|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30,December 31, 2003
OR
|_| Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period _____ to _____
Commission File Number 0-5232
(Exact name of registrant as specified in its charter)
Delaware | 72-0679819 |
(State or other jurisdiction of | (IRS Employer |
incorporation or organization) | Identification Number) |
224 Rue de Jean | |
Lafayette, Louisiana | 70508 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:(337) 233-1221
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or of 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of November 3, 2003.February 2, 2004.
22,520,921 22,586,421 shares of Common Stock, $.01 par value
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||
Gross revenue: | |||||||||||||||||||||||
Operating revenue | $ | 139,429 | $ | 143,576 | $ | 273,322 | $ | 278,645 | |||||||||||||||
Gain on disposal of assets | 1,374 | 1,966 | 2,231 | 2,253 | |||||||||||||||||||
140,803 | 145,542 | 275,553 | 280,898 | ||||||||||||||||||||
Operating expense: | |||||||||||||||||||||||
Direct cost | 102,847 | 105,886 | 202,673 | 206,557 | |||||||||||||||||||
Depreciation and amortization | 9,195 | 9,344 | 19,299 | 18,285 | |||||||||||||||||||
General and administrative | 8,740 | 8,734 | 17,087 | 17,057 | |||||||||||||||||||
120,782 | 123,964 | 239,059 | 241,899 | ||||||||||||||||||||
Operating income | 20,021 | 21,578 | 36,494 | 38,999 | |||||||||||||||||||
Earnings from unconsolidated affiliates, net | 3,047 | 1,668 | 4,950 | 3,451 | |||||||||||||||||||
Interest income | 644 | 309 | 1,048 | 647 | |||||||||||||||||||
Interest expense | 4,990 | 3,602 | 8,955 | 7,278 | |||||||||||||||||||
Loss on extinguishment of debt | (6,205 | ) | -- | (6,205 | ) | -- | |||||||||||||||||
Other income (expense), net | 380 | (1,485 | ) | (1,894 | ) | (3,229 | ) | ||||||||||||||||
Income before provision for income taxes | |||||||||||||||||||||||
and minority interest | 12,897 | 18,468 | 25,438 | 32,590 | |||||||||||||||||||
Provision for income taxes | 3,868 | 5,540 | 7,631 | 9,777 | |||||||||||||||||||
Minority interest | (529 | ) | (445 | ) | (1,039 | ) | (848 | ) | |||||||||||||||
Net income | $ | 8,500 | $ | 12,483 | $ | 16,768 | $ | 21,965 | |||||||||||||||
Net income per common share: | |||||||||||||||||||||||
Basic | $ | 0.38 | $ | 0.56 | $ | 0.74 | $ | 0.98 | |||||||||||||||
Diluted | $ | 0.37 | $ | 0.51 | $ | 0.74 | $ | 0.90 | |||||||||||||||
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||
Gross revenue: | |||||||||||||||||||||||
Operating revenue | $ | 138,715 | $ | 140,187 | $ | 412,037 | $ | 418,832 | |||||||||||||||
Gain (loss) on disposal of assets | 357 | (946 | ) | 2,588 | 1,307 | ||||||||||||||||||
139,072 | 139,241 | 414,625 | 420,139 | ||||||||||||||||||||
Operating expense: | |||||||||||||||||||||||
Direct cost | 107,551 | 101,555 | 310,224 | 308,112 | |||||||||||||||||||
Depreciation and amortization | 9,778 | 9,575 | 29,077 | 27,860 | |||||||||||||||||||
General and administrative | 10,973 | 9,170 | 28,060 | 26,227 | |||||||||||||||||||
128,302 | 120,300 | 367,361 | 362,199 | ||||||||||||||||||||
Operating income | 10,770 | 18,941 | 47,264 | 57,940 | |||||||||||||||||||
Earnings from unconsolidated affiliates, net | 1,930 | 3,277 | 6,880 | 6,728 | |||||||||||||||||||
Interest income | 280 | 474 | 1,328 | 1,121 | |||||||||||||||||||
Interest expense | 3,818 | 3,615 | 12,773 | 10,893 | |||||||||||||||||||
Loss on extinguishment of debt | -- | -- | (6,205 | ) | -- | ||||||||||||||||||
Other income (expense), net | (4,352 | ) | (1,244 | ) | (6,246 | ) | (4,473 | ) | |||||||||||||||
Income before provision for income taxes | |||||||||||||||||||||||
and minority interest | 4,810 | 17,833 | 30,248 | 50,423 | |||||||||||||||||||
Provision for income taxes | 1,444 | 5,350 | 9,075 | 15,127 | |||||||||||||||||||
Minority interest | (576 | ) | (465 | ) | (1,615 | ) | (1,313 | ) | |||||||||||||||
Net income | $ | 2,790 | $ | 12,018 | $ | 19,558 | $ | 33,983 | |||||||||||||||
Net income per common share: | |||||||||||||||||||||||
Basic | $ | 0.12 | $ | 0.53 | $ | 0.87 | $ | 1.52 | |||||||||||||||
Diluted | $ | 0.12 | $ | 0.49 | $ | 0.86 | $ | 1.39 | |||||||||||||||
September 30, 2003 | March 31, 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 72,902 | $ | 56,800 | |||||||
Accounts receivable | 121,895 | 119,012 | |||||||||
Inventories | 122,541 | 118,846 | |||||||||
Prepaid expenses and other | 10,254 | 8,443 | |||||||||
Total current assets | 327,592 | 303,101 | |||||||||
Investments in unconsolidated affiliates | 35,170 | 27,928 | |||||||||
Property and equipment - at cost: | |||||||||||
Land and buildings | 17,199 | 16,671 | |||||||||
Aircraft and equipment | 757,165 | 703,111 | |||||||||
774,364 | 719,782 | ||||||||||
Less: accumulated depreciation and amortization | (214,437 | ) | (193,555 | ) | |||||||
559,927 | 526,227 | ||||||||||
Other assets | 48,160 | 48,775 | |||||||||
$ | 970,849 | $ | 906,031 | ||||||||
LIABILITIES AND STOCKHOLDERS' INVESTMENT | ||||||||
---|---|---|---|---|---|---|---|---|
Current Liabilities: | ||||||||
Accounts payable | $ | 27,751 | $ | 29,666 | ||||
Accrued liabilities | 60,583 | 64,181 | ||||||
Deferred taxes | 636 | 33 | ||||||
Current maturities of long-term debt | 5,681 | 96,684 | ||||||
Total current liabilities | 94,651 | 190,564 | ||||||
Long-term debt, less current maturities | 251,637 | 136,134 | ||||||
Other liabilities and deferred credits | 127,189 | 120,035 | ||||||
Deferred taxes | 88,167 | 81,082 | ||||||
Minority interest | 18,481 | 16,555 | ||||||
Stockholders' Investment: | ||||||||
Common Stock, $.01 par value, authorized 35,000,000 shares; | ||||||||
outstanding 22,514,921 and 22,510,921 at September 30 and | ||||||||
March 31, respectively (exclusive of 1,281,050 treasury shares) | 225 | 225 | ||||||
Additional paid-in capital | 139,109 | 139,046 | ||||||
Retained earnings | 316,266 | 299,498 | ||||||
Accumulated other comprehensive income (loss) | (64,876 | ) | (77,108 | ) | ||||
390,724 | 361,661 | |||||||
$ | 970,849 | $ | 906,031 | |||||
December 31, 2003 | March 31, 2003 | |||||||
---|---|---|---|---|---|---|---|---|
(in thousands) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 79,225 | $ | 56,800 | ||||
Accounts receivable | 125,265 | 119,012 | ||||||
Inventories | 131,535 | 118,846 | ||||||
Prepaid expenses and other | 8,841 | 8,443 | ||||||
Total current assets | 344,866 | 303,101 | ||||||
Investments in unconsolidated affiliates | 37,772 | 27,928 | ||||||
Property and equipment - at cost: | ||||||||
Land and buildings | 25,802 | 16,671 | ||||||
Aircraft and equipment | 778,282 | 703,111 | ||||||
804,084 | 719,782 | |||||||
Less: accumulated depreciation and amortization | (227,434 | ) | (193,555 | ) | ||||
576,650 | 526,227 | |||||||
Other assets | 46,238 | 48,775 | ||||||
$ | 1,005,526 | $ | 906,031 | |||||
Current Liabilities: | ||||||||
Accounts payable | $ | 29,153 | $ | 29,666 | ||||
Accrued liabilities | 69,293 | 64,181 | ||||||
Deferred taxes | 1,025 | 33 | ||||||
Current maturities of long-term debt | 995 | 96,684 | ||||||
Total current liabilities | 100,466 | 190,564 | ||||||
Long-term debt, less current maturities | 251,383 | 136,134 | ||||||
Other liabilities and deferred credits | 136,494 | 120,035 | ||||||
Deferred taxes | 84,084 | 81,082 | ||||||
Minority interest | 20,438 | 16,555 | ||||||
Stockholders' Investment: | ||||||||
Common Stock, $.01 par value, authorized 35,000,000 shares; | ||||||||
outstanding 22,583,921 and 22,510,921 at December 31 and | ||||||||
March 31, respectively (exclusive of 1,281,050 treasury shares) | 226 | 225 | ||||||
Additional paid-in capital | 140,383 | 139,046 | ||||||
Retained earnings | 319,056 | 299,498 | ||||||
Accumulated other comprehensive income (loss) | (47,004 | ) | (77,108 | ) | ||||
412,661 | 361,661 | |||||||
$ | 1,005,526 | $ | 906,031 | |||||
Six Months Ended September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | ||||||||||
(in thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ 16,768 | $ | 21,965 | ||||||||
Adjustments to reconcile net income to cash | |||||||||||
provided by operating activities: | |||||||||||
Depreciation and amortization | 19,299 | 18,285 | |||||||||
Increase (decrease) in deferred taxes | 7,242 | 4,983 | |||||||||
(Gain) Loss on asset dispositions | (2,231 | ) | (2,253 | ) | |||||||
Loss on debt extinguishment | 6,205 | -- | |||||||||
Equity in earnings from unconsolidated affiliates | |||||||||||
(over) under dividends received | (3,487 | ) | (1,896 | ) | |||||||
Minority interest in earnings | 1,039 | 848 | |||||||||
(Increase) decrease in accounts receivable | 1,957 | (10,146 | ) | ||||||||
(Increase) decrease in inventories | (885 | ) | (3,658 | ) | |||||||
(Increase) decrease in prepaid expenses and other | 3,320 | (322 | ) | ||||||||
Increase (decrease) in accounts payable | (3,856 | ) | (2,600 | ) | |||||||
Increase (decrease) in accrued liabilities | (5,240 | ) | 5,461 | ||||||||
Increase (decrease) in other liabilities and deferred credits | (3 | ) | (1,516 | ) | |||||||
Net cash provided by (used in) operating activities | 40,128 | 29,151 | |||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (42,553 | ) | (11,684 | ) | |||||||
Assets purchased on behalf of affiliate | (35,394 | ) | (26,019 | ) | |||||||
Proceeds from sale of assets to affiliate | 35,394 | -- | |||||||||
Proceeds from asset dispositions | 3,350 | 7,126 | |||||||||
Acquisitions, net of cash received | -- | (15,953 | ) | ||||||||
Investments | (1,729 | ) | -- | ||||||||
Net cash provided by (used in) investing activities | (40,932 | ) | (46,530 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Proceeds from borrowings | 242,981 | 26,019 | |||||||||
Proceeds from borrowings under credit facilities | -- | 14,000 | |||||||||
Repayment of debt and payment of debt redemption premiums | (228,391 | ) | (16,645 | ) | |||||||
Issuance of common stock | 50 | 2,757 | |||||||||
Net cash provided by (used in) financing activities | 14,640 | 26,131 | |||||||||
Effect of exchange rate changes in cash | 2,266 | 703 | |||||||||
Net increase (decrease) in cash and cash equivalents | 16,102 | 9,455 | |||||||||
Cash and cash equivalents at beginning of period | 56,800 | 42,670 | |||||||||
Cash and cash equivalents at end of period | $ 72,902 | $ | 52,125 | ||||||||
Supplemental disclosure of cash flow information | |||||||||||
Cash paid during the period for: | |||||||||||
Interest, net of interest capitalized | $ 7,859 | $ | 7,138 | ||||||||
Income taxes | $ 561 | $ | 4,122 |
Nine Months Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | ||||||||||
(in thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 19,558 | $ | 33,983 | |||||||
Adjustments to reconcile net income to net cash | |||||||||||
provided by operating activities: | |||||||||||
Depreciation and amortization | 29,077 | 27,860 | |||||||||
Increase (decrease) in deferred taxes | 2,778 | 8,482 | |||||||||
Gain on asset dispositions | (2,588 | ) | (1,307 | ) | |||||||
Loss on extinguishment of debt | 6,205 | -- | |||||||||
Equity in earnings from unconsolidated affiliates | |||||||||||
over (under) dividends received | (4,459 | ) | (3,575 | ) | |||||||
Minority interest in earnings | 1,615 | 1,313 | |||||||||
(Increase) decrease in accounts receivable | 4,782 | (17,591 | ) | ||||||||
(Increase) decrease in inventories | (5,484 | ) | (7,483 | ) | |||||||
(Increase) decrease in prepaid expenses and other | 7,438 | 571 | |||||||||
Increase (decrease) in accounts payable | (4,353 | ) | 1,903 | ||||||||
Increase (decrease) in accrued liabilities | 1,844 | 8,207 | |||||||||
Increase (decrease) in other liabilities and deferred credits | 311 | (2,031 | ) | ||||||||
Net cash provided by (used in) operating activities | 56,724 | 50,332 | |||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (53,806 | ) | (41,454 | ) | |||||||
Assets purchased on behalf of affiliate | (35,394 | ) | (26,019 | ) | |||||||
Proceeds from sale of assets to affiliate | 35,394 | 26,019 | |||||||||
Proceeds from asset dispositions | 4,758 | 17,575 | |||||||||
Acquisitions, net of cash received | -- | (15,953 | ) | ||||||||
Investments | (1,729 | ) | -- | ||||||||
Net cash provided by (used in) investing activities | (50,777 | ) | (39,832 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Proceeds from borrowings | 242,981 | 45,286 | |||||||||
Repayment of debt and payment of debt redemption premiums | (233,384 | ) | (48,391 | ) | |||||||
Issuance of common stock | 1,147 | 2,926 | |||||||||
Net cash provided by (used in) financing activities | 10,744 | (179 | ) | ||||||||
Effect of exchange rate changes in cash | 5,734 | 2,312 | |||||||||
Net increase (decrease) in cash and cash equivalents | 22,425 | 12,633 | |||||||||
Cash and cash equivalents at beginning of period | 56,800 | 42,670 | |||||||||
Cash and cash equivalents at end of period | $ | 79,225 | $ | 55,303 | |||||||
Supplemental disclosure of cash flow information | |||||||||||
Cash paid during the period for: | |||||||||||
Interest, net of interest capitalized | $ | 14,794 | $ | 10,076 | |||||||
Income taxes | $ | 6,929 | $ | 6,733 |
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, any adjustments considered necessary for a fair presentation have been included. Operating results for the three and sixnine months ended September 30,December 31, 2003, are not necessarily indicative of the results that may be expected for the year ending March 31, 2004. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2003.
Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share for the three and sixnine months ended September 30, 2003December 31, 2002 excluded 381,076217,500 and 256,372244,167 stock options, respectively, at a weighted average exercise price of $21.26 and $21.31, respectively,$21.34 which were outstanding during the period but were anti-dilutive. Diluted earnings per share for the three and six months ended September 30, 2002 excluded 424,000 and 257,500 stock options, respectively, at a weighted average exercise price of $20.46 and $21.34, respectively, which were outstanding during the periodperiods but were anti-dilutive. The following table sets forth the computation of basic and diluted net income per share:
Three Months Ended September 30, | Six Months Ended September 30, | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003(1) | 2002 | |||||||||||||||||||||||||||
Net income (thousands of dollars): | ||||||||||||||||||||||||||||||||||
Income available to common stockholders | $ | 8,500 | $ | 12,483 | $ | 16,768 | $ | 21,965 | $ | 2,790 | $ | 12,018 | $ | 19,558 | $ | 33,983 | ||||||||||||||||||
Interest and redemption premium on convertible debt, | ||||||||||||||||||||||||||||||||||
net of taxes(1) | -- | 955 | 1,809 | 1,909 | ||||||||||||||||||||||||||||||
Interest on convertible debt, net of taxes | -- | 955 | -- | 2,864 | ||||||||||||||||||||||||||||||
Income available to common stockholders, | ||||||||||||||||||||||||||||||||||
plus assumed conversions | $ | 8,500 | $ | 13,438 | $ | 18,577 | $ | 23,874 | $ | 2,790 | $ | 12,973 | $ | 19,558 | $ | 36,847 | ||||||||||||||||||
Shares: | ||||||||||||||||||||||||||||||||||
Weighted average number of common | ||||||||||||||||||||||||||||||||||
shares outstanding | 22,514,628 | 22,398,223 | 22,512,825 | 22,356,507 | 22,555,042 | 22,498,903 | 22,526,949 | 22,404,145 | ||||||||||||||||||||||||||
Options | 158,316 | 127,989 | 145,240 | 167,850 | 253,210 | 164,144 | 170,065 | 165,775 | ||||||||||||||||||||||||||
Convertible debt | -- | 3,976,928 | 2,586,090 | 3,976,928 | -- | 3,976,928 | -- | 3,976,928 | ||||||||||||||||||||||||||
Weighted average number of common | ||||||||||||||||||||||||||||||||||
shares outstanding, plus assumed conversions | 22,672,944 | 26,503,140 | 25,244,155 | 26,501,285 | 22,808,252 | 26,639,975 | 22,697,014 | 26,546,848 | ||||||||||||||||||||||||||
Net income per share: | ||||||||||||||||||||||||||||||||||
Basic | $ | 0.38 | $ | 0.56 | $ | 0.74 | $ | 0.98 | $ | 0.12 | $ | 0.53 | $ | 0.87 | $ | 1.52 | ||||||||||||||||||
Diluted | $ | 0.37 | $ | 0.51 | $ | 0.74 | $ | 0.90 | $ | 0.12 | $ | 0.49 | $ | 0.86 | $ | 1.39 | ||||||||||||||||||
(1) The assumed conversion of the convertible debt redeemed in July 2003 is anti-dilutive for the threenine months ended September 30,December 31, 2003.
The Company accounts for its stock-based employee compensation under the principles prescribed by the Accounting Principles Board’s Opinion No. 25, Accounting for Stock Issued to Employees (Opinion No. 25). SFAS No. 123, “Accounting for Stock-Based Compensation” permits the continued use of the intrinsic-value based method prescribed by Opinion No. 25 but requires additional disclosures, including pro forma calculations of earnings and net earnings per share as if the fair value method of accounting prescribed by SFAS No. 123 had been applied. No stock-based compensation costs are reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant. As required by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amended SFAS No. 123, the following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. The pro forma data presented below is not representative of the effects on reported amounts for future years.
Three Months Ended September 30, | Six Months Ended September 30, | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||
Net income, as reported: | $ 8,500 | $ | 12,483 | $ | 16,768 | $ | 21,965 | 2,790 | 12,018 | 19,558 | 33,983 | |||||||||||||||||
Stock-based employee compensation expense, | ||||||||||||||||||||||||||||
net of tax | (237 | ) | (77 | ) | (359 | ) | (534 | ) | (428 | ) | (163 | ) | (788 | ) | (179 | ) | ||||||||||||
Pro forma net income | 8,263 | 12,406 | 16,409 | 21,431 | 2,362 | 11,855 | 18,770 | 33,804 | ||||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||
Earnings per share, as reported | $ | 0.38 | $ | 0.56 | $ | 0.74 | $ | 0.98 | $ | 0.12 | $ | 0.53 | $ | 0.87 | $ | 1.52 | ||||||||||||
Stock-based employee compensation expense, | ||||||||||||||||||||||||||||
net of tax | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02) | (0.01) | (0.03) | (0.01) | ||||||||||||||||
Pro forma basic earnings per share | $ | 0.37 | $ | 0.55 | $ | 0.73 | $ | 0.96 | $ | 0.10 | $ | 0.52 | $ | 0.84 | $ | 1.51 | ||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||
Earnings per share, as reported | $ | 0.37 | $ | 0.51 | $ | 0.74 | $ | 0.90 | $ | 0.12 | $ | 0.49 | $ | 0.86 | $ | 1.39 | ||||||||||||
Stock-based employee compensation expense, | ||||||||||||||||||||||||||||
net of tax | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.02) | (0.01) | (0.03) | (0.01) | ||||||||||||||||
Pro forma diluted earnings per share | $ | 0.36 | $ | 0.50 | $ | 0.72 | $ | 0.88 | $ | 0.10 | $ | 0.48 | $ | 0.83 | $ | 1.38 | ||||||||||||
The Company employs approximately 260 pilots in its North American Operations who are represented by the Office and Professional Employees International Union (“OPEIU”) under a collective bargaining agreement. Because this agreement became amendable in May 2003, the Company began negotiations with union representatives in March 2003. After approximately eight weeks of discussions, an agreement could not be reached on several keys areas, most notably compensation levels. Both management and the union representatives agreed to seek assistance from the National Mediation Board, or NMB, in appointing an independent mediator to assist with the negotiations. A mediator was assigned by the NMB and sessions have continued to date with some progress being made. Additional sessions are planned for NovemberIn January 2004, the Company made its last offer to the union which was termed not acceptable, citing primarily issues associated with pay and December. Future sessions will continue as long asbenefits. It appears the parties may have reached an impasse and the mediator believes progress is being made.has scheduled no additional negotiating sessions. If the mediator and the NMB should determine that no further progress can be made toward resolution, then the mediatorNMB can declare a 30-day “cooling-off period.” Negotiations may continue during the “cooling-off period.” If the dispute remains unresolved after the “cooling-off period,” then both parties would be released from negotiations and could seek “self help”. When “self help” is available then the pilots could then engage in a work action that could take a variety of forms including a work stoppage. The Company has contingency plans in place to respond to possible work actions by the pilots.
Comprehensive income is as follows:
Three Months Ended September 30, | Six Months Ended September 30, | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Net Income | $ | 8,500 | $ | 12,483 | $ | 16,768 | $ | 21,965 | $ | 2,790 | $ | 12,018 | $ | 19,558 | $ | 33,983 | ||||||||||||||||||||||||||||||
Other Comprehensive Income: | ||||||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | 1,568 | 7,308 | 12,232 | 24,289 | ||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment and other | 17,872 | 9,929 | 30,104 | 34,218 | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | $ | 10,068 | $ | 19,791 | $ | 29,000 | $ | 46,254 | $ | 20,662 | $ | 21,947 | $ | 49,662 | $ | 68,201 | ||||||||||||||||||||||||||||||
In October 2003, the Company announced that it had begun a restructuring of its North Sea Operations. The restructuring is designed to reduce costs and promote operational and managerial efficiencies to enable the Company to remain competitive in the North Sea offshore helicopter market.
As part of the restructuring program, the Company will reduce staffing levels by approximately 75 positions, or 11%, of its United Kingdom workforce over a six-month period. The Company will incur approximately $5.2 million in severance and other restructuring costs. In addition, the Company is considering changes to its defined benefit pension plan to limit future service accruals through the use of a defined contribution arrangement and is currently consulting with employees regarding this matter.
NOTE F – Property and Equipment
In conjunction with the Company’s previously announced fleet and facilities renewal and refurbishment program, the Company changed the estimated residual value of certain aircraft from 30% to 50% and changed the useful lives of certain aircraft from 7-10 years to 15 years, effective July 1, 2003. The Company believes the revised amounts reflect their historical experience and more appropriately matches costs over the estimated useful lives and salvage values of these assets. The effect of this change for the quarter and six months ended September 30,December 31, 2003, was a reduction in depreciation expense of $1.1 million, $0.8 million after tax. The effect of this change for the nine months ended December 31, 2003, was a reduction in depreciation expense of $2.2 million, $1.5 million after tax. The reduction in depreciation expense increased the Company’s net income for the three and sixnine months ended September 30,December 31, 2003 by $0.03 and $0.07 per diluted share.share, respectively.
On June 20, 2003, the Company completed a private placement of $230.0 million 6 1/8% Senior Notes due 2013. These notes are unsecured senior obligations and rank effectively junior in right of payment to all the Company’s existing and future secured indebtedness, rank equally in right of payment with the Company’s existing and future senior unsecured indebtedness and rank senior in right of payment to any of the Company’s existing and future subordinated indebtedness. A portion of the net proceeds from the issuance and sale of these notes was used to redeem all of the Company’s outstanding 7 7/8% Senior Notes due 2008 and all of the Company’s outstanding 6% Convertible Subordinated Notes due 2003. The remaining net proceeds from the private placement were used for general corporate purposes. At the end of June 2003 the Company notified the trustees of the full redemption of its $100.0 million 7 7/8% Senior Notes due 2008 at a redemption price equal to 103.938% of the principal amount plus accrued interest of $0.3 million for a total price of $104.2 million and the full redemption of its $90.9 million 6% Convertible Subordinated Notes due 2003 at a redemption price equal to 100.86% of the principal amount plus accrued interest of $0.7 million for a total price of $92.4 million. The above redemptions took place on July 29, 2003. The Company recorded a loss on the extinguishment of debt of $6.2 million in July 2003. Approximately $4.7 million of the loss pertains to redemption premiums and $1.5 million pertains to unamortized debt issuance costs relating to the redeemed debt.
The Company filed a registration statement on July 18, 2003, with respect to an offer to exchange the notes for a new issue of equivalent notes registered under the Securities Act. The registration statement was declared effective on August 4, 2003 and the exchange of notes was concluded on September 4, 2003.
In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” effective for fiscal years beginning after June 15, 2002. This statement will requirerequires the Company to record the fair value of liabilities related to future asset retirement obligations in the period the obligation is incurred. The Company adopted SFAS No. 143 on April 1, 2003. The adoption of SFAS No. 143 did not have an impact on the Company’s financial statements.
In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates SFAS No. 4 and as a result, gains and losses from extinguishments of debt should be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30. SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also updates and amends existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company implemented SFAS No. 145 on April 1, 2003, and determined that it had no impact on prior quarter financial statements. On July 29, 2003, the Company redeemed all of the then outstanding principal amount of its 7 7/8% Senior Notes due 2008 and its 6% Convertible Subordinated Notes due 2003 which resulted in a loss on extinguishment of debt of $6.2 million comprised of unamortized debt issuance costs and a premium payment. In accordance with SFAS No. 145 the loss on extinguishment of debt was recognized as a component of income from continuing operations.
In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective for fiscal periods after December 31, 2002. SFAS No. 146 requires companies to recognize costs associated with restructurings, discontinued operations, plant closings, or other exit or disposal activities, when incurred rather than at the date a plan is committed to. The Company has implemented the provisions of this statement on a prospective basis for exit or disposal activities initiated after December 31, 2002.
In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 expands existing accounting guidance and disclosure requirements for certain guarantees and requires recognition, at the inception of a guarantee, of a liability for the fair value of an obligation undertaken in connection with issuing a guarantee. The disclosure requirements of FIN 45 were effective for the Company’s March 31, 2003 financial statements and the remaining provisions of FIN 45 apply to guarantees issued or modified after December 31, 2002. During the current quarter,In July 2003, the Company sold six aircraft, at cost, to a newly formed limited liability company, Rotorwing Leasing Resources, L.L.C. or RLR. The capital stock of RLR is owned 49% by the Company and 51% by the same principal with whom the Company has other jointly owned businesses operating in Mexico. RLR financed 90% of the purchase price of these aircraft through a five year term loan (the RLR Note). The RLR Note is secured by the six aircraft. The Company has guaranteed 49% of the RLR Note ($15.6 million) and the other shareholder has guaranteed the remaining 51% of the RLR Note ($16.2 million). In addition, the Company has given the Bank a put option which the bank may exercise if the aircraft are not returned to the United States within 30 days of a default on the RLR Note. Any such exercise would require the Company to purchase the RLR Note from the bank. The Company and the other RLR shareholder simultaneously entered into a similar agreement which requires that, in event of exercise by the bank of its put option to the Company, the other shareholder will be required to purchase 51% of the RLR Note from the Company. As of September 30,December 31, 2003 a liability of $1.1$1.0 million representing the fair value of this guarantee is reflected in the balance sheet in other liabilities and deferred credits.
In January 2003, The fair value of the FASB issued Interpretation No. 46, “Consolidationguarantee is being amortized over the term of Variable Interest Entities” (“FIN 46”). In general, a variable interest entity (formerly referred to as a Special Purpose Entity or SPE) is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires consolidation of a variable interest entity by a company if that company is subject to the majority of risk of loss or residual return from the variable interest entity’s activities. FIN 46 is effective immediately for variable interest entities created after January 31, 2003. The consolidation requirements for variable interest entities created before February 1, 2003, begins no later than the first fiscal year or interim period beginning after December 15, 2003. The adoption of FIN 46 did not have a material impact on the Company’s consolidated financial statements.RLR Note.
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” effective for contracts entered into or modified after June 30, 2003. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The adoption of SFAS 149 did not have an impact on the Company’s financial statements.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 affects the issuer’s accounting for three types of freestanding financial instruments. One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets. A second type, which includes put options and forward purchase contracts, involves instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets. The third type of instrumentsinstrument that are liabilities under this Statement is obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominatelypredominantly to a variable such as a market index, or varies inversely with the value of the issuers’ shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on the Company’s financial statements.
In December 2003, the FASB published a revision to Interpretation 46 (“FIN 46R”) to clarify certain provisions of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” and to exempt certain entities from its requirements. FIN 46R requires a company to consolidate a variable interest entity (VIE), as defined, when the company will absorb a majority of the variable interest entity’s expected losses, receive a majority of the variable interest entity’s expected residual returns, or both. FIN 46R also requires consolidation of existing, non-controlled affiliates if the VIE is unable to finance its operations without investor support, or where the other investors do not have exposure to the significant risks and rewards of ownership. FIN 46R is effective by the end of the first reporting period beginning after December 15, 2003. The Company does not expect the adoption of FIN 46R to have a material impact on the Company’s consolidated financial statements.
The Company operates principally in two business segments: Helicopter Activities and Production Management Services. The following shows reportable segment information for the three and sixnine months ended September 30,December 31, 2003 and 2002, reconciled to consolidated totals, and prepared on the same basis as the Company’s consolidated financial statements:
Three Months Ended September 30, | Six Months Ended September 30, | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Segment operating revenue from external customers: | ||||||||||||||||||||||||||||||||||||||||||||||
Helicopter Activities: | ||||||||||||||||||||||||||||||||||||||||||||||
Helicopter activities: | ||||||||||||||||||||||||||||||||||||||||||||||
North American Operations | $ | 38,800 | $ | 34,303 | $ | 72,936 | $ | 70,569 | $ | 35,107 | $ | 34,369 | $ | 108,044 | $ | 104,938 | ||||||||||||||||||||||||||||||
North Sea Operations | 40,103 | 48,777 | 80,910 | 90,331 | 38,277 | 43,928 | 119,187 | 134,259 | ||||||||||||||||||||||||||||||||||||||
International Operations | 41,634 | 40,934 | 83,129 | 78,178 | 45,908 | 42,347 | 129,037 | 120,525 | ||||||||||||||||||||||||||||||||||||||
Technical Services | 6,491 | 7,538 | 12,032 | 15,386 | 6,585 | 7,546 | 18,618 | 22,932 | ||||||||||||||||||||||||||||||||||||||
Total Helicopter Activities | 127,028 | 131,552 | 249,007 | 254,464 | 125,877 | 128,190 | 374,886 | 382,654 | ||||||||||||||||||||||||||||||||||||||
Production Management Services | 12,001 | 11,914 | 23,656 | 23,909 | 12,597 | 11,820 | 36,253 | 35,729 | ||||||||||||||||||||||||||||||||||||||
Total segment operating revenue | $ | 139,029 | $ | 143,466 | $ | 272,663 | $ | 278,373 | $ | 138,474 | $ | 140,010 | $ | 411,139 | $ | 418,383 | ||||||||||||||||||||||||||||||
Intersegment operating revenue: | ||||||||||||||||||||||||||||||||||||||||||||||
Helicopter activities: | ||||||||||||||||||||||||||||||||||||||||||||||
North American Operations | $ | 3,884 | $ | 3,349 | $ | 7,573 | $ | 6,256 | $ | 4,309 | $ | 3,792 | $ | 11,881 | $ | 10,048 | ||||||||||||||||||||||||||||||
North Sea Operations | 3,665 | 4,199 | 7,841 | 8,528 | 4,806 | 3,935 | 12,647 | 12,463 | ||||||||||||||||||||||||||||||||||||||
International Operations | 229 | 677 | 468 | 1,353 | 230 | 675 | 698 | 2,028 | ||||||||||||||||||||||||||||||||||||||
Technical Services | 2,776 | 1,629 | 4,048 | 5,211 | 8,021 | 2,161 | 12,068 | 7,372 | ||||||||||||||||||||||||||||||||||||||
Total Helicopter Activities | 10,554 | 9,854 | 19,930 | 21,348 | 17,366 | 10,563 | 37,294 | 31,911 | ||||||||||||||||||||||||||||||||||||||
Production Management Services | 17 | 15 | 35 | 30 | 14 | 17 | 49 | 47 | ||||||||||||||||||||||||||||||||||||||
Total intersegment operating revenue | $ | 10,571 | $ | 9,869 | $ | 19,965 | $ | 21,378 | $ | 17,380 | $ | 10,580 | $ | 37,343 | $ | 31,958 | ||||||||||||||||||||||||||||||
Consolidated operating revenue reconciliation: | ||||||||||||||||||||||||||||||||||||||||||||||
Helicopter activities: | ||||||||||||||||||||||||||||||||||||||||||||||
North American Operations | $ | 42,684 | $ | 37,652 | $ | 80,509 | $ | 76,825 | $ | 39,416 | $ | 38,161 | $ | 119,925 | $ | 114,986 | ||||||||||||||||||||||||||||||
North Sea Operations | 43,768 | 52,976 | 88,751 | 98,859 | 43,083 | 47,863 | 131,834 | 146,722 | ||||||||||||||||||||||||||||||||||||||
International Operations | 41,863 | 41,611 | 83,597 | 79,531 | 46,138 | 43,022 | 129,735 | 122,553 | ||||||||||||||||||||||||||||||||||||||
Technical Services | 9,267 | 9,167 | 16,080 | 20,597 | 14,606 | 9,707 | 30,686 | 30,304 | ||||||||||||||||||||||||||||||||||||||
Total Helicopter Activities | 137,582 | 141,406 | 268,937 | 275,812 | 143,243 | 138,753 | 412,180 | 414,565 | ||||||||||||||||||||||||||||||||||||||
Production Management Services | 12,018 | 11,929 | 23,691 | 23,939 | 12,611 | 11,837 | 36,302 | 35,776 | ||||||||||||||||||||||||||||||||||||||
Corporate | 3,068 | 2,837 | 5,951 | 5,886 | 2,925 | 2,904 | 8,877 | 8,790 | ||||||||||||||||||||||||||||||||||||||
Intersegment eliminations | (13,239 | ) | (12,596 | ) | (25,257 | ) | (26,992 | ) | (20,064 | ) | (13,307 | ) | (45,322 | ) | (40,299 | ) | ||||||||||||||||||||||||||||||
Total consolidated operating revenue | $ | 139,429 | $ | 143,576 | $ | 273,322 | $ | 278,645 | $ | 138,715 | $ | 140,187 | $ | 412,037 | $ | 418,832 | ||||||||||||||||||||||||||||||
Consolidated operating income reconciliation: | ||||||||||||||||||||||||||||||||||||||||||||||
Helicopter activities: | ||||||||||||||||||||||||||||||||||||||||||||||
North American Operations | $ | 9,754 | $ | 4,970 | $ | 13,559 | $ | 8,954 | $ | 7,070 | $ | 5,727 | $ | 20,628 | $ | 14,681 | ||||||||||||||||||||||||||||||
North Sea Operations | 3,319 | 7,202 | 8,698 | 12,741 | (437 | ) | 6,783 | 8,261 | 19,524 | |||||||||||||||||||||||||||||||||||||
International Operations | 5,351 | 7,181 | 11,751 | 13,980 | 4,907 | 6,436 | 16,656 | 20,416 | ||||||||||||||||||||||||||||||||||||||
Technical Services | 128 | 529 | 272 | 1,273 | 1,023 | 1,237 | 1,296 | 2,510 | ||||||||||||||||||||||||||||||||||||||
Total Helicopter Activities | 18,552 | 19,882 | 34,280 | 36,948 | 12,563 | 20,183 | 46,841 | 57,131 | ||||||||||||||||||||||||||||||||||||||
Production Management Services | 780 | 898 | 1,403 | 1,793 | 540 | 686 | 1,942 | 2,479 | ||||||||||||||||||||||||||||||||||||||
Gain on disposal of assets | 1,374 | 1,966 | 2,231 | 2,253 | ||||||||||||||||||||||||||||||||||||||||||
Gain (loss) on disposal of assets | 357 | (946 | ) | 2,588 | 1,307 | |||||||||||||||||||||||||||||||||||||||||
Corporate | (685 | ) | (1,168 | ) | (1,420 | ) | (1,995 | ) | (2,690 | ) | (982 | ) | (4,107 | ) | (2,977 | ) | ||||||||||||||||||||||||||||||
Total consolidated operating income | $ | 20,021 | $ | 21,578 | $ | 36,494 | $ | 38,999 | $ | 10,770 | $ | 18,941 | $ | 47,264 | $ | 57,940 | ||||||||||||||||||||||||||||||
In October 2003, the Company announced that it had begun a restructuring of its United Kingdom based operations. The restructuring is designed to reduce costs and promote operational and managerial efficiencies to enable the Company to remain competitive in the North Sea offshore helicopter market.
As part of the restructuring program, the Company will reduce staffing levels by approximately 100 positions, or 11% of its United Kingdom workforce over a nine-month period. The Company will ultimately incur approximately £1.9 million ($3.3 million) in severance costs and approximately £0.4 million ($0.7 million) in other restructuring costs. For the three and nine months ended December 31, 2003, the Company has incurred to date approximately £1.3 million ($2.4 million) in severance costs and approximately £0.3 million ($0.6 million) in other restructuring costs. Approximately £0.5 million ($1.0 million) of costs incurred to date are included in Direct Cost in the consolidated income statement and have been allocated to the Helicopter Activities segment, specifically the North Sea business unit, while the remaining £1.1 million ($2.0 million) are included in General and Administrative costs in the consolidated income statement and were allocated to Corporate.
The balance of the accrued restructuring charges recorded in connection with the restructuring of the Company’s United Kingdom based operations at December 31, 2003 was as follows:
Employee Severance And Other Related Benefits | Other Restructuring Costs | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||
Restructuring Costs, incurred to date | $ | 2,404 | $ | 602 | $ | 3,006 | |||||
Cash payments | (196 | ) | (176 | ) | (372 | ) | |||||
Accrual balance at December 31, 2003 | $ | 2,208 | $ | 426 | $ | 2,634 | |||||
The accrual balance at December 31, 2003 is expected to be paid in the next three quarters.
During January 2004, the Company amended its only defined benefit pension plans covering certain United Kingdom and other overseas employees. The amendment, which is effective February 1, 2004, essentially removes the defined benefit feature for a participant’s future services and replaces it with a defined contribution arrangement. Under the new defined contribution feature, the Company will contribute 5% of a participant’s non-variable salary to a defined contribution section of the plans. The participant will be required to contribute a minimum of 5% of non-variable salary. Participants were also given the option to transfer out of the plans. In accordance with SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits”, the above change to the plans constitutes a “curtailment” of benefits and accordingly, all previously deferred service gains or losses are immediately recognized in the statement of income. At the date of the amendment the Company had a deferred prior service benefit in the range of £11.6 million to £12.3 million ($20.7 million to $22.0 million) related to prior plan amendments. This amount will be recorded as a gain in the Company’s fourth fiscal quarter.
In connection with the sale of the Company’s $230 million 6 1/8%1/8% Senior Notes due 2013, certain of the Company’s subsidiaries (the “Guarantor Subsidiaries”) jointly, severally and unconditionally guaranteed the payment obligations under the Notes. The following supplemental financial information sets forth, on a consolidating basis, the balance sheet, statement of income and cash flow information for Offshore Logistics, Inc. (“Parent Company Only”), for the Guarantor Subsidiaries and for Offshore Logistics, Inc.‘s other subsidiaries (the “Non-Guarantor Subsidiaries”). The Company has not presented separate financial statements and other disclosures concerning the Guarantor Subsidiaries because management has determined that such information is not material to investors.
The supplemental condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include all disclosures included in annual financial statements, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Certain reclassifications were made to conform all of the financial information to the financial presentation on a consolidated basis. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses.
The allocation of the consolidated income tax provision was made using the with and without allocation method.
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ 11,453 | $ | 2,797 | $ | 58,652 | $ | -- | $ | 72,902 | ||||||||
Accounts receivable | 968 | 42,348 | 83,273 | (4,694 | ) | 121,895 | |||||||||||
Inventories | -- | 68,418 | 53,974 | 149 | 122,541 | ||||||||||||
Prepaid expenses and other | 410 | 3,829 | 6,015 | -- | 10,254 | ||||||||||||
Total current assets | 12,831 | 117,392 | 201,914 | (4,545 | ) | 327,592 | |||||||||||
Intercompany investment | 271,257 | -- | -- | (271,257 | ) | -- | |||||||||||
Investments in unconsolidated affiliates | 1,052 | -- | 34,118 | -- | 35,170 | ||||||||||||
Intercompany note receivables | 457,458 | -- | 11,792 | (469,250 | ) | -- | |||||||||||
Property and equipment--at cost: | |||||||||||||||||
Land and buildings | 135 | 8,686 | 8,378 | -- | 17,199 | ||||||||||||
Aircraft and equipment | 1,483 | 292,836 | 462,846 | -- | 757,165 | ||||||||||||
1,618 | 301,522 | 471,224 | -- | 774,364 | |||||||||||||
Less: Accumulated depreciation | |||||||||||||||||
and amortization | (1,351 | ) | (93,645 | ) | (119,441 | ) | -- | (214,437 | ) | ||||||||
267 | 207,877 | 351,783 | -- | 559,927 | |||||||||||||
Other assets | 14,343 | 13,974 | 19,732 | 111 | 48,160 | ||||||||||||
$ | 757,208 | $ | 339,243 | $ | 619,339 | $ | (744,941 | ) | $ | 970,849 | |||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | ||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 14,548 | $ | 5,951 | $ | 58,726 | $ | -- | $ | 79,225 | ||||||||||||||||||||||
Accounts receivable | 4,504 | 40,766 | 87,300 | (7,305 | ) | 125,265 | ||||||||||||||||||||||||||
Inventories | -- | 69,102 | 62,284 | 149 | 131,535 | |||||||||||||||||||||||||||
Prepaid expenses and other | 220 | 2,166 | 6,455 | -- | 8,841 | |||||||||||||||||||||||||||
Total current assets | 19,272 | 117,985 | 214,765 | (7,156 | ) | 344,866 | ||||||||||||||||||||||||||
Intercompany investment | 260,792 | -- | -- | (260,792 | ) | -- | ||||||||||||||||||||||||||
Investments in unconsolidated affiliates | 947 | -- | 36,825 | -- | 37,772 | |||||||||||||||||||||||||||
Intercompany note receivables | 488,440 | -- | 12,001 | (500,441 | ) | -- | ||||||||||||||||||||||||||
Property and equipment--at cost: | ||||||||||||||||||||||||||||||||
Land and buildings | 135 | 17,140 | 8,527 | -- | 25,802 | |||||||||||||||||||||||||||
Aircraft and equipment | 1,464 | 287,884 | 488,934 | -- | 778,282 | |||||||||||||||||||||||||||
1,599 | 305,024 | 497,461 | -- | 804,084 | ||||||||||||||||||||||||||||
Less: accumulated depreciation | ||||||||||||||||||||||||||||||||
and amortization | (1,376 | ) | (94,240 | ) | (131,818 | ) | -- | (227,434 | ) | |||||||||||||||||||||||
223 | 210,784 | 365,643 | -- | 576,650 | ||||||||||||||||||||||||||||
Other assets | 14,959 | 13,970 | 17,198 | 111 | 46,238 | |||||||||||||||||||||||||||
$ | 784,633 | $ | 342,739 | $ | 646,432 | $ | (768,278) | $ | 1,005,526 | |||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ INVESTMENT | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current liabilities: | |||||||||||||||||
Accounts payable | $ 98 | $ | 6,111 | $ | 26,236 | $ | (4,694 | ) | $ | 27,751 | |||||||
Accrued liabilities | 457 | 13,188 | 33,506 | 13,432 | 60,583 | ||||||||||||
Deferred taxes | 1,079 | 110 | 12,452 | (13,005 | ) | 636 | |||||||||||
Current maturities of long-term debt | -- | -- | 5,681 | -- | 5,681 | ||||||||||||
Total current liabilities | 1,634 | 19,409 | 77,875 | (4,267 | ) | 94,651 | |||||||||||
Long-term debt, less current maturities | 230,000 | -- | 21,637 | -- | 251,637 | ||||||||||||
Intercompany notes payable | 10,657 | 96,232 | 362,361 | (469,250 | ) | -- | |||||||||||
Other liabilities and deferred credits | 1,338 | 2,781 | 123,070 | -- | 127,189 | ||||||||||||
Deferred taxes | 29,549 | 52,629 | 6,415 | (426 | ) | 88,167 | |||||||||||
Minority interest | 18,481 | -- | -- | -- | 18,481 | ||||||||||||
Stockholders' investment: | |||||||||||||||||
Common stock | 225 | 4,062 | 15,010 | (19,072 | ) | 225 | |||||||||||
Additional paid in capital | 139,109 | 51,168 | 8,015 | (59,183 | ) | 139,109 | |||||||||||
Retained earnings | 316,118 | 112,962 | 82,282 | (195,096 | ) | 316,266 | |||||||||||
Accumulated other comprehensive | |||||||||||||||||
income (loss) | 10,097 | -- | (77,326 | ) | 2,353 | (64,876 | ) | ||||||||||
465,549 | 168,192 | 27,981 | (270,998 | ) | 390,724 | ||||||||||||
$ | 757,208 | $ | 339,243 | $ | 619,339 | $ | (744,941 | ) | $ | 970,849 | |||||||
Current liabilities: | |||||||||||||||||
Accounts payable | $ | 247 | $ | 6,078 | $ | 26,358 | $ | (3,530 | ) | $ | 29,153 | ||||||
Accrued liabilities | 3,073 | 13,984 | 39,506 | 12,730 | 69,293 | ||||||||||||
Deferred taxes | 649 | -- | 13,381 | (13,005 | ) | 1,025 | |||||||||||
Current maturities of long-term debt | -- | -- | 995 | -- | 995 | ||||||||||||
Total current liabilities | 3,969 | 20,062 | 80,240 | (3,805 | ) | 100,466 | |||||||||||
Long-term debt, less current maturities | 230,000 | -- | 21,383 | -- | 251,383 | ||||||||||||
Intercompany notes payable | 10,871 | 90,780 | 398,790 | (500,441 | ) | -- | |||||||||||
Other liabilities and deferred credits | 1,297 | 3,136 | 132,061 | -- | 136,494 | ||||||||||||
Deferred taxes | 30,660 | 54,846 | 2,076 | (3,498 | ) | 84,084 | |||||||||||
Minority interest | 20,438 | -- | -- | -- | 20,438 | ||||||||||||
Stockholders' investment: | |||||||||||||||||
Common stock | 226 | 4,062 | 19,856 | (23,918 | ) | 226 | |||||||||||
Additional paid in capital | 140,383 | 51,168 | 7,323 | (58,491 | ) | 140,383 | |||||||||||
Retained earnings | 318,908 | 118,685 | 74,354 | (192,891 | ) | 319,056 | |||||||||||
Accumulated other comprehensive | |||||||||||||||||
income (loss) | 27,881 | -- | (89,651 | ) | 14,766 | (47,004 | ) | ||||||||||
487,398 | 173,915 | 11,882 | (260,534 | ) | 412,661 | ||||||||||||
$ | 784,633 | $ | 342,739 | $ | 646,432 | $ | (768,278 | ) | $ | 1,005,526 | |||||||
Supplemental Condensed Consolidating Statement of IncomeSix Months Ended September 30, 2003
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||||||||||||||
Gross revenue: | |||||||||||||||||||||||||||||
Operating revenue | $ 396 | $ | 96,593 | $ | 176,333 | $ | -- | $ | 273,322 | ||||||||||||||||||||
Intercompany revenue | -- | 5,621 | 1,004 | (6,625 | ) | -- | |||||||||||||||||||||||
Gain on disposal of assets | -- | 229 | 2,002 | -- | 2,231 | ||||||||||||||||||||||||
396 | 102,443 | 179,339 | (6,625 | ) | 275,553 | ||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Direct cost | -- | 74,921 | 127,752 | -- | 202,673 | ||||||||||||||||||||||||
Intercompany expense | 8 | 996 | 5,140 | (6,144 | ) | -- | |||||||||||||||||||||||
Depreciation and amortization | 118 | 6,300 | 12,881 | -- | 19,299 | ||||||||||||||||||||||||
General and administrative | 3,215 | 4,907 | 9,446 | (481 | ) | 17,087 | |||||||||||||||||||||||
3,341 | 87,124 | 155,219 | (6,625 | ) | 239,059 | ||||||||||||||||||||||||
Operating income | (2,945 | ) | 15,319 | 24,120 | -- | 36,494 | |||||||||||||||||||||||
Earnings from unconsolidated affiliates, net | 15,976 | -- | 4,950 | (15,976 | ) | 4,950 | |||||||||||||||||||||||
Interest income | 20,651 | 7 | 940 | (20,550 | ) | 1,048 | |||||||||||||||||||||||
Interest expense | 8,580 | -- | 20,925 | (20,550 | ) | 8,955 | |||||||||||||||||||||||
Loss on extinguishment of debt | (6,205 | ) | -- | -- | -- | (6,205 | ) | ||||||||||||||||||||||
Other income (expense), net | (306 | ) | (7 | ) | (1,581 | ) | -- | (1,894 | ) | ||||||||||||||||||||
Income before provision for income | |||||||||||||||||||||||||||||
taxes and minority interest | 18,591 | 15,319 | 7,504 | (15,976 | ) | 25,438 | |||||||||||||||||||||||
Allocation of consolidated income taxes | 784 | 4,595 | 2,252 | -- | 7,631 | ||||||||||||||||||||||||
Minority interest | (1,039 | ) | -- | -- | -- | (1,039 | ) | ||||||||||||||||||||||
Net income | $ 16,768 | $ | 10,724 | $ | 5,252 | $ | (15,976 | ) | $ | 16,768 | |||||||||||||||||||
NOTE J – Supplemental Condensed Consolidating Financial Statements – Continued
Supplemental Condensed Consolidating Statement of Cash FlowsSix Months Ended September 30, 2003
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||||||||||||
operating activities | $ (16,062 | ) | $ | 40,425 | $ | 19,493 | $ | (3,728 | ) | $ | 40,128 | ||||||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||||
Capital expenditures | (9 | ) | (40,363 | ) | (2,181 | ) | -- | (42,553 | ) | ||||||||||||||||||||
Proceeds from asset dispositions | -- | 522 | 2,828 | -- | 3,350 | ||||||||||||||||||||||||
Assets purchased on behalf of affiliates | (17,869 | ) | (6,217 | ) | (11,308 | ) | -- | (35,394 | ) | ||||||||||||||||||||
Proceeds from sale of assets to affiliates | 17,869 | 6,217 | 11,308 | -- | 35,394 | ||||||||||||||||||||||||
Investments | -- | -- | (1,729 | ) | -- | (1,729 | ) | ||||||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||||||||||||
investing activities | (9 | ) | (39,841 | ) | (1,082 | ) | -- | (40,932 | ) | ||||||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||||
Proceeds from borrowings | 242,981 | -- | 50 | (50 | ) | 242,981 | |||||||||||||||||||||||
Repayment of debt and payment of debt | |||||||||||||||||||||||||||||
redemption premiums | (231,289 | ) | -- | (880 | ) | 3,778 | (228,391 | ) | |||||||||||||||||||||
Issuance of common stock | 50 | -- | -- | -- | 50 | ||||||||||||||||||||||||
Net cash provided by (used in) financing | |||||||||||||||||||||||||||||
activities | 11,742 | -- | (830 | ) | 3,728 | 14,640 | |||||||||||||||||||||||
Effect of exchange rate changes in cash | -- | -- | 2,266 | -- | 2,266 | ||||||||||||||||||||||||
Net increase (decrease) in cash and | |||||||||||||||||||||||||||||
cash equivalents | (4,329 | ) | 584 | 19,847 | -- | 16,102 | |||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||
at beginning of period | 15,782 | 2,213 | 38,805 | -- | 56,800 | ||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||
at end of period | $ 11,453 | $ | 2,797 | $ | 58,652 | $ | -- | $ | 72,902 | ||||||||||||||||||||
NOTE JK – Supplemental Condensed Consolidating Financial Statements — Continued
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ | 15,782 | $ | 2,213 | $ | 38,805 | $ | -- | $ | 56,800 | |||||||
Accounts receivable | 1,860 | 35,442 | 86,414 | (4,704 | ) | 119,012 | |||||||||||
Inventories | -- | 66,278 | 52,575 | (7 | ) | 118,846 | |||||||||||
Prepaid expenses and other | 305 | 2,999 | 5,139 | -- | 8,443 | ||||||||||||
Total current assets | 17,947 | 106,932 | 182,933 | (4,711 | ) | 303,101 | |||||||||||
Intercompany investment | 264,498 | -- | -- | (264,498 | ) | -- | |||||||||||
Investments in unconsolidated affiliates | -- | -- | 27,928 | -- | 27,928 | ||||||||||||
Intercompany notes receivable | 409,544 | -- | 13,883 | (423,427 | ) | -- | |||||||||||
Property and equipment--at cost: | |||||||||||||||||
Land and buildings | 135 | 8,517 | 8,019 | -- | 16,671 | ||||||||||||
Aircraft and equipment | 1,474 | 253,458 | 448,179 | -- | 703,111 | ||||||||||||
1,609 | 261,975 | 456,198 | -- | 719,782 | |||||||||||||
Less: Accumulated depreciation | |||||||||||||||||
and amortization | (1,238 | ) | (87,876 | ) | (104,441 | ) | -- | (193,555 | ) | ||||||||
371 | 174,099 | 351,757 | -- | 526,227 | |||||||||||||
Other assets | 10,080 | 13,985 | 24,599 | 111 | 48,775 | ||||||||||||
$ | 702,440 | $ | 295,016 | $ | 601,100 | $ | (692,525 | ) | $ | 906,031 | |||||||
LIABILITIES AND STOCKHOLDERS’ INVESTMENT | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current liabilities: | |||||||||||||||||
Accounts payable | $ | 540 | $ | 7,306 | $ | 26,524 | $ | (4,704 | ) | $ | 29,666 | ||||||
Accrued liabilities | 4,175 | 14,488 | 45,518 | -- | 64,181 | ||||||||||||
Deferred taxes | 33 | -- | -- | -- | 33 | ||||||||||||
Current maturities of long-term debt | 90,921 | -- | 5,763 | -- | 96,684 | ||||||||||||
Total current liabilities | 95,669 | 21,794 | 77,805 | (4,704 | ) | 190,564 | |||||||||||
Long-term debt, less current maturities | 114,000 | -- | 22,134 | -- | 136,134 | ||||||||||||
Intercompany notes payable | 14,078 | 63,485 | 345,864 | (423,427 | ) | -- | |||||||||||
Other liabilities and deferred credits | 285 | 2,785 | 116,965 | -- | 120,035 | ||||||||||||
Deferred taxes | 24,429 | 49,482 | 7,171 | -- | 81,082 | ||||||||||||
Minority interest | 16,555 | -- | -- | -- | 16,555 | ||||||||||||
Stockholders' investment: | |||||||||||||||||
Common stock | 225 | 4,062 | 12,117 | (16,179 | ) | 225 | |||||||||||
Additional paid in capital | 139,046 | 51,168 | 8,015 | (59,183 | ) | 139,046 | |||||||||||
Retained earnings | 299,505 | 102,240 | 80,881 | (183,128 | ) | 299,498 | |||||||||||
Accumulated other comprehensive | |||||||||||||||||
income (loss) | (1,352 | ) | -- | (69,852 | ) | (5,904 | ) | (77,108 | ) | ||||||||
437,424 | 157,470 | 31,161 | (264,394 | ) | 361,661 | ||||||||||||
$ | 702,440 | $ | 295,016 | $ | 601,100 | $ | (692,525 | ) | $ | 906,031 | |||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||
Gross revenue: | |||||||||||||||||
Operating revenue | $ | 631 | $ | 144,620 | $ | 266,786 | $ | -- | $ | 412,037 | |||||||
Intercompany revenue | -- | 9,107 | 1,333 | (10,440 | ) | -- | |||||||||||
Gain on disposal of assets | -- | 610 | 1,978 | -- | 2,588 | ||||||||||||
631 | 154,337 | 270,097 | (10,440 | ) | 414,625 | ||||||||||||
Operating expenses: | |||||||||||||||||
Direct cost | -- | 112,530 | 197,694 | -- | 310,224 | ||||||||||||
Intercompany expense | 8 | 1,324 | 8,386 | (9,718 | ) | -- | |||||||||||
Depreciation and amortization | 162 | 9,444 | 19,471 | -- | 29,077 | ||||||||||||
General and administrative | 5,146 | 7,543 | 16,093 | (722 | ) | 28,060 | |||||||||||
5,316 | 130,841 | 241,644 | (10,440 | ) | 367,361 | ||||||||||||
Operating income | (4,685 | ) | 23,496 | 28,453 | -- | 47,264 | |||||||||||
Earnings from unconsolidated affiliates, net | 15,822 | -- | 6,985 | (15,927 | ) | 6,880 | |||||||||||
Interest income | 31,435 | 14 | 1,401 | (31,522 | ) | 1,328 | |||||||||||
Interest expense | 12,178 | 2 | 32,115 | (31,522 | ) | 12,773 | |||||||||||
Loss on extinguishment of debt | (6,205 | ) | -- | -- | -- | (6,205 | ) | ||||||||||
Other income (expense), net | (767 | ) | (15 | ) | (5,464 | ) | -- | (6,246 | ) | ||||||||
Income before provision for income | |||||||||||||||||
taxes and minority interest | 23,422 | 23,493 | (740 | ) | (15,927 | ) | 30,248 | ||||||||||
Allocation of consolidated income taxes | 2,249 | 7,048 | (222 | ) | -- | 9,075 | |||||||||||
Minority interest | (1,615 | ) | -- | -- | -- | (1,615 | ) | ||||||||||
Net income (loss) | $ | 19,558 | $ | 16,445 | $ | (518 | ) | $ | (15,927 | ) | $ | 19,558 | |||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||||||||||||||
Gross revenue: | |||||||||||||||||||||||||||||
Operating revenue | $ | 273 | $ | 94,540 | $ | 183,832 | $ | -- | $ | 278,645 | |||||||||||||||||||
Intercompany revenue | -- | 3,924 | 1,332 | (5,256 | ) | -- | |||||||||||||||||||||||
Gain on disposal of assets | 8 | 826 | 1,419 | -- | 2,253 | ||||||||||||||||||||||||
281 | 99,290 | 186,583 | (5,256 | ) | 280,898 | ||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Direct cost | -- | 75,670 | 130,887 | -- | 206,557 | ||||||||||||||||||||||||
Intercompany expense | 19 | 1,312 | 3,444 | (4,775 | ) | -- | |||||||||||||||||||||||
Depreciation and amortization | 273 | 5,718 | 12,294 | -- | 18,285 | ||||||||||||||||||||||||
General and administrative | 2,960 | 4,721 | 9,857 | (481 | ) | 17,057 | |||||||||||||||||||||||
3,252 | 87,421 | 156,482 | (5,256 | ) | 241,899 | ||||||||||||||||||||||||
Operating income | (2,971 | ) | 11,869 | 30,101 | -- | 38,999 | |||||||||||||||||||||||
Earnings from unconsolidated affiliates, net | 17,997 | -- | 3,451 | (17,997 | ) | 3,451 | |||||||||||||||||||||||
Interest income | 17,470 | 20 | 375 | (17,218 | ) | 647 | |||||||||||||||||||||||
Interest expense | 7,246 | -- | 17,250 | (17,218 | ) | 7,278 | |||||||||||||||||||||||
Other income (expense), net | (373 | ) | 61 | (2,917 | ) | -- | (3,229 | ) | |||||||||||||||||||||
Income before provision for income | |||||||||||||||||||||||||||||
taxes and minority interest | 24,877 | 11,950 | 13,760 | (17,997 | ) | 32,590 | |||||||||||||||||||||||
Allocation of consolidated income taxes | 2,064 | 3,585 | 4,128 | -- | 9,777 | ||||||||||||||||||||||||
Minority interest | (848 | ) | -- | -- | -- | (848 | ) | ||||||||||||||||||||||
Net income | $ | 21,965 | $ | 8,365 | $ | 9,632 | $ | (17,997 | ) | $ | 21,965 | ||||||||||||||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||
operating activities | $ | (14,068 | ) | $ | 49,566 | $ | 24,954 | $ | (3,728 | ) | $ | 56,724 | |||||
Cash flows from investing activities: | |||||||||||||||||
Capital expenditures | (9 | ) | (47,652 | ) | (6,145 | ) | -- | (53,806 | ) | ||||||||
Proceeds from asset dispositions | 4 | 1,824 | 2,930 | -- | 4,758 | ||||||||||||
Assets purchased on behalf of affiliates . | (17,869 | ) | (6,217 | ) | (11,308 | ) | -- | (35,394 | ) | ||||||||
Proceeds from sale of assets to affiliate | 17,869 | 6,217 | 11,308 | -- | 35,394 | ||||||||||||
Investments | -- | -- | (1,729 | ) | -- | (1,729 | ) | ||||||||||
Net cash provided by (used in) | |||||||||||||||||
investing activities | (5 | ) | (45,828 | ) | (4,944 | ) | -- | (50,777 | ) | ||||||||
Cash flows from financing activities: | |||||||||||||||||
Proceeds from borrowings | 242,981 | -- | 50 | (50 | ) | 242,981 | |||||||||||
Repayment of debt and payment of debt | |||||||||||||||||
redemption premiums | (231,289 | ) | -- | (5,873 | ) | 3,778 | (233,384 | ) | |||||||||
Issuance of common stock | 1,147 | -- | -- | -- | 1,147 | ||||||||||||
Net cash provided by (used in) financing | |||||||||||||||||
activities | 12,839 | -- | (5,823 | ) | 3,728 | 10,744 | |||||||||||
Effect of exchange rate changes in cash | -- | -- | 5,734 | -- | 5,734 | ||||||||||||
Net increase (decrease) in cash and | |||||||||||||||||
cash equivalents | (1,234 | ) | 3,738 | 19,921 | -- | 22,425 | |||||||||||
Cash and cash equivalents | |||||||||||||||||
at beginning of period | 15,782 | 2,213 | 38,805 | -- | 56,800 | ||||||||||||
Cash and cash equivalents | |||||||||||||||||
at end of period | $ | 14,548 | $ | 5,951 | $ | 58,726 | $ | -- | $ | 79,225 | |||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | ||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 15,782 | $ | 2,213 | $ | 38,805 | $ | -- | $ | 56,800 | ||||||||||||||||||||||
Accounts receivable | 1,860 | 35,442 | 86,414 | (4,704 | ) | 119,012 | ||||||||||||||||||||||||||
Inventories | -- | 66,278 | 52,575 | (7 | ) | 118,846 | ||||||||||||||||||||||||||
Prepaid expenses and other | 305 | 2,999 | 5,139 | -- | 8,443 | |||||||||||||||||||||||||||
Total current assets | 17,947 | 106,932 | 182,933 | (4,711 | ) | 303,101 | ||||||||||||||||||||||||||
Intercompany investment | 264,498 | -- | -- | (264,498 | ) | -- | ||||||||||||||||||||||||||
Investments in unconsolidated affiliates | -- | -- | 27,928 | -- | 27,928 | |||||||||||||||||||||||||||
Intercompany notes receivable | 409,544 | -- | 13,883 | (423,427 | ) | -- | ||||||||||||||||||||||||||
Property and equipment--at cost: | ||||||||||||||||||||||||||||||||
Land and buildings | 135 | 8,517 | 8,019 | -- | 16,671 | |||||||||||||||||||||||||||
Aircraft and equipment | 1,474 | 253,458 | 448,179 | -- | 703,111 | |||||||||||||||||||||||||||
1,609 | 261,975 | 456,198 | -- | 719,782 | ||||||||||||||||||||||||||||
Less: Accumulated depreciation | ||||||||||||||||||||||||||||||||
and amortization | (1,238 | ) | (87,876 | ) | (104,441 | ) | -- | (193,555 | ) | |||||||||||||||||||||||
371 | 174,099 | 351,757 | -- | 526,227 | ||||||||||||||||||||||||||||
Other assets | 10,080 | 13,985 | 24,599 | 111 | 48,775 | |||||||||||||||||||||||||||
$ | 702,440 | $ | 295,016 | $ | 601,100 | $ | (692,525 | ) | $ | 906,031 | ||||||||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable | $ | 540 | $ | 7,306 | $ | 26,524 | $ | (4,704 | ) | $ | 29,666 | ||||||
Accrued liabilities | 4,175 | 14,488 | 45,518 | -- | 64,181 | ||||||||||||
Deferred taxes | 33 | -- | -- | -- | 33 | ||||||||||||
Current maturities of long-term debt | 90,921 | -- | 5,763 | -- | 96,684 | ||||||||||||
Total current liabilities | 95,669 | 21,794 | 77,805 | (4,704 | ) | 190,564 | |||||||||||
Long-term debt, less current maturities | 114,000 | -- | 22,134 | -- | 136,134 | ||||||||||||
Intercompany notes payable | 14,078 | 63,485 | 345,864 | (423,427 | ) | -- | |||||||||||
Other liabilities and deferred credits | 285 | 2,785 | 116,965 | -- | 120,035 | ||||||||||||
Deferred taxes | 24,429 | 49,482 | 7,171 | -- | 81,082 | ||||||||||||
Minority interest | 16,555 | -- | -- | -- | 16,555 | ||||||||||||
Stockholders' investment: | |||||||||||||||||
Common stock | 225 | 4,062 | 12,117 | (16,179 | ) | 225 | |||||||||||
Additional paid in capital | 139,046 | 51,168 | 8,015 | (59,183 | ) | 139,046 | |||||||||||
Retained earnings | 299,505 | 102,240 | 80,881 | (183,128 | ) | 299,498 | |||||||||||
Accumulated other comprehensive | |||||||||||||||||
income (loss) | (1,352 | ) | -- | (69,852 | ) | (5,904 | ) | (77,108 | ) | ||||||||
437,424 | 157,470 | 31,161 | (264,394 | ) | 361,661 | ||||||||||||
$ | 702,440 | $ | 295,016 | $ | 601,100 | $ | (692,525 | ) | $ | 906,031 | |||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | ||||||||||||||||
Gross revenue: | ||||||||||||||||
Operating revenue | $ 428 | $140,725 | $ 277,679 | $ -- | $ 418,832 | |||||||||||
Intercompany revenue | -- | 7,041 | 1,989 | (9,030 | ) | -- | ||||||||||
Gain on disposal of assets | 11 | 707 | 589 | -- | 1,307 | |||||||||||
439 | 148,473 | 280,257 | (9,030 | ) | 420,139 | |||||||||||
Operating expenses: | ||||||||||||||||
Direct cost | -- | 111,933 | 196,179 | -- | 308,112 | |||||||||||
Intercompany expense | 20 | 1,969 | 6,319 | (8,308 | ) | -- | ||||||||||
Depreciation and amortization | 408 | 8,816 | 18,636 | -- | 27,860 | |||||||||||
General and administrative | 4,390 | 7,349 | 15,210 | (722 | ) | 26,227 | ||||||||||
4,818 | 130,067 | 236,344 | (9,030 | ) | 362,199 | |||||||||||
Operating income | (4,379 | ) | 18,406 | 43,913 | -- | 57,940 | ||||||||||
Earnings from unconsolidated affiliates, net | 27,569 | -- | 6,728 | (27,569 | ) | 6,728 | ||||||||||
Interest income | 27,000 | 29 | 700 | (26,608 | ) | 1,121 | ||||||||||
Interest expense | 10,944 | -- | 26,557 | (26,608 | ) | 10,893 | ||||||||||
Other income (expense), net | (638 | ) | 73 | (3,908 | ) | -- | (4,473 | ) | ||||||||
Income before provision for income | ||||||||||||||||
tax and minority interest | 38,608 | 18,508 | 20,876 | (27,569 | ) | 50,423 | ||||||||||
Allocation of consolidated income taxes | 3,312 | 5,552 | 6,263 | -- | 15,127 | |||||||||||
Minority interest | (1,313 | ) | -- | -- | -- | (1,313 | ) | |||||||||
Net income | $ 33,983 | $ 12,956 | $ 14,613 | $(27,569 | ) | $ 33,983 | ||||||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | |||||||||||||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||||||||||||
operating activities | $ | (15,550 | ) | $ | 4,472 | $ | 24,229 | $ | 16,000 | $ | 29,151 | ||||||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||||
Capital expenditures | (73 | ) | (6,309 | ) | (5,302 | ) | -- | (11,684 | ) | ||||||||||||||||||||
Assets purchased on behalf of affiliate | -- | -- | (26,019 | ) | -- | (26,019 | ) | ||||||||||||||||||||||
Proceeds from asset dispositions | 14 | 2,114 | 4,998 | -- | 7,126 | ||||||||||||||||||||||||
Acquisitions, net of cash received | -- | -- | (15,953 | ) | -- | (15,953 | ) | ||||||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||||||||||||
investing activities | (59 | ) | (4,195 | ) | (42,276 | ) | -- | (46,530 | ) | ||||||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||||
Proceeds from borrowings from affiliate | -- | -- | 42,019 | (16,000 | ) | 26,019 | |||||||||||||||||||||||
Proceeds from borrowings under credit | |||||||||||||||||||||||||||||
facilities | 14,000 | -- | -- | -- | 14,000 | ||||||||||||||||||||||||
Repayment of debt | -- | -- | (16,645 | ) | -- | (16,645 | ) | ||||||||||||||||||||||
Issuance of common stock | 2,757 | -- | -- | -- | 2,757 | ||||||||||||||||||||||||
Net cash provided by (used in) financing | |||||||||||||||||||||||||||||
activities | 16,757 | -- | 25,374 | (16,000 | ) | 26,131 | |||||||||||||||||||||||
Effect of exchange rate changes in cash | -- | -- | 703 | -- | 703 | ||||||||||||||||||||||||
Net increase (decrease) in cash and | |||||||||||||||||||||||||||||
cash equivalents | 1,148 | 277 | 8,030 | -- | 9,455 | ||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||
at beginning of period | 10,579 | 2,708 | 29,383 | -- | 42,670 | ||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||
at end of period | $ | 11,727 | $ | 2,985 | $ | 37,413 | $ | -- | $ | 52,125 | |||||||||||||||||||
Parent Company Only | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | ||||||||||||||||||||||||
Net cash provided by (used in) | ||||||||||||||||||||||||
operating activities | $(28,530 | ) | $ 35,558 | $ 17,154 | $ 26,150 | $ 50,332 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Capital expenditures | (113 | ) | (34,708 | ) | (6,633 | ) | -- | (41,454 | ) | |||||||||||||||
Assets purchased on behalf of affiliate . | -- | -- | (26,019 | ) | -- | (26,019 | ) | |||||||||||||||||
Proceeds from sale of assets to affiliate | -- | -- | 26,019 | -- | 26,019 | |||||||||||||||||||
Proceeds from asset dispositions | 22 | 2,606 | 14,947 | -- | 17,575 | |||||||||||||||||||
Acquisitions, net of cash received | -- | -- | (15,953 | ) | -- | (15,953 | ) | |||||||||||||||||
Investments in subsidiaries | 2,098 | (2,098 | ) | -- | -- | -- | ||||||||||||||||||
Net cash provided by (used in) | ||||||||||||||||||||||||
investing activities | 2,007 | (34,200 | ) | (7,639 | ) | -- | (39,832 | ) | ||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Proceeds from borrowings | 24,150 | -- | 47,286 | (26,150 | ) | 45,286 | ||||||||||||||||||
Repayment of debt | -- | -- | (48,391 | ) | -- | (48,391 | ) | |||||||||||||||||
Issuance of common stock | 2,926 | -- | -- | -- | 2,926 | |||||||||||||||||||
Net cash provided by (used in) financing | ||||||||||||||||||||||||
activities | 27,076 | -- | (1,105 | ) | (26,150 | ) | (179 | ) | ||||||||||||||||
Effect of exchange rate changes in cash | -- | -- | 2,312 | -- | 2,312 | |||||||||||||||||||
Net increase (decrease) in cash and | ||||||||||||||||||||||||
cash equivalents | 553 | 1,358 | 10,722 | -- | 12,633 | |||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||
at beginning of period | 10,579 | 2,708 | 29,383 | -- | 42,670 | |||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||
at end of period | $ 11,132 | $ 4,066 | $ 40,105 | $ -- | $ 55,303 | |||||||||||||||||||
Independent Accountants’ Review Report
The Board of Directors and Shareholders
Offshore Logistics, Inc.:
We have reviewed the consolidated balance sheet of Offshore Logistics, Inc. and subsidiaries as of September 30,December 31, 2003, the related consolidated statements of income for the three-month and six-monthnine-month periods ended September 30,December 31, 2003 and 2002, and the related consolidated statements of cash flows for the six-monthnine-month periods ended September 30,December 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Offshore Logistics, Inc. and subsidiaries as of March 31, 2003, and the related consolidated statements of income, stockholders’ investment, and cash flows for the year then ended (not presented herein); and in our report dated May 23, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of March 31, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
New Orleans, LouisianaOctober 24, 2003January 26, 2004
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations or MD&A should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto as well as our Annual Report on Form 10-K for the fiscal year ended March 31, 2003 and the MD&A contained therein.
Forward-Looking Statements
This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements about our future business, strategy, operations, capabilities and results; financial projections; plans and objectives of our management; expected actions by us and by third parties, including our customers, competitors and regulators; and other matters. Some of the forward-looking statements can be identified by the use of words such as believes, belief, expects, plans, anticipates, intends, projects, estimates, may, might, would, could or other similar words. All statements in this Form 10-Q other than statements of historical fact or historical financial results are forward-looking statements.
Our forward-looking statements reflect our views and assumptions on the date of this Form 10-Q regarding future events and operating performance. We believe that they are reasonable, but they involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Accordingly, you should not put undue reliance on any forward-looking statements. Factors that could cause our forward-looking statements to be incorrect and actual events or our actual results to differ from those that are anticipated include those Risk Factors disclosed in our Form 10-K for the year ended March 31, 2003; the level of activity in the oil and natural gas industry; production related activities becoming more sensitive to variances in commodity prices; the possibility that we are unable to achieve the cost savings and the operational and managerial efficiencies anticipated in our North Sea Operations; that the cost of the North Sea restructuring program exceeds management estimates; that we are unable to effect changes to the Bristow defined benefit pension plan which would reduce our future benefit cost; that the possible transfer of North Sea search and rescue and technical services into a joint venture does not occur or, even if it does, that we are unable to achieve a more aligned management structure and the joint venture does not experience an increase in the success rate on winning new contracts; changes in North Sea market conditions that would reverse that area’s current downward trend; unsettled political conditions, civil unrest and governmental actions, especially in higher risk countries of operations; foreign currency fluctuations; competition; unionization; unfavorable resolution of our labor mediation efforts; the ability to obtain insurance; failure to maintain an acceptable safety record; failure to attract and retain qualified personnel; weather related and seasonal fluctuations; and environmental regulations and liabilities.
All forward-looking statements in this Form 10-Q are qualified by these cautionary statements and are only made as of the date of this Form 10-Q. We do not undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
We are a leading provider of helicopter transportation services to the worldwide offshore oil and gas industry with major operations in the Gulf of Mexico and the North Sea. We also have operations, both directly and indirectly, in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, China, Mexico, Nigeria and Trinidad. Additionally, we are a leading provider of production management services for oil and gas production facilities in the Gulf of Mexico.
We operate our business in two segments: Helicopter Activities and Production Management Services. We conduct our Helicopter Activities through the following four business units:
• North American Operations; For the sixnine months ended September 30,December 31, 2003, our North American Operations, North Sea Operations, International Operations and Technical Services contributed 27%26%, 30%29%, 30%31%, and 4%5%, respectively, of our operating revenue. Our Production Management Services segment contributed the remaining 9% of our operating revenue for the sixnine months ended September 30,December 31, 2003.
Our operating revenue depends on the demand for our services and the pricing terms of our contracts. We measure the demand for our helicopter services in flight hours. Demand for our services depends on the level of worldwide offshore oil and gas exploration, development and production activities. We believe that our customers’ exploration and development activities are influenced by actual and expected trends in commodity prices for oil and gas. Exploration and development activities generally use medium size and larger aircraft on which we typically earn higher margins. We believe our production related activities are less sensitive to variances in commodity prices, and accordingly provide a more stable activity base for our flight operations. We estimate that a majority of our operating revenue from Helicopter Activities is related to the production activities of the oil and gas companies.
Demand for our helicopter services in the North Sea in support of oil and gas production (excluding Search and Rescue and Norway) has declined in the current fiscal year as evidenced by a 14.6% decrease in flight hours for the six months ended September 30, 2003 compared to the six months ended September 30, 2002. We are not aware of any changes in market conditions that would reverse this downward trend. Therefore, the demand for our helicopter services in the North Sea in support of oil and gas production may continue to decline in the forth-coming quarters.
In October 2003, we announced that we had begun a restructuring of our North Sea Operations. The restructuring is designed to reduce costs and promote operational and managerial efficiencies to enable us to remain competitive in the North Sea offshore helicopter market.
As part of the restructuring program, we will reduce staffing levels by approximately 75 positions, or 11%, of our United Kingdom workforce over a six-month period. We will incur approximately $5.2 million in severance and other restructuring costs. However, the reductions will generate approximately $1.0 million in savings during the remainder of fiscal 2004, increasing in fiscal 2005, to approximately $4.6 million on an annualized basis, primarily from decreased salary costs. In addition, we are considering changes to our defined benefit pension plan to limit future service accruals through the use of a defined contribution arrangement and are currently consulting with employees regarding this matter. These changes will result in a reduction of benefit costs related to future service provided by employees, the effect of which has not been considered in the savings quantified above. Finally, in order to better align core competencies and management resources and increase the chances of success on future contract opportunities, we are exploring the possible transfer of our search and rescue and technical services operations into one of our existing joint ventures.
Our helicopter contracts are generally based on a two-tier rate structure consisting of a daily or monthly fixed fee plus additional fees for each hour flown. We also provide services to customers on an “ad hoc” basis, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown. We estimate that our ad hoc services have a higher margin than our other helicopter contracts due to supply and demand dynamics. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are charged to the customer.
Our helicopter contracts are for varying periods and generally permit the customer to cancel the charter before the end of the contract term. In our North American Operations, we typically enter into short term contracts for 12 months or less. In our North Sea Operations, contracts are longer term, generally between two and five years. We have one seven year contract in the North Sea with a major international oil company. In our International Operations, contract length generally ranges from three to five years. At the expiration of a contract, our customers typically negotiate renewal terms with us for the next contract period. Sometimes customers solicit new bids at the expiration of a contract. Contracts are generally awarded based on a number of factors, including price, quality of service, equipment and record of safety. An incumbent operator has a competitive advantage in the bidding process based on its relationship with the customer, its knowledge of the site characteristics and its understanding of the cost structure for the operations.
Maintenance and repair expenses, training costs, employee wages and insurance premiums represent a significant portion of our overall expenses. Our production management costs also include contracted transportation services. We expense maintenance and repair costs, including major aircraft component overhaul costs, as the costs are incurred. Certain major aircraft components, primarily engines and transmissions, are maintained by third party vendors under contractual arrangements. The maintenance costs related to these contractual arrangements are recorded ratably as the components are used to generate flight revenue. As a result, our earnings in any given period are directly impacted by the amount of our maintenance and repair expenses for that period.
In addition to our variable operating expenses, we incur fixed charges for depreciation of our property and equipment. For accounting purposes, we depreciate our helicopters on a straight-line basis over their estimated useful lives to an estimated residual value of 30% to 50% of their original cost. We generally estimate the life of a helicopter to be seven, 10 or 15 years depending on its size and condition. We estimate the residual value of our helicopters based on the type of the aircraft.
We employ approximately 260 pilots in our North American Operations who are represented by the Office and Professional Employees International Union (“OPEIU”) under a collective bargaining agreement. Because this agreement became amendable in May 2003, we began negotiations with union representatives in March 2003. After approximately eight weeks of discussions, an agreement could not be reached on several keys areas, most notably compensation levels. Both the union representatives and we agreed to seek assistance from the National Mediation Board, or NMB, in appointing an independent mediator to assist with the negotiations. A mediator was assigned by the NMB and sessions have continued to date with some progress being made. In January 2004, we made our last offer to the union which was termed not acceptable, citing primarily issues associated with pay and benefits. It appears the parties may have reached an impasse and the mediator has scheduled no additional negotiating sessions. If the mediator and the NMB should determine that no further progress can be made toward resolution, then the NMB can declare a 30-day “cooling-off period.” Negotiations may continue during the “cooling-off period.” If the dispute remains unresolved after the “cooling-off period,” then both parties would be released from negotiations and could seek “self help”. When “self help” is available the pilots could then engage in a work action that could take a variety of forms including a work stoppage. We have contingency plans in place to respond to possible work actions by the pilots and believe we will be able to continue operations with limited disruption. However, no assurances can be given that these plans will be effective.
Demand for our helicopter services in the North Sea in support of oil and gas production (excluding Search and Rescue and Norway) has declined in the current fiscal year as evidenced by a 14.0% decrease in flight hours for the nine months ended December 31, 2003 compared to the nine months ended December 31, 2002. We are not aware of any changes in market conditions that would reverse this downward trend. Therefore, the demand for our helicopter services in the North Sea in support of oil and gas production may continue to decline in the forth-coming quarters.
In October 2003, we announced that we had begun a restructuring of our North Sea Operations. The restructuring is designed to reduce costs and promote operational and managerial efficiencies to enable us to remain competitive in the North Sea offshore helicopter market. As part of the restructuring program, we will reduce staffing levels by approximately 100 positions, or 11%, of our United Kingdom workforce over a nine-month period. We will incur approximately £2.2 million ($4.0 million) in severance and other restructuring costs of which £1.7 million ($3.0 million) has been accrued at December 31, 2003, £0.3 million ($0.5 million) will be expensed in our fourth quarter and £0.3 million ($0.5 million) expected to be expensed in fiscal 2005. The reductions will generate approximately £0.4 million ($0.7 million) in savings during the remainder of fiscal 2004, increasing in fiscal 2005, to approximately £3.5 million ($6.2 million) on an annualized basis, primarily from decreased salary costs.
Also as part of the restructuring, in January 2004, we amended our only defined benefit pension plans covering certain United Kingdom and other overseas employees. The amendment, which is effective February 1, 2004, essentially removes the defined benefit feature for a participant’s future services and replaces it with a defined contribution arrangement. Under the new defined contribution feature, we will contribute 5% of a participant’s non-variable salary to a defined contribution section of the plans. The participant will be required to contribute a minimum of 5% of non-variable salary. Participants were also given the option to transfer out of the plans. We estimate that the net impact on our statement of income as a result of these changes will be a reduction in pension expense of approximately £1.4 million ($2.4 million) for our fourth fiscal quarter and a reduction of approximately £4.8 million ($8.6 million) on an annual basis thereafter. In accordance with SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits”, the above change to the plans constitutes a “curtailment” of benefits and accordingly, all previously deferred service gains or losses are immediately recognized in the statement of income. At the date of the amendment we had a deferred prior service benefit in the range of £11.6 million to £12.3 million ($20.7 million to $22.0 million), or $0.64 to $0.68 per diluted share, related to prior plan amendments. This amount will be recorded as a gain in our fourth fiscal quarter.
Finally, in order to better align core competencies and management resources and increase the chances of success on future contract opportunities, we are exploring the possible transfer of our search and rescue and technical services operations into one of our existing joint ventures.
In November 2003, our 49%-owned Mexican affiliate was unsuccessful in renewing a contract for seven aircraft contracted to PEMEX that it leases from us. The current contract with PEMEX expires September 30, 2004. We are optimistic that, given the long and constructive history between PEMEX and our affiliate and the expanding demand for helicopter services by PEMEX and other customers in Mexico, our affiliate will continue to operate most of the aircraft in the Mexican offshore market. Alternatively, we believe these aircraft can be redeployed to other international markets in a reasonable time period.
In conjunction with our previously announced fleet and facilities renewal and refurbishment program, we changed the residual value estimate of certain aircraft and the useful lives estimate of certain aircraft, effective July 1, 2003. This will more closely reflect the actual salvage values realized and useful lives experienced by us. The effect of this change was a reduction in depreciation expense of $1.1 million, $0.8 million net of tax, and $2.2 million, $1.5 million net of tax, for the three and sixnine months ended September 30,December 31, 2003, respectively (See Note FE to the consolidated financial statements for further discussion).
A summary of operating results and other income statement information for the applicable periods is as follows:
Three Months Ended September 30, | Six Months Ended September 30, | Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||
Operating revenue | $ | 139,429 | $ | 143,576 | $ | 273,322 | $ | 278,645 | $ 138,715 | $ 140,187 | $ 412,037 | $ 418,832 | ||||||||||||||||||||||||||||||
Gain on disposal of assets | 1,374 | 1,966 | 2,231 | 2,253 | ||||||||||||||||||||||||||||||||||||||
Gain (loss) on disposal of assets | 357 | (946 | ) | 2,588 | 1,307 | |||||||||||||||||||||||||||||||||||||
Operating expenses | (120,782 | ) | (123,964 | ) | (239,059 | ) | (241,899 | ) | (128,302 | ) | (120,300 | ) | (367,361 | ) | (362,199 | ) | ||||||||||||||||||||||||||
Operating income | 20,021 | 21,578 | 36,494 | 38,999 | 10,770 | 18,941 | 47,264 | 57,940 | ||||||||||||||||||||||||||||||||||
Earnings from unconsolidated affiliates, net | 3,047 | 1,668 | 4,950 | 3,451 | 1,930 | 3,277 | 6,880 | 6,728 | ||||||||||||||||||||||||||||||||||
Interest income (expense), net | (4,346 | ) | (3,293 | ) | (7,907 | ) | (6,631 | ) | (3,538 | ) | (3,141 | ) | (11,445 | ) | (9,772 | ) | ||||||||||||||||||||||||||
Loss on extinguishment of debt | (6,205 | ) | -- | (6,205 | ) | -- | -- | -- | (6,205 | ) | -- | |||||||||||||||||||||||||||||||
Other income (expense), net | 380 | (1,485 | ) | (1,894 | ) | (3,229 | ) | (4,352 | ) | (1,244 | ) | (6,246 | ) | (4,473 | ) | |||||||||||||||||||||||||||
Income before provision for income taxes | ||||||||||||||||||||||||||||||||||||||||||
and minority interest | 12,897 | 18,468 | 25,438 | 32,590 | 4,810 | 17,833 | 30,248 | 50,423 | ||||||||||||||||||||||||||||||||||
Provision for income taxes | 3,868 | 5,540 | 7,631 | 9,777 | 1,444 | 5,350 | 9,075 | 15,127 | ||||||||||||||||||||||||||||||||||
Minority interest | (529 | ) | (445 | ) | (1,039 | ) | (848 | ) | (576 | ) | (465 | ) | (1,615 | ) | (1,313 | ) | ||||||||||||||||||||||||||
Net income | $ | 8,500 | $ | 12,483 | $ | 16,768 | $ | 21,965 | $ 2,790 | $ 12,018 | $ 19,558 | $ 33,983 | ||||||||||||||||||||||||||||||
The following table sets forth certain operating information, which forms the basis for discussion of the Company’sour Helicopter Activities and Production Management Services and for the four business units comprising our Helicopter Activities segment. The table also presents certain operating information about our corporate activities which primarily relate to intercompany leasing of aircraft and are eliminated in consolidation.
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||
(in thousands, except flight hours) | |||||||||||||||||||||||
Flight hours (excludes unconsolidated affiliates): | |||||||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||||||
North American Operations | 34,147 | 31,905 | 65,025 | 67,020 | |||||||||||||||||||
North Sea Operations | 11,742 | 13,143 | 23,143 | 25,609 | |||||||||||||||||||
International Operations | 22,311 | 21,766 | 43,218 | 41,411 | |||||||||||||||||||
Technical Services | 544 | 319 | 757 | 717 | |||||||||||||||||||
Total | 68,744 | 67,133 | 132,143 | 134,757 | |||||||||||||||||||
Operating revenue: | |||||||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||||||
North American Operations | $ | 42,684 | $ | 37,652 | $ | 80,509 | $ | 76,825 | |||||||||||||||
North Sea Operations | 43,768 | 52,976 | 88,751 | 98,859 | |||||||||||||||||||
International Operations | 41,863 | 41,611 | 83,597 | 79,531 | |||||||||||||||||||
Technical Services | 9,267 | 9,167 | 16,080 | 20,597 | |||||||||||||||||||
Less: Intercompany | (8,858 | ) | (8,369 | ) | (16,493 | ) | (18,299 | ) | |||||||||||||||
Total | 128,724 | 133,037 | 252,444 | 257,513 | |||||||||||||||||||
Production Management Services | 12,018 | 11,929 | 23,691 | 23,939 | |||||||||||||||||||
Corporate | 3,068 | 2,837 | 5,951 | 5,886 | |||||||||||||||||||
Less: Intersegment | (4,381 | ) | (4,227 | ) | (8,764 | ) | (8,693 | ) | |||||||||||||||
Consolidated total | $ | 139,429 | $ | 143,576 | $ | 273,322 | $ | 278,645 | |||||||||||||||
Operating income: | |||||||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||||||
North American Operations | $ | 9,754 | $ | 4,970 | $ | 13,559 | $ | 8,954 | |||||||||||||||
North Sea Operations | 3,319 | 7,202 | 8,698 | 12,741 | |||||||||||||||||||
International Operations | 5,351 | 7,181 | 11,751 | 13,980 | |||||||||||||||||||
Technical Services | 128 | 529 | 272 | 1,273 | |||||||||||||||||||
Total | 18,552 | 19,882 | 34,280 | 36,948 | |||||||||||||||||||
Production Management Services | 780 | 898 | 1,403 | 1,793 | |||||||||||||||||||
Corporate | (685 | ) | (1,168 | ) | (1,420 | ) | (1,995 | ) | |||||||||||||||
Gain on disposal of assets | 1,374 | 1,966 | 2,231 | 2,253 | |||||||||||||||||||
Consolidated total | $ | 20,021 | $ | 21,578 | $ | 36,494 | $ | 38,999 | |||||||||||||||
Operating margin: | ||||||||||||||
Helicopter Activities: | ||||||||||||||
North American Operations | 22 | .9% | 13 | .2% | 16 | .8% | 11 | .7% | ||||||
North Sea Operations | 7 | .6% | 13 | .6% | 9 | .8% | 12 | .9% | ||||||
International Operations | 12 | .8% | 17 | .3% | 14 | .1% | 17 | .6% | ||||||
Technical Services | 1 | .4% | 5 | .8% | 1 | .7% | 6 | .2% | ||||||
Total | 14 | .4% | 14 | .9% | 13 | .6% | 14 | .3% | ||||||
Production Management Services | 6 | .5% | 7 | .5% | 5 | .9% | 7 | .5% | ||||||
Consolidated total | 14 | .4% | 15 | .0% | 13 | .4% | 14 | .0% |
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2003 | 2002 | ||||||||||||||||
(in thousands, except flight hours) | |||||||||||||||||||
Flight hours (excludes unconsolidated affiliates): | |||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||
North American Operations | 29,369 | 29,859 | 94,394 | 96,879 | |||||||||||||||
North Sea Operations | 10,399 | 12,226 | 33,542 | 37,835 | |||||||||||||||
International Operations | 22,589 | 22,438 | 65,807 | 63,849 | |||||||||||||||
Technical Services | 548 | 310 | 1,305 | 1,027 | |||||||||||||||
Total | 62,905 | 64,833 | 195,048 | 199,590 | |||||||||||||||
Operating revenue: | |||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||
North American Operations | $ 39,416 | $ 38,161 | $ 119,925 | $ 114,986 | |||||||||||||||
North Sea Operations | 43,083 | 47,863 | 131,834 | 146,722 | |||||||||||||||
International Operations | 46,138 | 43,022 | 129,735 | 122,553 | |||||||||||||||
Technical Services | 14,606 | 9,707 | 30,686 | 30,304 | |||||||||||||||
Less: Intercompany | (15,646 | ) | (9,047 | ) | (32,140 | ) | (27,346 | ) | |||||||||||
Total | 127,597 | 129,706 | 380,040 | 387,219 | |||||||||||||||
Production Management Services | 12,611 | 11,837 | 36,302 | 35,776 | |||||||||||||||
Corporate | 2,925 | 2,904 | 8,877 | 8,790 | |||||||||||||||
Less: Intersegment | (4,418 | ) | (4,260 | ) | (13,182 | ) | (12,953 | ) | |||||||||||
Consolidated total | $ 138,715 | $ 140,187 | $ 412,037 | $ 418,832 | |||||||||||||||
Operating income: | |||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||
North American Operations | $ 7,070 | $ 5,727 | $ 20,628 | $ 14,681 | |||||||||||||||
North Sea Operations | (437 | ) | 6,783 | 8,261 | 19,524 | ||||||||||||||
International Operations | 4,907 | 6,436 | 16,656 | 20,416 | |||||||||||||||
Technical Services | 1,023 | 1,237 | 1,296 | 2,510 | |||||||||||||||
Total | 12,563 | 20,183 | 46,841 | 57,131 | |||||||||||||||
Production Management Services | 540 | 686 | 1,942 | 2,479 | |||||||||||||||
Corporate | (2,690 | ) | (982 | ) | (4,107 | ) | (2,977 | ) | |||||||||||
Gain (loss) on disposal of assets | 357 | (946 | ) | 2,588 | 1,307 | ||||||||||||||
Consolidated total | $ 10,770 | $ 18,941 | $ 47,264 | $ 57,940 | |||||||||||||||
Operating margin: | |||||||||||||||||||
Helicopter Activities: | |||||||||||||||||||
North American Operations | 17.9 | % | 15.0 | % | 17.2 | % | 12.8 | % | |||||||||||
North Sea Operations | (1.0 | %) | 14.2 | % | 6.3 | % | 13.3 | % | |||||||||||
International Operations | 10.6 | % | 15.0 | % | 12.8 | % | 16.7 | % | |||||||||||
Technical Services | 7.0 | % | 12.7 | % | 4.2 | % | 8.3 | % | |||||||||||
Total | 9.8 | % | 15.6 | % | 12.3 | % | 14.8 | % | |||||||||||
Production Management Services | 4.3 | % | 5.8 | % | 5.3 | % | 6.9 | % | |||||||||||
Consolidated total | 7.8 | % | 13.5 | % | 11.5 | % | 13.8 | % |
Consolidated Results
During the quarter ended September 30,December 31, 2003, our operating revenue decreased to $139.4$138.7 million from $143.6$140.2 million for the quarter ended September 30,December 31, 2002. The decrease in operating revenue was primarily due to decreased activity in our North Sea Operations partially offset by an increase in our North American and International Operations. Our operating expense for the quarter ended September 30,December 31, 2003 decreasedincreased to $120.8$128.3 million from $124.0$120.3 million for the comparable prior year quarter. The decrease was primarily a result of aincrease in operating expense is due partially to the $3.0 million in restructuring costs further discussed in Note I to the consolidated financial statements and the increase in activity in our Technical Services business unit discussed below. Operating expenses were partially offset by the $1.1 million reduction in depreciation costs due to the change in salvage value and useful lives on certain aircraft types (seetypes. (See Note FE to the consolidated financial statementsstatement for further discussion) and a reduction in costs related to the assets in Italy disposed of in November 2002.. As a result of the above our operating income and operating margin for the quarter ended September 30,December 31, 2003 decreased to $20.0$10.8 million and 14.4%7.8%, respectively, compared to $21.6$18.9 million and 15.0%13.5%, respectively for the quarter ended September 30,December 31, 2002.
Net income for the quarter ended September 30,December 31, 2003 of $8.5decreased to $2.8 million represents a 31.9% decline from $12.0 million in the prior year comparable quarter. This decrease primarily resulted from the loss on debt extinguishmentsrestructuring costs of $6.2$3.0 million further discussed in Note GI to the consolidated financial statements.statements and the $3.1 million increase in our foreign exchange losses. Set forth below is a discussion of the results of our segments and business units.
Helicopter Activities
Operating revenue from Helicopter Activities decreased to $128.7$127.6 million during the three months ended September 30,December 31, 2003 from $133.0$129.7 million for the prior year comparable quarter while operating expenses decreasedincreased to $110.2$115.0 million from $113.2$109.5 million. This resulted in an operating margin of 14.4%9.8% for the quarter ended September 30,December 31, 2003 as compared to 14.9%15.6% in the similar quarter in the prior year. Helicopter Activities results are further explained below by business unit.
North American Operations. Operating revenue from our North American Operations increased by 13.4%3.3% during the current quarter from the similar quarter in the prior year primarily as a result of a 7.0% increase in flight activity from the prior year quarter. Operating revenue increased at a higher rate than flight hours due in part to the 7% rate increase for the Gulf of Mexico that went into effect March 2003 and is being phased-in through our fourth quarter of fiscal 2004. The rate increase offset a 1.6% decline in flight activity for the three months ended December 31, 2003 from the three months ended December 31, 2002.
Operating expenses from our North American Operations increased to $32.9remained constant at $32.4 million forbetween the three months ended September 30,December 31, 2003 from $32.7 million forand the three months ended September 30,December 31, 2002. Excluding the effect on depreciation expense of the change in salvage value and useful lives on certain aircraft types, operating expenses for the current fiscal quarter would have been $33.8$33.2 million. Operating expenses increasedThis increase is principally due to higher labor and insurance costs in the current fiscal quarter.
The operating margin in our North American Operations increased to 22.9%17.9% for the three months ended September 30,December 31, 2003 compared to the margin of 13.2%15.0% for the three months ended September 30,December 31, 2002 primarily due to higher operating revenue from increased activity offsetting the slightly higher operating expenses.revenue. Additionally, the reduction in depreciation expense due to the change in salvage value and useful lives on certain aircraft had a favorable impact on the operating margin for the current quarter.
North Sea Operations.Operations. Operating revenue from our North Sea Operations decreased for the three months ended September 30,December 31, 2003 to $43.8$43.1 million, or 17.4%10.0%, from $53.0$47.9 million for the three months ended September 30,December 31, 2002. Excluding foreign exchange effects and revenue related to the assets in Italy disposed of in November 2002, revenue from this operation decreased by 9.0%13.3%. This decrease relates to reduced activity as reflected by the reduction in flight hours of 10.7%14.9% between the current fiscal quarter and the prior year fiscal quarter.
Operating expenses from our North Sea Operations, excluding foreign exchange effects and costs related to the assets in Italy disposed of in November 2002, increased by 1.0%2.9%. AnThe increase in salaryoperating expenses is primarily due to the $1.0 million in restructuring costs was offset by lower maintenance costs.further discussed in Note I to the consolidated financial statements. The lower operating revenue and higher operating expenses resulted in a decrease in the operating margin in our North Sea Operations to 7.6%(1.0)% for the three months ended September 30,December 31, 2003 from 13.6%14.2% for the three months ended September 30,December 31, 2002.
International Operations.Operations. Operating revenue from International Operations increased in the quarter ended September 30,December 31, 2003 to $41.9$46.1 million from $41.6$43.0 million in the quarter ended September 30,December 31, 2002 partially due to a 2.5%1.0% increase in flight activity from the prior quarter. Increases were primarily noted in Brazil and Mexico.
In Brazil, flight activity and operating revenue for the quarter ended September 30,December 31, 2003 increased by 45.3%22.1% and 52.0%32.2% from the prior year comparable quarter. The increase in flight activity and operating revenue was primarily due to three additional aircraft sent to the area during the fourth quarter of fiscal 2003 due to increased drilling activity.
In Mexico, operating revenue was up 1.0%declined by 1.5% and flight activity increased by 4.7%6.4% for the current quarter over the prior year comparable quarter. The increase in flight activity was primarily due to the addition of two aircraft in the current quarter.quarter ended September 30, 2003. Operating revenue was positively impacted by the addition of the two aircraft and a favorable change in the mix of aircraft. However, during July 2003, six older aircraft which we directly leased into Mexico were replaced with six newer aircraft owned by an unconsolidated affiliate. Accordingly, the revenue from these aircraft is no longer consolidated in our results. Instead, we record the 49% equity from the unconsolidated affiliate in the earnings from unconsolidated affiliates, which for the quarter ended September 30,December 31, 2003, was $0.7$0.5 million.
In Nigeria, customer flight hours decreased while operating revenue increased for the three months ended September 30,December 31, 2003 by 3.1%8.9% and 10.5%3.4%, respectively over the same period last year. This results from the decrease in flight activity with one customer that furnishes its own aircraft (not reflected in hours), offset by an increase in hours on other contracts. Operating margins were virtually unchanged.
Operating expenses for our International Operations increased in the quarter ended September 30,December 31, 2003 to $36.5$41.2 million, or 6.0%12.7%, from $34.4$36.6 million in the quarter ended September 30,December 31, 2002. The increase was primarily due to higher salary costs and maintenance costs fromcosts. The increase in salaries is primarily attributed to our Nigerian operations. Management is taking action to address these increased operations in our international areas.costs. The operating margin in our International Operations decreased to 12.8%10.6% in the current quarter from 17.3%15.0% in the prior year quarter primarily due to the increase in operating expenses discussed above.
Technical Services.Operating revenue for Technical Services increased marginally to $9.3$14.6 million during the current quarter from $9.2$9.7 million for the similar quarter in the prior year. Operatingyear due to an increase in work performed for the other business units. Due to the increased activity, operating expenses increased from $8.6$8.5 million for the quarter ended September 30,December 31, 2002 to $9.1$13.6 million for the quarter ended September 30,December 31, 2003. The increase in operating expense was due to higher labor costs. Our operating margin for Technical Services decreased to 1.4%7.0% in the current quarter from 5.8%12.7% in the prior year comparable quarter.
Production Management Services
Operating revenue from our Production Management segment remained constant at $12.0increased to $12.6 million betweenfor the three months ended September 30,December 31, 2003 andfrom $11.8 million for the similar period in the prior year.three months ended December 31, 2002. Operating expenses increased by 1.9%8.3% for the quarter ended September 30,December 31, 2003 as compared to the quarter ended September 30,December 31, 2002 primarily due to higher transportation costs. The increase in operating expenses caused a decline in our operating margin to 6.5%4.3% from 7.5%5.8% in the similar quarter in the prior year.
Corporate and Other
Earnings from unconsolidated affiliates increaseddecreased to $3.0$1.9 million for the three months ended September 30,December 31, 2003 from $1.7$3.3 million for the three months ended September 30,December 31, 2002 primarily due to improvementsa reduction in the earningsdividends from unconsolidated affiliates accounted for under the equitycost method. Consolidated net interest expense increased during the current quarter due to the interest expense on the $230.0 million Senior Notes for the current quarter andcompared to interest expense on the 6% Convertible Subordinated Notes and on$190 million debt redeemed in July 2003 in the 7 7/8% Senior Notes for one month of the currentprior year comparable quarter. See Note G to the consolidated financial statements for further discussion. This interest was offset by $0.3 million of interest capitalized in the current quarter related to progress payments for our fleet and facilities renewal and refurbishment program and $0.3 million of interest incomeprogram. Other expense primarily represents foreign currency transaction losses. These losses arise from the investmentconsolidation of our United Kingdom operations, whose functional currency is the Great Britain Pound sterling, yet contracts for a portion of its revenue and expense in United States Dollars and other currencies. The weakening of the proceeds ofUnited States Dollar against the Senior NotesGreat Britain Pound sterling since March 31, 2003 is the primary reason for approximately one month. A loss on extinguishment of debt of $6.2 million was recognized relatedthese losses being recorded. The average exchange rate for the U.S. Dollar to the redemption on July 29,U.K. Pound sterling for the three months ended December 31, 2003 of our 6% Convertible Subordinated Notes and our 7 7/8% Senior Notes. Approximately $4.7 million ofwas 1.71 as compared to 1.57 for the loss pertains to redemption premiums and $1.5 million pertains to unamortized debt issuance costs relating to the 6% Convertible Subordinated Notes and 7 7/8% Senior Notes. Other income increased in the current quarter in comparison to the same period in the prior year primarily due to lower foreign exchange losses.three months ended December 31, 2002. The effective income tax rate was approximately 30% for the three months ended September 30,December 31, 2003 and September 30,December 31, 2002.
SixNine months ended September 30,December 31, 2003 compared to SixNine months ended September 30,December 31, 2002
Consolidated Results
During the sixnine months ended September 30,December 31, 2003, our operating revenue decreased to $273.3$412.0 million from $278.6$418.8 million for the sixnine months ended September 30,December 31, 2002. The decrease in operating revenue was primarily due to decreased activity in our North Sea Operations and Technical Services business unit.Operations. Our operating expense for the sixnine months ended September 30,December 31, 2003 decreasedincreased to $239.1$367.4 million from $241.9$362.2 million for the comparable prior year period. This resulted in a decrease in our operating income and operating margin for the sixnine months ended September 30,December 31, 2003 to $36.5$47.3 million and 13.4%11.5%, respectively, from $39.0$57.9 million and 14.0%13.8%, respectively for the sixnine months ended September 30,December 31, 2002.
Net income for the sixnine months ended September 30,December 31, 2003 decreased to $16.8$19.6 million from $22.0$34.0 million in the prior year comparable period. This decrease primarily resulted from our reduced operating income and from the loss on extinguishment of debt of $6.2 million further discussed in Note GF to the consolidated financial statements. Set forth below is a discussion of the results of our segments and business units.
Helicopter Activities
Operating revenue from Helicopter Activities decreased to $252.4$380.0 million during the sixnine months ended September 30,December 31, 2003 from $257.5$387.2 million for the prior year comparable period while operating expenses decreasedincreased to $218.2$333.2 million from $220.6$330.1 million. This resulted in an operating margin of 13.6%12.3% as compared to 14.3%14.8% in the similar period in the prior year. Helicopter Activities results are further explained below by business unit.
North American Operations. Operating revenue from our North American Operations increased by 4.8%4.3% during the sixnine months ended September 30,December 31, 2003 from the similar period in the prior year while flight activity decreased by 3.0%2.6% from the prior year period. The increase in operating revenue with a decline in flight hours is due in part to the 7% rate increase for the Gulf of Mexico that went into effect March 2003 and is being phased-in through our fourth quarter of fiscal 2004.
Operating expenses from our North American Operations decreased to $67.0$99.3 million for the current period from $67.9$100.3 million for the prior year period. Excluding the effect of the change in salvage value and useful lives on certain aircraft types on depreciation expense, operating expenses for the sixnine months ended September 30,December 31, 2003 would have been $67.8$101.0 million.
The result of our higher revenue and lower operating expenses was an increase in our operating margin in our North American Operations to 16.8%17.2% for the sixnine months ended September 30,December 31, 2003 from 11.7%12.8% for the sixnine months ended September 30,December 31, 2002.
North Sea Operations.Operations. Operating revenue from our North Sea Operations decreased for the sixnine months ended September 30,December 31, 2003 to $88.8$131.8 million, or 10.2%10.1%, from $98.9$146.7 million for the sixnine months ended September 30,December 31, 2002. Excluding foreign exchange effects and revenue related to the assets in Italy disposed of in November 2002, revenue from this operation decreased by 6.2%8.5%. This decrease relates to reduced activity as reflected by the reduction in flight hours of 9.6%11.3% between the current period and the prior year period.
Operating expenses from our North Sea Operations, excluding foreign exchange effects and costs related to the assets in Italy disposed of in November 2002, remained constantincreased 1.0% between the sixnine months ended September 30,December 31, 2003 and the prior year comparable period. The increase in operating expenses is primarily due to the $1.0 million restructuring costs further discussed in Note I to the consolidated financial statements. The operating margin in our North Sea Operations decreased to 9.8%6.3% for the sixnine months ended September 30,December 31, 2003 compared to 12.9%13.3% for the sixnine months ended September 30,December 31, 2003.
International Operations.Operations. Operating revenue from International Operations increased for the sixnine months ended September 30,December 31, 2003 to $83.6$129.7 million, or 5.1%5.9%, from $79.5$122.6 million in the sixnine months ended September 30,December 31, 2002 primarily as a result of a 4.4%3.1% increase in flight activity from the prior period. Increases were primarily noted in Brazil, Mexico and Nigeria.
In Brazil, flight activity and operating revenue for the sixnine months ended September 30,December 31, 2003 increased by 27.7%25.6% and 37.2%35.4% from the prior year comparable period. The increase in flight activity and operating revenue was primarily due to three additional aircraft sent to the area during the fourth quarter of fiscal 2003 due to increased drilling activity.
In Mexico, operating revenue was up 2.6%1.2% and flight activity increased by 5.1%5.6% for the sixnine months ended September 30,December 31, 2003 over the sixnine months ended September 30,December 31, 2002. The increase in flight activity was primarily due to the addition of two aircraft in the second quarter of fiscal 2004. Operating revenue was positively impacted by the addition of the two aircraft and a favorable change in the mix of aircraft. However, during July 2003, six older aircraft which we directly leased into Mexico were replaced with six newer aircraft owned by an unconsolidated affiliate. Accordingly, the revenue from these aircraft is no longer consolidated in our results. Instead, we record the 49% equity from the unconsolidated affiliate in earnings from unconsolidated affiliates, which for the sixnine months ended September 30,December 31, 2003 was $0.7$1.2 million.
In Nigeria, customer flight hours and operating revenue increased for the sixnine months ended September 30,December 31, 2003 by 17.6%2.0% and 24.1%4.1%, respectively over the same period last year. This increase resulted primarily from the acquisition of a controlling interest in a West African operating company in July 2002, when we began to provide services to a major oil company under a five year contract. Excluding thisthe activity and revenue related to this contract, customer flight hours decreased whileand operating revenue increaseddecreased for the six month end September 30,nine months ended December 31, 2003 by 17.6%24.8% and 3.5%1.0%, respectively over the same period last year. This results from the decrease in flight activity with one customer that furnishes its own aircraft (not reflected in hours), offset by an increase in hours on other contracts. Operating margins were virtually unchanged.
Operating expenses for our International Operations increased in the sixnine months ended September 30,December 31, 2003 to $71.8$113.1 million, or 9.6%10.7%, from $65.6$102.1 million in the sixnine months ended September 30,December 31, 2002. The increase was primarily due to higher salary costs and maintenance costs from increased operations in our international areas. The operating margin in our International Operations decreased to 14.1%12.8% in the current period from 17.6%16.7% in the prior period.
Technical Services.Operating revenue for Technical Services decreasedincreased marginally to $16.1$30.7 million during the sixnine months ended September 30,December 31, 2003 from $20.6$30.3 million for the sixnine months ended September 30, 2002 primarily due to a reduction in refurbishment and engineering/design work for external customers.December 31, 2002. Operating expenses decreasedincreased from $19.3$27.8 million for the sixnine months ended September 30,December 31, 2002 to $15.8$29.4 million for the sixnine months ended September 30,December 31, 2003. The decrease in operating expense was due to the reduction in work discussed above. Our operating margin for Technical Services decreased to 1.7%4.2% in the current period from 6.2%8.3% in the prior year comparable period.
Production Management Services
Operating revenue from our Production Management segment decreasedincreased by 1.0%1.5% during the sixnine months ended September 30,December 31, 2003, as compared to the similar period in the prior year primarily due to a reduction in contract personnel revenue.year. Operating expenses increased slightly to $22.3$34.4 million for the sixnine months ended September 30,December 31, 2003 compared to $22.1$33.3 million for the sixnine months ended September 30,December 31, 2002. Our operating margin decreased to 5.9%5.3% for the sixnine months ended September 30,December 31, 2003 from 7.5%6.9% in the similar period in the prior year.
Corporate and Other
Earnings from unconsolidated affiliates increased to $5.0$6.9 million for the sixnine months ended September 30,December 31, 2003 from $3.5$6.7 million for the sixnine months ended September 30, 2002 primarily due to improvements in the earnings from unconsolidated affiliates accounted for under the equity method.December 31, 2002. Consolidated net interest expense increased for the sixnine months ended September 30,December 31, 2003 due to the interest expense on the $230.0 million Senior Notesdebt refinancing transaction that took place in June and interest expense on the 6% Convertible Subordinated Notes and on the 7 7/8% Senior Notes.July 2003. See Note GF to the consolidated financial statements for further discussion. This interest was offset by $0.8$1.1 million of interest capitalized in the current period related to progress payments for our fleet and facilities renewal and refurbishment program and $0.3 million of interest income from the investment of the proceeds of the Senior Notesdebt refinancing for approximately one month. A loss on extinguishment of debt of $6.2 million was recognized related to the redemption on July 29, 2003 of our 6% Convertible Subordinated Notes and our 7 7/8% Senior Notes. Approximately $4.7 million of the loss pertains to redemption premiums and $1.5 million pertains to unamortized debt issuance costs relating to the 6% Convertible Subordinated Notes and 7 7/8% Senior Notes. Other expense decreasedprimarily represents foreign currency transaction losses. These losses arise from the consolidation of our United Kingdom operations, whose functional currency is the Great Britain Pound sterling, yet contracts for a portion of its revenues and expense in United States Dollars and other currencies. The weakening of the United States Dollar against the Great Britain Pound sterling since March 31, 2003 is the primary reason for these losses being recorded. The average exchange rate for the sixU.S. Dollar to the U.K. Pound sterling for the nine months ended September 30,December 31, 2003 was 1.65 as compared to 1.53 for the same period in the prior year primarily due to lower foreign exchange losses.nine months ended December 31, 2002. The effective income tax rate was approximately 30% for the sixnine months ended September 30,December 31, 2003 and September 30,December 31, 2002.
Cash and cash equivalents were $72.9$79.2 million as of September 30,December 31, 2003, a $16.1$22.4 million increase from March 31, 2003. Working capital as of September 30,December 31, 2003 was $232.9$244.4 million, a $120.4$131.9 million increase from March 31, 2003. Total debt was $257.3$252.4 million as of September 30,December 31, 2003.
As of September 30,December 31, 2003, we had a £12 million ($19.921.4 million) revolving credit facility of which £6.0 million ($10.010.7 million) is only available for letters of credit, with a United Kingdom bank that is payable on demand and matures on December 31, 2003.June 30, 2004. We had no amounts drawn under this facility as of September 30,December 31, 2003, but did have £3.2£3.1 million ($5.35.5 million) of letters of credit utilized which reduced availability under the line. Management is in the process of renewing the line of credit and expects it to be finalized before December 31, 2003.June 30, 2004. As of September 30,December 31, 2003, we had a $30$30.0 million unsecured working capital line of credit with a U.S. bank that expires on August 31, 2005. The line of credit is subject to a sublimit of $10.0 million for the issuance of letters of credit. As of September 30,December 31, 2003, we had no amounts drawn under this facility but did have $5.9$3.3 million of letters of credit utilized which reduced availability under the line. Subsequent to September 30, 2003, we issued an additional letter of credit in the amount of $0.7 million which further reduced availability under the line. Management believes that its normal operations, lines of credit and available financing will provide sufficient working capital and cash flow to meet operating requirements and debt service needs for the foreseeable future.
Included in deferred taxes onDuring January 2004, we reached a settlement with the consolidated balance sheet, we have an accrual of $14.0 million relating to tax exposures resulting from ourUnited Kingdom Inland Revenue regarding the tax treatment offor certain aircraft maintenance expenditures.expenditures by our primary United Kingdom operating company. These expenditures are contractual cash payments made to certain repair and maintenance service providers in advance of the actual repair requirement. We have historically deducted these expenditures for tax purposes as the payments were made, but will now treat these expenditures as prepayments, for United Kingdom income tax purposes to be deducted when the repair or maintenance service actually occurs. This change in treatment will be made effective April 1, 2002, and will result in a cash payment for taxes and interest of £8.9 million ($15.9 million) by the first quarter of fiscal 2005. The UKpayment of these taxes will not affect total tax authorities have argued that this amount relatesexpense on our income statement but will instead be treated as a deferred tax asset to priorbe deducted in the future when the repair and maintenance services are provided.
In February 2004, we agreed to a schedule of contributions for our defined benefit pension plan in order to comply with the minimum funding rules of the United Kingdom. Those rules require us to make scheduled contributions in amounts sufficient to bring the plan up to 90% funded (as defined by United Kingdom legislation) within three years and is currently due. Although100% funded within ten years. In recognition of participants’ concerns regarding the under-funded portion of the plan as well as other changes we are disputing this, it is possible thatmaking to the whole or a significant partplan (as more fully described under “Management’s Discussion and Analysis of this amount will become payable in fiscal 2004.Financial Condition”), on February 1, 2004, we contributed £5.2 million ($9.3 million) to the plan to reach the 90% funded level, and agreed to monthly contributions of £0.2 million ($0.4 million) for the next ten years to comply with the 100% funding requirement. The £5.2 million ($9.3 million) contribution was made from existing cash balances and does not materially impact our working capital position.
In November 2002, our Board of Directors approved a fleet and facilities renewal and refurbishment program. Under the program, we expect to incur approximately $150.0 million of capital expenditures over the next five to seven years to replace certain of our aircraft and upgrade strategic base facilities. During the sixnine months ended September 30,December 31, 2003, we expended $29.2$34.0 million as deposits and progress payments under this program. Subsequent to September 30,December 31, 2003, we made additional payments under this program of $0.7$0.4 million. Sales and trade-ins of older aircraft will reduce the projected expenditures discussed above. We plan to use internally generated funds and available financing, if needed, to meet our obligations under the program.
In May 2003, we entered into a purchase agreement with Bell Helicopter Textron Canada, Ltd. for five new medium sized aircraft. The total purchase price of the five aircraft was $30.1 million. We funded $12.2 million of the purchase price from available cash and the balance of $17.9 million was financed by the manufacturer for 90 days with interest payable at 3-month LIBOR plus 2.95%. In addition, we purchased a sixth Bell 412 for $5.3 million. These aircraft were purchased to meet the contract renewal requirements of an existing customer of our unconsolidated affiliate in Mexico, and replaced older aircraft currently being used on the contract.
On July 11, 2003, we sold these six aircraft, at our cost, to a newly formed limited liability company, Rotorwing Leasing Resources, L.L.C. or RLR. The capital stock of RLR is owned 49% by us and 51% by the same principal with whom we have other jointly owned businesses operating in Mexico. RLR financed 90% of the purchase price of these aircraft through a five year term loan with a bank requiring monthly principal and interest payments of $346,047 and a balloon payment of $18.3 million due July 11, 2008 (the RLR Note). The RLR Note is secured by the six aircraft. We have guaranteed 49% of the RLR Note ($15.6 million) and the other shareholder has guaranteed the remaining 51% of the RLR Note ($16.2 million). In addition, we have given the Bank a put option which the bank may exercise if the aircraft are not returned to the United States within 30 days of a default on the RLR Note. Any such exercise would require us to purchase the RLR Note from the bank. The other RLR shareholder and usWe simultaneously entered into a similar agreement with the other RLR shareholder which requires that, in event of exercise by the bank of its put option to us, the other shareholder will be required to purchase 51% of the RLR Note from us. As of September 30,December 31, 2003, a liability of $1.1$1.0 million representing the fair value of this guarantee is reflected in the balance sheet in other liabilities and deferred credits. The fair value of the guarantee is being amortized over the term of the RLR Note.
We used the proceeds received from the sale of the aircraft to RLR to repay the $17.9 million short-term note to the manufacturer in July 2003. No gain or loss was recognized on the sale.
In addition, during the sixnine months ended September 30,December 31, 2003, the Companywe received proceeds of $3.4$4.8 million primarily from the disposition of fourten aircraft and purchased one medium aircraft for $6.1 million and one small aircraft for $1.0 million. These aircraft acquisitions were made to fulfill customer requirements. During the sixnine months ended September 30,December 31, 2002, the Companywe received proceeds of $7.1$17.6 million primarily from the disposition of ninetwelve aircraft and proceeds from the sale of our assets in Italy. We purchased twoseven small aircraft for $2.1$8.6 million and onethree medium aircraft for $2.5$6.5 million. These aircraft acquisitions were made with existing cash and were made to fulfill customer contract requirements.
We have the following contractual obligations and commercial commitments as of September 30,December 31, 2003:
Payments Due by Period | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||||||
Long-Term Debt | $252,378 | $ 995 | $21,383 | $ -- | $230,000 | |||||||||||||||||||
Operating Leases | 29,106 | 1,604 | 14,424 | 3,442 | 9,636 | |||||||||||||||||||
Unconditional Purchase | ||||||||||||||||||||||||
Obligations | 80,395 | 34,379 | 46,016 | -- | -- | |||||||||||||||||||
Total Contractual Cash Obligations | $361,879 | $36,978 | $81,823 | $3,442 | $239,636 | |||||||||||||||||||
Payments Due by Period | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | |||||||||||||
(in thousands) | |||||||||||||||||
Contractual Obligations: | |||||||||||||||||
Long-Term Debt | $ | 257,318 | $ | 5,681 | $ | 21,637 | $ | -- | $ | 230,000 | |||||||
Operating Leases | 28,938 | 2,696 | 13,986 | 3,243 | 9,013 | ||||||||||||
Unconditional Purchase | |||||||||||||||||
Obligations | 78,631 | 31,288 | 47,343 | -- | -- | ||||||||||||
Total Contractual Cash Obligations | $ | 364,887 | $ | 39,665 | $ | 82,966 | $ | 3,243 | $ | 239,013 | |||||||
Amount of Commitment Expiration Per Period | Amount of Commitment Expiration Per Period | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total | Less than 1 year | 1-3 years | 4-5 years | Over 5 years | Total | Less than 1 year | 1-3 years | 4-5 years | Over 5 years | ||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Other Commercial Commitments: | Other Commercial Commitments: | Other Commercial Commitments: | |||||||||||||||||||||||||||||||||||||||
Debt Guarantee | $ | 25,987 | $ | -- | $ | -- | $ -- | $ | 25,987 | $42,336 | $ -- | $ -- | $15,565 | $26,771 | |||||||||||||||||||||||||||
Letters of Credit | 11,196 | 8,926 | 2,270 | -- | -- | 8,748 | 4,242 | 1,874 | 2,632 | -- | |||||||||||||||||||||||||||||||
Other | 1,072 | 1,072 | -- | -- | -- | 1,159 | 1,159 | -- | -- | -- | |||||||||||||||||||||||||||||||
Total Commercial Commitments | $ | 38,255 | $ | 9,998 | $ | 2,270 | $ -- | $ | 25,987 | $52,243 | $5,401 | $1,874 | $18,197 | $26,771 | |||||||||||||||||||||||||||
On July 29, 2003, we redeemed all of our $100.0 million 7 7/8% Senior Notes due 2008 at a redemption price equal to 103.938% of the principal amount plus accrued interest of $0.3 million for a total price of $104.2 million and the full redemption of our $90.9 million 6% Convertible Subordinated Notes due 2003 at a redemption price equal to 100.86% of the principal amount plus accrued interest of $0.7 million for a total price of $92.4 million. The total redemption price of our 7 7/8% Senior Notes and 6% Convertible Subordinated Notes was $196.6 million. We recorded a loss on the extinguishment of debt of $6.2 million in the second quarter of fiscal year 2004. Approximately $4.7 million of the loss pertains to redemption premiums and $1.5 million pertains to unamortized debt issuance costs relating to the 7 7/8% Senior Notes and 6% Convertible Subordinated Notes.
The United States Environmental Protection Agency, also referred to as EPA, has in the past notified us that we are a potentially responsible party, or PRP, at three former disposal facilities that are on the National Priorities List of contaminated sites. Although we have not obtained a formal release of liability from the EPA with respect to any of the sites, we believe that our potential liability in connection with these sites is not likely to have a material adverse effect on our business, financial condition, or results of operations.
We are involved from time to time in various litigation and regulatory matters arising in the ordinary course of business. The amount, if any, of our ultimate liability with respect to these matters cannot be determined, but we do not expect the resolution of any pending matters to have a material adverse effect on our business, financial condition, or results of operations.
In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” effective for fiscal years beginning after June 15, 2002. This statement will requirerequires us to record the fair value of liabilities related to future asset retirement obligations in the period the obligation is incurred. We adopted SFAS No. 143 on April 1, 2003. The adoption of SFAS No. 143 did not have an impact on our financial statements.
In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates SFAS No. 4 and as a result, gains and losses from extinguishments of debt should be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30. SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also updates and amends existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. We implemented SFAS No. 145 on April 1, 2003, and determined that it had no impact on prior quarter financial statements. On July 29, 2003, we redeemed all of the then outstanding principal amount of our 7 7/8% Senior Notes due 2008 and our 6% Convertible Subordinated Notes due 2003 which resulted in a loss on extinguishment of debt of $6.2 million comprised of unamortized debt issuance costs and a premium payment. In accordance with SFAS No. 145 the loss on extinguishment of debt was recognized as a component of income from continuing operations.
In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective for fiscal periods after December 31, 2002. SFAS No. 146 requires companies to recognize costs associated with restructurings, discontinued operations, plant closings, or other exit or disposal activities, when incurred rather than at the date a plan is committed to. We have implemented the provisions of this statement on a prospective basis for exit or disposal activities initiated after December 31, 2002.
In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 expands existing accounting guidance and disclosure requirements for certain guarantees and requires recognition, at the inception of a guarantee, of a liability for the fair value of an obligation undertaken in connection with issuing a guarantee. The disclosure requirements of FIN 45 were effective for our March 31, 2003 financial statements and the remaining provisions of FIN 45 apply to guarantees issued or modified after December 31, 2002. During the current quarter,In July 2003, we sold six aircraft, at cost, to a newly formed limited liability company, Rotorwing Leasing Resources, L.L.C. or RLR. The capital stock of RLR is owned 49% by us and 51% by the same principal with whom we have other jointly owned businesses operating in Mexico. RLR financed 90% of the purchase price of these aircraft through a five year term loan (the RLR Note). The RLR Note is secured by the six aircraft. We guaranteed 49% of the RLR Note ($15.6 million) and the other shareholder has guaranteed the remaining 51% of the RLR Note ($16.2 million). In addition, we gave the Bank a put option which the bank may exercise if the aircraft are not returned to the United States within 30 days of a default on the RLR Note. Any such exercise would require us to purchase the RLR Note from the bank. The other RLR shareholder and usWe simultaneously entered into a similar agreement with the other RLR shareholder which requires that, in event of exercise by the bank of its put option to us, the other shareholder will be required to purchase 51% of the RLR Note from the us. As of September 30,December 31, 2003 a liability of $1.1$1.0 million representing the fair value of this guarantee is reflected in the balance sheet in other liabilities and deferred credits.
In January 2003, The fair value of the FASB issued Interpretation No. 46, “Consolidationguarantee is being amortized over the term of Variable Interest Entities” (“FIN 46”). In general, a variable interest entity (formerly referred to as a Special Purpose Entity or SPE) is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires consolidation of a variable interest entity by a company if that company is subject to the majority of risk of loss or residual return from the variable interest entity’s activities. FIN 46 is effective immediately for variable interest entities created after January 31, 2003. The consolidation requirements for variable interest entities created before February 1, 2003, begins no later than the first fiscal year or interim period beginning after December 15, 2003. The adoption of FIN 46 did not have a material impact on our consolidated financial statements.RLR Note.
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” effective for contracts entered into or modified after June 30, 2003. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The adoption of SFAS 149 did not have an impact on our financial statements.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 affects the issuer’s accounting for three types of freestanding financial instruments. One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets. A second type, which includes put options and forward purchase contracts, involves instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets. The third type of instrumentsinstrument that are liabilities under this Statement is obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominatelypredominantly to a variable such as a market index or varies inversely with the value of the issuers’ shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on our financial statements.
In December 2003, the FASB published a revision to Interpretation 46 (“FIN 46R”) to clarify certain provisions of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” and to exempt certain entities from its requirements. FIN 46R requires a company to consolidate a variable interest entity (VIE), as defined, when the company will absorb a majority of the variable interest entity’s expected losses, receive a majority of the variable interest entity’s expected residual returns, or both. FIN 46R also requires consolidation of existing, non-controlled affiliates if the VIE is unable to finance its operations without investor support, or where the other investors do not have exposure to the significant risks and rewards of ownership. FIN 46R is effective by the end of the first reporting period beginning after December 15, 2003. We do not expect the adoption of FIN 46R to have a material impact on our consolidated financial statements.
This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements about our future business, strategy, operations, capabilities and results; financial projections; plans and objectives of our management; expected actions by us and by third parties, including our customers, competitors and regulators; and other matters. Some of the forward-looking statements can be identified by the use of words such as believes, belief, expects, plans, anticipates, intends, projects, estimates, may, might, would, could or other similar words. All statements in this Form 10-Q other than statements of historical fact or historical financial results are forward-looking statements.
Our forward-looking statements reflect our views and assumptions on the date of this Form 10-Q regarding future events and operating performance. We believe that they are reasonable, but they involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Accordingly, you should not put undue reliance on any forward-looking statements. Factors that could cause our forward-looking statements to be incorrect and actual events or our actual results to differ from those that are anticipated include those Risk Factors disclosed in our Form 10-K for the year ended March 31, 2003; those risks cited in our Forms 10-Q and 8-K filed during the current fiscal year; the level of activity in the oil and natural gas industry; production related activities becoming more sensitive to variances in commodity prices; our ability to achieve anticipated savings from our North Sea restructuring; changes in North Sea market conditions that would reverse that area’s current downward trend; unsettled political conditions, civil unrest and governmental actions, especially in higher risk countries of operations; foreign currency fluctuations; competition; unionization; unfavorable resolution of our labor mediation efforts or the success of our contingency plans; the ability to obtain insurance; failure to maintain an acceptable safety record; failure to attract and retain qualified personnel; weather related and seasonal fluctuations; and environmental regulations and liabilities.
All forward-looking statements in this Form 10-Q are qualified by these cautionary statements and are only made as of the date of this Form 10-Q. We do not undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
We occasionally use off-balance sheet hedging instruments to manage our risks associated with our operating activities conducted in foreign currencies. In limited circumstances and when considered appropriate, we will utilize forward exchange contracts to hedge anticipated transactions. We have historically used these instruments primarily in the buying and selling of certain spare parts, maintenance services and equipment. We attempt to minimize our exposure to foreign currency fluctuations by matching our revenues and expenses in the same currency for our contracts. Most of our revenue and expenses from North Sea Operations are denominated in British Pounds Sterling (“pound”). As of September 30,December 31, 2003, we did not have any nominal forward exchange contracts outstanding. Management does not believe that our limited exposure to foreign currency exchange risk necessitates the extensive use of forward exchange contracts.
(a) Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. As of September 30,December 31, 2003, we carried out an evaluation, under the supervision and with the participation of the our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
(b) There has been no change in our internal control over financial reporting during our last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Item 5. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of stockholders was held on September 15, 2003.
(c) Matters voted on at the meeting included:
1. For the election of directors, all nominees were approved. The results were as follows:
Nominee | For | Withheld | ||||||
---|---|---|---|---|---|---|---|---|
Peter N. Buckley | 19,525,338 | 516,886 | ||||||
Stephen J. Cannon | 19,712,226 | 329,998 | ||||||
Jonathan H. Cartwright | 19,500,998 | 541,226 | ||||||
David M. Johnson | 19,736,461 | 305,763 | ||||||
Kenneth M. Jones | 19,295,189 | 747,035 | ||||||
Pierre H. Jungels, CBE | 19,735,981 | 306,243 | ||||||
George M. Small | 19,524,522 | 517,702 | ||||||
Ken C. Tamblyn | 19,713,421 | 328,803 | ||||||
Robert W. Waldrup | 19,737,126 | 305,098 | ||||||
Howard Wolf | 19,499,413 | 542,811 |
For | Against | Abstain | ||||||
---|---|---|---|---|---|---|---|---|
18,110,351 | 1,895,620 | 36,252 |
(a) The following exhibits are filed as part of this quarterly report:
Exhibit Number Description of Exhibit
3.1 | Delaware Certificate of Incorporation of the Company (filed as Exhibit 3(10) to the Company’s Form 10-K for the fiscal year ended June 30, 1989), and incorporated herein by reference. |
3.2 | Certificate of Amendment of Certificate of Incorporation dated November 30, 1989 (filed as Exhibit 3(5) to the Company’s Form 10-K for the fiscal year ended June 30, 1990), and incorporated herein by reference. |
3.3 | Certificate of Amendment of Certificate of Incorporation dated December 9, 1992 (filed as Exhibit 3 to the Company’s Form 8-K filed in December 1992), and incorporated herein by reference. |
3.4 | Amended and Restated By-laws of the Company (filed as Exhibit 3(7) to the Company’s Form 8-K filed in February 1996), and incorporated herein by reference. |
3.5 | Certificate of Designation of Series A Junior Participating Preferred Stock (filed as Exhibit 3(9) to the Company’s Form 10-K for the fiscal year ended June 30, 1996), and incorporated herein by reference. |
15.1 | Letter from KPMG LLP dated |
31.1 | Certification by President and Chief Executive Officer. |
31.2 | Certification by Chief Financial Officer. |
32.1 | Certification of the Chief Executive Officer of Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
32.2 | Certification of the Chief Financial Officer of Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
(b) Offshore Logistics, Inc. filed the following reports on Form 8-K during the three months ended September 30,December 31, 2003:
Date of Event Reported Item(s) Reported
AugustOctober 31, 2003 Item 7 & 9*
November 6, 2003 Item 7 & 12*
*The information in the Form 8-K furnished pursuant to ItemItems 9 and 12 isare not considered to be “filed” for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
OFFSHORE LOGISTICS, INC. /s/ H. Eddy Dupuis —————————————— H. Eddy Dupuis Vice President and Chief Financial Officer (on behalf of Registrant and as Principal Financial Officer) |
DATE: November 5, 2003
EXHIBIT 10.1
OFFSHORE LOGISTICS, INC.
2003 NONQUALIFIED STOCK OPTION PLANFOR NON-EMPLOYEE DIRECTORS
1. Purpose of the Plan
The Offshore Logistics, Inc. 2003 Nonqualified Stock Option Plan For Non-employee Directors (the ‘Plan”) is intended to promote the interests of Offshore Logistics, Inc., a Delaware corporation (the “Company”), and its shareholders by helping to attract and retain the services of experienced and knowledgeable non-employee directors and by providing an opportunity for ownership by non-employee directors of shares of common stock of the Company, $0.01 par value (the “Common Stock”). Options granted under the Plan (collectively the “Options” and in the singular an “Option”) will be Options which do not constitute incentive stock options, within the meaning of Section 422A(b) of the Internal Revenue Code of 1986, as amended (the “Code”).
2. Administration of Plan
The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the “Board”). Subject to the terms of the Plan, the Compensation Committee of the Board (the “Committee”) shall have the power to interpret the provisions and supervise the administration of the Plan. All decisions made by the Committee pursuant to the provisions of the Plan shall be made by a majority of its members at a duly held regular or special meeting or by written consent of all members of the Committee in lieu of any such meeting.
3. Option Agreements
Each Option granted under the Plan shall be evidenced by an agreement (the “Option Agreement”) in such form as shall have been approved by the Committee. The Option Agreement shall be subject to the terms, provisions, and conditions of the Plan and may contain such other terms, provisions, and conditions that are not inconsistent with the Plan as the Committee shall determine.
4. Grant of Options
As of the date of the Company’s annual meeting of stockholders in each year that the Plan remains in effect, commencing with the 2003 annual meeting of stockholders, each director of the Company who is not otherwise an employee of the Company or any of the Company’s subsidiaries, as that term is defined in Section 424(f) of the Code (each of whom is referred to herein as a “Non-employee Director”), who is elected or reelected to the Board or who otherwise continues to serve as a director of the Company as of the close of such meeting shall be granted, without the exercise of discretion on the part of any person or persons, an Option to purchase 5,000 shares of Common Stock; provided, however, that no Options shall be granted to a Non-employee Director in a particular year if such Non-employee Director missed 50% or more of the aggregate number of meetings of the Board and committees on which he served during the twelve months preceding the annual meeting for such year. If, as of such annual meeting date of any year that the Plan is in effect, there are not sufficient shares available under this Plan to allow for the grant to each Non-employee Director of Options for the number of shares provided herein, each Non-employee Director shall receive Options for his pro rata share of the total number of shares of Common Stock available under the Plan.
5. Shares Subject to the Plan
Subject to adjustments as provided in SectionFebruary 11, the aggregate number of shares of Common Stock reserved for issuance pursuant to the exercise of Options granted under this Plan is 250,000. Such shares may consist of authorized but unissued shares of Common Stock or previously issued shares of Common Stock reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purposes of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares to meet the requirements of the Plan. Should any Option hereunder expire or terminate prior to its exercise in full, the shares theretofore subject to such Option may again be subject to an Option granted under the Plan. Exercise of an Option shall result in a decrease in the number of shares of Common Stock which may thereafter be available, both for purposes of the Plan and for sale to any one individual, by the number of shares as to which the Option is exercised.
6. Option Price
The exercise price of each Option shall be the fair market value of the Common Stock subject to such Option on the Date of Grant. For the purposes of this Plan, the following terms shall have the following meanings:
(a) “Date of Grant” means the date of the annual meeting of stockholders on which such Option is granted.
(b) The “fair market value” of a share of Common Stock on a particular date shall be deemed to be the average of the high and low composite prices for a share of Common Stock on the New York Stock Exchange (the “Exchange”) on such day or, if no sales of the Common Stock were made on that day, the average of the high and low composite prices for a share of Common Stock on the next preceding day on which sales were made on the Exchange.
7. Term of Plan
The Plan shall be effective as of September 15, 2003, if stockholder approval of the Plan is obtained at the 2003 annual meeting of the stockholders of the Company. Except with respect to Options then outstanding, if not sooner terminated under the provisions to Section 16 of this Plan, the Plan shall terminate upon and no further Options shall be granted after the date of the annual meeting of stockholders held in 2012.
8. Procedure for Exercise
No option granted under this Plan may be exercised, and the shares subject to each Option may not be purchased, for a period of six (6) months after the Date of Grant of such Option. Thereafter, Options shall be exercised by written notice to the Company setting forth the number of shares with respect to which the Option is to be exercised and specifying the address to which the certificates for such shares are to be mailed. Such notice shall be accompanied by cash or certified check or bank draft payable to the order of the Company in an amount equal to the option price per share multiplied by the number of shares of Common Stock as to which the Option is then being exercised or, at the election of the Non-employee Director who holds such Option, accompanied by Common Stock held by the Non-employee Director equal in value to the full amount of the option price (or any combination of cash or such Common Stock). For purposes of determining the amount, if any, of the option price satisfied by payment in Common Stock, such Common Stock shall be valued at its fair market value on the date of exercise in accordance with Section 6(b) of this Plan. Any Common Stock delivered in satisfaction of all or a portion of the option price shall be appropriately endorsed for transfer and assigned to the Company. No fraction of a share of Common Stock shall be issued by the Company upon exercise of an Option or accepted by the Company in payment of the purchase price thereof. As promptly as practicable after receipt of such written notification and payment, the Company shall deliver to the Non-employee Director one or more certificates representing in the aggregate the number of shares with respect to which such Option was exercised, issued in the Non-employee Director’s name; provided, however, that such delivery shall be deemed to have occurred for all purposes when a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Non-employee Director, at the address specified pursuant to this Section 8.
In addition, payment for any shares subject to an Option may also be made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.
Options shall expire ten years from the Date of Grant of such Option unless such Option terminates prior thereto pursuant to the provisions of the Plan or of the respective Option Agreement.
9. Assignability
An Option shall not be assignable or otherwise transferable by the Non-employee Director holding such Options except by will or by the laws of descent and distribution, and may be exercised during such Non-employee Director’s lifetime only by that Non-employee Director. No transfer of an Option by a Non-employee Director by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice of the transfer and an authenticated copy of the will and such other evidence as the Board may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of such Option.
10. No Rights as Shareholder
No Non-employee Director shall have any rights as a stockholder with respect to shares covered by an Option until the date of issuance of a stock certificate representing such shares. Except as provided in Section 11 of this Plan, no adjustment for dividends, or otherwise, shall be made if the record date therefore is prior to the date of issuance of such certificate.
11. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of debt or equity securities ranking prior to or affecting the Common Stock or the rights attendant thereto, or the dissolution or liquidation of the Company, or any sale, lease, exchange or other disposition of all or any part of the Company’s assets or business or any other corporate act or proceeding, whether of a similar or dissimilar nature.
(b) The shares with respect to which options may be granted hereunder are shares of Common Stock of the Company as presently constituted. If, and whenever, prior to the delivery by the Company of all of the shares of the Common Stock which are subject to Options granted hereunder, the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, a stock split, a combination of shares, a recapitalization or other increase or reduction of the number of shares of the Common Stock outstanding without receiving consideration therefore in money, services or property, the number of shares of Common Stock available under this Plan and the number of shares of Common Stock with respect to which Options granted hereunder may thereafter be exercised shall (i) in the event of an increase in the number of outstanding shares, be proportionately increased, and the option price payable per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, be proportionately reduced, and the option price payable per share shall be proportionately increased.
(c) If the Company is reorganized, merged or consolidated or is otherwise a party to a plan of exchange with another corporation pursuant to which reorganization, merger, consolidation or plan of exchange shareholders of the Company receive any shares of Common Stock or other securities or if the Company shall distribute (“Spin Off”) securities of another corporation to its shareholders, there shall be substituted for the shares subject to the unexercised portions of outstanding Options granted hereunder an appropriate number of shares of (i) each class of stock or other securities which were distributed to the shareholders of the Company in respect of such shares in the case of a reorganization, merger, consolidation or plan of exchange, or (ii) in the case of a Spin Off, the securities distributed to shareholders of the Company together with shares of Common Stock, such number of shares or securities to be determined in accordance with the provisions of Section 425 of the Code (or other applicable provisions of the Code or regulations issued thereunder which may from time to time govern the treatment of stock options in such a transaction); provided, however, that all such Options may be canceled by the Company as of the effective date of a reorganization, merger, consolidation, plan of exchange or Spin Off, or any dissolution or liquidation of the Company, by giving notice to each Non-employee Director of the Company’s intention to do so and by permitting the purchase for a period of at least thirty days during the sixty days next preceding such effective date of all of the shares subject to such outstanding Options, without regard to the installment provisions (if any) set forth in the Option Agreements governing such Options; and provided further that in the event of a Spin Off, the Company may, in lieu of substituting securities or accelerating and canceling Options as contemplated above, elect (A) to reduce the purchase price for each share of Stock subject to an outstanding Option by an amount equal to the fair market value, as determined in accordance with the provisions of Section 6(b), of the securities distributed in respect of each outstanding share of Common Stock in the Spin Off or (B) to reduce proportionately the purchase price per share and to increase proportionately the number of shares of Common Stock subject to each Option in order to reflect the economic benefits inuring to the shareholders of the Company as a result of the Spin Off.
(d) Except as otherwise expressly provided in this Plan, the issuance by the Company of shares of stock of any class or securities convertible into or exchangeable for shares of stock of any class, for cash, property, labor or services, upon the direct sale, upon the exercise of rights or warrants to subscribe therefore, or upon conversion of shares or obligations of the Company convertible into or exchangeable for such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to Options theretofore granted or the exercise price per share.
12. Termination of Option
(a) Upon the optionee’s ceasing to be a Non-employee Director of the Company for cause (as hereinafter defined), such optionee’s Options shall terminate immediately. For purposes of this Section, “cause” shall mean a breach of such Non-employee Director’s fiduciary duty as a director of the Company or such Non-employee Director’s conviction of a felony or a crime involving moral turpitude.
(b) Upon an optionee’s ceasing to be a Non-employee Director as a result of retirement, disability or death, or such optionee’s becoming employed by the Company or a subsidiary of the Company, the period during which such optionee may exercise any outstanding portion of his Options shall not exceed (i) one year from the date of retirement, disability or death or (ii) three months from the date such employment begins; provided, however that should that optionee die during such three-month period, such Options shall terminate one year from the date of employment. Notwithstanding the foregoing, however, in no event shall the period during which such Options may be exercised extend beyond the expiration of the term of such Options.
(c) Upon an optionee’s ceasing to be a Non-employee Director for any reason other than for cause (as hereinabove defined) or as a result of retirement, disability, death or his employment by the Company or a subsidiary, the optionee shall be entitled to exercise any outstanding portion of his Options for a period of three months from the date the optionee ceases to be a Non-employee Director; provided, however, that should such optionee die during such three-month period, such Options shall terminate one year from the date such optionee ceased to be a Non-employee Director.
13. Compliance with Law; Purchase for Investment
No shares shall be issuable upon the exercise of an Option unless the Company shall have determined that the issuance complies with applicable law. Unless the Options and shares of Common Stock subject to this Plan have been registered under the Securities Act of 1933, as amended, no shares shall be issuable upon exercise of an Option unless the Company has determined that such registration is unnecessary and, if deemed necessary by the Company, each person exercising an Option under this Plan has represented in writing that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. The Company may require that any certificates of shares issued upon exercise of an Option bear a legend restricting transfer thereof on such terms as the Company may determine, and the Company may instruct its transfer agent to “stop transfer” of any such shares on such terms as it deems appropriate.
14. Taxes
(a) The Company may make such provisions as it deems appropriate for the withholding of any taxes if the Company determines such withholding is required in connection with the grant or exercise of any Options.
(b) Any Non-employee Director may pay all or any portion of the taxes required to be withheld by the Company or paid by him in connection with the exercise of an Option by electing to have the Company withhold shares of Common Stock, or by delivering previously owned shares of Common Stock, having a fair market value, determined in accordance with Section 6(b), equal to the amount required to be withheld or paid. A Non-employee Director must make the foregoing election on or before the date that the amount of tax to be withheld is determined (“Tax Date”). All such elections are irrevocable and subject to disapproval by the Board and are subject to the following additional restrictions: (i) such election may not be made within six months of the grant of an Option, provided that this limitation shall not apply in the event of death or disability; and (ii) such election must be made either six months or more prior to the Tax Date or in a window period commencing on the third business day following the Company’s release of a quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such release. Where the Tax Date in respect of an Option is deferred until six months after exercise and the Non-employee Director elects share withholding, the full amount of shares of Common Stock will be issued or transferred to him upon exercise of the Option, but he shall be unconditionally obligated to tender back to the Company the number of shares necessary to discharge the Company’s withholding obligation or his estimated tax obligation on the Tax Date.
15. Government Regulations
This Plan, the grant and exercise of Options hereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of the Plan or any Option Agreement to the contrary, the Plan shall be administered and interpreted in order that the Plan, and the grant and exercise of Options under the Plan, shall comply with the provisions of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as amended from time to time.
16. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with respect to any shares for which Options have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that no change to any Option may be made which would impair the rights of the Non-employee Director holding that Option without the consent of that Non-employee Director; and provided, further, that the Board may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan, change the class of individuals eligible to receive Options under the Plan or extend the term of the Plan, without the approval of the stockholders of the Company.2004
EXHIBIT 15.1
Offshore Logistics, Inc.
Lafayette, Louisiana
Re: Registration Statements No. 33-87450, No. 33-50946 and No. 333-100017 on Form S-8.
With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated October 24, 2003January 26, 2004 related to our review of interim financial information.
Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act.
/s/ KPMG LLP
New Orleans, LouisianaNovember 5, 2003February 11, 2004
EXHIBIT 31.1
I, George M. Small, CEO and President, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Offshore Logistics, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registration’s internal control over financial reporting; |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 5, 2003February 11, 2004
/s/ George M. Small —————————————— George M. Small CEO and President |
EXHIBIT 31.2
I, H. Eddy Dupuis, CFO and Vice President, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Offshore Logistics, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registration’s internal control over financial reporting; |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 5, 2003February 11, 2004
/s/ H. Eddy Dupuis —————————————— H. Eddy Dupuis CFO and Vice President |
EXHIBIT 32.1
CERTIFICATION UNDER SECTION 906
OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Offshore Logistics, Inc. (the “Company”) for the period ended September 30,December 31, 2003, as filed with the Securities and Exchange Commission as of the date hereof, I, George M. Small, Chief Executive Officer and President of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as appropriate, of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ George M. Small —————————————— Name: George M. Small Title: Chief Executive Officer and President Date: |
EXHIBIT 32.2
CERTIFICATION UNDER SECTION 906
OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Offshore Logistics, Inc. (the “Company”) for the period ended September 30,December 31, 2003, as filed with the Securities and Exchange Commission as of the date hereof, I, H. Eddy Dupuis, Chief Financial Officer and Vice-President of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as appropriate, of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ H. Eddy Dupuis —————————————— Name: H. Eddy Dupuis Title: Chief Financial Officer and Vice President Date: |