SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                   FORM 10-Q


            [X] Quarterly Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934
               For the quarterly period ended December 31, 1994


             [_] 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


                           Offshore Logistics, Inc.
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            (Exact name of registrant as specified in its charter)

           Delaware                                      72-0679819
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(State or other jurisdiction of            (IRS Employer Identification Number)
incorporation or organization)                                


      224 Rue de Jean
  P.O. Box 5C, Lafayette, LA                             70505
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    (Address of principal                             (Zip Code)
     executive offices)


Registrant's telephone number, including area code       (318) 233-1221
                                                   ----------------------------


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       (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, and (2) has been subject to such filing 
requirements for the past 90 days.


                               Yes  X         No
                                  -----         -----

Indicate the number of shares outstanding of each of the issuer's classes of 
Common Stock, as of December 31, 1994.


               19,405,459 shares of Common Stock, $.01 par value
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                   OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES
                       Consolidated Statement of Income
               (thousands of dollars, except per share amounts)

Three Months Ended Six Months Ended December 31, December 31, ------------------ ----------------- 1994 1993 1994 1993 ---- ---- ---- ---- GROSS REVENUE Operating revenue $ 41,519 $ 22,699 $ 67,741 $ 44,663 Gain on disposal of equipment 176 333 179 345 ------------------------------------------------------- 41,695 23,032 67,920 45,008 OPERATING EXPENSES Direct Cost 30,962 14,575 47,467 27,569 Depreciation and amortization 2,606 1,800 4,635 3,630 General and administration 2,872 1,715 4,620 3,450 ------------------------------------------------------- 36,440 18,090 56,722 34,649 ------------------------------------------------------- OPERATING INCOME 5,255 4,942 11,198 10,359 Earnings from unconsolidated entities 1,775 507 2,400 1,007 Interest income 609 444 1,308 905 Interest expense 268 302 445 618 ------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 7,371 5,591 14,461 11,653 Provision for income taxes 2,138 1,491 4,210 3,126 Minority interest in income of consolidated subsidiaries (13) - (13) - ------------------------------------------------------- NET INCOME $ 5,220 $ 4,100 $ 10,238 $ 8,527 ======================================================= Earnings per common share and common equivalent share $ 0.27 $ 0.23 $ 0.54 $ 0.47 ======================================================= Common shares and common equivalent shares outstanding 19,644,684 18,042,218 18,927,082 18,004,314 =======================================================
2 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES Consolidated Balance Sheet (thousands of dollars)
December 31, June 30, 1994 1994 ----------------------- ASSETS - - ------ CURRENT ASSETS: Cash and cash equivalents $ 32,685 $ 27,225 Investment in marketable securities 19,964 19,950 Accounts receivable 28,000 17,681 Inventories 25,706 21,907 Prepaid expenses 1,286 500 ----------------------- Total current assets 107,641 87,263 Investments in unconsolidated entities 8,829 12,917 Property and equipment - at cost: Land and buildings 2,849 2,772 Aircraft and equipment 126,297 122,759 ----------------------- 129,146 125,531 Less: accumulated depreciation and amoritization (55,347) (51,614) ----------------------- 73,799 73,917 Other assets, primarily goodwill 26,817 148 ----------------------- $ 217,086 $ 174,245 ======================= LIABILITIES AND STOCKHOLDERS' INVESTMENT - - ---------------------------------------- CURRENT LIABILITIES: Accounts payable $ 4,220 $ 1,957 Accrued liabilities 7,842 5,210 Current maturities of long-term debt 2,011 3,031 ----------------------- Total current liabilities 14,073 10,198 Long-term debt - less current maturities 6,600 2,000 Deferred taxes 18,939 17,980 Deferred credits 1,250 2,500 Minority interest in consolidated subsidiaries 1,513 -- STOCKHOLDERS' INVESTMENT: Common Stock, $.01 par value, authorized 35,000,000 shares; outstanding 19,405,459 and 17,602,379 at December 31 and June 30, respectively (exclusive of 517,550 treasury shares) 193 176 Paid in capital 94,452 71,563 Retained earnings 80,066 69,828 ----------------------- 174,711 141,567 ----------------------- $ 217,086 $ 174,245 =======================
3 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (thousands of dollars)
Six Months Ended December 31, ---------------- 1994 1993 ---- ---- Cash flows from operating activities: Net income $ 10,238 $ 8,527 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,635 3,630 Increase in deferred taxes 959 670 Gain on asset dispositions (179) (345) Equity in earnings from unconsolidated entities (over) under dividends received (41) (83) Minority interest in earnings 13 - Decrease (Increase) in accounts receivable 2,653 (1,537) Increase in inventories (140) (1,362) Increase in prepaid expenses and other (70) (93) Increase in accounts payable 861 729 Increase (Decrease) in accrued liabilities (1,857) 2 Decrease in deferred credits (1,250) (1,013) ----------------------- Net cash provided by operating activities 15,822 9,125 ----------------------- Cash flows from investing activities: Capital expenditures (1,038) (9,805) Proceeds from asset dispositions 277 472 Additional advances to GPM - (750) GPM acquisition costs, net of cash received (567) - Acquisition of CPS, net of cash received (7,586) - ----------------------- Net cash used in investing activities (8,914) (10,083) ----------------------- Cash flows from financing activities: Repayment of debt (3,224) (3,690) Issue common stock 1,776 334 ----------------------- Net cash used in financing activities (1,448) (3,356) Net increase (decrease) in cash 5,460 (4,314) Cash and cash equivalents at beginning of year 27,225 27,180 ----------------------- Cash and cash equivalents at end of quarter $ 32,685 $ 22,866 ======================= Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 282 $ 625 Income taxes 2,641 1,684
4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994 NOTE A - Basis of Presentation - - ------------------------------ 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 six months ended December 31, 1994, are not necessarily indicative of the results that may be expected for the year ending June 30, 1995. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended June 30, 1994. NOTE B - Production Management Services - - --------------------------------------- The Company expanded its operations in July 1992 to include production management services. During fiscal 1993 and until October 29, 1993, the Company owned 50% of PPI-Seahawk Services, Inc. ("Seahawk"), a company which provided platform and production management services, offshore medical support services, and temporary personnel to the oil and gas industry. On October 29, 1993, the Company further expanded its interest in production management services by Seahawk merging into Grasso Corporation ("Grasso"). The Company exchanged its 50% investment in Seahawk for a 27.5% interest in Grasso. On September 16, 1994, the Company acquired the remaining 72.5% interest in Grasso by issuing .49 of a share of the Company's common stock for each share of Grasso common stock owned. In addition, holders of Grasso Class B warrants are entitled to receive similar warrants for shares of the Company's common stock. The Merger was treated as a purchase for accounting purposes which resulted in goodwill of approximately $22.6 million after stepping up the assets and liabilities of Grasso. The goodwill will be amortized over a 20 year period. The following summarized income statement data reflects the impact the Grasso merger would have had on the Company's results of operations had the transactions taken place on July 1, 1993:
Proforma Results for the Six Months Ended December 31, ------------------------ 1994 1993 ---- ---- Gross revenue $76,555 $63,289 ------- ------- Net income $ 9,766 $ 7,810 ------- ------- Earnings per common share and common equivalent share $ .50 $ .40 ------- -------
5 NOTE C - Cathodic Protection Services - - ------------------------------------- In October 1994, the Company acquired 75% of Cathodic Protection Services Company ("CPS") for $7.5 million. CPS manufactures, installs and maintains cathodic protection systems to arrest corrosion in oil and gas drilling and production facilities, pipelines, oil and gas well casings, hydrocarbon processing plants, and other metal structures. The acquisition was treated as a purchase for accounting purposes which resulted in goodwill of approximately $3.6 million. The goodwill will be amortized over a 20 year period. The proforma effect of this acquisition as though it had been acquired at the beginning of each of the periods presented is not material to the operating results of the Company. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A summary of operating results for the applicable periods is as follows:
Three Months Ended Six Months Ended December 31, December 31, ------------------ ----------------- 1994 1993 1994 1993 ---- ---- ---- ---- Gross revenue $ 41,695 $ 23,032 $ 67,920 $ 45,008 Operating expenses 36,440 18,090 56,722 34,649 -------------------------------------------- Operating income 5,255 4,942 11,198 10,359 Earnings from unconsolidated entities 1,775 507 2,400 1,007 Interest income 609 444 1,308 905 Interest expense 268 302 445 618 -------------------------------------------- Income before provision for income taxes 7,371 5,591 14,461 11,653 Provision for income taxes 2,138 1,491 4,210 3,126 Minority interest in income of consolidated subsidiaries (13) - (13) _ -------------------------------------------- Net income $ 5,220 $ 4,100 $ 10,238 $ 8,527 ============================================
7 Results of Operations - - --------------------- Consolidated operating revenues for the three months and six months ended December 31, 1994 were $41.5 million and $67.7 million, respectively. Prior year operating revenues were $22.7 million and $44.7 million, respectively. The acquisitions of GPM and CPS had a significant impact on the Company's operating revenues for the December 1994 quarter. Consolidated operating expenses for the three months and six months ended December 31, 1994 were $36.4 million and $56.7 million, respectively. Prior year operating expenses were $18.1 million and $34.6 million, respectively. Operating revenues for the Air Division increased 2% and 7% for the three and six months ended December 31, 1994. Consolidated flight hours during the three and six months ended December 31, 1994 were approximately 29,000 and 60,000 hours, respectively. This represents a 6% and 5% increase in flight hours compared to the same periods in the prior year. This increase is primarily the result of increased operations in the Gulf of Mexico. Operating expenses for the Air Division were relatively unchanged and increased 7% for the three and six months ended December 31, 1994, respectively. Gross margins for the Air Division were approximately 26% for the three and six months ended December 31, 1994, relatively unchanged from the prior year. GPM, the Company's production management services subsidiary, acquired on September 16, 1994, generated $10.8 million and $12.8 million in operating revenues for the three months and six months ended December 31, 1994, respectively. Operating expenses from GPM were $10.8 million and $12.7 for the three months and six months ended December 31, 1994, respectively. GPM was operating at nearly a break even gross margin for the three and six months ended December 31, 1994. CPS, the Company's 75% owned cathodic protection corrosion control company, was acquired in October 1994. Operating revenues for the three months and six months ended December 31, 1994 included $9.1 million from CPS. Operating expenses from CPS for the three months and six months ended December 31, 1994 were $8.9 million. CPS gross margin for the three months ended December 31, 1994 was $0.2 million, approximately 2% of revenues. The Company operates, through an unconsolidated subsidary, several aircraft in Mexico. This subsidiary's major contract is denominated in Pesos. The recent devaluation of the Peso will have an adverse affect on the subsidiary unless such contract can be renegotiated. Such negotiations are presently underway and the subsidiary believes that the outcome would be positive. The Company believes that an unfavorable outcome of these negotiations would not have a material adverse effect on the Company's business or financial position. Liquidity and Capital Resources - - ------------------------------- Cash and cash equivalents (including marketable securities) were $52.6 million as of December 31, 1994, a $5.5 million increase from fiscal year end 1994. Total debt was $8.6 million as of December 31, 1994. 8 As of December 31, 1994, the Company had $10 million of credit available under an unsecured working capital line of credit from a bank. Management believes that normal operations will provide sufficient working capital and cash flow to meet debt service for the foreseeable future. The effective income tax rates from continuing operations were 29% and 27% for the six months ended December 31, 1994 and 1993, respectively, and is based on the Company's projected effective tax rate for the fiscal year then ended. The increase in the effective tax rate is due primarily to amortization of goodwill related to GPM acquisition, which is not deductible for tax purposes. As of June 30, 1994, the Company had approximately $229,000 of alternative minimum tax credits available to reduce regular federal tax liability in future years. The Company has received notices from the United States Environmental Protection Agency that it is one of approximately 160 potentially responsible parties ("PRP") at one Superfund site in Texas, one of over 300 PRP's at two sites in Louisiana, and a PRP at a site in Rhode Island. The Company believes, based on presently available information, that its potential liability for clean-up and other response costs in connection with these sites is not likely to have a material adverse effect on the Company's business or financial condition. 9 PART II Item 4. Submission of Matters to a Vote of Security Holders - - ------ --------------------------------------------------- (a) The Annual meeting of Stockholders was held on December 9, 1994. (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 ------- --- -------- James B. Clement 15,749,525 68,598 Louis F. Crane 15,751,877 66,246 David S. Foster 15,745,787 72,336 David M. Johnson 15,748,677 69,446 Kenneth M. Jones 15,749,555 68,568 Homer L. Luther, Jr. 15,441,127 376,996 Harry C. Sager 15,748,012 70,111 George M. Small 15,750,277 67,846 Howard Wolf 15,749,977 68,146 2. Proposal to approve the 1994 Long-Term Management Incentive Plan was approved. The following votes were cast: For: 11,794,724 Against: 3,759,900 Abstained: 762,505 3. Proposal to approve the Annual Incentive Compensation Plan was approved. The following votes were cast: For: 14,690,449 Against: 658,443 Abstained: 769,309 Item 6. Exhibits and Reports on Form 8-K - - ------ -------------------------------- (a) Listed below are the documents filed as exhibits to this report. Exhibit 11 Computation of Earnings Per Share Exhibit 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended December 31, 1994 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OFFSHORE LOGISTICS, INC. BY: /s/ JAMES B. CLEMENT --------------------------- JAMES B. CLEMENT President Chief Executive Officer DATE: February 10, 1995 BY: /s/ GEORGE M. SMALL --------------------------- GEORGE M. SMALL Vice President Chief Financial Officer DATE: February 10, 1995 11

 
                                  EXHIBIT 11
                       Computation of Earnings Per Share

Three Months Ended Six Months Ended December 31, December 31, ------------------ ------------------ 1994 1993 1994 1993 ---- ---- ---- ---- PRIMARY: Weighted average shares outstanding 19,316,826 17,585,401 18,574,587 17,575,792 Net effect of dilutive stock warrants based on the Treasury Stock method using average market price 25,946 97,505 54,458 92,330 Net effect of dilutive stock options based on the Treasury Stock method using average market price 301,912 359,312 298,037 336,192 -------------------------------------------------------- 19,644,684 18,042,218 18,927,082 18,004,314 ======================================================== FULLY DILUTED: Weighted average shares outstanding 19,316,826 17,585,401 18,574,587 17,575,792 Net effect of dilutive stock warrants based on the Treasury Stock method using end of period market price 25,946 97,505 55,280 100,272 Net effect of dilutive stock options based on the Treasury Stock method using end of period market price 301,912 359,312 300,827 356,863 -------------------------------------------------------- 19,644,684 18,042,218 18,930,694 18,032,927 ======================================================== (thousands of dollars, except per share data) Net income $ 5,220 $ 4,100 $ 10,238 $ 8,527 ======================================================== Per share amount - Primary $ 0.27 $ 0.23 $ 0.54 $ 0.47 ======================================================== Per share amount - Fully diluted $ 0.27 $ 0.23 $ 0.54 $ 0.47 ========================================================
 


5 1,000 6-MOS JUN-30-1995 JUL-01-1994 DEC-31-1994 32,685 19,964 28,000 0 25,706 107,641 129,146 55,347 217,086 14,073 6,600 193 0 0 174,518 217,086 67,741 67,920 47,467 56,722 0 0 445 14,461 4,210 10,238 0 0 0 10,238 .54 .54