 1997 and 1996
Consolidated Statements of Earnings for the three years
ended April 30, 1997
Consolidated Statements of Shareholders' Equity for the
three years ended April 30, 1997
Consolidated Statements of Cash Flows for the three years
ended April 30, 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying accounts for
the years ended April 30, 1997, 1996,
and 1995.
3. Exhibits
3 Articles of Incorporation and By-laws
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 as amended on August 18,
1996 (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 Material Contracts
10.1 Master Helicopter Lease Agreement dated May 29, 1991 between
AT&T Systems Leasing Corporation and PHI (incorporated by
reference to Exhibit No. 10.1 (2) to PHI's Report on Form
10-K dated April 30, 1992).
10.2 Master Helicopter Lease Agreement dated February 14, 1991
between General Electric Capital Corporation and PHI
(incorporated by reference to Exhibit No. 10.1 (1) to PHI's
Report on Form 10-K dated April 30, 1991).
10.3 Amended and Restated Loan Agreement originally dated as of
January 31, 1986 Amended and Restated in its entirety as of
March 31, 1997 among Petroleum Helicopters, Inc., Whitney
National Bank, First National Bank of Commerce, and
NationsBank of Texas, N.A., as agent.
10.4 Installment promissory note dated June 4, 1993 by PHI
payable to debis Financial Services, Inc. in the original
principal amount of $ 3,122,441.56, secured by Aircraft
Security Agreement dated June 4, 1993 between PHI and debis
Financial Services, Inc. (incorporated by reference to
Exhibit No. 10.4 to PHI's Report on Form 10-K dated
April 30, 1993).
10.5 Installment Promissory Note dated June 4, 1993 by PHI
payable to debis Financial Services, Inc. in the original
principal amount of $ 3,078,695.58, secured by Aircraft
Security Agreement dated June 4, 1993 between PHI and debis
Financial Services, Inc. (incorporated by reference to
Exhibit No. 10.5 to PHI's Report on Form 10-K dated
April 30, 1993).
10.6 Installment Promissory Note dated June 4, 1993 by PHI
payable to debis Financial Services, Inc. in the original
principal amount of $ 3,078,695.58, secured by Aircraft
Security Agreement dated June 4, 1993 between PHI and debis
Financial Services, Inc. (incorporated by reference to
Exhibit No. 10.6 to PHI's Report on Form 10-K dated
April 30, 1993).
10.7 The Petroleum Helicopters, Inc. 401(k) Retirement Plan
effective July 1, 1989 (incorporated by reference to Exhibit
No. 10.4 to PHI's Report on Form 10-K dated April 30, 1990).
10.8 Petroleum Helicopters, Inc. 1992 Non-Qualified Stock Option
and Stock Appreciation Rights Plan adopted by PHI's Board
effective May 1, 1992 and approved by the shareholders of
PHI on September 30, 1992 (incorporated by reference to
Exhibit No. 10.8 to PHI's Report on Form 10-K dated April
30, 1993).
10.9 Form of Stock Option Agreement for the Grant of Non-
Qualified Stock Options Under the Petroleum Helicopters,
Inc. 1992 Non-Qualified Stock Option and Stock Appreciation
Rights Plan dated June 2, 1993 between PHI and certain of
its key employees (incorporated by reference to Exhibit No.
10.9 to PHI's Report on Form 10-K dated April 30, 1993).
10.10 Employment Agreement between PHI and John H. Untereker dated
June 15, 1992 (incorporated by reference to Exhibit No.
10.10 to PHI's Report on Form 10-K dated April 30, 1993).
10.11 Stock Option Agreement between PHI and John H. Untereker
dated April 12, 1993, but effective as of July 20, 1992
(incorporated by reference to Exhibit No. 10.11 to PHI's
Report on Form 10-K dated April 30, 1993).
10.12 Amended and Restated Petroleum Helicopters, Inc. 1995
Incentive Compensation Plan adopted by PHI's Board effective
July 11, 1995 and approved by the shareholders of PHI on
September 22, 1995 (incorporated by reference to Exhibit No
10.12 to PHI's Report on Form 10-K dated April 30, 1996).
10.13 Form of Non-Qualified Stock Option Agreement under the
Petroleum Helicopters, Inc. 1995 Incentive Compensation Plan
between PHI and certain of its key employees (incorporated
by reference to Exhibit No. 10.13 to PHI's Report on Form
10-K dated April 30, 1996).
10.14 Form of Restricted Stock Agreement under the Amended and
Restated Petroleum Helicopters, Inc. 1995 Incentive
Compensation Plan, as amended (incorporated by reference to
Exhibit No. 10.2 to PHI's Report on Form 10-Q dated October
31, 1996).
10.15 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 (incorporated by reference to Exhibit 10.3 to PHI's
Report on Form 10-Q dated October 31, 1996).
21 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the fourth quarter of fiscal
1997.
Petroleum Helicopters, Inc. and Subsidiaries
Schedule II Valuation and Qualifying Accounts
For the Years Ended April 30, 1997, 1996, and 1995
(in thousands)
Additions
----------------
Bal. at Charged to Charged to Balance
Description Beginning Costs and Other At End
----------- of Year Expenses Accounts Deductions of Year
Year ended April 30, 1997: ------- ------- ------ ------- -----
Allowance for doubtful
accounts $ 923 $ 415 $ - $ 178 $ 1,160
Allowance for obsolete
inventory 2,389 - - - 2,389
Year ended April 30, 1996:
Allowance for doubtful
accounts $ 788 $ 250 $ - $ 115 $ 923
Allowance for obsolete
inventory 2,139 250 - - 2,389
Year ended April 30, 1995:
Allowance for doubtful
accounts $ 493 $ 300 $ - $ 5 $ 788
Allowance for obsolete
inventory 2,139 - - - 2,139
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PETROLEUM HELICOPTERS, INC.
By: /s/ Carroll W. Suggs
-----------------------
Carroll W. Suggs
Chairman of the Board,
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- -----
/s/ Carroll W. Suggs Chairman of the Board, July 24, 1997
------------------- Chief Executive Officer
Carroll W. Suggs and Director (Principal
Executive Officer)
/s/ John H. Untereker Vice President and July 24, 1997
--------------------- Chief Financial Officer
John H. Untereker Principal Financial and
Accounting Officer)
/s/ Leonard M. Horner Director July 24, 1997
---------------------
Leonard M. Horner
/s/ Robert G. Lambert Director July 24, 1997
----------------------
Robert G. Lambert
/s/ James W. McFarland Director July 24, 1997
----------------------
James W. McFarland
/s/ Bruce N. Whitman Director July 24, 1997
--------------------
Bruce N. Whitman