10-K405 1 0001.txt FORM 10-K ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended March 31, 2000 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _______________ to _________________ Commission File Number 0-5232 Offshore Logistics, Inc. (Exact name of registrant as specified in its Charter) Delaware 72-0679819 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 224 Rue de Jean P. O. Box 5-C, Lafayette, Louisiana 70505 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (337) 233-1221 Securities registered pursuant to Section 12(b) of the Act: Title of each Class: None Name of each exchange on which registered: None Securities registered pursuant to Section 12(g) of the Act: Common Stock ($.01 par value) Preferred Share Purchase Rights (Title of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ----- The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 31 was $278,721,873. The number of shares outstanding of the registrant's Common Stock as of May 31 was 21,105,921. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Definitive Proxy Statement for this year's Annual Meeting of are incorporated by reference into Part III hereof. ============================================================================== OFFSHORE LOGISTICS, INC. INDEX--FORM 10-K PART I Page Item 1. Business ......................................................... 1 Item 2. Properties........................................................ 6 Item 3. Legal Proceedings................................................. 7 Item 4. Submission of Matters to a Vote of Security Holders............... 8 Item 4a. Executive Officers of the Registrant.............................. 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................................... 9 Item 6. Selected Financial Data .......................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 10 Item 7a. Quantitative and Qualitative Disclosures about Market Risk........ 17 Item 8. Consolidated Financial Statements and Supplementary Data.......... 18 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.......................................... 49 PART III Item 10. Directors and Executive Officers of the Registrant ............... 49 Item 11. Executive Compensation ........................................... 49 Item 12. Security Ownership of Certain Beneficial Owners and Management.... 49 Item 13. Certain Relationships and Related Transactions ................... 49 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 50 Signatures................................................................. 53 i PART I ITEM 1. Business Offshore Logistics, Inc. was incorporated in Louisiana in 1969 and its state of incorporation was changed to Delaware in 1988. Unless the context herein indicates otherwise, all references to the "Company" refer to Offshore Logistics, Inc., ("OLOG") and its majority-owned and non-majority owned entities. The Company's executive offices are located at 224 Rue de Jean, Post Office Box 5-C, Lafayette, Louisiana 70505, and its telephone number is (337) 233-1221. The Company, through its Air Logistics subsidiaries ("Air Log") and with its investment in Bristow Aviation Holdings Limited ("Bristow"), is a major supplier of helicopter transportation services to the worldwide offshore oil and gas industry. See Note J in "Notes to Consolidated Financial Statements" for discussion of the Company's investment in Bristow. At March 31, 2000, Air Log and Bristow's operations included 380 aircraft (including 78 aircraft operated through unconsolidated entities). The Company's operations also include production management services through its wholly-owned subsidiary, Grasso Production Management, Inc. ("GPM"). See Note K in "Notes to Consolidated Financial Statements" for information on the Company's operating revenue, operating income and identifiable assets by industry segment and geographical distribution for the years ended March 31, 2000, 1999 and 1998. FORWARD LOOKING STATEMENTS This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements included herein other than statements of historical fact are forward-looking statements. Such forward-looking statements include, without limitation, the statements herein regarding the timing of future events regarding the Company's operations, the statements under "Helicopter Activities -- United States Operations" regarding the ability of the Company to better manage its helicopter fleet, under "Production Management Services -- Customers" and "Production Management Services -- Competition" regarding outsourcing and cost structure and the market for production management operations, under "General -- Union Activities" regarding the effect of the Company's pilots electing to be represented by a union and the impact of the current organizing efforts of the Company's mechanics, under "Legal Proceedings" regarding the Company's potential liability on environmental claims, under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General" and "Helicopter Activities" regarding, respectively, concentration and globalization of the helicopter industry, restructuring of the oil and gas industry, decreased levels of activity and their effects on the Company's future prospects, the estimation of annual revenue from a contract not yet fully phased-in and the expected salary savings from the redundancy program in the North Sea and under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Year 2000 Matters" regarding, respectively, the Company's anticipated future financial position and cash requirements and the impact of Year 2000 compliance. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Factors that could cause actual results to differ materially from those in the forward-looking statements contained in this report include the possibility that the annual salary cost savings, currently expected to be realized as a result of recent employee terminations, will not be as large as management presently expects, that Bristow's results and operating margins will not be as adversely affected, and for as long as management currently anticipates, and that there is a substantially increased level of activity in the Company's markets. Other important factors that could cause actual results to differ materially from the Company's expectations (with those included in the prior sentence "Cautionary Statements") may include, but are not limited to, demand for Company services, worldwide activity levels in oil and natural gas exploration, development and production, fluctuations in oil and natural gas prices, unionization and the response thereto by the Company's customers, currency fluctuations, international political conditions, the ability to achieve reduced operating expenses and the ability to maintain Year 2000 compliance. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. 1 HELICOPTER ACTIVITIES Air Log and Bristow charter their helicopters to customers for use in transporting personnel and time-sensitive equipment from onshore bases to offshore drilling rigs, platforms and other installations. The helicopter charters are for varying periods and, in some cases, may contain provisions for cancellation prior to completion of the contract. Charges under these charter agreements are generally based on either a daily or monthly fixed fee plus additional hourly charges. Helicopter activities are seasonal in nature and influenced by weather conditions, length of daylight hours, and level of offshore production, exploration, and construction activity. The following table sets forth the number and type of aircraft operated by Air Log and Bristow at the end of the past three fiscal years.

March 31, Passenger Speed ------------------------- Type Capacity (MPH) 2000 1999 1998 ------------------------------ ---------- ----- ---- ---- ---- AS332L Super Puma............. 18 160 36 33 30 Sikorsky S-61................. 19 135 20 17 17 Bell 214ST.................... 18 150 6 6 6 Puma SA 330J.................. 16 150 2 2 2 Sikorsky S-76................. 12 160 42 41 41 Bell 212...................... 12 115 40 42 42 Bell 412...................... 12 140 10 6 6 Bo - 105...................... 4 125 18 19 21 AS355 Twinstar................ 5 135 8 9 10 Bell 407...................... 6 130 26 19 16 Bell 206L Series.............. 6 125 64 66 68 Bell 206B Jet Ranger.......... 4 115 20 21 24 Other (includes fixed wing)... 10 14 18 --- --- --- 302 295 301 === === ===

At March 31, 2000, Air Log and Bristow owned or employed pursuant to a capital lease arrangement 299 of the 302 aircraft that are operated. The following table sets forth certain information concerning the 299 aircraft.

As of March 31, 2000 -------------------------- Net Type Number Book Value --------------------------------------------------- ------ ---------- (000's) AS332L Super Puma................................... 34 $221,898 Sikorsky S-61....................................... 20 42,932 Bell 214ST.......................................... 6 11,498 Puma SA 330J........................................ 2 2,421 Sikorsky S-76....................................... 41 47,802 Bell 212............................................ 40 33,997 Bell 412............................................ 10 23,995 Bo - 105............................................ 18 4,662 AS355 Twinstar...................................... 8 1,539 Bell 407............................................ 26 30,905 Bell 206L Series.................................... 64 15,360 Bell 206B Jet Ranger................................ 20 1,619 Other............................................... 4 7,100 ---- -------- 293 445,728 Fixed Wing.......................................... 6 3,301 ---- -------- 299 $449,029 ==== ========

In addition to the foregoing 299 aircraft, at March 31, 2000, Air Log and Bristow operated 3 aircraft pursuant to operating lease arrangements. Bristow provides engineering and administrative support to 47 aircraft operated in an unconsolidated entity involved in military training. Air Log and Bristow also provide services and technical support to other unconsolidated entities that operate 26 helicopters of various types and 5 fixed wing aircraft. 2 United States Operations The United States ("U.S.") helicopter activities are conducted primarily from operating facilities along the Gulf of Mexico. As of March 31, 2000, Air Log operated 149 aircraft in that area. Air Log also operates 12 aircraft in Alaska. Although the Company's business is primarily dependent upon activity levels in the offshore oil and gas industry, the existence of other markets for helicopter services distinguishes the Company's business from other segments of the oil service industry. Other markets for helicopters include emergency medical transportation, agricultural and forestry support and general aviation activities. These other markets enable the Company to better manage its helicopter fleet by providing both a source of additional aircraft during times of high demand and potential purchasers for excess Company aircraft during times of reduced demand. United Kingdom/Europe Operations During 1997, the Company expanded its presence in the United Kingdom and Europe through its investment in Bristow. As of March 31, 2000, 71 aircraft were being operated by Bristow in the United Kingdom and Europe, mainly in the North Sea offshore market. These activities are primarily dependent upon activity levels in the offshore oil and gas production, exploration and construction industries and search and rescue needs in that area. Bristow also has a 50% interest in an unconsolidated entity that has a 15 year contract to provide pilot training and maintenance services to the British military. This entity purchased and specially modified 47 aircraft and maintains a staff of approximately 600 employees dedicated to conducting these training activities which began in May 1997. Other International Operations Utilization of helicopters in international service is dependent on the worldwide level of oil and gas exploration and development offshore and in remote areas. This, in turn, is dependent on the funds available to the major oil companies to conduct such activities and upon the number and location of new foreign concessions. As of March 31, 2000, Air Log and Bristow operated 70 of their aircraft in locations outside the United States and Europe. Air Log operated 23 helicopters in Bolivia, Brazil, Colombia and Mexico. Bristow operated 23 aircraft in Africa, 11 aircraft in Australia and 13 aircraft elsewhere throughout the world. In addition to its direct operations in international areas, Air Log has service agreements with, and equity interests in, entities that operate 31 aircraft in Egypt and Mexico. Air Log provides services and technical support to these entities and, from time to time, leases aircraft to these entities as additional support for these operations. Customers The principal customers for the Company's helicopter activities are national and international petroleum and offshore construction companies. During 2000, one customer accounted for 12% of consolidated operating revenues. During 1999 and 1998, no one customer accounted for more than 10% of the Company's consolidated operating revenues. Competition The helicopter transportation business is highly competitive on a worldwide basis. Chartering of helicopters is usually done on the basis of competitive bidding among those having the necessary experience, equipment and resources. The technical requirements of operating helicopters offshore have increased as oil and gas activities have moved into deeper water requiring more sophisticated aircraft to service the market. As it is difficult to maintain an adequate shorebased and offshore infrastructure while providing the working capital required to conduct such operations, the number of new entrants into the Gulf of Mexico market has been few. One of Air Log's competitors has substantially more helicopters in service in the Gulf of Mexico. Bristow has one significant competitor in the North Sea. The harsh conditions in the North Sea demand larger, more sophisticated helicopters to conduct operations. Industry Hazards and Insurance Hazards, such as adverse weather and marine conditions, crashes, collisions and fire are inherent in the offshore transportation industry, and may result in losses of equipment, revenues or death of personnel. Air Log and Bristow maintain Hull and Liability insurance, which generally insures them against certain legal liabilities to others, as well as damage to their aircraft. It is also their policy to carry insurance for or require their customers to provide indemnification against expropriation, war risk and confiscation of their helicopters employed in international operations. There is no assurance that in the future they will be able to maintain their existing coverage or that the related premiums will not increase substantially. 3 Government Regulation United States. As a commercial operator of small aircraft, Air Log is subject to regulations pursuant to the Federal Aviation Act of 1958, as amended, and other statutes. Air Log carries persons and property in its helicopters pursuant to an Air Taxi Certificate granted by the Federal Aviation Administration ("FAA"). The FAA regulates the flight operations of Air Log, and in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of its operations. The National Transportation Safety Board is authorized to investigate aircraft accidents and to recommend improved safety standards. Air Log is also subject to the Communications Act of 1934 because of the use of radio facilities in its operations. Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the United States unless such aircraft are registered with the FAA and the operator of such aircraft has been issued an operating certificate by the FAA. As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft are owned or controlled by one or more citizens of the United States and an operating certificate may be granted only to a citizen of the United States. For the purposes of these requirements, a corporation is deemed to be a citizen of the United States only if, among other things, at least 75% of the voting interest therein is owned or controlled by United States citizens. In the event that persons other than United States citizens should come to own or control more than 25% of the voting interest in the Company, the Company has been advised that Air Log's aircraft may be subject to deregistration under the Federal Aviation Act and loss of the privilege of operating within the United States. At March 31, 2000, the Company had approximately 1,361,575 common shares held by persons with foreign addresses representing approximately 6.5% of the 21,105,921 common shares outstanding. The Company's operations are subject to federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on the Company's business or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which in turn could adversely affect the Company. United Kingdom. As a commercial operator of aircraft, Bristow is subject to the Licensing of Air Carriers Regulations 1992, and Regulations made under the Civil Aviation Act 1982 and other statutes. Bristow carries persons and property in its helicopters pursuant to an operating license issued by the Civil Aviation Authority ("CAA"). The CAA regulates the flight operations of Bristow, and in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of Bristow's operations. Accident investigations are carried out by the Air Accident Investigation Branch of the Department of the Environment, Transport and the Regions. The CAA often imposes improved safety standards on the basis of a report of the Inspector. Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the United Kingdom unless such aircraft are approved by the CAA. The holder of an operating license must meet the ownership and control requirements of Council Regulation 2407/92 (i.e. the entity that operates under the license must be owned directly or through majority ownership by United Kingdom or European Economic Area nationals and must at all times be effectively controlled by them). Bristow's operations are subject to local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on Bristow's business or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which may in turn have an adverse affect on the Company. International. Operations other than in the United States and the United Kingdom are subject to local governmental regulations and to uncertainties of economic and political conditions in those areas. Because of the impact of local laws, these operations are conducted primarily through entities (including joint ventures) in which local citizens own interests and Air Log or Bristow holds only a minority interest, or pursuant to arrangements under which the Company operates assets or conducts operations under contracts with local entities. There can be no assurance that there will not be changes in local laws, regulations or administrative requirements, or the interpretation thereof, any of which could have a material adverse effect on the business or financial condition of the Company or on its ability to continue operations in certain regions. 4 Currency Fluctuations Most of Bristow's revenues and expenses are denominated in British Pounds Sterling ("pound"). For the year ended March 31, 2000, approximately 36% of consolidated operating revenues were translated from pounds into the United States Dollar. In addition, portions of Bristow's revenues are denominated in other currencies (including Australian Dollars, Euros, Nigerian Naira, Norwegian Krone, and Trinidad and Tobago Dollars) to cover expenses in the areas and/or currencies in which such expenses are incurred. To the extent operating revenues are denominated in the same currency as operating expenses, the Company can reduce its vulnerability to exchange rate fluctuations. Because the Company maintains its financial statements in United States Dollars, it is vulnerable to fluctuations in the exchange rate between the pound and the United States Dollar. PRODUCTION MANAGEMENT SERVICES The Company's wholly owned subsidiary, GPM is the leading independent contract operator of oil and gas production facilities in the Gulf of Mexico. GPM also provides services for certain onshore facilities. In providing these services, GPM operates oil and gas production facilities for major and smaller independent oil and gas companies. Typical project assignments may involve full or limited management of operations of oil and gas production facilities located offshore, particularly in the Gulf of Mexico. The work involves placing experienced crews, employed by GPM, to operate the facilities and provide all necessary services and products for the offshore operations. When servicing offshore oil and gas production facilities, GPM's employees normally live on the facility for a seven-day rotation. GPM's services include furnishing personnel, engineering, production operating services, paramedic services and the provision of boat and helicopter transportation of personnel and supplies between onshore bases and offshore facilities. GPM also handles regulatory and production reporting for certain of its customers. Operations GPM's production management services are conducted primarily from production facilities in the Gulf of Mexico. As of March 31, 2000, GPM managed or had personnel assigned to 210 production facilities in the Gulf of Mexico. Although GPM's business is primarily dependent upon activity levels in the offshore oil and gas industry, 90% of GPM's production management costs consist of labor and contracted transportation services. This enables GPM to scale down operations rapidly should market conditions change. Because of this ability to react to market conditions, management believes the production management segment of the oil service industry is less affected by downturns in offshore oil and gas activities. Customers GPM's customers are primarily major and small independent oil and gas companies that own oil and gas production facilities in the Gulf of Mexico. These companies are increasingly inclined to outsource services provided by companies such as GPM which are able to operate more efficiently and with a lower cost structure. This allows the customers to focus their efforts on their core activities, which is the exploration for and development of oil and gas reserves. During 2000, 1999 and 1998, no single GPM customer accounted for more than 10% of the Company's consolidated operating revenues. Competition GPM's business is highly competitive. There are a number of competitors that are smaller than GPM but maintain a Gulf-wide presence. In addition, there are many smaller operators that compete on a local basis or for single projects or jobs. Management of the Company anticipates that the market for oil and gas production management operations will continue to increase over the next few years as oil and gas producing companies continue to reduce the size of field personnel and further utilize outside contractors as efforts to reduce their operating costs continue. Typically, GPM will be requested to bid on one or more production facilities owned by an oil and gas producer. The two key elements in the pricing of the bid are personnel and transportation costs. In addition to price, an additional consideration is the quality of personnel, training programs, safety record and stability of the operator since this can greatly affect the revenue flow to the producer and reduce the risk of possible damage to the production facility. There are no assurances that an increase in the market for production management services will occur. 5 Industry Hazards and Insurance GPM's operations are subject to the normal risks associated with working on oil and gas production facilities. These risks could result in damage to or loss of property and injury to or death of personnel. GPM carries normal business insurance including general liability, worker's compensation, automobile liability and property and casualty insurance coverages. Government Regulation The Mineral Management Service ("MMS") regulates the production operations of GPM's customers and, in this respect, exercises jurisdiction over personnel, production facilities and certain technical aspects of GPM's operations. GPM's operations are subject to federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on GPM's business or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which in turn could adversely affect the Company. GENERAL Employees As of March 31, 2000 Air Log, Bristow and GPM employed 677, 1,867 and 587 employees worldwide, respectively. The Company's corporate staff consisted of 21 employees. Union Activities On August 6, 1997, the U.S. pilots at the Company voted to become members of the Office and Professional Employees International Union ("OPEIU"). The Company commenced contract negotiations with the OPEIU on April 1, 1998 and on April 15, 1999 announced that it had reached a tentative agreement with pilot representatives on the contract's provisions. The contract calls for a four year term which began on May 18, 1999. The contract provides the pilots with scheduled increases in base pay and other fringe benefit enhancements and provides the Company with strike protection and certain other rights to allow it to continue to manage its business. The contract was ratified on May 18, 1999 by a 96% affirmative vote of the pilot employees and on May 26, 1999, by a unanimous affirmative vote of the Company's Board of Directors. On November 16, 1999, the OPEIU petitioned the National Mediation Board ("NMB") to conduct an election among the mechanics and related personnel employed by both Air Logistics, LLC and Air Logistics of Alaska, Inc. The election for Air Logistics, L.L.C. was held on March 13, 2000 with the mechanics voting in favor of the Company. The NMB dismissed the matter with respect to the Alaska-based group on January 24, 2000, but due to extraordinary circumstances, the NMB did accept another representation application covering the Air Logistics of Alaska, Inc. mechanics and related employees. The election is set with two unions on the ballot, the OPEIU and International Union of Operating Engineers. The ballots will be counted on July 11, 2000. The Company does not believe that the terms of the pilots' contract or the current organizing efforts will place it at a disadvantage with its competitors as management believes that pay scales, benefits, and work rules will continue to be similar throughout the industry. ITEM 2. Properties See "Business -- Helicopter Activities" for a discussion of the number and types of aircraft operated by Air Log and Bristow. Air Log leases approximately 8 acres of land at the Acadiana Regional Airport in New Iberia, Louisiana under a lease expiring in 2030. The Company has constructed office and helicopter maintenance facilities on the site containing approximately 44,000 square feet of floor space. The property has access to the airport facilities, as well as a major highway. 6 The Company's Corporate offices occupy 14,440 square feet in a building in Lafayette, Louisiana under a lease expiring in 2003. Other office and operating facilities in the United States and abroad, including most of the operating facilities along the Gulf of Mexico, are held under leases, the rental obligations under which are not material in the aggregate. Bristow leases land and facilities at Redhill Aerodrome near London, England under a lease expiring in 2075. Leases of various hangars, offices and aviation fuel facilities at Redhill Aerodrome expire during 2003. Bristow leases a helicopter terminal, offices and hangar facilities at Aberdeen Airport, Scotland under a lease expiring in 2013 with an option to extend to 2023. Additional hangar and office facilities at Aberdeen Airport are maintained under a lease expiring in 2030. Bristow leases various hangars and terminal access at North Denes Airport near Great Yarmouth, England under a lease expiring in 2014, and at Norwich under a lease expiring in 2008. Bristow leases office space and hangar facilities at Sumburgh Airport in Sumburgh, Shetland under a lease expiring in 2004 with renewal options through 2019. Bristow owns and leases numerous residential locations near its operating bases in the United Kingdom, Australia, China, Nigeria, and in the Caribbean primarily for housing pilots and staff supporting those areas of operation. GPM's Corporate offices occupy 6,000 square feet in a building in Houston, Texas, under a lease expiring in 2002. Other office and operating facilities along the Gulf of Mexico are held under leases, the rental obligations under which are not material in the aggregate. ITEM 3. Legal Proceedings In January 1989, the Company received notice from the United States Environmental Protection Agency ("EPA") that it is a potentially responsible party ("PRP") for clean up and other response costs at the Sheridan Disposal Services Superfund Site in Waller County, Texas. The Company is among approximately 160 PRPs identified with respect to the site. The EPA has estimated that the cost of remedial activities at the site will be approximately $30 million. In August 1989, the Company received a similar notice with respect to the Gulf Coast Vacuum Services Site, which is near Abbeville, Louisiana. The Company is among over 300 PRPs identified with respect to this site. The EPA alleged that the Company was a generator or transporter of hazardous substances found at the two sites. In February 1991, the Company received a request for information from the EPA relating to the Western Sand and Gravel Superfund Site in Rhode Island, as to which the Company had been named a PRP after an earlier request for information from the EPA issued in 1983 - 1984. Based on presently available information, the Company believes that it generated only a small portion, if any, of the substances found at the above described sites. In addition, many of the other PRPs at all of the aforementioned sites are large companies with substantial resources. As a result, the Company believes 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. In addition to notification of PRP responsibility, the EPA notices to the Company also contained information requests regarding the Company's connection with the various sites. The responses to the information requests were due in early March 1989 for the Sheridan site and in early September 1989 for the Louisiana site. Through oversight, the Company did not respond to the requests until April and May 1990. The EPA is authorized to seek civil penalties for failure to respond to its information requests in a timely manner in an amount up to a maximum of $25,000 per day for each day of continued non-compliance; however, to date, no such penalties have been sought. While it is not possible to predict whether any civil penalties might be assessed against the Company for the delays in responding to the EPA requests, the Company believes the amount of such penalties, if any, will not have a material adverse effect on its business or financial condition. The Company is not a party to any other litigation, which, in the opinion of management, will have a material adverse effect on the Company's business or financial condition. 7 ITEM 4. Submission of Matters to a Vote of Security Holders Not applicable. ITEM 4a. Executive Officers of the Registrant All executive officers hereunder are, in accordance with the By-laws, elected annually and hold office until a successor has been duly elected and qualified. There are no family relationships among any of the Company's executive officers. The executive officers of the Company are as follows:

Name Age Position Held with Registrant --------------------- --- -------------------------------------------------- Louis F. Crane........ 59 Chairman, Chief Executive Officer and Director George M. Small....... 55 President, Chief Operating Officer and Director Hans J. Albert........ 58 Executive Vice President-- Corporate Development Drury A. Milke........ 42 Executive Vice President-- International Operations Gene Graves........... 51 Vice President-- Marketing H. Eddy Dupuis........ 35 Vice President and Chief Financial Officer

Mr. Crane has been a director since 1987. He was appointed Chairman of the Board in 1997 and elected Chief Executive Officer in 1999. Mr. Small joined the Company in 1977 as Controller. He was elected Vice President-- Treasurer in 1979, Chief Financial Officer and Secretary in 1986 and President during 1997. Mr. Albert joined the Company in 1972 as a pilot and served in several operating capacities before being appointed Director of International Aviation Operations in 1980. He was elected Vice President in 1987 and Executive Vice President - Corporate Development in 1999. Mr. Albert has thirty-three years of experience in the aviation industry. Mr. Milke joined the Company in 1988 as Director of Planning and Development and was elected Vice President in 1990, Chief Financial Officer and Secretary in 1998, and Executive Vice President - International Operations in 1999. Mr. Graves joined the Company in 1993 as Vice President -- Aviation Marketing and was elected Vice President -- Domestic Aviation in 1994 and Vice President -- Marketing in 1998. Prior to joining the Company, Mr. Graves had 26 years of experience in the commercial helicopter service business in the Gulf of Mexico as Vice President -- Marketing and several operating positions. Mr. Dupuis joined the Company in 1998 as Controller. He was elected Vice President and Chief Financial Officer in 1999. Prior to joining the Company, Mr. Dupuis was a Manager with Arthur Andersen LLP. Mr. Dupuis is an inactive CPA. 8 PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Common Stock of the Company is traded in the over-the-counter market and is reported on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "OLOG". The Company's Common Stock has been quoted on the NASDAQ National Market System since 1984.

March 31, 2000 March 31, 1999 ------------------ ------------------- High Low High Low -------- -------- --------- ------ First Quarter........... 13 3/8 10 1/4 25 13/16 17 Second Quarter.......... 14 3/8 10 18 5/8 8 3/4 Third Quarter........... 10 29/32 7 15/16 18 9 5/8 Fourth Quarter.......... 14 3/8 8 1/2 13 8 1/2

The approximate number of holders of record of Common Stock as of May 31, 2000 was 1,027. On January 27, 1998, the Company issued $100 million of 7 7/8% Senior Notes due 2008. The terms of the Senior Notes restrict payment of cash dividends to shareholders. The Company has not paid dividends on its Common Stock since January 1984. ITEM 6. Selected Financial Data The following table sets forth certain selected historical consolidated financial data of the Company and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included elsewhere herein. The information presented reflects Cathodic Protection Services Company ("CPS") as a discontinued operation. See Note D in "Notes to Consolidated Financial Statements."

Nine Months Ended Year Ended Year Ended March 31, March 31, June 30, ---------------------------------- --------- ---------- 2000 1999 1998 1997 (1) 1996 --------- --------- --------- --------- ---------- (in thousands, except per share data) Statement of Operations Data: Operating revenues................... $ 417,087 $ 466,440 $ 426,893 $ 167,128 $ 117,289 ========= ========= ========= ========= ========== Income from continuing operations.... $ 8,890 $ 20,920 $ 31,254 $ 17,625 $ 15,024 ========= ========= ========= ========= ========== Net income........................... $ 8,890 $ 20,920 $ 31,408 $ 17,232 $ 15,276 ========= ========= ========= ========= ========== Basic earnings per common share: (2) Income from continuing operations.. $ 0.42 $ 0.97 $ 1.45 $ 0.88 $ 0.77 ========= ========= ========= ========= ========== Net income......................... $ 0.42 $ 0.97 $ 1.46 $ 0.86 $ 0.78 ========= ========= ========= ========== ========== Diluted earnings per common share: (2) Income from continuing operations.. $ 0.42 $ 0.97 $ 1.35 $ 0.85 $ 0.76 ========= ========= ========= ========= ========== Net Income......................... $ 0.42 $ 0.97 $ 1.36 $ 0.83 $ 0.77 ========= ========= ========= ========= ========== Balance Sheet Data: Total assets....................... $ 743,174 $ 732,030 $ 736,011 $ 674,213 $ 230,741 ========= ========= ========= ========= ========== Long-term obligations: Long-term debt.................... $ 224,738 $ 233,615 $ 251,560 $ 199,631 $ -- ========= ========= ========= ========= ========== Cash dividends declared per common share...................... $ -- $ -- $ -- $ -- $ -- ========= ========= ========= ========= ==========

(1) Includes financial data for Bristow after the effective date of the investment on December 19, 1996 (See Note J in "Notes to Consolidated Financial Statements"). (2) Earnings per share amounts for the nine months ended March 31, 1997 and for the year ended June 30, 1996 have been restated for the adoption of Statement of Financial Accounting Standards No. 128 "Earnings per share." 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company is a major supplier of helicopter transportation services to the worldwide offshore oil and gas industry. In December 1996, the Company expanded its aviation services and related operations through its investment in Bristow Aviation Holdings Limited ("Bristow") (see Note J in the "Notes to the Consolidated Financial Statements" for a complete discussion of this investment). The investment in Bristow was influenced by the Company's belief that the globalization of helicopter operators had begun with the then recent acquisitions and consolidations completed by two of its major international competitors. This trend has continued with the recent consolidation of two major international competing helicopter operators. Further consolidation is possible as operators seek to broaden their exposure to international markets in order to better serve their customers and increase their access and influence with financial markets, insurance markets and other suppliers. The combined helicopter activities of the Company's Air Logistics subsidiaries ("Air Log") and that of Bristow, together with its investment in unconsolidated entities, result in an operating fleet of 380 aircraft servicing the major oil and gas markets of the world. The Company also provides production management services to the domestic offshore oil and gas industry through its wholly-owned subsidiary, Grasso Production Management, Inc. ("GPM"). GPM's services include furnishing personnel, engineering, production operating services, paramedic services and the provision of boat and helicopter transportation of personnel and supplies between onshore bases and offshore facilities. The Company's investment in GPM was influenced by its belief that a restructuring in the United States oil and gas industry was taking place, creating opportunities to provide production management services to both independent and major oil companies as they either grow, contract or refocus their activities accordingly. The level of worldwide offshore oil and gas exploration, development and production activity has traditionally influenced demand for the Company's services. This was clearly evident during fiscal year 1999 when the oil and gas industry experienced a significant downturn. A market over-supply of oil caused prices to decline to their lowest level in over 12 years. This protracted decline in commodity prices resulted in oil companies' canceling or deferring a significant portion of their current and planned exploration and development activities and, accordingly, reduced demand for helicopter services in certain markets and increased rate pressure from customers in other markets. Additionally, oil companies sought to lower their internal and external production costs through initiatives to reduce excess costs and make more efficient use of contracted third party services, a trend which continued into Fiscal Year 2000. During fiscal year 2000, the member nations of OPEC sought to correct the over supply of oil by instituting production cuts which, along with increasing worldwide demand, drove oil prices to historically high levels. Despite the resurgence in oil prices, oil companies have been slow to return to the levels of exploration and development experienced prior to fiscal year 1999. The Company has no way of predicting the activity levels of either the oil and gas industry in general or that of its specific customers. However, management does believe that the current sustained level of higher commodity prices will foster increased industry commitment for new exploration and development activities and, consequently, helicopter transportation services. 10 Results of Operations Operating results and other income statement information for the fiscal years ended March 31, 2000, 1999 and 1998 follows (in thousands of dollars):

Year Ended March 31, ------------------------------------------- 2000 1999 1998 ----------- ----------- ---------- Operating revenues........................ $ 417,087 $ 466,440 $ 426,893 Gain (loss) on disposal of equipment...... 3,516 2,400 (238) ----------- ----------- ---------- 420,603 468,840 426,655 ----------- ----------- ---------- Direct cost............................... 335,411 363,272 311,641 Depreciation and amortization............. 33,213 32,742 32,240 General and administrative................ 26,215 29,847 26,310 ----------- ----------- ---------- 394,839 425,861 370,191 ----------- ----------- ---------- Operating income.......................... 25,764 42,979 56,464 Earnings from unconsolidated entities..... 4,196 5,104 7,205 Interest income (expense), net............ (15,079) (16,351) (17,555) ----------- ----------- ---------- Income before provision for income taxes.. 14,881 31,732 46,114 Provision for income taxes................ 4,586 9,509 13,833 Minority interest......................... (1,405) (1,303) (1,027) Discontinued operations................... -- -- 154 ----------- ----------- ---------- Net income................................ $ 8,890 $ 20,920 $ 31,408 =========== =========== ==========

11 Consistent with the presentation of segment information in Note K in the "Notes to Consolidated Financial Statements", the following table sets forth certain operating information, which will form the basis for discussion of each of the two identified segments, Helicopter activities and Production management and related services. Beginning in fiscal year 2000, the Company has changed the basis of segmentation within its Helicopter activities segment. The respective international operations of Air Log (headquartered in the United States) and Bristow (headquartered in the United Kingdom) will, from this point forward, be reported as a separate division. The new International division will encompass all helicopter activities outside of the United States Gulf of Mexico and Alaska (reported as "Air Log") and the United Kingdom and Europe Sectors of the North Sea (reported as "Bristow"). The analysis and comparison that follow are based on the previous segment format as comparative information for 1999 and 1998 under the current segment format is not presented.

Year Ended March 31, ----------------------------------------------- Current Segment Format Previous Segment Format ---------- ---------------------------------- 2000 2000 1999 1998 ---------- --------- --------- -------- (in thousands, except flight hours and gross margin percentages) Flight hours (excludes unconsolidated entities): Helicopter activities: Air Log................................. 100,563 118,747 120,888 137,495 Bristow................................. 53,905 92,664 107,301 95,987 International........................... 56,943 -- -- -- ---------- --------- --------- -------- Total................................ 211,411 211,411 228,189 233,482 ========== ========= ========= ======== Operating revenues: Helicopter activities: Air Log................................. $ 94,901 $ 113,922 $ 123,399 $123,544 Bristow................................. 181,339 266,938 305,408 264,612 International........................... 104,620 -- -- -- Less: Intercompany......................... (967) (967) (716) (587) ---------- --------- --------- -------- Total............................ 379,893 379,893 428,091 387,569 Production management and related services.. 39,703 39,703 41,236 42,829 Corporate................................... 9,384 9,384 5,580 4,069 Less: Intercompany......................... (11,893) (11,893) (8,467) (7,574) ---------- --------- --------- -------- Consolidated total............... $ 417,087 $ 417,087 $ 466,440 $426,893 ---------- --------- --------- -------- Operating expenses: Helicopter activities: Air Log................................. $ 82,604 $ 94,958 $ 99,575 $ 95,034 Bristow................................. 186,626 265,982 289,582 236,378 International........................... 91,710 -- -- -- Less: Intercompany.......................... (967) (967) (716) (587) ---------- -------- --------- -------- Total................................ 359,973 359,973 388,441 330,825 Production management and related services.. 37,615 37,615 39,035 39,755 Corporate................................... 9,144 9,144 6,852 7,185 Less: Intercompany......................... (11,893) (11,893) (8,467) (7,574) ---------- --------- --------- -------- Consolidated total.............................. $ 394,839 $ 394,839 $ 425,861 $370,191 ---------- --------- --------- -------- Operating income, excluding gain or loss on disposal of equipment: Helicopter activities: Air Log................................. $ 12,297 $ 18,964 $ 23,824 $ 28,510 Bristow................................. (5,287) 956 15,826 28,234 International........................... 12,910 -- -- -- ---------- --------- --------- -------- Total................................ 19,920 19,920 39,650 56,744 Production management and related services.. 2,088 2,088 2,201 3,074 Corporate................................... 240 240 (1,272) (3,116) ---------- --------- --------- -------- Consolidated total............... $ 22,248 $ 22,248 $ 40,579 $ 56,702 ========== ========= ========= ========

12

Year Ended March 31, ------------------------------------------- Current Segment Format Previous Segment Format --------- ------------------------------ 2000 2000 1999 1998 --------- ------ ------- ------- (in thousands, except flight hours and gross margin percentages) Gross margin, excluding gain or loss on disposal of equipment: Helicopter Activities: Air Log................................ 13.0 % 16.6% 19.3% 23.1% Bristow................................ (2.9)% 0.4% 5.2% 10.7% International.......................... 12.3 % -- -- -- Total............................... 5.2 % 5.2% 9.3% 14.6% Production management and related services. 5.3 % 5.3% 5.4% 7.2% Consolidated total.............. 5.3 % 5.3% 8.7% 13.3%

Helicopter Activities The following table sets forth certain information regarding aircraft operated by Air Log, Bristow and unconsolidated entities:

March 31, -------------------- 2000 1999 1998 ---- ---- ---- Number of aircraft operated (excludes unconsolidated entities): United States - Air Log............................... 161 155 154 United Kingdom/Europe - Bristow....................... 71 66 73 International - Air Log and Bristow................... 70 74 74 --- -- --- Total.................................................... 302 295 301 === === === Number of aircraft operated by unconsolidated entities... 78 78 78 == == ==

Air Log and Bristow conduct helicopter activities principally in the Gulf of Mexico and the North Sea, respectively, where they provide support to the production, exploration and construction activities of oil and gas companies. Air Log also charters helicopters to governmental entities involved in regulating offshore oil and gas operations in the Gulf of Mexico and provides helicopter services to the Alyeska Pipeline in Alaska. Bristow also provides search and rescue work for the British Coast Guard. International's activities include Air Log and Bristow's operations in the following countries: Australia, Brazil, China, Colombia, Cyprus, India, Kazakhstan, Kosovo, Mexico, Nigeria, Spain, The Maldives and Trinidad. These international operations are subject to local governmental regulations and uncertainties of economic and political conditions in those areas. International also includes Air Log's service agreements with, and equity interests in, entities that operate aircraft in Egypt and Mexico ("unconsolidated entities"). Fiscal 2000 as compared to Fiscal 1999 - Operating revenues from helicopter activities declined by 11% during fiscal 2000, with operating expenses declining by only 7%. Much of this decline in revenue is attributed to the loss of two major customers in the North Sea effective August 1, 1999, coupled with low levels of exploration and development by the oil companies. Despite sustained higher commodity price levels, oil companies have been slow to return to pre-fiscal 1999 exploration and development activity levels. However, flight activity during the fourth quarter of fiscal 2000 in the Gulf of Mexico and certain international markets showed increases over the prior year fourth quarter, which management believes may be the reversal of a trend of decreasing activity in these markets. Air Log's flight activity for fiscal 2000 is 1.8% below the level experienced in fiscal 1999. Revenue for fiscal 2000 fell by 7.7% from the prior year. This larger percentage decrease in revenue compared to flight activity is due primarily to a shift in the mix of aircraft generating revenues. Flight hours and revenue generated from larger, crew change aircraft in the Gulf of Mexico decreased by 20% from the prior year, while flight hours and revenue from smaller, production related aircraft increased by 1.6%. Air Log's operating margin of 16.6% for fiscal 2000 compares to 19.3% for the prior year, and is reflective of the decline in flight hours from higher margin crew change aircraft discussed above and increased compensation costs for pilots (discussed below) and other employees. During the fourth quarter of fiscal 2000, Air Log collected 13 in full its pre-petition receivables from a significant customer emerging from Chapter 11 bankruptcy. The reserve for bad debts was reduced by $0.5 million as a result of the resolution of this contingency. Air Log's domestic pilots are now compensated in accordance with the terms of a negotiated contract between the Company and the union representing the pilot group. The contract calls for a four year term, effective May 18, 1999. The contract provides the pilots with scheduled increases in base pay and other fringe benefit enhancements and provides the Company with strike protection and certain other rights to allow it to continue to manage its business. The Company has extended the fringe benefit enhancements to Air Log's non-union employee group as well. Based on employment levels at the time the contract was signed, Air Log's compensation costs increased in fiscal 2000 by approximately 13%, as a result of the union contract. Three additional base pay increases of 3% each are scheduled for the pilot group at varying intervals of 12 to 15 months through the remainder of the contract term. On November 16, 1999, the OPEIU petitioned the "NMB" to conduct an election among the mechanics and related personnel employed by two of the companies comprising the Air Log group (Air Logistics, L.L.C. and Air Logistics of Alaska, Inc.). The election for Air Logistics, L.L.C. was held on March 13, 2000 with the mechanics voting in favor of the Company. The NMB dismissed the matter with respect to the Alaska-based group on January 24, 2000, but due to extraordinary circumstances, the NMB did accept another representation application covering the Air Logistics of Alaska, Inc. mechanics and related employees. The election in Alaska will proceed with two unions on the ballot, the OPEIU and International Union of Operating Engineers. The ballots will be counted on July 11, 2000. The Company does not believe the current organizing efforts will place it at a disadvantage with its competitors as management believes that pay scales, benefits, and work rules will continue to be similar throughout the industry. During March 2000, the Company's 49% owned affiliate in Mexico was awarded a $75 million three year contract to provide helicopter transportation services to the Federal Electric Commission of Mexico. The 13 aircraft needed to fulfill the contract requirements will be leased by the affiliate from Air Log. The start up of the contract will be in phases over a two month period beginning March 31, 2000. Air Log currently has six aircraft operating in Brazil which are leased to an unrelated local operator. Subsequent to year end, Air Log imported a seventh aircraft to cover the increased ad hoc flying resulting from the international oil companies expanding into the Brazilian market. Management believes that the trend of increasing activity in Brazil will continue, and consequently is in negotiations to acquire a minority interest in the local operator. In Brazil, operating licenses are granted by the aviation authorities only to Brazilian entities. This investment, the amount of which is not expected to be material, will serve to secure Air Log's presence in Brazil and enhance the local operator's ability to do business with the international oil companies. Additionally, concerns over the economic conditions in Brazil have lessened somewhat as the Brazilian currency has stabilized for the time being in relation to the United States dollar. Bristow's flight hours for fiscal 2000 decreased by 13.6%, from the prior year. This net decrease in flight activity is comprised of decreases in Bristow's North Sea and Trinidad markets, offset by increases in flight activity in Nigeria and Australia. The decrease in the North Sea activity is related to an overall slow down in exploration and development activity in that market, which includes the termination of contracts with two major customers, effective August 1, 1999. These contracts accounted for $43.4 million in revenue in fiscal 1999, or 24% of revenue from the North Sea versus only $11.9 million in fiscal 2000. The Aberdeen, Scotland base, from where these contracts are serviced, employs approximately 600 staff. Management developed a plan to adjust its cost structure to adapt to the reduced volume of business, as discussed further below. Management believes that the impact of the above decrease in revenue will be partially offset by a new contract which was phased-in between January 1, 1999 to January 1, 2000, which should generate revenues of approximately $21 million per annum when fully operational. Excluding the impact of this lost work, North Sea flight hours and revenue for the remaining customer base decreased by 8% and 7%, respectively, from the prior year as a result of reduced utilization and pricing pressures from customers. The North Sea has been more adversely affected by low oil prices due to generally higher exploration and production costs in that area compared with other production areas around the world. Bristow's operating margin declined from 5.2% in fiscal 1999 to 0.4% in the fiscal 2000. These low margins are due to the reduced utilization and pricing pressures discussed above and the terminated contracts and related restructuring charges of $5.0 million recognized in the second quarter of fiscal year 2000. The restructuring charges were incurred to adjust Bristow's staffing to the current volume of work and entailed a reduction in the North Sea workforce by 19%. Absent these charges, Bristow's operating margin for fiscal 2000 would have been 2.2%. The Company expects to realize at least $7 million in combined annual salary savings from the aforementioned redundancy program. In addition, further cost reductions, including additional employee terminations, renegotiating contracted maintenance services and revisions to employee benefit plans, are being pursued as management works to establish a more cost effective and competitive organization. However, given the significant reduction in North Sea flight activity, it is likely that Bristow's results and operating margins will be adversely affected for sometime absent increased activity in the North Sea market. 14 Fiscal 1999 as compared to Fiscal 1998 - The Company experienced mixed results from its Helicopter activities during fiscal 1999 as it saw revenues increase and operating income decrease. This is in contrast to the increases experienced during fiscal 1998 primarily as a result of the Company's investment in Bristow and improved market conditions in the Gulf of Mexico. Air Log's flight activity decreased during fiscal 1999 by 12% from 1998 levels, primarily due to the overall decrease in demand for helicopter services from the oil and gas industry. Despite the decrease in flight activity, Air Log's operating revenues remained unchanged from fiscal 1998 to 1999. Several factors, including rate increases (approximating 10%) obtained in the third quarter of fiscal 1998 and the continued high percentage of aircraft under contract between the two fiscal years, served to prevent an otherwise expected decline in revenue. Flight hours and related revenue generated per flight hour began trending downward from the first quarter of fiscal 1999 onward as customers began scaling back operations without releasing aircraft from fixed monthly leases until December 1998. While this situation had a positive effect on revenues, it had an opposite effect on operating costs as Air Log was required to keep these aircraft maintained and crewed ready for flight, which contributed to Air Log's overall operating income decline of 16% in fiscal 1999 from 1998. To protect the erosion of its margins, in July 1998 Air Log instituted stricter review and authorization procedures for maintenance expenditures, put a hiring freeze in effect, and in February 1999 reduced its workforce by 50 employees. Other factors contributing to Air Log's decline in profitability in 1999 include the provisions of additional reserve for bad debts of $0.8 million for one significant customer which filed Chapter 11 bankruptcy and $1.1 million for another significant customer experiencing financial difficulties due to the devaluation of the Brazilian currency, and the accrual of $1.3 million for changes in Air Log's compensated absences policies. Unlike Air Log's other foreign operations, its customer in Brazil is exposed to currency exchange risk as it earns all of its revenue in the Brazilian currency, but incurs a majority of its expenses (including Air Log's leases) in United States Dollars. Air Log's revenue from this Brazilian customer was $5.0 million in fiscal 1999. Bristow's flight activity increased during fiscal 1999 by 12% from 1998 levels resulting in a corresponding increase in operating revenue of 15%. These increases are primarily attributed to the start up of the Shell Expro contract on July 1, 1998, which accounted for 13,696 flight hours and $33.6 million in revenue. Apart from Shell Expro activity, Bristow's fiscal 1999 North Sea flight activity and revenue declined 6% and 4% respectively from 1998. These declines in the North Sea were caused by a lack of available aircraft to perform ad hoc work in early fiscal 1999 (due to full utilization of aircraft as a result of the Shell Expro contract) and the general downturn in the oil and gas industry in the last half of fiscal 1999. Bristow's operating income decreased by 44% during fiscal 1999 from fiscal 1998, and it saw its gross margins deteriorate from 10.7% in 1998 to 5.2% in 1999. Several factors contributed to this decline in profitability, including the reduction of higher margin ad hoc flight activity, the provision of additional reserve for bad debts of $.8 million and higher maintenance and repair expenditures. In February 1999, Bristow instituted procedures, similar to those of Air Log, to closely review all significant maintenance and repair expenditures and to better utilize existing spare parts and fleet capacity in order to manage its operating expense. Production Management and Related Services GPM conducts production management and related services in the Gulf of Mexico for both major and independent oil companies. GPM's services include furnishing personnel, engineering, production operating services, paramedic services, and the provision of boat and helicopter transportation of personnel and supplies between onshore bases and offshore facilities. Fiscal 2000 as compared to Fiscal 1999 - Operating revenues for GPM decreased 4% during fiscal 2000, primarily due to mergers and consolidation among GPM's customer group and overall oil service industry conditions. This decrease continues a trend consistent with that of the Company's Helicopter Activities and the oil service industry in general. Despite this decrease in revenue, GPM was able to maintain its operating margin at 5.3% essentially unchanged from Fiscal 1999. Fiscal 1999 as compared to Fiscal 1998 - GPM was also affected by the changing industry fundamentals during fiscal 1999. The reported 4% decline in revenues in 1999 from 1998 does not highlight the significant level of customer turnover which is inherent in its business due to mergers, business failures, and rate shopping by customers. Management was successful in replacing most of the work lost during 1999. Gross margin declined to 5.4% in 1999 from 7.2% in 1998, due primarily to an increase in the provision for bad debts of $.5 million attributable to two customers in bankruptcy. Additionally, some of the customer turnover discussed above was replaced with lower margin work, contributing to the decline in margins. 15 Corporate and Other Corporate operating revenues are primarily generated from the intercompany leasing of aircraft to the operating segments, which in consolidation is eliminated. Consolidated general and administrative costs declined by $3.6 million in fiscal 2000 as fiscal 1999 included $3.5 million of non-recurring charges for provisions for bad debts as discussed above for Air Log, Bristow and GPM. Earnings from unconsolidated entities decreased in 2000 by $0.9 million and in 1999 by $2.1 million due primarily to decreases in dividends received ($1.8 million in 2000 compared to $2.9 million in 1999 and $4.7 million in 1998) from equity investments accounted for under the cost method of accounting (See Note C in the "Notes to Consolidated Financial Statements"). The decline in dividends paid by these entities is directly attributable to the impact the oil industry downturn has had on their respective operations. The effective income tax rates from continuing operations were 31%, 30% and 30% for 2000, 1999 and 1998. The variance between the Federal statutory rate and the effective rate for these periods is due primarily to non-taxable foreign source income and foreign tax credits available to reduce domestic taxable income. The Company's effective tax rate is impacted by the amount of foreign source income generated by the Company and its ability to realize foreign tax credits. Changes in the Company's operations and operating location in the future could impact the Company's effective tax rate. Liquidity and Capital Resources Cash and cash equivalents were $37.9 million as of March 31, 2000, a $32.7 million decrease from March 31, 1999. Working capital as of March 31, 2000 was $102.7 million, a $40.2 million decrease from March 31, 1999. Total debt was $241.3 million as of March 31, 2000, a $2.4 million decrease from March 31, 1999. Cash flows provided by operating activities were $34.1 million, $49.7 million and $68.9 million in 2000, 1999, and 1998, respectively. The decrease in cash flows provided by operating activities from 1998 to 2000 was due primarily to the erosion in the oil and gas industry market conditions. Cash flows used in investing activities were $64.4 million, $13.0 million, and $54.2 million for 2000, 1999 and 1998, respectively. During 2000, the Company received proceeds of $10.3 million primarily from thirteen separate disposals of aircraft. During the same period, the Company purchased seven Bell 407's for $9.4 million; four S-61's for $10.9 million, two S-76's for $4.5 million, 5 Bell 412's for $19.8 million and three Super Puma's for $20.4 million. In addition, the Company placed $4.3 million into escrow, included in other assets as of March 31, 2000, for the purchase of three S-76 aircraft. Subsequent to year-end, the Company purchased two Bell 412's for $10 million. The Company has no other material capital commitments outstanding. The majority of these aircraft purchases were made to fulfill customer contract requirements. The three Super Pumas and two S76s referenced above were acquired in anticipation of international expansion. Capital expenditures during 1999 of $19.2 million included one AS332L-Super Puma and three Bell 407's. The Company used existing cash to purchase these aircraft. Deposits on two new AS332L-Super Pumas made during the third quarter of 1999 were refunded to the Company during the fourth quarter of 1999 after the Company decided to lease rather than purchase these aircraft (see Note F in the "Notes to Consolidated Financial Statements"). During 1998, the Company acquired five aircraft (including four AS332L-Super Pumas, which had previously been leased by Bristow under short-term operating leases) for $32.3 million. The Company used existing cash and incurred an additional $20.0 million of 7.9% fixed rate financing that amortizes over five years to complete this transaction. In addition to the financed aircraft, the Company used existing cash to purchase 13 Bell 407's, four Sikorsky S-76's and one Bell 214ST in 1998. Cash flows provided by (used in) financing activities were $(1.8) million, $(22.0) million and $10.7 million in 2000, 1999, and 1998, respectively. In July 1998, the Board of Directors reaffirmed its February 1996 authorization to repurchase up to 1 million shares of the Company's Common Stock in the open market or through private transactions. The authorization has no time limit and authorizes management to make repurchases of common stock and/or debt securities as they deem prudent. During the fiscal year ended March 31, 1999, the Company repurchased 763,500 shares of Common Stock and $7.1 million face value of 6% Notes in the open market for a total purchase price of $13.2 million. In October 1997, the Company repaid (pound)11.6 million ($18.7 million) of Bristow debt with its existing cash. In January 1998, the Company issued $100 million of 7 7/8% Senior Notes due 2008 discounted to yield 7.915%, which resulted in net proceeds to the Company of $97.2 million. The proceeds were used to repay certain indebtedness of Bristow of (pound)40.7 million ($66.6 million) and to replace general corporate funds used to repay certain indebtedness of Bristow in October 1997. As of March 31, 2000, Bristow had a (pound)15 million ($23.9 million) revolving credit facility with a syndicate of United Kingdom banks that matures on December 31, 2002. Bristow had no amounts drawn under this facility as of March 31, 2000, but did have (pound)1.4 million ($2.2 million) of outstanding guarantees of certain obligations, which reduced availability under the line. As of March 31, 2000, OLOG had a $20 million unsecured working capital line of credit with a bank that expires on September 30, 2001. Management believes that its normal operations, lines of credit and available financing will provide sufficient working capital and cash flow to meet debt service needs for the foreseeable future. 16 Legal Matters The Company has received notices from the EPA that it is one of approximately 160 PRPs at one Superfund site in Texas, one of over 300 PRPs at a site in Louisiana and a PRP at one 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. See Item 3 -- "Legal Proceedings" for additional information regarding EPA notices. Year 2000 Matters To date the Company has not encountered any significant Year 2000 problems with any of its information technology (IT) systems, such as accounting and financial ledgers and aircraft and pilot records, or non-IT systems (which incorporate embedded technology), such as onboard navigational, communication and safety systems, nor is it aware of any problems with its vendors' or customers' systems. However, Year 2000 issues may yet arise that are not currently apparent. To date, the Company has spent $0.4 million on its replacement and remediation efforts and no additional expenditures are contemplated. The Company does not separately account for the internal costs incurred for its Year 2000 compliance efforts. Such costs consist primarily of salaries and benefits for the Company's IT personnel. The Company has a Year 2000 contingency plan in place if any problems arise in its operations or with any of its significant vendors or customers. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" which establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. Changes in a derivative's fair value are to be recognized currently in earnings unless specific hedge accounting criteria are met. The Company will be required to adopt SFAS No. 133, as amended by SFAS No. 137, no later than April 1, 2001. The Company has not yet quantified the impact to its financial statements that may result from adoption of SFAS No. 133, however, the Company does not use derivative instruments or hedging activities extensively in its business and therefore the adoption of this new statement is not expected to materially affect the Company's financial positions or results of operations. The new statement could however cause volatility in the components of other comprehensive income. ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk The Company has $241.3 million of debt outstanding, of which $34.9 million carries a variable rate of interest. The Company uses an interest rate swap to hedge a portion of the interest rate exposure on this variable rate debt. Management does not believe that this swap, or the remaining level of variable rate debt exposes it to a material amount of interest rate market risk. However, the market value of the Company's fixed rate debt fluctuates with changes in interest rates. The Company does not have any significant maturities of fixed rate debt occurring before fiscal 2004. The Company's ability to refinance this fixed rate debt varies in response to significant changes in interest rates, among other factors. The Company currently does not have any off-balance sheet hedging instruments to manage its risks associated with its operating activities conducted in foreign currencies. In limited circumstances and when considered appropriate, the Company will utilize forward exchange contracts to hedge anticipated transactions. The Company has historically used these instruments primarily in the buying and selling of certain spare parts and equipment. The Company attempts to minimize its exposure to foreign currency fluctuations by matching its revenues and expenses in the same currency for its contracts. Most of Bristow's revenues and expenses are denominated in British Pounds Sterling ("pound"). As of March 31, 2000, the Company does not have any outstanding forward exchange contracts. Management does not believe that its limited exposure to foreign currency exchange risk necessitates the extensive use of forward exchange contracts. 17 ITEM 8. Consolidated Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Offshore Logistics, Inc.: We have audited the accompanying consolidated balance sheets of Offshore Logistics, Inc. (a Delaware corporation) and subsidiaries as of March 31, 2000 and 1999, and the related consolidated statements of income, stockholders' investment and cash flows for the years ended March 31, 2000, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Offshore Logistics, Inc. and subsidiaries as of March 31, 2000 and 1999, and the results of their operations and their cash flows for the years ended March 31, 2000, 1999 and 1998 in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP New Orleans, Louisiana May 25, 2000 18 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS

March 31, ------------------------- 2000 1999 ---------- --------- (thousands of dollars) Current assets: Cash and cash equivalents....................................$ 37,935 $ 70,594 Accounts receivable.......................................... 96,387 89,077 Inventories.................................................. 80,435 82,853 Prepaid expenses............................................. 5,725 5,999 --------- --------- Total current assets............................................. 220,482 248,523 Investments in unconsolidated entities........................... 14,093 9,998 Property and equipment -- at cost Land and buildings........................................... 11,005 10,860 Aircraft and equipment....................................... 605,949 554,852 --------- --------- 616,954 565,712 Less - Accumulated depreciation and amortization............. (142,931) (122,796) --------- --------- 474,023 442,916 Other assets..................................................... 34,576 30,593 --------- --------- $ 743,174 $ 732,030 ========= ========= LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable.............................................$ 30,749 $ 35,534 Accrued liabilities.......................................... 52,082 42,395 Deferred taxes............................................... 18,443 17,697 Current maturities of long-term debt......................... 16,540 10,037 --------- --------- Total current liabilities........................................ 117,814 105,663 Long-term debt, less current maturities.......................... 224,738 233,615 Other liabilities and deferred credits........................... 2,932 3,000 Deferred taxes................................................... 96,739 94,908 Minority interest................................................ 11,911 10,716 Commitments and contingencies.................................... -- -- Stockholders' investment: Common stock, $.01 par value, authorized 35,000,000 shares; outstanding 21,105,921 in 2000 and 21,103,421 in 1999 (exclusive of 1,281,050 treasury shares)................. 211 211 Additional paid in capital................................... 116,074 116,053 Retained earnings............................................ 182,004 173,114 Accumulated other comprehensive income (loss)................ (9,249) (5,250) --------- --------- 289,040 284,128 --------- --------- $ 743,174 $ 732,030 ========= =========

The accompanying notes are an integral part of these statements. 19 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

Year Ended March 31, ----------------------------------- 2000 1999 1998 --------- --------- --------- (thousands of dollars, except per share amounts) Gross revenue: Operating revenue......................................$ 417,087 $ 466,440 $ 426,893 Gain (loss) on disposal of equipment................... 3,516 2,400 (238) --------- --------- --------- 420,603 468,840 426,655 --------- --------- --------- Operating expenses: Direct cost............................................ 335,411 363,272 311,641 Depreciation and amortization.......................... 33,213 32,742 32,240 General and administrative............................. 26,215 29,847 26,310 --------- --------- --------- 394,839 425,861 370,191 --------- --------- --------- Operating income................................... 25,764 42,979 56,464 Earnings from unconsolidated entities...................... 4,196 5,104 7,205 Interest income............................................ 3,400 3,460 2,981 Interest expense........................................... 18,479 19,811 20,536 --------- --------- --------- Income from continuing operations before provision for income taxes and minority interest... 14,881 31,732 46,114 Provision for income taxes................................. 4,586 9,509 13,833 Minority interest.......................................... (1,405) (1,303) (1,027) --------- --------- --------- Income from continuing operations.................. 8,890 20,920 31,254 Discontinued operations: Loss from CPS operations............................... -- -- (230) Gain on sale of CPS.................................... -- -- 384 --------- --------- --------- -- -- 154 --------- --------- --------- Net income.........................................$ 8,890 $ 20,920 $ 31,408 ========= ========= ========= BASIC: Income per common share: Continuing operations..................................$ 0.42 $ 0.97 $ 1.45 Discontinued operations................................ -- -- 0.01 --------- --------- --------- Net income per common share ...............................$ 0.42 $ 0.97 $ 1.46 ========= ========= ========= DILUTED: Income per common share: Continuing operations..................................$ 0.42 $ 0.97 $ 1.35 Discontinued operations................................ -- -- 0.01 --------- --------- --------- Net income per common share ...............................$ 0.42 $ 0.97 $ 1.36 ========= ========= =========

The accompanying notes are an integral part of these statements. 20 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

Accumulated Other Common Stock Additional Comprehensive Total ------------------- Paid in Income Retained Stockholders' Shares Amount Capital (Loss) Earnings Investment ----------- ------ ---------- ------------- --------- ------------ (in thousands, except share amounts) BALANCE - March 31, 1997........ 21,081,133 $ 211 $ 115,346 $ (1,437) $120,786 $234,906 Comprehensive Income: Net income............... -- -- -- -- 31,408 31,408 Translation adjustments.. -- -- -- 5,848 -- 5,848 -------- Total Comprehensive Income... 37,256 Stock options exercised...... 745,500 8 7,335 -- -- 7,343 Restricted stock issued...... 28,288 -- 380 -- -- 380 ---------- ---- --------- --------- -------- -------- BALANCE - March 31, 1998........ 21,854,921 219 123,061 4,411 152,194 279,885 Comprehensive Income: Net income............... -- -- -- -- 20,920 20,920 Translation adjustments.. -- -- -- (9,661) -- (9,661) -------- Total Comprehensive Income... 11,259 Stock options exercised...... 12,000 -- 113 -- -- 113 Stock repurchased............ (763,500) (8) (7,121) -- -- (7,129) ----------- ---- -------- -------- -------- -------- BALANCE - March 31, 1999........ 21,103,421 211 116,053 (5,250) 173,114 284,128 Comprehensive Income: Net income............... -- -- -- -- 8,890 8,890 Translation adjustments.. -- -- -- (3,999) -- (3,999) -------- Total Comprehensive Income... 4,891 Stock options exercised...... 2,500 -- 21 -- -- 21 ----------- ---- --------- -------- -------- -------- BALANCE - March 31, 2000........ 21,105,921 $211 $ 116,074 $ (9,249) $182,004 $289,040 =========== ==== ========= ======== ======== ========

The accompanying notes are an integral part of these statements. 21 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended March 31, ------------------------------------- 2000 1999 1998 ----------- ----------- ---------- (thousands of dollars) Cash flows from operating activities: Net income ....................................... $ 8,890 $ 20,920 $ 31,408 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................... 33,213 32,742 32,240 Increase in deferred taxes........................ 3,513 3,724 10,826 (Gain) loss on asset dispositions................. (3,516) (2,400) 238 Equity in earnings from unconsolidated entities (over) under dividends received............... (4,205) 341 1,679 Minority interest in earnings..................... 1,405 1,303 1,027 Discontinued operations........................... -- -- 230 Change in operating assets and liabilities: (Increase) decrease in accounts receivable........ (8,434) (5,581) 6,694 (Increase) decrease in inventories................ 1,847 (8,322) (4,187) Increase in prepaid expenses and other............ (5,383) (1,821) (5,574) Increase (decrease) in accounts payable........... (4,454) 5,565 (2,860) Increase (decrease) in accrued liabilities........ 11,294 800 (2,747) Increase (decrease) in other liabilities and deferred credits.......................... (67) 2,406 (28) -------- -------- -------- Net cash provided by operating activities............. 34,103 49,677 68,946 -------- -------- -------- Cash flows from investing activities: Capital expenditures.............................. (74,681) (19,219) (70,465) Proceeds from asset dispositions.................. 10,302 6,236 10,963 Proceeds from CPS disposal........................ -- -- 5,700 Acquisitions, net of cash received.................... -- -- (353) -------- -------- -------- Net cash used in investing activities................. (64,379) (12,983) (54,155) -------- -------- -------- Cash flows from financing activities: Proceeds from borrowings.......................... 6,452 -- 123,538 Repayment of debt................................. (8,268) (14,948) (120,519) Repurchase of common stock........................ -- (7,128) -- Issuance of common stock.......................... 21 113 7,723 -------- -------- -------- Net cash provided by (used in) financing activities... (1,795) (21,963) 10,742 -------- -------- -------- Effect of exchange rate changes in cash............... (588) (213) 714 Net increase (decrease) in cash and cash equivalents.. (32,659) 14,518 26,247 Cash and cash equivalents at beginning of period...... 70,594 56,076 29,829 -------- -------- -------- Cash and cash equivalents at end of period............ $ 37,935 $ 70,594 $ 56,076 ======== ======== ========

The accompanying notes are an integral part of these statements. 22 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A -- OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations -- The Company's most significant area of operation is supplying helicopter transportation services to the worldwide offshore oil and gas industry. The Company also provides production personnel and medical support services to the worldwide oil and gas industry. Basis of Presentation -- The consolidated financial statements include the accounts of Offshore Logistics, Inc., a Delaware corporation ("OLOG") and its majority owned and non-majority owned entities including Bristow Aviation Holdings Limited ("Bristow"), collectively referred to as "the Company", after elimination of all significant intercompany accounts and transactions. Investments in 50% or less owned affiliates over which the Company has the ability to exercise significant influence are accounted for using the equity method. Investments in which the Company does not exercise significant influence are accounted for under the cost method. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents -- The Company's cash equivalents include funds invested in highly liquid debt instruments with original maturities of 90 days or less. Accounts Receivable -- Trade and other receivables are stated at net realizable value and the allowance for uncollectible accounts was $4,911,000 and $4,010,000 at March 31, 2000 and 1999, respectively. During the years ended March 31, 2000, 1999 and 1998 the Company increased the allowance account through charges to expense by $901,000, $3,508,000 and $310,000, respectively and decreased the allowance account for write offs of uncollectable accounts by $0, $348,000 and $800,000 respectively. The Company grants short-term credit to its customers, primarily major and independent oil and gas companies. Inventories -- Inventories are stated at the lower of average cost or market and consist primarily of spare parts. The valuation reserve related to obsolete and excess inventory was $3,958,000 and $4,045,000 at March 31, 2000 and 1999. There were no related charges to operations in 2000, 1999, or 1998. Other Assets -- In 2000, $16,060,000 of goodwill, net of accumulated amortization of $6,222,000, was included in other assets. Goodwill is amortized using the straight-line method over a period of 20 years. Goodwill is recognized for the excess of the purchase price over the value of the identifiable net assets. Realization of goodwill is periodically assessed by management based on the expected future profitability and undiscounted future cash flows of acquired companies and their contribution to the overall operations of the Company. Also included in other assets is restricted cash of (pound)4.8 million ($7.6 million), debt issuance costs of $3.3 million, being amortized over the life of the related debt, and $4.3 million placed into escrow, for the purchase of three S-76 aircraft. Depreciation and Amortization -- Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets. Estimated residual value used in calculating depreciation of aircraft ranges from 30% to 50% of cost. Maintenance and repairs are expensed as incurred; betterments and improvements are capitalized. The costs and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and resultant gains or losses are included in income. Income Taxes -- Income taxes are accounted for in accordance with the provisions of the Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under this statement, deferred income taxes are provided for by the asset and liability method. 23 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Foreign Currency Translation -- Bristow maintains its accounting records in its local currency (British Pounds Sterling). Foreign currencies are converted to United States Dollars with the effect of the foreign currency translation reflected as a component of shareholders' investment in accordance with SFAS No. 52, "Foreign Currency Translation." Foreign currency transaction gains or losses are credited or charged to income and such amounts are insignificant for the periods presented. Derivative Financial Instruments -- The Company enters into forward exchange contracts from time to time to hedge committed transactional exposures denominated in currencies other than the functional currency of the business. Foreign currency positions mature at the anticipated currency requirement date and rarely exceed three months. The purpose of the Company's foreign currency hedging activities is to protect the Company from the risk that foreign currency outflows resulting from payments for services and parts to foreign suppliers will be adversely affected by changes in exchange rates. There were no open forward currency positions at March 31, 2000. The amount of gains and losses recognized on foreign currency hedging contracts during the year was immaterial. Financial instruments are designated as a hedge at inception where there is a direct relationship to the price risk associated with the service and parts. Hedges of transactions are accounted for under the deferral method with gains and losses recognized in revenues when the hedged transaction occurs. If the direct relationship to price risk ceases to exist, the difference in the carrying value and fair value of a forward contract is recognized as a gain or loss in revenues in the period the relationship ceases to exist. The Company uses an interest rate swap to manage a portion of its interest rate exposure. Revenues or expenses on interest rate swaps are recognized over the lives of the agreements as adjustments to interest expense of the liability being hedged. Any interest rate swap not qualifying for deferred accounting is recorded at fair value. Stock Compensation -- The Company uses the intrinsic value method of accounting for stock-based compensation prescribed by Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to Employees" (APB No. 25) and, accordingly, adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Effect of Recent Accounting Pronouncements -- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" which establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. Changes in a derivative's fair value are to be recognized currently in earnings unless specific hedge accounting criteria are met. The Company will be required to adopt SFAS No. 133, as amended by SFAS No. 137, no later than April 1, 2001. The Company has not yet quantified the impact to its financial statements that may result from adoption of SFAS No. 133, however, the Company does not use derivative instruments or hedging activities extensively in its business and therefore the adoption of this new statement is not expected to materially affect the Company's financial positions or results of operations. The new statement could however cause volatility in the components of other comprehensive income. Other - The Company recorded a restructuring charge of $5.0 million (which is included in direct costs in the accompanying statement of operations) in the second quarter of the fiscal year ended March 31, 2000 related to staffing level adjustments necessitated by the termination of certain North Sea contracts. Substantially all amounts identified with this restructuring charge were disbursed by March 31, 2000. 24 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) B -- LONG-TERM DEBT Long-term debt at March 31, 2000 and 1999 consisted of the following (thousands of dollars):

March 31, -------------------------- 2000 1999 ----------- ---------- 7 7/8% Senior Notes due 2008.........................$ 100,000 $ 100,000 6% Convertible Subordinated Notes due 2003 .......... 90,922 90,922 Term Loan with a syndicate of United Kingdom banks... 23,882 29,061 Term Loan with a United Kingdom bank................. 12,660 15,439 Capital Lease Obligation............................. 4,647 5,391 Management Fee Debt (see Note J)..................... 2,801 2,839 Term loan with an unconsolidated affiliate........... 6,366 -- ---------- --------- Total debt........................................ 241,278 243,652 Less current maturities........................... 16,540 10,037 ---------- --------- Total long-term debt..............................$ 224,738 $ 233,615 ========== ==========

On January 27, 1998, the Company issued $100 million aggregate principal amount of 7 7/8% Senior Notes ("Senior Notes") due 2008 discounted to yield 7.915%. Proceeds of $97.2 million, after debt issuance costs of $2.8 million, were used to repay approximately (pound)40.7 million ($66.6 million) of Bristow debt and to replace general corporate funds used to repay certain indebtedness of Bristow in October 1997. The weighted average of the stated rates of interest on the indebtedness retired was 16.6%, but had been adjusted to 8.5% as a result of purchase accounting for the Company's investment in Bristow. The Senior Notes are guaranteed by certain of the Company's subsidiaries (see Note M). On December 17, 1996, the Company issued $98 million of 6% Convertible Subordinated Notes ("6% Notes") due 2003. The 6% Notes are convertible at any time into the Company's Common Stock at a conversion price of $22.86 per share (equivalent to a conversion rate of approximately 43.74 shares per $1,000 principal amount of 6% Notes). The 6% Notes are redeemable at the option of the Company. The Company issued $7.5 million of the 6% Notes to Caledonia Investments plc in conjunction with the investment in Bristow. Proceeds of $88.4 million, after debt issuance costs of $2.1 million, were also used to finance the investment in Bristow. During 1999, the Company repurchased $7.1 million face value of the 6% Notes in the open market at a gain to the Company, which was not material. Bristow renewed a term loan with a syndicate of United Kingdom banks on January 26, 1998, that is repayable in semi-annual installments varying from $1.6 to $4.8 million ((pound)1.0 to (pound)3.0 million) through December 31, 2002. The term loan bears interest at 0.8% above LIBOR rates. The average interest rate for the term loan during the years ended March 31, 2000 and 1999 was 8.335% and 8.214%, respectively. The term loan is guaranteed by certain United Kingdom subsidiaries of Bristow and is secured by a negative pledge on all Bristow assets. The Company entered into an interest rate swap agreement to reduce the impact of change in interest rates on this floating rate long-term debt. At March 31, 2000, the outstanding notional amount of the swap was (pound)22 million ($35 million). The agreement matures on December 31, 2001. At March 31, 2000, the fair value of the swap was (pound)372,000, ($592,000) and the fair value of the notional amount of the swap in excess of the outstanding principal amount of the term loan was (pound)76,000 ($121,000) which is included in Accrued liabilities in the accompanying balance sheet. In May 1997, the Company acquired five aircraft (including four AS332L Super Pumas, which had previously been leased by Bristow under short-term operating leases) for $32.3 million. The Company used existing cash and incurred an additional $20.0 million of 7.9% fixed rate financing, that amortizes over five years, to complete this transaction. 25 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) The obligation under capital lease bears interest at a rate tied to LIBOR and requires monthly payments. The lease is secured by the aircraft and the guarantee of Bristow. The term loan with an unconsolidated affiliate bears interest at the prime rate of a United Kingdom bank plus 0.5% and is due December 22, 2000. Bristow has a revolving credit facility, with the same syndicate of United Kingdom banks as with the term loan, which matures December 31, 2002, and is available for working capital requirements and general corporate purposes. Availability under the revolving credit facility is subject to certain limitations based on the value of certain qualifying helicopters. All advances under the revolving credit facility bear interest at 0.6% above one, three, or six month LIBOR rates. The revolving credit facility is guaranteed by certain United Kingdom subsidiaries of Bristow and is secured by helicopter mortgages and a negative pledge of all Bristow assets. The revolving credit facility is (pound)15 million ($23.9 million) at March 31, 2000. There were no borrowings under this revolving credit facility as of March 31, 2000; however, availability on the line was reduced by (pound)1.4 million ($2.2 million) of outstanding guarantees on certain obligations of Bristow. The facility requires Bristow to pay a quarterly commitment fee at an average annual rate of 0.3% on the unused portion of the line. At March 31, 2000, the Company had a $20 million unsecured line of credit with a U.S. bank that expires on September 30, 2001. There were no borrowings under this line as of March 31, 2000. The rate of interest payable under the line of credit is, at the Company's option, prime rate or LIBOR rate plus 1.25%. The agreement requires the Company to pay a quarterly commitment fee at an annual rate of .25% on the average unused portion of the line. Aggregate annual maturities for all long-term debt, including the capitalized lease, for the next five years are as follows: 2001 -- $16.5 million; 2002 -- $17.2 million; 2003 -- $16.5 million; 2004 -- $90.9 million; and 2005 -- $0 million. Interest paid during the year was $18,088,000, $19,881,000 and $21,673,000 for 2000, 1999 and 1998, respectively. The estimated fair value of the Company's total debt at March 31, 2000 and 1999 was $221.3 million and $229.4 million, respectively based on quoted market prices for the publicly listed 6% Notes and the Senior Notes and the current rates offered to the Company on other outstanding obligations. C -- INVESTMENTS IN UNCONSOLIDATED ENTITIES The Company has two principal unconsolidated entities that are accounted for on the cost method, as the Company is unable to exert significant influence over their operations and one principal unconsolidated entity, which it accounts for under the equity method. Each of these three investments is described in further detail below. The Company has a 49% investment in Hemisco Helicopters International, Inc. ("HHII") and related venture companies. The Company's investment in HHII was $2,637,000 at March 31, 2000 and 1999. There were no dividends received from HHII during 2000. During 1999 and 1998, $857,000 and $2,292,000 respectively, in dividends were received from HHII. The Company has a 25% investment in an Egyptian helicopter venture. The Company's investment in the venture was $5,986,000 at March 31, 2000 and 1999. During 2000, 1999, and 1998, $1,793,000, $1,997,000 and $2,430,000, respectively, in dividends were received from the venture. During 2000, the venture's Board of Directors approved a cash dividend, of which the Company's share applicable to fiscal year 2001 is approximately $1.5 million. 26 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Bristow has a 50% investment in FBS Limited (FBS) which was formed in 1996 and was awarded a contract to provide pilot training and maintenance services to the Defence Helicopter Flying School ("DHFS"), a newly established training school for all branches of the British military, under a fifteen year contract valued at approximately (pound)500 million over the full term. FBS purchased and specially modified 47 aircraft and maintains a staff of approximately 600 employees dedicated to conducting these training activities which began in May 1997. Prior to FBS, Bristow had provided similar pilot training and maintenance services to the British Army Air Corps since 1963. Bristow's partners in FBS had similar experience in providing training services to other branches of the British military. Bristow and its partners have given joint and several guarantees related to the performance of this contract. To date, FBS has not paid any cash dividends, although certain income tax benefits have been distributed to Bristow. In the following unaudited table, FBS represents $124,988,000 and $127,135,000 of the assets and $(2,070,000) and $(3,221,000) of equity (deficit) at March 31, 2000 and 1999, respectively. FBS also represents $54,262,000, $54,863,000 and $54,577,000 of revenue and $4,737,000, $3,381,000 and $2,477,000 of net income for the years ended March 31, 2000, 1999 and 1998, respectively. A summary of unaudited financial information of these principal unconsolidated entities is set forth below (thousands of dollars):

March 31, ------------------------- 2000 1999 -------- -------- (unaudited) (unaudited) Current assets.............................. $ 81,019 $ 72,789 Non-current assets.......................... 130,627 139,003 --------- --------- Total assets............................. $ 211,646 $ 211,792 ========= ========= Current liabilities......................... $ 25,641 $ 25,135 Non-current liabilities..................... 116,932 120,846 Equity...................................... 69,073 65,811 --------- --------- Total liabilities and equity............. $ 211,646 $ 211,792 ========= =========

Year Ended March 31, ---------------------------------------- 2000 1999 1998 ------------ ----------- ----------- (unaudited) (unaudited) (unaudited) Revenues....................$ 109,549 $ 109,879 $ 112,119 =========== =========== =========== Gross profit................$ 32,682 $ 30,240 $ 32,638 =========== =========== =========== Net income..................$ 14,680 $ 13,768 $ 16,322 =========== =========== ===========

During 2000, 1999 and 1998, respectively, revenues of $15,646,000, $15,984,000 and $21,261,000 were recognized for services provided to these affiliates by the Company. 27 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) D -- DISCONTINUED OPERATIONS In May 1997, the Company discontinued its investment in Cathodic Protection Services Company which manufactured, installed and maintained 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 consolidated financial statements of the Company and the related Notes to Consolidated Financial Statements and supplemental data reflect the results of operations net as a discontinued operation in accordance with generally accepted accounting principles. E -- INVESTMENT IN MARKETABLE SECURITIES Under the provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities", investments in debt and equity securities are required to be classified in one of three categories: held-to-maturity, available-for-sale, or trading. As of March 31, 2000 and 1999, the Company had (pound)4.8 million ($7.6 million and $7.7 million, respectively) of UK government securities classified as available-for-sale included in other assets. F -- COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases in connection with the lease of certain equipment, land and facilities. Rental expense incurred under these leases was $4,605,000 in 2000, $2,150,000 in 1999, and $1,872,000 in 1998. On March 29, 1999, the Company entered into an eight year operating lease for a new aircraft under which it provided the lessor with a residual value guarantee of up to 15% ($1,972,000) of the aircraft's original cost. During 2000, the Company entered into a similar lease for a second aircraft of comparable value providing the lessor with a residual value guarantee of up to 15% ($1,870,000) of the aircraft's original cost. As of March 31, 2000, aggregate future payments under noncancelable operating leases are as follows: 2001 -- $4,423,000; 2002 -- $4,355,000; 2003 -- $4,255,000; 2004 -- $3,883,000 and 2005 -- $3,746,000. On November 16, 1999, the Office and Professional Employees International Union ("OPEIU") petitioned the National Mediation Board ("NMB") to conduct an election among the mechanics and related personnel employed by both Air Logistics, LLC and Air Logistics of Alaska, Inc. The election for Air Logistics, L.L.C. was held on March 13, 2000 with the mechanics voting in favor of the Company. The NMB dismissed the matter with respect to the Alaska-based group on January 24, 2000, but due to extraordinary circumstances, the NMB did accept another representation application covering the Air Logistics of Alaska, Inc. mechanics and related employees. The election is set with two unions on the ballot, the OPEIU and International Union of Operating Engineers. The ballots will be counted on July 11, 2000. The Company does not believe that current organizing efforts will place it at a disadvantage with its competitors and management believes that pay scales, benefits, and work rules will continue to be similar through out the industry. 28 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) G -- INCOME TAXES The components of deferred tax assets and liabilities are as follows (thousands of dollars):

March 31, -------------------------- 2000 1999 -------- -------- Deferred Tax Assets: Foreign tax credits.............................$ 94,983 $ 108,843 Other........................................... 21,354 11,672 Valuation allowance............................. (40,886) (43,795) --------- --------- Total deferred tax assets.................... 75,451 76,720 --------- --------- Deferred Tax Liabilities: Property and equipment.......................... (149,780) (152,663) Inventories..................................... (9,607) (10,970) Accrual for repairs and maintenance............. (5,950) (6,408) Other........................................... (25,296) (19,284) --------- --------- Total deferred tax liabilities.............. (190,633) (189,325) --------- --------- Net deferred tax liabilities......................$(115,182) $(112,605) ========= =========

The valuation allowance was established for the deferred tax asset related to foreign tax credits. Companies may use foreign tax credits to offset the United States income taxes due on income earned from foreign sources. However, the credit is limited by the total income on the United States income tax return as well as by the ratio of foreign source income in each statutory category to total income. Excess foreign tax credits may be carried back two years and forward five years. As of March 31, 2000 and 1999, the Company did not believe it was more likely than not that it would generate sufficient foreign sourced income within the appropriate period to utilize all the foreign tax credits. Certain of the above components have changed due to changes in foreign currency rates. The components of income from continuing operations before provision for income taxes and minority interest for the years ended March 31, 2000, 1999 and 1998 are as follows (thousands of dollars):

Year Ended March 31, ---------------------------------- 2000 1999 1998 -------- -------- -------- Domestic..................................$ 8,301 $ 10,322 $ 12,675 Foreign................................... 6,580 21,410 33,439 -------- -------- -------- Total.....................................$ 14,881 $ 31,732 $ 46,114 ======== ======== ========

29 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) The provision for income taxes for the years ended March 31, 2000, 1999 and 1998 consisted of the following (thousands of dollars):

Year Ended March 31, --------------------------------- 2000 1999 1998 -------- -------- ------- Current: Domestic................................$ (5,565) $ (66) $(2,237) Foreign................................. 6,335 6,044 7,545 -------- -------- ------- 770 5,978 5,308 -------- -------- ------- Deferred: Domestic................................ 8,073 10,526 9,035 Foreign................................. (3,005) (5,702) 2,965 -------- -------- ------- 5,068 4,824 12,000 -------- -------- ------- Decrease in valuation allowance........... (1,252) (1,293) (3,475) -------- -------- ------- Total.....................................$ 4,586 $ 9,509 $13,833 ======== ======== =======

The reconciliation of Federal statutory and effective income tax rates is shown below:

Year Ended March 31, ------------------------------- 2000 1999 1998 ------ ------ ----- Statutory rate.............................. 35 % 35 % 35 % Utilization of foreign tax credits.......... (8)% (7)% (3)% Additional taxes on foreign source income... 19 % 9 % 8 % Foreign source income not taxable........... (9)% (5)% (3)% Change in valuation allowance............... (8)% (4)% (7)% State taxes provided........................ 1 % 1 % 1 % Effect of UK rate change.................... (1)% -- -- Other, net.................................. 2 % 1 % (1)% ------ ------ ----- Effective tax rate.......................... 31 % 30 % 30 % ====== ====== =====

The Internal Revenue Service has examined the Company's Federal income tax returns for all years through 1996. The years have been closed through 1996, either through settlement or expiration of the statute of limitations. The Company believes that it has made adequate provision for income taxes that may become payable with respect to open tax years. Unremitted foreign earnings reinvested abroad upon which deferred income taxes have not been provided aggregated approximately $18.8 million at March 31, 2000. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts. Withholding taxes, if any, upon repatriation would not be significant. Income taxes paid during 2000, 1999 and 1998 were $7,042,000; $4,857,000 and $4,516,000, respectively. 30 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) H -- EMPLOYEE BENEFIT PLANS Savings and Retirement Plans The Company currently has two qualified defined contribution plans, which cover substantially all employees other than Bristow employees. The Offshore Logistics, Inc. Employee Savings and Retirement Plan ("OLOG Plan") covers corporate level and Air Log employees. Under the OLOG Plan, except for those employees working in the state of Alaska, the Company matches each participant's contributions up to 3% of the employee's compensation. In addition, the Company contributes an additional 3% of the employee's compensation at the end of each calendar year. Under the OLOG Plan, for Air Log employees working in the state of Alaska, the Company matches each participant's contributions up to 4% of the employee's compensation. The Grasso Production Management, Inc. Thrift & Profit Sharing Trust covers eligible GPM employees. Effective January 1, 1999, the Company began matching each participant's contributions up to 3% of the employee's compensation, plus a 50% match of contributions up to an additional 2% of compensation. Previously, the Company matched 25% of each participant's contributions up to 6% of the employee's compensation. Bristow has a defined benefit retirement plan, which covers all full-time employees of Bristow employed on or before December 31, 1997. The plan is funded by contributions partly from employees and partly from Bristow. Members contribute up to 7.5% of pensionable salary (as defined) and can pay additional voluntary contributions to provide additional benefits. The benefits are based on the employee's annualized average last three years pensionable salaries. Plan assets are held in separate trustee administered funds, which are primarily invested in equities and bonds in the United Kingdom. For employees hired after December 31, 1997, Bristow contributes 4% (5% for pilots) of the employees base salary into a defined contribution retirement plan operated by a private insurance company. The following table sets forth the defined benefit retirement plan's funded status in accordance with the provisions of SFAS No. 87 "Employers' Accounting for Pensions" (SFAS No. 87) (in thousands of dollars): Actuarial Present Value of Benefit Obligations (thousands of dollars): March 31, ----------------------- 2000 1999 -------- --------- Projected benefit obligation........................ $275,277 $ 245,929 Plan assets at fair value........................... 263,582 241,589 -------- --------- Plan assets less than projected benefit obligation.. (11,695) (4,340) Unrecognized net loss (gain)........................ 18,414 8,236 -------- --------- Accrued pension asset............................... $ 6,719 $ 3,896 ======== ========= The following tables provide a rollforward of the projected benefit obligation and the fair value of plan assets in accordance with SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits" (SFAS No. 132) and a detail of the components of net periodic pension cost calculated in accordance with SFAS No. 87 (in thousands of dollars): 31 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)

Year Ended March 31, --------------------------------- 2000 1999 1998 -------- -------- -------- Reconciliation of Projected Benefit Obligation: Projected benefit obligation (PBO) at beginning of period............................ $245,929 $218,760 $179,995 Service cost..................................... 9,190 9,218 8,394 Interest cost.................................... 15,196 14,376 14,193 Member contributions............................. 2,587 3,055 3,105 Actuarial (gain)/loss............................ 19,450 15,947 15,941 Benefit payments and expenses.................... (13,275) (6,946) (7,177) Effect of exchange rate changes.................. (3,800) (8,481) 4,309 -------- -------- -------- Projected benefit obligation (PBO) at end of period.................................. $275,277 $245,929 $218,760 ======== ======== ======== Reconciliation of Fair Value of Asset: Market value of assets at beginning of period............................ $241,589 $230,179 $184,762 Actual return on assets.......................... 28,582 16,474 38,543 Employer contributions........................... 7,750 7,329 6,421 Member contributions............................. 2,587 3,055 3,105 Benefit payments and expenses.................... (13,275) (6,946) (7,177) Effect of exchange rate changes.................. (3,651) (8,502) 4,525 -------- -------- -------- Market value of assets at end of period.......... $263,582 $241,589 $230,179 ======== ======== ======== Components of Net Periodic Pension Cost: Service cost for benefits earned during the period..................................... $ 9,190 $ 9,218 $ 8,394 Interest cost on PBO............................. 15,196 14,376 14,193 Expected return on assets........................ (19,547) (18,902) (17,727) -------- -------- -------- Net periodic pension cost........................ $ 4,839 $ 4,692 $ 4,860 ======== ======== ========

Actuarial assumptions used to develop these components were as follows: 2000 1999 1998 ---- ---- ---- Discount rate................................ 6.00% 6.25% 6.75% Expected long-term rate of return on assets.. 7.00% 8.00% 8.25% Rate of compensation increase................ 4.75% 4.75% 5.25% The Company's contributions to the three plans were $9,702,000, $8,090,000 and $7,190,000 for the years ended March 31, 2000, 1999 and 1998, respectively. 32 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Incentive and Stock Option Plans Under the 1994 Long-Term Management Incentive Plan, as amended ("1994 Plan"), a maximum of 1,900,000 shares of Common Stock, or cash equivalents of Common Stock, were provided for awards to officers and key employees. Awards granted under the 1994 Plan may be in the form of stock options, stock appreciation rights, restricted stock, deferred stock, other stock-based awards or any combination thereof. Options become exercisable at such time or times as determined at the date of grant and expire no more than ten years after the date of grant. Incentive stock option prices are determined by the Board and cannot be less than fair market value at the date of grant. Non-qualified stock option prices cannot be less than 50% of the fair market value at the date of grant. The Annual Incentive Compensation Plan ("Annual Plan") provides for an annual award of cash bonuses to key employees based primarily on pre-established objective measures of Company performance. Participants are permitted to receive all or any part of their annual incentive bonus in the form of shares of Restricted Stock in accordance with the terms of the 1994 Plan. The bonuses related to this plan were $418,000, $550,000 and $838,000 for the years ended March 31, 2000, 1999 and 1998, respectively. There were no shares of Restricted Stock outstanding as of March 31, 2000. The 1991 Non-qualified Stock Option Plan for Non-employee Directors ("1991 Plan") provided for a maximum of 200,000 shares of Common Stock to be reserved for issuance pursuant to such plan. As of the date of each annual meeting each non-employee director, who meets certain attendance criteria, will automatically be granted an option to purchase 2,000 shares of the Company's Common Stock. The exercise price of the options granted shall be equal to the fair market value of the Common Stock on the date of grant and are exercisable not earlier than six months after the date of grant. Under the Company's stock option plans there were 1,852,802 shares of Common Stock reserved for issue at March 31, 2000 of which 655,802 shares are available for future grants. The Company accounts for its stock-based compensation under APB No. 25. Had compensation cost been determined based on the fair value at the grant date consistent with the optional provisions of SFAS No. 123, the Company's net income and earnings per common share would have approximated the pro forma amounts below:

Year Ended March 31, ---------------------------------------- 2000 1999 1998 -------- --------- -------- Net income (in thousands): As reported................. $ 8,890 $ 20,920 $ 31,408 Pro forma................... $ 7,890 $ 19,848 $ 30,109 Basic earnings per share: As reported................. $ 0.42 $ 0.97 $ 1.46 Pro forma................... $ 0.37 $ 0.92 $ 1.40 Diluted earnings per share: As reported................. $ 0.42 $ 0.97 $ 1.36 Pro forma................... $ 0.37 $ 0.92 $ 1.31

The effects of applying SFAS No. 123 to this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to grants prior to 1995, and additional awards in the future are anticipated. 33 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) A summary of the Company's stock options as of March 31, 2000, 1999 and 1998 and changes during the periods ended on those dates is presented below:

Weighted-Average Number Exercise Price of Shares ---------------- ---------- Balance at March 31, 1997...................... $11.64 1,231,000 Granted ..................................... 18.93 219,000 Exercised ................................... 9.85 (745,500) Expired or cancelled ........................ 19.38 (35,000) ---------- Balance at March 31, 1998 ..................... 15.62 669,500 Granted ..................................... 12.47 274,000 Exercised ................................... 9.42 (12,000) Expired or cancelled ........................ 18.18 (19,000) ---------- Balance at March 31, 1999 ..................... 14.70 912,500 Granted ..................................... 11.11 355,500 Exercised ................................... 8.25 (2,500) Expired or cancelled ........................ 13.86 (68,500) ---------- Balance at March 31, 2000 ..................... 13.69 1,197,000 ==========

As of March 31, 2000, 1999 and 1998, the number of options exercisable under the stock option plans was 855,500; 650,500 and 349,500, respectively; and the weighted average exercise price of those options was $14.73, $15.59 and $12.44, respectively. The weighted average fair value at date of grant for options granted during 2000, 1999 and 1998 was $5.07, $4.95 and $6.48 per option, respectively. The fair value of options granted during the periods presented is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2000 1999 1998 --------- --------- ------ Risk-free interest rate 5.8% 5.2% 6.4% Expected life 4 years 4 years 3 years Expected volatility 50% 42% 40% Expected dividend yield 0% 0% 0% The following table summarizes information about stock options outstanding as of March 31, 2000:

Options Outstanding Options Exercisable ------------------------------------------ ------------------------- Wgtd. Avg. Wgtd. Avg. Wgtd. Avg. Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Contr. Life Price Exercisable Price ----------------- ----------- ----------- ---------- ------------ --------- $ 7.375 - $ 9.313 46,500 2.58 $ 7.87 41,500 $ 7.69 $11.125 - $13.000 831,000 7.84 $11.96 494,500 $12.53 $15.438 - $19.625 319,500 7.12 $19.06 319,500 $19.06 --------- ------- $ 7.375 - $19.625 1,197,000 7.44 $13.69 855,500 $14.73 ========= =======

34 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) I -- EARNINGS PER SHARE 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 common share for the years ended March 31, 1999 and 1998 were determined on the assumption that the convertible debt was converted on April 1, 1998 and 1997, respectively. The computation of diluted earnings per common share for year ended March 31, 2000 excluded 3,976,928 shares related to the convertible debt which were outstanding during the period but were anti-dilutive. Diluted earnings per share for the years ended March 31, 2000 and 1999, excluded 1,028,599 and 423,625 stock options, respectively, at a weighted average exercise price of $14.37 and $16.51, respectively, which were outstanding during the period but were anti-dilutive. The following table sets forth the computation of basic and diluted income from continuing operations per share:

Year Ended March 31, ------------------------------------- 2000 1999 1998 ---------- ---------- --------- Income from continuing operations (thousands of dollars): Income available to common stockholders.......$ 8,890 $ 20,920 $ 31,254 Interest on convertible debt, net of taxes.... -- 4,012 4,116 ----------- ---------- ---------- Income available to common stockholders, plus assumed conversions.......................$ 8,890 $ 24,932 $ 35,370 =========== ========== ========== Shares: Weighted average number of common shares outstanding.............................. 21,103,435 21,581,683 21,543,198 Options....................................... 12,734 65,731 269,911 Convertible debt.............................. -- 4,177,016 4,286,520 ----------- ---------- ---------- Weighted average number of common shares outstanding, plus assumed conversions..... 21,116,169 25,824,430 26,099,629 ========== ========== ========== Income from continuing operations: Basic earnings per share......................$ 0.42 $ 0.97 $ 1.45 =========== ========== ========== Diluted earnings per share....................$ 0.42 $ 0.97 $ 1.35 =========== ========== ==========

The Company adopted a stockholder rights plan on February 9, 1996, designed to assure that the Company's stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers, squeeze-outs, open market accumulations and other abusive tactics to gain control without paying all stockholders a fair price. The rights plan was not adopted in response to any specific takeover proposal. Under the rights plan, the Company declared a dividend of one right ("Right") on each share of the Company's common stock. Each Right will entitle the holder to purchase one one-hundredth of a share of a new Series A Junior Participating Preferred Stock, par value $1.00 per share, at an exercise price of $50.00. Each Right will entitle its holder to purchase a number of common shares of the Company having a market value of twice the exercise price. The Rights are not currently exercisable and will become exercisable only in the event a person or group acquires beneficial ownership of 10 percent or more of the Company's common stock. The dividend distribution was made on February 29, 1996 to stockholders of record on that date. The Rights will expire on February 26, 2006. 35 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) J -- RELATED PARTIES On December 19, 1996, OLOG acquired 49% of the common stock and a significant amount of Bristow subordinated debt as detailed below. Bristow is incorporated in England and holds all of the outstanding shares in Bristow Helicopter Group Limited ("BHGL"). Bristow is organized with three different classes of ordinary shares (common stock) having disproportionate voting rights. The Company, Caledonia Investments plc and its subsidiary, Caledonia Industrial & Services Limited (collectively, "Caledonia") and a Norwegian investor (the "E.U. Investor"), own 49%, 49% and 2%, respectively, of Bristow's total outstanding ordinary shares. The Company paid (pound)80.2 million (approximately $132 million) in cash (funded from existing cash balances and the proceeds of the 6% Notes), issued $7.5 million of the 6% Notes to Caledonia and issued 1,374,389 shares of common stock on December 19, 1996 for its ownership of Bristow. Caledonia received 1,300,000 shares of the common stock and BHGL's management received 74,389 shares. In addition, the Company acquired (pound)5.0 million ($8.4 million) principal amount of BHGL's subordinated debt for cash of approximately (pound)5.4 million ($8.9 million) including accrued interest. In addition to its ownership of 49% of Bristow's outstanding ordinary shares and (pound)5.0 million principal amount of Bristow's subordinated debt, the Company acquired (pound)91.0 million (approximately $150 million) principal amount of subordinated unsecured loan stock (debt) of Bristow bearing interest at an annual rate of 13.5% and payable semi-annually. Bristow has the right to defer payment of interest on such debt until January 31, 2002. Any such deferred interest would also accrue interest at an annual rate of 13.5%. The Company, Caledonia, the E.U. Investor and Bristow entered into a shareholders' agreement respecting, among other things, the composition of the board of directors of Bristow. On matters coming before Bristow's board, Caledonia's appointees have a total of five votes and the four other directors have one vote each. So long as Caledonia has a significant interest in the shares of Common Stock issued to it pursuant to the transaction or maintains its voting control of Bristow, Caledonia will have the right to nominate two persons to the board of directors of the Company and to replace any such directors so nominated. Caledonia, the Company and the E.U. Investor also entered into a Put/Call Agreement under which, upon giving specified prior notice, the Company has the right to buy all the Bristow shares held by Caledonia and the E.U. Investor, who, in turn, each has the right to sell such shares to the Company. Under current United Kingdom law, the Company would be required, in order for Bristow to retain its operating license, to find a qualified European investor to own any Bristow shares it has the right to acquire under the Put/Call Agreement. Any put or call of the Bristow shares will be subject to the approval of the Civil Aviation Authority ("CAA"). Caledonia receives management fees from Bristow that are payable semi-annually in advance ranging from (pound)500,000 to (pound)900,000 annually for the next four years. 36 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) K -- SEGMENT INFORMATION The Company has adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. The Company operates principally in two business segments: Helicopter activities and Production management and related services. Air Log and Bristow are major suppliers of helicopter transportation services to the worldwide offshore oil and gas industry. GPM provides production management services, contract personnel and medical support services to the domestic and international oil and gas industry. The following shows reportable segment information for the years ended March 31, 2000, 1999 and 1998, reconciled to consolidated totals, and prepared on the same basis as the Company's consolidated financial statements (in thousands):

Year Ended March 31, ------------------------------------------- 2000 1999 1998 ---------- ---------- --------- Segment operating revenue from external customers: Helicopter activities........................... $ 376,995 $ 425,194 $ 383,638 Production management and related services...... 39,703 41,236 42,785 --------- --------- --------- Total segment operating revenue............. $ 416,698 $ 466,430 $ 426,423 ========= ========= ========= Intersegment operating revenue: Helicopter activities........................... $ 2,898 $ 2,897 $ 3,931 Production management and related services...... -- -- 44 --------- --------- --------- Total intersegment operating revenue........ $ 2,898 $ 2,897 $ 3,975 ========= ========= ========= Consolidated operating revenue reconciliation: Helicopter activities........................... $ 379,893 $ 428,091 $ 387,569 Production management and related services...... 39,703 41,236 42,829 Intersegment eliminations....................... (2,898) (2,897) (3,975) Corporate....................................... 389 10 470 --------- --------- --------- Total consolidated operating revenue........ $ 417,087 $ 466,440 $ 426,893 ========= ========= ========= Consolidated operating income reconciliation: Helicopter activities........................... $ 19,920 $ 39,650 $ 56,744 Production management and related services...... 2,088 2,201 3,074 --------- --------- --------- Total segment operating income.............. 22,008 41,851 59,818 Gain on disposal of equipment................... 3,516 2,400 (238) Corporate....................................... 240 (1,272) (3,116) --------- --------- --------- Total consolidated operating income......... $ 25,764 $ 42,979 $ 56,464 ========= ========= =========

Capital Expenditures -------------------------------- 2000 1999 1998 ------- ------- -------- Helicopter activities.............................$73,758 $18,939 $ 70,170 Production management and related services........ 163 253 140 Corporate......................................... 760 27 155 ------- ------- -------- Total.......................................$74,681 $19,219 $ 70,465 ======= ======= ========

37 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued)

Depreciation and Amortization -------------------------------- 2000 1999 1998 ------- ------- -------- Helicopter activities.............................$31,746 $31,245 $ 30,286 Production management and related services........ 1,247 1,334 1,364 Corporate......................................... 220 163 590 ------- ------- -------- Total.......................................$33,213 $32,742 $ 32,240 ======= ======= ========

Identifiable Assets ------------------------------ 2000 1999 1998 ------- ------- -------- Helicopter activities............................$651,812 $645,727 $658,461 Production management and related services....... 25,488 30,208 28,421 Corporate and other.............................. 65,874 56,095 49,129 ------- ------- -------- Total......................................$743,174 $732,030 $736,011 ======== ======== ========

The Company attributes revenue to various countries based on the location where helicopter activities or production management services are actually performed. Long-lived assets consist primarily of helicopters and are attributed to various countries based on the physical location of the asset at a given fiscal year end. Entity wide information by geographic area is as follows (thousands of dollars):

Year Ended March 31, ------------------------------------- 2000 1999 1998 -------- -------- -------- Operating revenue: United States..........................$132,400 $141,156 $143,870 United Kingdom......................... 133,459 179,572 167,776 Nigeria................................ 41,240 42,397 43,658 Norway................................. 33,545 26,857 10,066 Other countries........................ 76,443 76,458 61,523 -------- -------- -------- $417,087 $466,440 $426,893 ======== ======== ========

As of March 31, ----------------------------- 2000 1999 --------- ---------- Long-lived assets: United States.................................$ 82,255 $ 71,717 United Kingdom................................ 210,489 222,677 Nigeria....................................... 22,331 26,557 Norway........................................ 41,459 42,566 Other countries............................... 117,489 79,399 --------- ---------- $ 474,023 $ 442,916 ========= ==========

During 2000, 1999 and 1998, Air Log and Bristow conducted operations in approximately 19 foreign countries as well as in the United States and the United Kingdom. Due to the nature of the principal assets of the Company, they are regularly and routinely moved between operating areas (both domestic and foreign) to meet changes in market and operating conditions. During 2000, one customer accounted for 12% of consolidated operating revenues. Revenue earned from any single customer did not exceed 10% of total revenues during 1999 and 1998. 38 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) L-- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarter Ended ----------------------------------------------------- June 30 September 30 December 31 March 31 ---------- ------------ ----------- ----------- (thousands of dollars, except per share amounts) 2000 Gross revenue...................... $ 107,380 $ 105,542 $ 105,166 $ 102,515 Gross profit....................... $ 14,312 $ 9,249 $ 15,150 $ 13,268 Net income (loss).................. $ 3,085 $ (1,055) $ 3,967 $ 2,893 ========== ========== =========== =========== Basic earnings per share........... $ 0.15 $ (0.05) $ 0.19 $ 0.14 ========== ========== =========== =========== Diluted earnings per share......... $ 0.15 $ (0.05) $ 0.19 $ 0.14 ========== ========== =========== =========== 1999 Gross revenue...................... $ 117,553 $ 129,168 $ 116,190 $ 105,929 Gross profit....................... $ 19,106 $ 25,137 $ 15,361 $ 13,222 Net income......................... $ 6,553 $ 10,016 $ 4,321 $ 30 ========== ========== =========== =========== Basic earnings per share........... $ 0.30 $ 0.46 $ 0.20 $ 0.00 ========== ========== =========== =========== Diluted earnings per share......... $ 0.29 $ 0.43 $ 0.20 $ 0.00 ========== ========== =========== =========== 1998 Gross revenue...................... $ 99,981 $ 107,565 $ 112,950 $ 106,159 Gross profit....................... $ 19,497 $ 21,526 $ 21,169 $ 20,582 Income from continuing operations.. $ 6,593 $ 7,959 $ 7,963 $ 8,739 Income (loss) from discontinued operations..................... (15) 169 -- -- ---------- ---------- ----------- ----------- Net income......................... $ 6,578 $ 8,128 $ 7,963 $ 8,739 ========== ========== =========== =========== Basic earnings per share: Income from continuing operations................... $ 0.31 $ 0.37 $ 0.37 $ 0.40 Income from discontinued operations................... -- 0.01 -- -- ---------- ---------- ----------- ----------- Net income......................... $ 0.31 $ 0.38 $ 0.37 $ 0.40 ========== ========== =========== =========== Diluted earnings per share: Income from continuing operations................... $ 0.30 $ 0.35 $ 0.34 $ 0.37 Income from discontinued operations................... -- 0.01 -- -- ---------- ---------- ----------- ----------- Net income......................... $ 0.30 $ 0.36 $ 0.34 $ 0.37 ========== ========== =========== ===========

39 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) M -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION On January 27, 1998, the Company completed the sale of $100 million 7 7/8% Senior Notes due 2008, which were discounted to yield 7.915%. The net proceeds to the Company were $97.2 million. In connection with the sale of the Senior Notes, certain of the Company's subsidiaries (the "Guarantor Subsidiaries") jointly, severally and unconditionally guaranteed the payment obligations under the Senior 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. During 1998, the Company formed a new wholly owned subsidiary and contributed the Company's operating assets, separate from its investment in its subsidiaries, to the newly formed subsidiary. The subsidiary is a Guarantor Subsidiary. For purposes of the historical supplemental financial information, the Company has presented the aforementioned operating assets and related operating results together with the operating assets and results of other Guarantor Subsidiaries. The allocation of the consolidated income tax provision was made using the with and without allocation method. 40 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Balance Sheet March 31, 2000 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents.............$ 14,537 $ 2,323 $ 21,075 $ -- $ 37,935 Accounts receivable................... 280 22,822 75,116 (1,831) 96,387 Inventories........................... -- 38,023 42,412 -- 80,435 Prepaid expenses...................... 227 558 4,940 -- 5,725 ---------- --------- ---------- ----------- ----------- Total current assets.............. 15,044 63,726 143,543 (1,831) 220,482 Intercompany investment................. 201,410 -- -- (201,410) -- Investments in unconsolidated entities.. 1,108 229 12,756 -- 14,093 Intercompany note receivables........... 286,388 -- 3,844 (290,232) -- Property and equipment--at cost: Land and buildings.................... -- 3,220 7,785 -- 11,005 Aircraft and equipment................ 4,335 155,867 445,747 -- 605,949 ---------- --------- ---------- ----------- ----------- 4,335 159,087 453,532 -- 616,954 Less: Accumulated depreciation and amortization............... (2,939) (75,943) (64,049) -- (142,931) ---------- --------- ---------- ----------- ----------- 1,396 83,144 389,483 -- 474,023 Other assets............................ 11,558 16,700 6,207 111 34,576 ---------- --------- ---------- ----------- ----------- $ 516,904 $ 163,799 $ 555,833 $ (493,362) $ 743,174 ========== ========= ========== =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable......................$ 196 $ 4,931 $ 27,151 $ (1,529) $ 30,749 Accrued liabilities................... 6,074 10,028 36,286 (306) 52,082 Deferred taxes........................ -- -- 18,443 -- 18,443 Current maturities of long-term debt.. -- -- 16,540 -- 16,540 ---------- --------- ---------- ----------- ----------- Total current liabilities......... 6,270 14,959 98,420 (1,835) 117,814 Long-term debt, less current maturities. 190,922 -- 33,816 -- 224,738 Intercompany notes payable.............. 3,844 379 286,004 (290,227) -- Other liabilities and deferred credits.. 272 2,223 437 -- 2,932 Deferred taxes.......................... 9,508 33,564 53,667 -- 96,739 Minority interest....................... 11,911 -- -- -- 11,911 Stockholders' investment: Common stock.......................... 211 4,048 1,384 (5,432) 211 Additional paid in capital............ 116,074 52,567 15,928 (68,495) 116,074 Retained earnings..................... 182,004 56,059 65,068 (121,127) 182,004 Accumulated other comprehensive income (loss).................... (4,112) -- 1,109 (6,246) (9,249) ---------- --------- ---------- ----------- ----------- 294,177 112,674 83,489 (201,300) 289,040 ---------- --------- ---------- ----------- ----------- $ 516,904 $ 163,799 $ 555,833 $ (493,362) $ 743,174 ========== ========= ========== =========== ===========

41 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Statement of Income Year Ended March 31, 2000 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ GROSS REVENUE Operating revenue...........................$ 388 $ 131,579 $ 285,120 $ -- $ 417,087 Intercompany revenue........................ 257 7,993 290 (8,540) -- Gain (loss) on disposal of equipment........ 3 3,152 361 -- 3,516 ---------- --------- ---------- ----------- ------------ 648 142,724 285,771 (8,540) 420,603 OPERATING EXPENSES Direct cost................................. 7 109,410 225,994 -- 335,411 Intercompany expense........................ -- 289 8,251 (8,540) -- Depreciation and amortization............... 221 10,045 22,947 -- 33,213 General and administrative.................. 5,242 5,493 15,480 -- 26,215 ---------- --------- ---------- ----------- ------------ 5,470 125,237 272,672 (8,540) 394,839 ---------- --------- ---------- ----------- ------------ OPERATING INCOME............................ (4,822) 17,487 13,099 -- 25,764 Earnings from unconsolidated entities....... 2,246 -- 4,196 (2,246) 4,196 Interest income............................. 29,819 344 1,608 (28,371) 3,400 Interest expense............................ 14,209 -- 32,641 (28,371) 18,479 ---------- --------- ---------- ----------- ------------ INCOME BEFORE PROVISION FOR INCOME TAXES..................... 13,034 17,831 (13,738) (2,246) 14,881 Allocation of consolidated income taxes..... 2,783 6,060 (4,257) -- 4,586 Minority interest........................... (1,361) -- (44) -- (1,405) ---------- --------- ---------- ----------- ------------ NET INCOME..................................$ 8,890 $ 11,771 $ (9,525) $ (2,246) $ 8,890 ========== ========= ========== =========== ============

42 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Statement of Cash Flows Year Ended March 31, 2000 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ----------- Net cash provided by (used in) operating activities...........................$ (10,945) $ 5,616 $ 29,063 $ 10,369 $ 34,103 ---------- --------- ---------- ------------ ----------- Cash flows from investing activities: Capital expenditures................. (761) (13,079) (60,841) -- (74,681) Proceeds from asset dispositions..... 16 4,953 5,333 -- 10,302 Investments in subsidiaries.......... 5,751 (5,751) -- -- -- ---------- --------- ---------- ------------ ----------- Net cash provided by (used in) investing activities........................... 5,006 (13,877) (55,508) -- (64,379) ---------- --------- ---------- ------------ ----------- Cash flows from financing activities: Proceeds from borrowings............. -- -- 31,141 (24,689) 6,452 Repayment of debt.................... (14,320) -- (8,268) 14,320 (8,268) Issuance of common stock............. 21 -- -- -- 21 ---------- --------- ---------- ------------ ----------- Net cash provided by (used in) financing activities........................... (14,299) -- 22,873 (10,369) (1,795) ---------- --------- ---------- ------------ ----------- Effect of exchange rate changes in cash..... -- -- (588) -- (588) ---------- --------- ---------- ------------ ----------- Net decrease in cash and cash equivalents... (20,238) (8,261) (4,160) -- (32,659) Cash and cash equivalents at beginning of period............................... 34,775 10,584 25,235 -- 70,594 ---------- --------- ---------- ------------ ----------- Cash and cash equivalents at end of period..$ 14,537 $ 2,323 $ 21,075 $ -- $ 37,935 ========== ========= ========== ============ ===========

43 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Balance Sheet March 31, 1999 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents.............$ 34,775 $ 10,584 $ 25,235 $ -- $ 70,594 Accounts receivable................... 3,792 20,752 67,499 (2,966) 89,077 Inventories........................... -- 36,621 46,232 -- 82,853 Prepaid expenses...................... 220 577 5,202 -- 5,999 ---------- --------- ---------- ----------- ----------- Total current assets.............. 38,787 68,534 144,168 (2,966) 248,523 Intercompany investment................. 220,575 -- -- (220,575) -- Investments in unconsolidated entities.. 1,108 229 8,661 -- 9,998 Intercompany note receivables........... 233,444 3,015 86 (236,545) -- Property and equipment--at cost: Land and buildings.................... -- 3,220 7,640 -- 10,860 Aircraft and equipment................ 3,630 149,544 401,678 -- 554,852 ---------- --------- ---------- ----------- ---------- 3,630 152,764 409,318 -- 565,712 Less: Accumulated depreciation and amortization................. (2,772) (72,292) (47,732) -- (122,796) ---------- --------- ---------- ----------- ----------- 858 80,472 361,586 -- 442,916 Other assets............................ 12,607 18,200 (325) 111 30,593 ---------- --------- ---------- ----------- ----------- $ 507,379 $ 170,450 $ 514,176 $ (459,975) $ 732,030 ========== ========= ========== =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable......................$ 148 $ 4,378 $ 33,764 $ (2,756) $ 35,534 Accrued liabilities................... 7,033 11,171 24,620 (429) 42,395 Deferred taxes........................ -- -- 17,697 -- 17,697 Current maturities of long-term debt.. -- -- 10,037 -- 10,037 ---------- --------- ---------- ----------- ----------- Total current liabilities......... 7,181 15,549 86,118 (3,185) 105,663 Long-term debt, less current maturities. 190,922 -- 42,693 -- 233,615 Intercompany notes payable.............. 6,364 -- 229,962 (236,326) -- Other liabilities and deferred credits.. 4 2,364 632 -- 3,000 Deferred taxes.......................... 907 32,815 61,186 -- 94,908 Minority interest....................... 10,716 -- -- -- 10,716 Stockholders' investment: Common stock.......................... 211 4,048 1,384 (5,432) 211 Additional paid in capital............ 116,053 58,318 16,800 (75,118) 116,053 Retained earnings..................... 173,114 57,356 78,628 (135,984) 173,114 Accumulated other comprehensive income (loss).................... 1,907 -- (3,227) (3,930) (5,250) ---------- --------- ---------- ----------- ----------- 291,285 119,722 93,585 (220,464) 284,128 ---------- --------- ---------- ----------- ----------- $ 507,379 $ 170,450 $ 514,176 $ (459,975) $ 732,030 ========== ========= ========== =========== ===========

44 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Statement of Income Year Ended March 31, 1999 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ GROSS REVENUE Operating revenue...........................$ 10 $ 140,519 $ 325,911 $ -- $ 466,440 Intercompany revenue........................ 224 10,141 690 (11,055) -- Gain (loss) on disposal of equipment........ 11 227 2,162 -- 2,400 ---------- --------- ---------- ----------- ------------ 245 150,887 328,763 (11,055) 468,840 OPERATING EXPENSES Direct cost................................. (12) 113,979 249,305 -- 363,272 Intercompany expense........................ -- 690 10,365 (11,055) -- Depreciation and amortization............... 163 10,019 22,560 -- 32,742 General and administrative.................. 5,339 6,695 17,813 -- 29,847 ---------- --------- ---------- ----------- ------------ 5,490 131,383 300,043 (11,055) 425,861 ---------- --------- ---------- ----------- ------------ OPERATING INCOME............................ (5,245) 19,504 28,720 -- 42,979 Earnings from unconsolidated entities....... 15,488 -- 5,108 (15,492) 5,104 Interest income ............................ 28,207 494 1,128 (26,369) 3,460 Interest expense............................ 14,458 1 31,721 (26,369) 19,811 ---------- --------- ---------- ----------- ------------ INCOME BEFORE PROVISION FOR INCOME TAXES..................... 23,992 19,997 3,235 (15,492) 31,732 Allocation of consolidated income taxes..... 1,836 6,704 969 -- 9,509 Minority interest........................... (1,236) -- (67) -- (1,303) ---------- --------- ---------- ----------- ------------ NET INCOME..................................$ 20,920 $ 13,293 $ 2,199 $ (15,492) $ 20,920 ========== ========= ========== =========== ============

45 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Statement of Cash Flows Year Ended March 31, 1999 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ Net cash provided by operating activities...$ 10,791 $ 10,447 $ 26,747 $ 1,692 $ 49,677 ---------- --------- ---------- ------------ ----------- Cash flows from investing activities: Capital expenditures................. -- (5,543) (13,676) -- (19,219) Proceeds from asset dispositions..... 15 488 5,733 -- 6,236 ---------- --------- ---------- ------------ ----------- Net cash provided by (used in) investing activities........................... 15 (5,055) (7,943) -- (12,983) Cash flows from financing activities: Proceeds from borrowings............. 20 -- -- (20) -- Repayment of debt.................... (3,300) -- (9,976) (1,672) (14,948) Repurchase of common stock........... (7,128) -- -- -- (7,128) Issuance of common stock............. 113 -- -- -- 113 ---------- --------- ---------- ------------ ----------- Net cash used in financing activities....... (10,295) -- (9,976) (1,692) (21,963) ---------- --------- ---------- ------------ ----------- Effect of exchange rate changes in cash..... -- -- (213) -- (213) ---------- --------- ---------- ------------ ----------- Net increase in cash and cash equivalents... 511 5,392 8,615 -- 14,518 Cash and cash equivalents at beginning of period............................... 34,264 5,192 16,620 -- 56,076 ---------- --------- ---------- ------------ ----------- Cash and cash equivalents at end of period..$ 34,775 $ 10,584 $ 25,235 $ -- $ 70,594 ========== ========= ========== ============ ===========

46 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Statement of Income Year Ended March 31, 1998 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ GROSS REVENUE Operating revenue...........................$ 20 $ 141,179 $ 285,694 $ -- $ 426,893 Intercompany revenue........................ 280 10,345 308 (10,933) -- Gain (loss) on disposal of equipment........ -- (439) 201 -- (238) ---------- --------- ---------- ----------- ------------ 300 151,085 286,203 (10,933) 426,655 OPERATING EXPENSES Direct cost................................. 7 112,246 199,388 -- 311,641 Intercompany expense........................ -- 243 10,690 (10,933) -- Depreciation and amortization............... 589 8,949 22,702 -- 32,240 General and administrative.................. 5,632 5,289 15,389 -- 26,310 ---------- --------- ---------- ----------- ------------ 6,228 126,727 248,169 (10,933) 370,191 ---------- --------- ---------- ----------- ------------ OPERATING INCOME............................ (5,928) 24,358 38,034 -- 56,464 Earnings from unconsolidated entities....... 27,185 -- 7,207 (27,187) 7,205 Interest income ............................ 20,288 282 1,314 (18,903) 2,981 Interest expense............................ 7,419 -- 32,020 (18,903) 20,536 ---------- --------- ---------- ----------- ------------ INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES..................... 34,126 24,640 14,535 (27,187) 46,114 Allocation of consolidated income taxes..... 1,809 8,028 3,996 -- 13,833 Minority interest........................... (1,016) -- (11) -- (1,027) ---------- --------- ---------- ----------- ------------ INCOME FROM CONTINUING OPERATIONS........................... 31,301 16,612 10,528 (27,187) 31,254 Discontinued operations: Income (loss) from CPS operations.... 107 -- 47 -- 154 ---------- --------- ---------- ----------- ------------ NET INCOME..................................$ 31,408 $ 16,612 $ 10,575 $ (27,187) $ 31,408 ========== ========= ========== ============ ============

47 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (Continued) Supplemental Condensed Consolidating Statement of Cash Flows Year Ended March 31, 1998 (thousands of dollars)

Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------ ------------ ------------ ------------ Net cash provided by operating activities...$ (93,486) $ 27,903 $ 49,389 $ 85,140 $ 68,946 ---------- --------- ---------- ------------ ----------- Cash flows from investing activities: Capital expenditures................. (155) (27,706) (42,604) -- (70,465) Proceeds from asset dispositions..... -- 1,450 9,513 -- 10,963 Cash received from CPS disposal...... -- -- 5,700 -- 5,700 Acquisitions, net of cash received... -- -- (353) -- (353) ---------- --------- ---------- ------------ ----------- Net cash used in investing activities....... (155) (26,256) (27,744) -- (54,155) ---------- --------- ---------- ------------ ----------- Cash flows from financing activities: Proceeds from borrowings............. 98,723 -- 109,955 (85,140) 123,538 Repayment of debt.................... -- -- (120,519) -- (120,519) Issuance of common stock............. 7,723 -- -- -- 7,723 ---------- --------- ---------- ------------ ----------- Net cash provided by (used in) financing activities........................... 106,446 -- (10,564) (85,140) 10,742 ---------- --------- ---------- ------------ ----------- Effect of exchange rate changes in cash..... -- -- 714 -- 714 ---------- --------- ---------- ------------ ----------- Net increase in cash and cash equivalents... 12,805 1,647 11,795 -- 26,247 Cash and cash equivalents at beginning of period............................... 21,459 3,545 4,825 -- 29,829 ---------- --------- ---------- ------------ ----------- Cash and cash equivalents at end of period..$ 34,264 $ 5,192 $ 16,620 $ -- $ 56,076 ========== ========= ========== ============ ===========

48 ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None PART III ITEM 10. Directors and Executive Officers of the Registrant There is incorporated by reference herein the information under the caption "Information Concerning Nominees" contained in the registrant's definitive proxy statement for use in connection with this year's Annual Stockholders' Meeting. ITEM 11. Executive Compensation There is incorporated by reference herein the information under the caption "Executive Compensation" contained in the registrant's definitive proxy statement for use in connection with this year's Annual Stockholders' Meeting. ITEM 12. Security Ownership of Certain Beneficial Owners and Management There is incorporated by reference herein the information under the captions "Security Ownership of Certain Beneficial Owners" and "Information Concerning Nominees" contained in the registrant's definitive proxy statement for use in connection with this year's Annual Stockholders' Meeting. ITEM 13. Certain Relationships and Related Transactions There is incorporated by reference herein the information under the caption "Executive Compensation" contained in the registrant's definitive proxy statement for use in connection with this year's Annual Stockholders' Meeting. 49 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)(1) Financial Statements -- Report of Independent Public Accountants Consolidated Balance Sheet-- March 31, 2000 and 1999. Consolidated Statement of Income for the years ended March 31, 2000, 1999 and 1998. Consolidated Statement of Stockholders' Investment for the years ended March 31, 2000, 1999 and 1998. Consolidated Statement of Cash Flows for the years ended March 31, 2000, 1999 and 1998. Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules All schedules have been omitted because the information required is included in the financial statements or notes or have been omitted because they are not applicable or not required.

Incorporated by Reference to Registration or Form or Exhibit Exhibits File Number Report Date Number ------------------------------------------------- --------------- --------- --------- -------- (a)(3) (3) Articles of Incorporation and By-laws (1) Delaware Certificate of 0-5232 10-K June 1989 3(10) Incorporation (2) Agreement and Plan of Merger 0-5232 10-K June 1989 3(11) dated December 29, 1987 (3) Certificate of Merger dated 0-5232 10-K June 1990 3(3) December 29, 1987 (4) Certificate of Correction of 0-5232 10-K June 1990 3(4) Certificate of Merger dated January 20, 1988 (5) Certificate of Amendment of 0-5232 10-K June 1990 3(5) Certificate of Incorporation dated November 30, 1989 (6) Certificate of Amendment of 0-5232 8-K Dec. 1992 3 Certificate of Incorporation dated December 9, 1992 (7) Rights Agreement and Form of 0-5232 8A Feb. 1996 4 Rights Certificate (8) Amended and Restated By-laws 0-5232 8-K Feb. 1996 3(7) (9) Certificate of Designation of 0-5232 10-K June 1996 3(9) Series A Junior Participating Preferred Stock (10) First Amendment to Rights 0-5232 8-A/A May 1997 5 Agreement (4) Instruments defining the rights of security holders, including indentures (1) Indenture dated as of December 0-5232 10-Q Dec. 1996 4(1) 15, 1996, between Fleet National Bank and the Company (2) Registration Rights Agreement 0-5232 10-Q Dec. 1996 4(2) dated December 17, 1996, between the Company and Jefferies & Company, Inc., Simmons & Company International, and Johnson Rice & Company L.L.C. (3) Registration Rights Agreement 0-5232 10-Q Dec. 1996 4(3) dated December 19, 1996, between the Company and Caledonia Industrial and Services Limited (4) Indenture, dated as of January 333-48803 S-4 March 1998 4.1 27, 1998, among the Company, the Guarantors and State Street Bank and Trust Company (5) Registration Rights Agreement, 333-48803 S-4 March 1998 4.2 dated as of January 22, 1998, among the Company, the Guarantors and Jefferies & Company, Inc.

50

Incorporated by Reference to Registration or Form or Exhibit Exhibits File Number Report Date Number ------------------------------------------------- --------------- --------- --------- -------- (a)(3) (10) Material Contracts (1) Employee Incentive Award Plan * 0-5232 10-K June 1981 10(5) (2) Executive Welfare Benefit 33-9596 S-4 Dec. 1986 10(ww) Agreement, similar agreement omitted pursuant to Instruction 2 to Item 601 of Regulation S-K * (3) Executive Welfare Benefit 33-9596 S-4 Dec. 1986 10(xx) Agreement, similar agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K * (4) Offshore Logistics, Inc. 1989 0-5232 10-K June 1990 (28) Incentive Plan * (5) Offshore Logistics, Inc. 1991 33-50946 S-8 Aug. 1992 4.1 Non-qualified Stock Option Plan for Non-employee Directors * (6) Agreement and Plan of Merger 33-79968 S-4 Aug. 1994 2(1) dated as of June 1, 1994, as amended (7) Shareholders Agreement dated as 33-79968 S-4 Aug. 1994 2(2) of June 1, 1994 (8) Proposed Form of Non-competition 33-79968 S-4 Aug. 1994 2(3) Agreement with Individual Shareholders (9) Proposed Form of Joint Venture 33-79968 S-4 Aug. 1994 2(4) Agreement (10) Offshore Logistics, Inc. 1994 33-87450 S-8 Dec. 1994 84 Long-Term Management Incentive Plan * (11) Offshore Logistics, Inc. Annual 0-5232 10-K June 1995 10(20) Incentive Compensation Plan * (12) Indemnity Agreement, similar 0-5232 10-K March 1997 10(14) agreements with other directors of the Company are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K. (13) Master Agreement dated December 0-5232 8-K Dec. 1996 2(1) 12, 1996 (14) Change of Control Agreement 0-5232 10-Q Sept. 1997 10(1) between the Company and George M. Small. Substantially identical contracts with five other officers are omitted pursuant to Item 601 of Regulation S-K Instructions. * (15) Offshore Logistics, Inc. 1994 0-5232 10-K March 1999 10(15) Long-Term Management Incentive Plan, as amended * (16) Agreement between Pilots 0-5232 10-K March 1999 10(16) Represented by Office and Professional Employees International Union, AFL-CIO and Offshore Logistics, Inc.

* Compensatory Plan or Arrangement Agreements with respect to certain of the Company's long-term debt are not filed as Exhibits hereto inasmuch as the debt authorized under any such Agreement does not exceed 10% of the Company's total assets. The Company agrees to furnish a copy of each such Agreement to the Securities and Exchange Commission upon request. (21) Subsidiaries of the registrant. (23) Consent of Arthur Andersen LLP (27) Financial Data Schedule (b) Reports on Form 8-K There were no Form 8-K filings during the quarter ended March 31, 2000. 51 EXHIBIT 21 OFFSHORE LOGISTICS, INC. Subsidiaries of the Registrant at March 31, 2000

Percentage Place of of Voting Company Incorporation Stock Owned ---------------------------------------------------- ---------------------- ----------- Air Logistics of Alaska, Inc........................ Alaska 100% Air Logistics, L.L.C................................ Louisiana 100% Aircopter Maintenance International, Inc............ Panama 49% Airlog International, Inc........................... Panama 100% Airlog Part Sales, Inc.............................. Louisiana 100% Brilog Leasing Limited.............................. Cayman Islands 100% Bristow Aviation Holdings Limited................... England 49% Bristow Helicopters Australia Pty. Ltd.............. Australia 49% * Bristow Helicopters International Limited........... England 49% Bristow Helicopters Limited......................... England 49% Bristow Helicopters Nigeria Limited................. Nigeria 40% * Bristow Helicopter Group Limited.................... England 49% FBS Limited......................................... England 50% * Grasso Corporation.................................. Delaware 100% Grasso Production Management........................ Texas 100% Guaranty Financial International, N.A............... Netherlands Antilles 49% Heliflight Services, Inc............................ Texas 49% Heliservicio Campeche S.A. de C.V. ................ Mexico 49% Hemisco Helicopters International, Inc............. Panama 49% Medic Systems International, Inc.................... Panama 100% Medic Systems, Inc.................................. Delaware 100% Norsk Helikopter AS................................. Norway 49% * Offshore Logistics International, Inc............... Panama 100% Offshore Logistics Management Services, Inc......... Louisiana 100% Petroleum Air Services.............................. Egypt 25%

* percentage owned by Bristow Helicopters Limited 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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/ H. Eddy Dupuis ------------------------------------------ H. Eddy Dupuis Vice President-- Chief Financial Officer (Principal Financial and Accounting Officer) June 28, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. -------------------------------- Peter N. Buckley Director June 28, 2000 /s/ J. H. Cartwright -------------------------------- Jonathan H. Cartwright Director June 28, 2000 /s/ Louis F. Crane -------------------------------- Louis F. Crane Chairman of the Board, Chief June 28, 2000 Executive Officer and Director --------------------------------- David M. Johnson Director June 28, 2000 /s/ Kenneth M. Jones --------------------------------- Kenneth M. Jones Director June 28, 2000 /s/ Harry C. Sager --------------------------------- Harry C. Sager Director June 28, 2000 /s/ George M. Small --------------------------------- George M. Small President, Chief Operating June 28, 2000 Officer and Director --------------------------------- Howard Wolf Director June 28, 2000 53