10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
|
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þ |
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended: June 30, 2009
or
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o |
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number: 0-9827
PHI, Inc.
(Exact name of registrant as specified in its charter)
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|
Louisiana
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72-0395707 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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2001 SE Evangeline Thruway |
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|
Lafayette, Louisiana
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70508 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (337) 235-2452
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: þ No: o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes: o No: o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer þ |
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Non-accelerated filer o (Do not check if a smaller reporting company) |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes: o No: þ
Indicate the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.
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Class |
|
Outstanding at July 31, 2009 |
Voting Common Stock
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|
2,852,616 shares |
Non-Voting Common Stock
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|
12,458,992 shares |
PHI, INC.
Index Form 10-Q
2
PART I FINANCIAL INFORMATION
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Item 1. |
|
FINANCIAL STATEMENTS |
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
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|
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June 30, |
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December 31, |
|
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2009 |
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2008 |
|
ASSETS |
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|
|
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|
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Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,429 |
|
|
$ |
1,159 |
|
Short-term investments |
|
|
59,074 |
|
|
|
42,121 |
|
Accounts receivable net |
|
|
|
|
|
|
|
|
Trade |
|
|
100,532 |
|
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|
104,912 |
|
Other |
|
|
6,821 |
|
|
|
6,510 |
|
Inventories of spare parts net |
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|
61,859 |
|
|
|
58,249 |
|
Other current assets |
|
|
10,909 |
|
|
|
10,687 |
|
Income taxes receivable |
|
|
785 |
|
|
|
982 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
243,409 |
|
|
|
224,620 |
|
|
|
|
|
|
|
|
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Other |
|
|
15,413 |
|
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|
23,988 |
|
Property and equipment net |
|
|
534,983 |
|
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|
528,574 |
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|
|
|
|
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Total assets |
|
$ |
793,805 |
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|
$ |
777,182 |
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|
|
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|
|
|
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|
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities: |
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Accounts payable |
|
$ |
21,109 |
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|
$ |
25,449 |
|
Accrued liabilities |
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|
26,483 |
|
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|
25,193 |
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|
|
|
|
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Total current liabilities |
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47,592 |
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|
50,642 |
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|
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|
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Long-term debt |
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|
213,350 |
|
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|
203,000 |
|
Deferred income taxes |
|
|
68,638 |
|
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|
65,175 |
|
Other long-term liabilities |
|
|
6,005 |
|
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|
5,969 |
|
Commitments and contingencies (Note 3) |
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Shareholders Equity: |
|
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|
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Voting common stock |
|
|
285 |
|
|
|
285 |
|
Non-voting common stock |
|
|
1,246 |
|
|
|
1,245 |
|
Additional paid-in capital |
|
|
291,403 |
|
|
|
291,262 |
|
Accumulated other comprehensive (loss) income |
|
|
(14 |
) |
|
|
45 |
|
Retained earnings |
|
|
165,300 |
|
|
|
159,559 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
458,220 |
|
|
|
452,396 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
793,805 |
|
|
$ |
777,182 |
|
|
|
|
|
|
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|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars, except per share data)
(Unaudited)
|
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|
|
|
|
|
|
|
|
|
|
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|
|
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Quarter Ended |
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Six Months Ended |
|
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|
June 30, |
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June 30, |
|
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|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Operating revenues |
|
$ |
123,321 |
|
|
$ |
130,111 |
|
|
$ |
240,273 |
|
|
$ |
247,256 |
|
(Loss) gain on dispositions of
assets, net |
|
|
(107 |
) |
|
|
1,255 |
|
|
|
165 |
|
|
|
4,204 |
|
Other, principally interest income |
|
|
65 |
|
|
|
201 |
|
|
|
128 |
|
|
|
503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,279 |
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|
131,567 |
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|
|
240,566 |
|
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|
251,963 |
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|
|
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|
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|
|
|
|
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|
|
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|
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Expenses: |
|
|
|
|
|
|
|
|
|
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|
|
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Direct expenses |
|
|
104,912 |
|
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|
109,757 |
|
|
|
207,039 |
|
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|
207,983 |
|
Selling, general and
administrative expenses |
|
|
8,218 |
|
|
|
7,534 |
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|
|
16,042 |
|
|
|
14,923 |
|
Interest expense |
|
|
4,039 |
|
|
|
3,854 |
|
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|
7,918 |
|
|
|
7,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,169 |
|
|
|
121,145 |
|
|
|
230,999 |
|
|
|
230,594 |
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|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
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Earnings before income taxes |
|
|
6,110 |
|
|
|
10,422 |
|
|
|
9,567 |
|
|
|
21,369 |
|
Income tax expense |
|
|
2,444 |
|
|
|
4,169 |
|
|
|
3,826 |
|
|
|
8,548 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net earnings |
|
$ |
3,666 |
|
|
$ |
6,253 |
|
|
$ |
5,741 |
|
|
$ |
12,821 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,303 |
|
|
|
15,277 |
|
|
|
15,302 |
|
|
|
15,277 |
|
Diluted |
|
|
15,307 |
|
|
|
15,286 |
|
|
|
15,305 |
|
|
|
15,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.24 |
|
|
$ |
0.41 |
|
|
$ |
0.38 |
|
|
$ |
0.84 |
|
Diluted |
|
$ |
0.24 |
|
|
$ |
0.41 |
|
|
$ |
0.38 |
|
|
$ |
0.84 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
PHI, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF SHAREHOLDERS EQUITY
(Thousands of dollars and shares)
(Unaudited)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Voting |
|
|
Non-Voting |
|
|
Additional |
|
|
Other Com- |
|
|
|
|
|
|
Share- |
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
prehensive |
|
|
Retained |
|
|
Holders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
Balance at December 31, 2008 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,449 |
|
|
$ |
1,245 |
|
|
$ |
291,262 |
|
|
$ |
45 |
|
|
$ |
159,559 |
|
|
$ |
452,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,741 |
|
|
|
5,741 |
|
Changes in pension plan assets and
benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,682 |
|
Stock options exercised |
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
1 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,459 |
|
|
$ |
1,246 |
|
|
$ |
291,403 |
|
|
$ |
(14 |
) |
|
$ |
165,300 |
|
|
$ |
458,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Voting |
|
|
Non-Voting |
|
|
Additional |
|
|
Other Com- |
|
|
|
|
|
|
Share- |
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
prehensive |
|
|
Retained |
|
|
Holders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
Balance at December 31, 2007 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,439 |
|
|
$ |
1,244 |
|
|
$ |
291,035 |
|
|
$ |
61 |
|
|
$ |
136,044 |
|
|
$ |
428,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,821 |
|
|
|
12,821 |
|
Changes in pension plan assets and
benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,439 |
|
|
$ |
1,244 |
|
|
$ |
291,035 |
|
|
$ |
64 |
|
|
$ |
148,865 |
|
|
$ |
441,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
5,741 |
|
|
$ |
12,821 |
|
Adjustments to reconcile net earnings to net cash
provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
13,901 |
|
|
|
13,186 |
|
Deferred income taxes |
|
|
3,463 |
|
|
|
8,117 |
|
Gain on asset dispositions, net |
|
|
(165 |
) |
|
|
(4,204 |
) |
Other |
|
|
464 |
|
|
|
456 |
|
Changes in operating assets and liabilities |
|
|
(3,336 |
) |
|
|
(17,148 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
20,068 |
|
|
|
13,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(27,693 |
) |
|
|
(38,106 |
) |
Proceeds from asset dispositions |
|
|
8,897 |
|
|
|
8,983 |
|
Purchase of short-term investments |
|
|
(31,639 |
) |
|
|
(21,584 |
) |
Proceeds from sale of short-term investments |
|
|
14,687 |
|
|
|
49,075 |
|
Deposits on aircraft |
|
|
7,600 |
|
|
|
(11,546 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(28,148 |
) |
|
|
(13,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from line of credit |
|
|
10,350 |
|
|
|
3,800 |
|
Payment on line of credit |
|
|
|
|
|
|
(3,800 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
2,270 |
|
|
|
50 |
|
Cash and cash equivalents, beginning of period |
|
|
1,159 |
|
|
|
1,425 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
3,429 |
|
|
$ |
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures Cash Flow Information |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
7,424 |
|
|
$ |
7,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
763 |
|
|
$ |
232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued payables related to purchase of property and
equipment |
|
$ |
237 |
|
|
$ |
356 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying unaudited condensed consolidated financial statements include the accounts of PHI,
Inc. and subsidiaries (PHI or the Company). In the opinion of management, these financial
statements reflect all adjustments, consisting of only normal, recurring adjustments, necessary to
present fairly the financial results for the interim periods presented. These condensed
consolidated financial statements should be read in conjunction with the consolidated financial
statements contained in the Companys Annual Report on Form 10-K for the year ended December 31,
2008 and the accompanying notes.
The Companys financial results, particularly as they relate to the Companys Oil and Gas
operations, are influenced by seasonal fluctuations as discussed in the Companys Annual Report on
Form 10-K for the year ended December 31, 2008. Therefore, the results of operations for interim
periods are not necessarily indicative of the operating results that may be expected for a full
fiscal year.
Subsequent Events The Company evaluated events of which its management was aware subsequent to
June 30, 2009, through the date that this quarterly report was
issued, August 10, 2009.
2. Segment Information
PHI is primarily a provider of helicopter services, including helicopter maintenance and repair
services. We used a combination of factors to identify reportable segments as required by
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an
Enterprise and Related Information. The overriding determination of our segments is based on how
the chief operating decision-maker of our Company evaluates our results of operations. The
underlying factors include customer bases, types of service, operational management, physical
locations, and underlying economic characteristics of the types of work we perform.
A segments operating income is its operating revenues less its direct expenses and selling,
general and administrative expenses. Each segment has a portion of selling, general and
administrative expense that is charged directly to the segment and a portion that is allocated.
Direct charges represent the vast majority of segment selling, general and administrative expenses.
Allocated selling, general and administrative expense is based primarily on total segment direct
expenses as a percentage of total direct expenses. Unallocated overhead consists primarily of
corporate selling, general, and administrative expenses that we do not allocate to the reportable
segments.
Air Medical operations are headquartered in Phoenix, Arizona, where we maintain significant
separate facilities and administrative staff dedicated to this segment. Those costs are charged
directly to the Air Medical segment, resulting in a disproportionate share of selling, general and
administrative expenses compared to the Companys other reportable segments.
Oil and Gas Segment. Our Oil and Gas segment provides helicopter services primarily for the major
oil and gas production companies transporting personnel and/or equipment to offshore platforms in
the Gulf of Mexico, Angola and the Democratic Republic of Congo. We currently operate 158 aircraft
in this segment.
Operating revenue from the Oil and Gas segment is derived mainly from fixed-term contracts that
include a fixed monthly rate for a particular model of aircraft, plus a variable rate for flight
time. Most of our fixed-term contracts permit early termination by the customer generally without
penalty. Operating costs for the Oil and Gas operations are primarily aircraft operations costs,
including costs for pilots and
7
maintenance personnel. Approximately 64% and 63% of our total operating revenue was generated by
our Oil and Gas operations for the quarter and six months ended June 30, 2009 and 2008,
respectively.
Air Medical Segment. Our Air Medical segment provides transport services as an independent
provider of emergency medical services and, to a lesser extent, under contract with certain
hospitals. We operate at 51 locations in 17 states with 89 aircraft that are specially outfitted
to accommodate emergency patients, medical personnel and emergency medical equipment. For the
quarter and six months ended June 30, 2009 and 2008, approximately 34% and 35% of our total
operating revenues were generated by our Air Medical operations, respectively.
As an independent provider, we bill for our services on the basis of a flat rate plus a variable
charge per loaded mile, regardless of aircraft model. Revenues are recorded net of contractual
allowances under agreements with third party payors and estimated uncompensated care when the
services are provided. Contractual allowances and uncompensated care are estimated based on
historical collection experience by payor category. The main payor categories are Medicaid,
Medicare, Insurance, and Self-Pay. Payor mix and changes in reimbursement rates are the factors
most subject to sensitivity and variability in calculating our allowances. We compute a historical
payment analysis of accounts paid in full, by category. The allowance percentages calculated are
applied to the payor categories, and the necessary adjustments are made to the revenue allowance.
Provisions for contractual discounts and estimated uncompensated care for Air Medical
operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
Quarter Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Gross billings |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Provision for contractual
discounts |
|
|
53 |
% |
|
|
45 |
% |
|
|
53 |
% |
|
|
47 |
% |
Provision for uncompensated care |
|
|
10 |
% |
|
|
11 |
% |
|
|
9 |
% |
|
|
10 |
% |
Net reimbursement per transport from
commercial payors generally do increase when a rate increase is
implemented. Net reimbursement from
certain commercial payors, as well as Medicare and Medicaid, do not increase proportionately with
rate increases.
Amounts attributable to Medicaid, Medicare, Insurance and Self Pay as a percentage of net Air
Medical revenues are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Medicaid |
|
|
13 |
% |
|
|
10 |
% |
|
|
13 |
% |
|
|
12 |
% |
Medicare |
|
|
16 |
% |
|
|
17 |
% |
|
|
18 |
% |
|
|
17 |
% |
Insurance |
|
|
67 |
% |
|
|
69 |
% |
|
|
66 |
% |
|
|
67 |
% |
Self-Pay |
|
|
4 |
% |
|
|
4 |
% |
|
|
3 |
% |
|
|
4 |
% |
8
We also have a limited number of contracts with hospitals under which we receive a fixed
monthly rate for aircraft availability and an hourly rate for flight time. Those contracts
generated approximately 15% and 12% of the segments revenues for the quarter and six months ended
June 30, 2009 and 2008, respectively.
Technical Services Segment. The Technical Services segment provides helicopter repair and overhaul
services for customer owned aircraft. Costs associated with these services are primarily labor,
and customers are generally billed at a percentage above cost. This segment also conducts flight
operations unrelated to the other segments. We currently operate four aircraft for the National
Science Foundation in Antarctica under this segment.
Approximately 2% of our total operating revenues for the quarter and six months ended June 30, 2009
and 2008 were generated by our Technical Services operations.
Summarized financial information concerning our reportable operating segments for the quarter and
six months ended June 30, 2009 and 2008 is as follows:
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Thousands of dollars) |
|
|
(Thousands of dollars) |
|
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
78,970 |
|
|
$ |
82,063 |
|
|
$ |
153,795 |
|
|
$ |
156,663 |
|
Air Medical |
|
|
42,628 |
|
|
|
46,311 |
|
|
|
81,721 |
|
|
|
85,571 |
|
Technical Services |
|
|
1,723 |
|
|
|
1,737 |
|
|
|
4,757 |
|
|
|
5,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
123,321 |
|
|
|
130,111 |
|
|
|
240,273 |
|
|
|
247,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment direct expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
64,963 |
|
|
|
64,824 |
|
|
|
126,247 |
|
|
|
124,083 |
|
Air Medical |
|
|
38,620 |
|
|
|
43,286 |
|
|
|
77,498 |
|
|
|
80,369 |
|
Technical Services |
|
|
1,329 |
|
|
|
1,647 |
|
|
|
3,294 |
|
|
|
3,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct expenses |
|
|
104,912 |
|
|
|
109,757 |
|
|
|
207,039 |
|
|
|
207,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
319 |
|
|
|
342 |
|
|
|
706 |
|
|
|
655 |
|
Air Medical |
|
|
1,619 |
|
|
|
2,075 |
|
|
|
3,108 |
|
|
|
4,192 |
|
Technical Services |
|
|
3 |
|
|
|
8 |
|
|
|
17 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses |
|
|
1,941 |
|
|
|
2,425 |
|
|
|
3,831 |
|
|
|
4,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct and selling, general and administrative expenses |
|
|
106,853 |
|
|
|
112,182 |
|
|
|
210,870 |
|
|
|
212,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
13,688 |
|
|
|
16,897 |
|
|
|
26,842 |
|
|
|
31,925 |
|
Air Medical |
|
|
2,389 |
|
|
|
950 |
|
|
|
1,115 |
|
|
|
1,010 |
|
Technical Services |
|
|
391 |
|
|
|
82 |
|
|
|
1,446 |
|
|
|
1,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
16,468 |
|
|
|
17,929 |
|
|
|
29,403 |
|
|
|
34,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net (2) |
|
|
(42 |
) |
|
|
1,456 |
|
|
|
293 |
|
|
|
4,707 |
|
Unallocated selling, general and administrative costs (1) |
|
|
(6,277 |
) |
|
|
(5,109 |
) |
|
|
(12,211 |
) |
|
|
(10,042 |
) |
Interest expense |
|
|
(4,039 |
) |
|
|
(3,854 |
) |
|
|
(7,918 |
) |
|
|
(7,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
6,110 |
|
|
$ |
10,422 |
|
|
$ |
9,567 |
|
|
$ |
21,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in direct expenses and unallocated selling, general, and administrative costs are
the depreciation expense amounts below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Oil and Gas |
|
$ |
4,107 |
|
|
$ |
3,780 |
|
|
$ |
8,350 |
|
|
$ |
7,479 |
|
Air Medical |
|
|
1,969 |
|
|
|
2,055 |
|
|
|
3,954 |
|
|
|
4,043 |
|
Technical Services |
|
|
11 |
|
|
|
15 |
|
|
|
111 |
|
|
|
119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,087 |
|
|
$ |
5,850 |
|
|
$ |
12,415 |
|
|
$ |
11,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated SG&A |
|
$ |
735 |
|
|
$ |
751 |
|
|
$ |
1,486 |
|
|
$ |
1,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Consists of (losses) gains on disposition of property and equipment, and other income. |
10
3. Commitments and Contingencies
Environmental Matters We have recorded an aggregate estimated liability of $0.2 million as of
June 30, 2009 and December 31, 2008 for environmental remediation costs that are probable and
estimable. The Company has conducted environmental surveys of its former Lafayette facility, which
it vacated in 2001, and has determined that limited soil and groundwater contamination exists at
the facility. The Company has installed groundwater monitoring wells at the facility and
periodically monitors and reports on the contamination. The Company previously submitted a
Louisiana Risk Evaluation/Corrective Action Plan (RECAP) Standard Site Assessment Report to the
Louisiana Department of Environmental Quality (LDEQ) fully delineating the extent and type of
contamination and updated the report to include recent analytical data. LDEQ is reviewing the
assessment report. Once LDEQ completes its review and reports on whether all contamination has
been fully defined, a risk evaluation in accordance with RECAP will be submitted and evaluated by
LDEQ. At that point, LDEQ will establish what cleanup standards must be met at the site. When the
process is complete, the Company will be in a position to develop an appropriate remediation plan
and determine the resulting cost of remediation. The Company has not recorded any estimated
liability for remediation and contamination and, based upon the May 2003 Site Assessment Report,
the April 2006 update and ongoing monitoring, it believes the ultimate remediation costs for the
former Lafayette facility will not be material to its consolidated financial position, results of
operations, or cash flows.
Legal Matters The Company is named as a defendant in various legal actions that have arisen
in the ordinary course of business and have not been finally adjudicated. In the opinion of
management, the amount of the ultimate liability with respect to these actions will not have a
material adverse effect on the Companys consolidated financial position, results of operations, or
cash flows.
As previously reported, the Company is involved in Federal Court litigation in the Western District
of Louisiana with the Office and Professional Employees International Union (OPEIU), the union
representing domestic pilots, over claims of bad faith bargaining and issues relating to the return
to work of striking pilots. The pilots commenced a strike in September 2006, and a court-approved
return to work process began in January 2007 for those pilots who had not already returned to work
or left the Companys employment, and this was essentially completed in April 2007. Pilots
continue to work under the terms and conditions of employment set forth in the final implementation
proposals made by the Company at the end of collective bargaining negotiations in August 2006. A
trial date on strike-related matters has been postponed from June 29, 2009 until July 6, 2010.
Management does not expect the outcome of this litigation to have a material adverse effect on our
financial condition, results of operations, or cash flows.
Superior Offshore International Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor Holdings
Inc., ERA Group Inc., ERA Aviation, Inc., and PHI, Inc., Civil Action No. 1:09-cv-00438 on the
docket of the United States District Court for the District of Delaware. This purported class
action was filed on June 12, 2009, on behalf of a class defined to include all direct purchasers of
offshore helicopter services in the Gulf of Mexico from the defendants at any time from January 1,
2001 through December 31, 2005. The suit alleges that the defendants acted jointly to fix,
maintain, or stabilize prices for offshore helicopter services during the above time frame in
violation of the federal antitrust laws. The plaintiff seeks unspecified treble damages,
injunctive relief, costs, and attorneys fees. The outcome of this matter cannot be reasonably
assessed at this time. The Company intends to aggressively defend itself in this matter.
Operating Leases We lease certain aircraft, facilities, and equipment used in our operations.
The related lease agreements, which include both non-cancelable and month-to-month terms, generally
provide for fixed monthly rentals, and certain real estate leases also include renewal options. We
generally pay all insurance, taxes, and maintenance expenses associated with these leases. Several
leases contain fair value purchase options.
11
At June 30, 2009, we had approximately $207.2 million in aggregate commitments under operating
leases of which approximately $13.7 million is payable through December 31, 2009, and a total of
$27.6 million is payable over the twelve months ending June 30, 2010. The total lease commitments
include $187.3 million for aircraft and $19.9 million for facility lease commitments, primarily for
our facilities in Lafayette, Louisiana.
Purchase Commitments At June 30, 2009, we had an order for four additional transport category
aircraft at an approximate cost of $86.9 million with delivery dates throughout 2009. These
aircraft are planned for service in the Oil and Gas segment. Approximately $4.0 million of
deposits on aircraft purchase commitments are included in other assets at June 30, 2009.
4. Long-term Debt
The $200 million 7.125% Senior Notes mature April 15, 2013, and interest is payable semi-annually
on April 15 and October 15. The notes contain restrictive covenants, including limitations on
indebtedness, liens, dividends, repurchases of capital stock and other payments affecting
restricted subsidiaries, issuance and sales of restricted subsidiary stock, dispositions of
proceeds of asset sales, and mergers and consolidations and sales of assets. At June 30, 2009, the
market value of the notes was approximately $178.0 million, based on quoted market indicators. We
were in compliance with the covenants applicable to these notes as of June 30, 2009.
We have a $50 million revolving credit facility with a commercial bank, which is scheduled to
expire on September 1, 2010. As of June 30, 2009, we had $13.4 million in borrowings and $5.1
million in letters of credit outstanding under the facility. The facility includes covenants
related to working capital, funded debt to net worth, and consolidated net worth. As of June 30,
2009, we were in compliance with these covenants.
Effective August 5, 2009, we executed a new credit agreement with a syndicate of three commercial
banks providing a $75 million revolving credit facility maturing
in September 2011. The interest rate was reduced to our choice
of the prime rate or LIBOR plus 100 basis points. Other terms are
substantially similar to the prior facility. The new facility includes covenants related to
working capital and funded debt to net worth, identical to the previous
credit agreement, and the consolidated net worth covenant was
increased from $400 million to $425 million.
5. Valuation Accounts
We have established an allowance for doubtful accounts based upon factors surrounding the credit
risk of specific customers, current market conditions, and other information. The allowance for
doubtful accounts was approximately $0.1 million at June 30, 2009 and December 31, 2008.
Revenues related to emergency flights generated by the Companys Air Medical segment are recorded
net of contractual allowances under agreements with third party payors and uncompensated care when
the services are provided. The allowance for contractual discounts was $38.1 million and $37.6
million as of June 30, 2009 and December 31, 2008, respectively. The allowance for uncompensated
care was $25.7 million and $20.8 million as of June 30, 2009 and December 31, 2008, respectively.
The allowance for contractual discounts and estimated uncompensated care
as a percentage of gross accounts receivable are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2009 |
|
2008 |
Gross Accounts Receivable |
|
|
100 |
% |
|
|
100 |
% |
Allowance for Contractual Discounts |
|
|
36 |
% |
|
|
35 |
% |
Allowance for Uncompensated Care |
|
|
24 |
% |
|
|
20 |
% |
12
We have also established valuation reserves related to obsolete and excess inventory. The
inventory valuation reserves were $7.5 million and $7.9 million at June 30, 2009 and December 31,
2008, respectively.
6. Employees
Employee Incentive Compensation In 2002, we implemented the employee incentive compensation plan
for non-executive and non-represented employees. For calendar year 2007, the represented pilots
were added to this plan as part of the final implementation proposals made by the Company at the
end of the collective bargaining negotiations in August 2006. The plan allows us to pay up to
8.25% of earnings before income taxes upon achieving a specified earnings threshold. During 2004,
we implemented the management incentive compensation plan for certain corporate and business unit
management employees. The management incentive compensation plan was amended August 5, 2008, to
include safety components, in addition to certain earnings targets as provided in the prior plan.
The amount expensed for 2008 under both the employee incentive compensation plan and the management
incentive compensation plan was $1.0 million. For the six months ended June 30, 2009, we expensed
an estimated incentive compensation expense of $0.3 million compared to $0.2 million for the six
months ended June 30, 2008.
We also have a Safety Incentive Plan related to Occupational Safety and Health Administration
recordable incidents, for which we expensed and paid $0.5 million for 2008. For the six months
ended June 30, 2009, we expensed $0.2 million.
7. Fair Value Measurements
The Company adopted SFAS No. 157, Fair Value Measurements, beginning in its 2008 fiscal year and
there was no material impact to its consolidated financial statements. SFAS No. 157 applies to all
assets and liabilities that are being measured and reported on a fair value basis. SFAS No. 157
requires new disclosure that establishes a framework for measuring fair value in GAAP, and expands
disclosure about fair value measurements. This statement enables the reader of the financial
statements to assess the inputs used to develop those measurements by establishing a hierarchy for
ranking the quality and reliability of the information used to determine fair values. The statement
requires that assets and liabilities carried at fair value will be classified and disclosed in one
of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following table summarizes the valuation of our short-term investments and financial
instruments by the above SFAS No. 157 pricing levels as of the valuation dates listed:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Quoted prices in |
|
|
Quoted prices in |
|
|
|
active markets for |
|
|
active markets for |
|
|
|
Identical Assets |
|
|
Identical Assets |
|
|
|
(Level 1) |
|
|
(Level 1) |
|
|
|
(Thousands of dollars) |
|
Short-term investments |
|
$ |
59,074 |
|
|
$ |
42,121 |
|
|
|
|
|
|
|
|
|
|
Investments in other assets |
|
|
3,640 |
|
|
|
3,297 |
|
|
|
|
|
|
|
|
Total |
|
$ |
62,714 |
|
|
$ |
45,418 |
|
|
|
|
|
|
|
|
13
The Company holds it short-term investments in a money market fund consisting mainly of government
backed securities, which is classified as a short-term investment. Investments included in other
assets consist mainly of investment funds that are highly liquid and diversified.
8. Recent Accounting Pronouncements
In December 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) No. SFAS 132(R)-1, which amends SFAS No. 132(R), Employers Disclosures about Pensions and
Other Postretirement Benefits, to provide guidance on an employers disclosures about plan assets
of a defined benefit pension or other postretirement plan. The disclosures about plan assets
required by this FSP No. SFAS 132(R)-1 shall be provided for fiscal years ending after December 15,
2009. Upon initial application, the provisions of this FSP No. SFAS 132(R)-1 are not required for
earlier periods that are presented for comparative purposes. Management does not currently expect
that implementation of FSP No. 132(R)-1 will have an impact on our consolidated financial
statements.
In April 2009, the FASB issued FSP No. SFAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly. FSP No. SFAS 157-4 applies to all assets and liabilities
within the scope of accounting pronouncements that require or permit fair value measurements,
except as discussed in paragraphs 2 and 3 of SFAS No. 157, and provides additional guidance for
estimating fair value when the volume and level of activity for the asset or liability have
significantly decreased. FSP No. SFAS 157-4 also includes guidance on identifying circumstances
that indicate a transaction is not orderly. This statement is effective for interim reporting
periods ending after June 15, 2009. The implementation of FSP No. SFAS 157-4 did not have an
effect on our consolidated financial statements.
In April 2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This statement amends SFAS No. 107 and APB Opinion No. 28, to
require disclosures about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements, in either the body or the
accompanying notes of summarized financial information. FSP No. SFAS 107-1 and APB 28-1 is
effective for interim reporting periods ending after June 15, 2009. The implementation of FSP No.
SFAS 107-1 and APB 28-1 did not have an effect on our consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which establishes principles and
requirements for subsequent events, including the disclosures that an entity shall make about
events or transactions that occurred after the balance sheet date. This statement is effective for
financial statements issued for interim and annual periods ending after June 15, 2009. The
implementation of SFAS No. 165 did not have a material impact on our consolidated financial
statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles. This statement, which replaces SFAS No.
162, The Hierarchy of Generally Accepted Accounting Principles, identifies the sources of
accounting principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. This statement is effective for financial
statements issued for interim and annual periods ending after September 15, 2009. Management does
not currently expect the implementation of SFAS No. 168 will have a material impact on our
consolidated financial statements.
14
9. Shareholders Equity
We had an average of 15.3 million common shares outstanding for the quarters ended June 30, 2009
and 2008.
At an annual meeting of stockholders on May 6, 2008, the number of authorized shares of non-voting
common stock was increased from 12.5 million shares to 25 million shares.
10. Comprehensive Income
The following table summarizes the components of total comprehensive income (net of taxes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Thousands of dollars) |
|
|
(Thousands of dollars) |
|
Net earnings |
|
$ |
3,666 |
|
|
$ |
6,253 |
|
|
$ |
5,741 |
|
|
$ |
12,821 |
|
Changes in pension plan assets
and benefit obligations |
|
|
(10 |
) |
|
|
4 |
|
|
|
(59 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
3,656 |
|
|
$ |
6,257 |
|
|
$ |
5,682 |
|
|
$ |
12,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Condensed Consolidating Financial Information
Our 7.125% Senior Notes are fully and unconditionally guaranteed on a joint and several, senior
basis by all of our Guarantor Subsidiaries.
The following supplemental condensed financial information sets forth, on a consolidated basis, the
balance sheet, statement of operations, and statement of cash flows information for PHI, Inc.
(Parent Company Only) and the Guarantor Subsidiaries. The principal eliminating entries
eliminate investments in subsidiaries, intercompany balances, and intercompany revenues and
expenses.
15
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
399 |
|
|
$ |
433 |
|
|
$ |
2,597 |
|
|
$ |
|
|
|
$ |
3,429 |
|
Short-term investments |
|
|
59,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,074 |
|
Accounts receivable net |
|
|
96,082 |
|
|
|
11,271 |
|
|
|
|
|
|
|
|
|
|
|
107,353 |
|
Intercompany receivable |
|
|
|
|
|
|
63,064 |
|
|
|
|
|
|
|
(63,064 |
) |
|
|
|
|
Inventories of spare parts net |
|
|
61,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,859 |
|
Other current assets |
|
|
10,893 |
|
|
|
10 |
|
|
|
6 |
|
|
|
|
|
|
|
10,909 |
|
Income taxes receivable |
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
229,092 |
|
|
|
74,778 |
|
|
|
2,603 |
|
|
|
(63,064 |
) |
|
|
243,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries and other |
|
|
68,125 |
|
|
|
|
|
|
|
|
|
|
|
(68,125 |
) |
|
|
|
|
Other assets |
|
|
15,253 |
|
|
|
152 |
|
|
|
8 |
|
|
|
|
|
|
|
15,413 |
|
Property and equipment-net |
|
|
517,795 |
|
|
|
17,188 |
|
|
|
|
|
|
|
|
|
|
|
534,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
830,265 |
|
|
$ |
92,118 |
|
|
$ |
2,611 |
|
|
$ |
(131,189 |
) |
|
$ |
793,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
18,579 |
|
|
$ |
197 |
|
|
$ |
2,333 |
|
|
$ |
|
|
|
$ |
21,109 |
|
Accrued liabilities |
|
|
21,818 |
|
|
|
4,651 |
|
|
|
14 |
|
|
|
|
|
|
|
26,483 |
|
Intercompany payable |
|
|
63,064 |
|
|
|
|
|
|
|
|
|
|
|
(63,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
103,461 |
|
|
|
4,848 |
|
|
|
2,347 |
|
|
|
(63,064 |
) |
|
|
47,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
213,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,350 |
|
Deferred income taxes and other
long-term
liabilities |
|
|
55,234 |
|
|
|
19,401 |
|
|
|
8 |
|
|
|
|
|
|
|
74,643 |
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital |
|
|
292,934 |
|
|
|
2,354 |
|
|
|
320 |
|
|
|
(2,674 |
) |
|
|
292,934 |
|
Accumulated other comprehensive loss |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
Retained earnings |
|
|
165,300 |
|
|
|
65,515 |
|
|
|
(64 |
) |
|
|
(65,451 |
) |
|
|
165,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
458,220 |
|
|
|
67,869 |
|
|
|
256 |
|
|
|
(68,125 |
) |
|
|
458,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
830,265 |
|
|
$ |
92,118 |
|
|
$ |
2,611 |
|
|
$ |
(131,189 |
) |
|
$ |
793,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only (1) |
|
|
Subsidiaries (1)(2) |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
559 |
|
|
$ |
600 |
|
|
$ |
|
|
|
$ |
1,159 |
|
Short-term investments |
|
|
42,121 |
|
|
|
|
|
|
|
|
|
|
|
42,121 |
|
Accounts receivable net |
|
|
97,618 |
|
|
|
13,804 |
|
|
|
|
|
|
|
111,422 |
|
Intercompany receivable |
|
|
|
|
|
|
57,722 |
|
|
|
(57,722 |
) |
|
|
|
|
Inventories of spare parts net |
|
|
58,249 |
|
|
|
|
|
|
|
|
|
|
|
58,249 |
|
Other current assets |
|
|
10,671 |
|
|
|
16 |
|
|
|
|
|
|
|
10,687 |
|
Income taxes receivable |
|
|
982 |
|
|
|
|
|
|
|
|
|
|
|
982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
210,200 |
|
|
|
72,142 |
|
|
|
(57,722 |
) |
|
|
224,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries and others |
|
|
65,227 |
|
|
|
|
|
|
|
(65,227 |
) |
|
|
|
|
Other assets |
|
|
23,761 |
|
|
|
227 |
|
|
|
|
|
|
|
23,988 |
|
Property and equipment-net |
|
|
511,986 |
|
|
|
16,588 |
|
|
|
|
|
|
|
528,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
811,174 |
|
|
$ |
88,957 |
|
|
$ |
(122,949 |
) |
|
$ |
777,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
25,174 |
|
|
$ |
275 |
|
|
$ |
|
|
|
$ |
25,449 |
|
Accrued liabilities |
|
|
20,886 |
|
|
|
4,307 |
|
|
|
|
|
|
|
25,193 |
|
Intercompany payable |
|
|
57,722 |
|
|
|
|
|
|
|
(57,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
103,782 |
|
|
|
4,582 |
|
|
|
(57,722 |
) |
|
|
50,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
203,000 |
|
|
|
|
|
|
|
|
|
|
|
203,000 |
|
Deferred
income taxes and other long-term liabilities |
|
|
51,996 |
|
|
|
19,148 |
|
|
|
|
|
|
|
71,144 |
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital |
|
|
292,792 |
|
|
|
2,674 |
|
|
|
(2,674 |
) |
|
|
292,792 |
|
Accumulated
other comprehensive income |
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
45 |
|
Retained earnings |
|
|
159,559 |
|
|
|
62,553 |
|
|
|
(62,553 |
) |
|
|
159,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
452,396 |
|
|
|
65,227 |
|
|
|
(65,227 |
) |
|
|
452,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
811,174 |
|
|
$ |
88,957 |
|
|
$ |
(122,949 |
) |
|
$ |
777,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain revisions were made to conform to the current years presentation. |
|
(2) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
17
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
|
$ |
105,519 |
|
|
$ |
17,796 |
|
|
$ |
6 |
|
|
$ |
|
|
|
$ |
123,321 |
|
Management fees |
|
|
712 |
|
|
|
|
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
Loss on dispositions of assets, net |
|
|
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(107 |
) |
Other, principally interest income |
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,189 |
|
|
|
17,796 |
|
|
|
6 |
|
|
|
(712 |
) |
|
|
123,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
92,177 |
|
|
|
12,735 |
|
|
|
|
|
|
|
|
|
|
|
104,912 |
|
Management fees |
|
|
|
|
|
|
712 |
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
Selling,
general and administrative expenses |
|
|
7,786 |
|
|
|
399 |
|
|
|
33 |
|
|
|
|
|
|
|
8,218 |
|
Equity in
net income of consolidated subsidiaries |
|
|
(2,354 |
) |
|
|
|
|
|
|
|
|
|
|
2,354 |
|
|
|
|
|
Interest expense |
|
|
4,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,648 |
|
|
|
13,846 |
|
|
|
33 |
|
|
|
1,642 |
|
|
|
117,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
4,541 |
|
|
|
3,950 |
|
|
|
(27 |
) |
|
|
(2,354 |
) |
|
|
6,110 |
|
Income tax expense |
|
|
875 |
|
|
|
1,580 |
|
|
|
(11 |
) |
|
|
|
|
|
|
2,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
3,666 |
|
|
$ |
2,370 |
|
|
$ |
(16 |
) |
|
$ |
(2,354 |
) |
|
$ |
3,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
For the quarter ended June 30, 2008 |
|
| |
| |
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
| |
| |
|
Only (1) |
|
|
Subsidiaries (1)(2) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
| |
| |
|
$ |
111,149 |
|
|
$ |
18,962 |
|
|
$ |
|
|
|
$ |
130,111 |
|
Management fees |
| |
| |
|
|
759 |
|
|
|
|
|
|
|
(759 |
) |
|
|
|
|
Gain on dispositions of assets, net |
| |
| |
|
|
1,255 |
|
|
|
|
|
|
|
|
|
|
|
1,255 |
|
Other, principally interest income |
| |
| |
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
201 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
113,364 |
|
|
|
18,962 |
|
|
|
(759 |
) |
|
|
131,567 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
| |
| |
|
|
95,423 |
|
|
|
14,334 |
|
|
|
|
|
|
|
109,757 |
|
Management fees |
| |
| |
|
|
|
|
|
|
759 |
|
|
|
(759 |
) |
|
|
|
|
Selling, general and administrative expenses |
| |
| |
|
|
6,600 |
|
|
|
934 |
|
|
|
|
|
|
|
7,534 |
|
Equity in net income of consolidated subsidiaries |
| |
| |
|
|
(2,329 |
) |
|
|
|
|
|
|
2,329 |
|
|
|
|
|
Interest expense |
| |
| |
|
|
3,854 |
|
|
|
|
|
|
|
|
|
|
|
3,854 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
103,548 |
|
|
|
16,027 |
|
|
|
1,570 |
|
|
|
121,145 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
| |
| |
|
|
9,816 |
|
|
|
2,935 |
|
|
|
(2,329 |
) |
|
|
10,422 |
|
Income tax expense |
| |
| |
|
|
3,563 |
|
|
|
606 |
|
|
|
|
|
|
|
4,169 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
| |
| |
|
$ |
6,253 |
|
|
$ |
2,329 |
|
|
$ |
(2,329 |
) |
|
$ |
6,253 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain revisions were made to conform to the current years presentation. |
|
(2) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
18
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
|
$ |
205,733 |
|
|
$ |
34,514 |
|
|
$ |
26 |
|
|
$ |
|
|
|
$ |
240,273 |
|
Management fees |
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
|
(1,382 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165 |
|
Other, principally interest income |
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,408 |
|
|
|
34,514 |
|
|
|
26 |
|
|
|
(1,382 |
) |
|
|
240,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
179,756 |
|
|
|
27,283 |
|
|
|
|
|
|
|
|
|
|
|
207,039 |
|
Management fees |
|
|
|
|
|
|
1,381 |
|
|
|
1 |
|
|
|
(1,382 |
) |
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses |
|
|
14,997 |
|
|
|
984 |
|
|
|
61 |
|
|
|
|
|
|
|
16,042 |
|
Equity in net income of consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiaries |
|
|
(2,898 |
) |
|
|
|
|
|
|
|
|
|
|
2,898 |
|
|
|
|
|
Interest expense |
|
|
7,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,773 |
|
|
|
29,648 |
|
|
|
62 |
|
|
|
1,516 |
|
|
|
230,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
7,635 |
|
|
|
4,866 |
|
|
|
(36 |
) |
|
|
(2,898 |
) |
|
|
9,567 |
|
Income tax expense |
|
|
1,894 |
|
|
|
1,946 |
|
|
|
(14 |
) |
|
|
|
|
|
|
3,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
5,741 |
|
|
$ |
2,920 |
|
|
$ |
(22 |
) |
|
$ |
(2,898 |
) |
|
$ |
5,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2008 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only (1) |
|
|
Subsidiaries (1) (2) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
|
$ |
208,216 |
|
|
$ |
39,040 |
|
|
$ |
|
|
|
$ |
247,256 |
|
Management fees |
|
|
1,562 |
|
|
|
|
|
|
|
(1,562 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
4,204 |
|
Other, principally interest income |
|
|
503 |
|
|
|
|
|
|
|
|
|
|
|
503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,485 |
|
|
|
39,040 |
|
|
|
(1,562 |
) |
|
|
251,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
179,644 |
|
|
|
28,339 |
|
|
|
|
|
|
|
207,983 |
|
Management fees |
|
|
|
|
|
|
1,562 |
|
|
|
(1,562 |
) |
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses |
|
|
13,096 |
|
|
|
1,827 |
|
|
|
|
|
|
|
14,923 |
|
Equity in net income of consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiaries |
|
|
(6,151 |
) |
|
|
|
|
|
|
6,151 |
|
|
|
|
|
Interest expense |
|
|
7,688 |
|
|
|
|
|
|
|
|
|
|
|
7,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,277 |
|
|
|
31,728 |
|
|
|
4,589 |
|
|
|
230,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
20,208 |
|
|
|
7,312 |
|
|
|
(6,151 |
) |
|
|
21,369 |
|
Income tax expense |
|
|
7,387 |
|
|
|
1,161 |
|
|
|
|
|
|
|
8,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
12,821 |
|
|
$ |
6,151 |
|
|
$ |
(6,151 |
) |
|
$ |
12,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain revisions were made to conform to the current years presentation. |
|
(2) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
19
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
15,992 |
|
|
$ |
1,673 |
|
|
$ |
2,403 |
|
|
$ |
|
|
|
$ |
20,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(26,047 |
) |
|
|
(1,646 |
) |
|
|
|
|
|
|
|
|
|
|
(27,693 |
) |
Proceeds from asset dispositions |
|
|
8,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,897 |
|
Purchase of short-term investments, net |
|
|
(16,952 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,952 |
) |
Deposits on aircraft |
|
|
7,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(26,502 |
) |
|
|
(1,646 |
) |
|
|
|
|
|
|
|
|
|
|
(28,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from line of credit |
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash
equivalents |
|
|
(160 |
) |
|
|
27 |
|
|
|
2,403 |
|
|
|
|
|
|
|
2,270 |
|
Cash and cash equivalents, beginning of
period |
|
|
559 |
|
|
|
406 |
|
|
|
194 |
|
|
|
|
|
|
|
1,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
399 |
|
|
$ |
433 |
|
|
$ |
2,597 |
|
|
$ |
|
|
|
$ |
3,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2008 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries (1)(2) |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
12,242 |
|
|
$ |
986 |
|
|
$ |
|
|
|
$ |
13,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(37,149 |
) |
|
|
(957 |
) |
|
|
|
|
|
|
(38,106 |
) |
Proceeds from asset dispositions |
|
|
8,983 |
|
|
|
|
|
|
|
|
|
|
|
8,983 |
|
Proceeds from sale of short-term investments, net |
|
|
27,491 |
|
|
|
|
|
|
|
|
|
|
|
27,491 |
|
Deposits on aircraft |
|
|
(11,546 |
) |
|
|
|
|
|
|
|
|
|
|
(11,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(12,221 |
) |
|
|
(957 |
) |
|
|
|
|
|
|
(13,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
21 |
|
|
|
29 |
|
|
|
|
|
|
|
50 |
|
Cash and cash equivalents, beginning of
period |
|
|
1,004 |
|
|
|
421 |
|
|
|
|
|
|
|
1,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
1,025 |
|
|
$ |
450 |
|
|
$ |
|
|
|
$ |
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain revisions were made to cash flows provided by (used in) operating and investing
activities to conform to the current years presentation. |
|
(2) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
20
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This discussion and analysis should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and the notes thereto as well as our audited
consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for
the year ended December 31, 2008, managements discussion and analysis, risk factors and other
information contained therein.
Forward-Looking Statements
All statements other than statements of historical fact contained in this Form 10-Q and other
periodic reports filed by PHI, Inc. (the Company or PHI) under the Securities Exchange Act of
1934 and other written or oral statements made by it or on its behalf, are forward-looking
statements. When used herein, the words anticipates, expects, believes, goals, intends,
plans, projects and similar words and expressions are intended to identify forward-looking
statements. Forward-looking statements are based on a number of assumptions about future events
and are subject to significant risks, uncertainties, and other factors that may cause the Companys
actual results to differ materially from the expectations, beliefs, and estimates expressed or
implied in such forward-looking statements. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, no assurance can be given that such
assumptions will prove correct or even approximately correct. Factors that could cause the
Companys results to differ materially from the expectations expressed in such forward-looking
statements include but are not limited to the following: unexpected variances in flight hours, the
effect on demand for our services caused by volatility of oil and gas prices and the level of
exploration and production activity in the Gulf of Mexico, the effect on our operating costs of
volatile fuel prices, the availability of capital required to acquire aircraft, environmental
risks, hurricanes and other adverse weather conditions, the activities of our competitors, changes
in government regulation, unionization, operating hazards, risks related to operating in foreign
countries, the ability to obtain adequate insurance at an acceptable cost and the ability of the
Company to develop and implement successful business strategies. For a more detailed description
of risks, see the Risk Factors section in Item 1.A. of our Form 10-K for the year ended December
31, 2008 (the 2008 Form 10-K). All forward-looking statements in this document are expressly
qualified in their entirety by the cautionary statements in this paragraph and the Risk Factors
section of our 2008 Form 10-K. PHI undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events, or otherwise.
Overview
Operating revenues for the three months ended June 30, 2009 were $123.3 million, a decrease of $6.8
million, compared to $130.1 million for the three months ended June 30, 2008. Oil and Gas
operating revenues decreased $3.1 million for the quarter ended June 30, 2009 due to a decrease in
medium aircraft revenue due to a decrease in activity on the continental shelf. There were also
decreases in revenue as a result of the completion of a foreign contract in 2008, and decreases in
revenue related to fuel charges. Total fuel cost is included in direct expense and reimbursement
of a portion of these costs above a contracted per-gallon amount is included in revenue. These
amounts were offset in part by an increase in revenue for medium aircraft related to deepwater
activity and an increase in light aircraft flight hours and revenues also in the Gulf of Mexico.
Operating revenues in the Air Medical segment decreased $3.7 million due to decreased patient
transports in the independent provider programs. We believe this decrease is primarily
attributable to the current economic environment. Also contributing to the decrease was the
closure in 2009 of six bases that were generating less than acceptable transport volumes. We did not incur
any significant costs as a result of these closures.
Flight hours for the quarter ended June 30, 2009 were 39,246 compared to 39,630 for the quarter
ended June 30, 2008. Oil and Gas segments flight hours increased 493 hours due to an increase in
light aircraft flight hours. There was a decrease of 815 flight hours in the Air Medical segment
for the quarter ended
21
June 30,
2009 due to a 597 decrease in patient transports in the independent provider programs as mentioned
above. There was a decrease of approximately 300 transports due to the base closures. We believe
the remaining decrease in transports was primarily attributable to the current economic
environment.
Operating income for the Oil and Gas segment was $13.7 million for the quarter ended June 30, 2009,
compared to $16.9 million for the quarter ended June 30, 2008. The decrease of $3.2 million was
due to decreased medium aircraft revenue due to decreased activity on the continental shelf, a
decrease in foreign contract revenues and a decrease in revenue related to fuel charges. Total
fuel cost is included in direct expense and reimbursement of a portion of these costs above a
contracted per-gallon amount is included in revenue. These amounts were offset in part by an
increase in revenue for medium aircraft related to deepwater activity and an increase in light
aircraft flight hours and revenues in the Gulf of Mexico, which operate at lower rates and margins
as compared to medium aircraft.
Operating income for the Air Medical segment was $2.4 million for the quarter ended June 30, 2009,
compared to $1.0 million for the quarter ended June 30, 2008. The $1.4 increase was primarily due
to increased hospital-based contract revenue, offset in part by a decrease in revenue in the
independent provider programs due to decreased transports as previously mentioned. We also
had a $4.7 million decrease in direct expense,
discussed further in the Segment Discussion below. Direct expense in the quarter ended June 30,
2008, included a $1.6 million insurance charge related to our aviation insurance and workers
compensation coverages due to two accidents in June 2008.
Net earnings for the quarter ended June 30, 2009 were $3.7 million, or $0.24 per diluted share,
compared to $6.3 million for the quarter ended June 30, 2008, or $0.41 per diluted share. Pre-tax
earnings were $6.1 million for the quarter ended June 30, 2009, compared to $10.4 million for the
same period in 2008. The decrease was primarily due to a decrease in medium aircraft revenue due
to a decrease in activity on the continental shelf, completion of a foreign contract in 2008 and a
decrease in revenue related to fuel charges. These amounts were offset in part by an increase in
revenue for medium aircraft activity related to deepwater activity and an increase in light
aircraft flight hours. Earnings for the quarter ended June 30, 2008 included a $1.3 million
pre-tax gain on dispositions of assets, offset by a charge of $2.1 million related to our aviation
insurance and workers compensation coverages, of which $1.6 million was related to our Air Medical
segment and $0.5 million was related to our Oil and Gas segment.
Operating revenues for the six months ended June 30, 2009 were $240.3 million, compared to $247.3
million for the same period in 2008, a decrease of $7.0 million. Oil and Gas operating revenues
decreased $2.9 million. There was a decrease in flight hours and revenues for medium aircraft as a
result of a voluntary grounding of certain aircraft in the first quarter related to the January 4,
2009 accident, and a decrease in revenue related to fuel charges. Total fuel cost is included in
direct expense and reimbursement of a portion of these costs above a contracted per-gallon amount
is included in revenue. There was also a decrease in medium aircraft revenue due to a decrease in
activity on the continental shelf, and a decrease in foreign contract revenues due to completion of
a foreign contract in 2008. These amounts were offset in part by an increase for medium aircraft
related to deepwater activity and an increase in flight hours and revenues for light aircraft in
the Oil and Gas segment. Air Medical operating revenues decreased $3.8 million due to a 1,119 decrease in
patient transports in the independent provider programs due to the closure of six bases and the
effects of the current economic environment. We did not incur any significant costs as a result of
these closures. There was a decrease of approximately 430 transports due to the base closures.
We believe the remaining decrease in transports was primarily attributable to the current economic
environment.
Flight hours for the six months ended June 30, 2009 were 74,310, an increase of 533 flight hours,
compared to 73,777 for the six months ended June 30, 2008. Oil and Gas segment flight hours
increased 2,142 due to increased light aircraft flight hours, offset by a decrease in medium
aircraft flight hours in the Gulf of Mexico, and a decrease in flight hours in our foreign
operations due to completion of a
22
contract in 2008. Air Medical segment flight hours decreased 1,284 flight hours due to decreased
patient transports in the independent provider programs due to the reasons mentioned above.
Oil and Gas segments operating income was $26.8 million for the six months ended June 30, 2009,
compared to $31.9 million for the six months ended June 30, 2008. The decrease of $5.2 million was
primarily due to decreased revenues related to activity on the continental shelf, decreased foreign
contract revenues and increased direct expense. Oil and Gas segment operating income was also
adversely affected in the first quarter of 2009 due to the decrease in operating revenues
associated with the voluntary grounding of certain aircraft related to the January 4, 2009
accident.
Operating income for the Air Medical segment was $1.1 million for the six months ended June 30,
2009, compared to $1.0 million for the six months ended June 30, 2008.
Net earnings for the six months ended June 30, 2009 were $5.7 million, or $0.38 per diluted share,
compared to $12.8 million for the six months ended June 30, 2008, or $0.84 per diluted share.
Pre-tax earnings were $9.6 million for the six months ended June 30, 2009, compared to $21.4
million for the same period in 2008. The decrease in earnings is primarily due to decreased
revenues related to decreased activity on the continental shelf, decreased revenues as a result of
the completion of a foreign contract, and decreased revenues related to fuel charges. Earnings for
the six months ended June 30, 2008 included a pre-tax gain on disposition of assets, net, of $4.2
million and an aggregate insurance charge of $2.1 million.
At June 30, 2009, we had an order for four additional transport category aircraft at an approximate
cost of $86.9 million with delivery dates throughout 2009. These aircraft are planned for service
in the Oil and Gas segment. We intend to fund these aircraft with operating leases.
Operating Statistics
The following tables present certain non-financial operational statistics for the quarter and six
months ended June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Flight hours: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
30,241 |
|
|
|
29,748 |
|
|
|
56,721 |
|
|
|
54,579 |
|
Air Medical (1) |
|
|
9,005 |
|
|
|
9,820 |
|
|
|
17,211 |
|
|
|
18,495 |
|
Technical Services |
|
|
|
|
|
|
62 |
|
|
|
378 |
|
|
|
703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
39,246 |
|
|
|
39,630 |
|
|
|
74,310 |
|
|
|
73,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air Medical Transports (2) |
|
|
5,345 |
|
|
|
5,942 |
|
|
|
10,303 |
|
|
|
11,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Aircraft operated at period end: |
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
158 |
|
|
|
147 |
|
Air Medical |
|
|
89 |
|
|
|
85 |
|
Technical Services |
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
Total (3) |
|
|
251 |
|
|
|
236 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Flight hours include 2,260 flight hours associated with hospital-based contracts, compared
to 1,804 flight hours in the prior year quarter. |
|
(2) |
|
Represents individual patient transports for the period. |
|
(3) |
|
Includes 16 aircraft as of June 30, 2009 and 15 aircraft as of June 30, 2008 that are
customer owned. |
23
Results of Operations
Quarter Ended June 30, 2009 compared with Quarter Ended June 30, 2008
Combined Operations
Revenues Operating revenues for the three months ended June 30, 2009 were $123.3
million, compared to $130.1 million for the three months ended June 30, 2008, a decrease of $6.8
million. Oil and Gas operating revenues decreased $3.1 million for the quarter ended June 30, 2009
due to a decrease in medium aircraft revenue due to a decrease in activity on the continental
shelf. There were also decreases in foreign contract revenue and revenue related to fuel charges.
Total fuel cost is included in direct expense and reimbursement of a portion of these costs above a
contracted per-gallon amount is included in revenue. These amounts were offset in part by an
increase in revenue for medium aircraft related to deepwater activity and an increase in light
aircraft flight hours and revenue in the Gulf of Mexico, which operate at lower rates and margins
as compared to medium aircraft. Operating revenues in the Air Medical segment decreased $3.7
million due to a 597 decrease in patient transports in the independent provider programs. There was a
decrease of approximately 300 transports due to base closures. We believe the remaining decrease
in transports was primarily attributable to the current economic environment.
Total flight hours were 39,246 for the three months ended June 30, 2009, compared to 39,630 for the
three months ended June 30, 2008. Flight hours in the Oil and Gas segment were 30,241 for the
three months ended June 30, 2009, compared to 29,748 for three months ended June 30, 2008, an
increase of 493 flight hours. The increase resulted from an increase in light aircraft flight
hours, offset by a decrease in medium aircraft flight hours, and also by decreased flight hours due
to completion of a foreign contract. Air Medical segment flight hours for the three months ended
June 30, 2009 were 9,005 compared to 9,820 for the three months ended June 30, 2008, a decrease of
815 flight hours. This decrease was related to reduced patient transport volume related to the
closure of six bases and current economic conditions. We did not incur any significant costs as a
result of these closures.
Other Income and Gains Loss on dispositions of assets was $0.1 million for the three
months ended June 30, 2009, compared to gain on disposition of assets of $1.3 million for the three
months ended June 30, 2008. These amounts represent gains and losses on sales of assets that no
longer meet our strategic needs.
Other income was $0.1 million for the three months ended June 30, 2009, compared to $0.2 million
for the three months ended June 30, 2008.
Direct Expenses Direct operating expense was $104.9 million for the three months ended
June 30, 2009, compared to $109.8 million for the three months ended June 30, 2008, a decrease of
$4.9 million. This decrease was primarily due to decreased fuel expense ($5.4 million) primarily
due to reduced per-gallon fuel costs compared to the prior year quarter. There were also decreases
in aircraft parts usage ($0.3 million), aircraft insurance ($0.3 million), aircraft warranty costs
($0.3 million), and other items, net ($0.3 million). Direct expense for the quarter ended June 30,
2008 included a $2.1 million charge related to our aviation insurance and workers compensation
coverages related to accidents during the quarter. These decreases
were partially offset by an increase in aircraft
rent ($1.7 million) due to additional aircraft added to the fleet.
Selling, General, and Administrative Expenses Selling, general and administrative
expenses were $8.2 million for the three months ended June 30, 2009, compared to $7.5 million for
the three months ended June 30, 2008. This increase is primarily due to increased legal fees ($0.6
million), net of a decrease in other items, ($0.2 million).
Interest Expense Interest expense was $4.0 million for the three months ended June 30,
2009, compared to $3.9 million for the three months ended June 30, 2008.
24
Income Taxes Income tax expense for the three months ended June 30, 2009 was $2.4
million compared to $4.2 million for the three months ended June 30, 2008. The effective tax rate
was 40% for the three months ended June 30, 2009 and 2008.
Earnings Our net income for the three months ended June 30, 2009 was $3.7 million
compared to $6.3 million for the three months ended June 30, 2008. Earnings before income taxes
for the three months ended June 30, 2009 were $6.1 million compared to $10.4 million for the same
period in 2008. Earnings per diluted share were $0.24 for the current quarter compared to earnings
per diluted share of $0.41 for the prior year quarter. The decrease for the quarter ended June 30,
2009 is primarily related to a decrease in medium aircraft revenue due to a decrease in activity on
the continental shelf, completion of a foreign contract in 2008 and a decrease in revenue related
to fuel charges. The quarter ended June 30, 2008 included a pre-tax gain on disposition of assets
of $1.3 million, and a $2.1 million charge related to our aviation insurance and workers
compensation coverages. We had 15.3 million common shares outstanding during the three months
ended June 30, 2009 and 2008.
Segment Discussion
Oil and Gas Oil and Gas segment revenues were $79.0 million for the three months ended June 30,
2009, compared to $82.1 million for the three months ended June 30, 2008, a decrease of $3.1
million. Flight hours were 30,241 for the current quarter compared to 29,748 for the same quarter
in the prior year. The decrease in revenue is due to a decrease in medium aircraft revenue due to
a decrease in activity on the continental shelf, decreased foreign contract revenues, and a
decrease in revenue related to fuel charges. Total fuel cost is included in direct expense and
reimbursement of a portion of these costs above a contracted per-gallon amount is included in
revenue. These amounts were offset in part by and increase in revenue for medium aircraft related
to deepwater activity and increased light aircraft flight hours and revenues in the Gulf of Mexico,
which operate at lower rates and margins as compared to medium aircraft.
The number of aircraft in the segment was 158 at June 30, 2009, compared to 147 aircraft at June
30, 2008. We have sold or disposed of three aircraft in the Oil and Gas segment since June 30,
2008, consisting of one light and two medium aircraft. We also transferred one light aircraft from
the Air Medical segment since June 30, 2008. We have added 13 new aircraft to the Oil and Gas
segment since June 30, 2008, consisting of seven light, three medium, two heavy, and one fixed-wing
aircraft. We have four heavy aircraft on order for delivery in 2009. The additional heavy
aircraft are for deepwater applications.
Direct expense in our Oil and Gas segment was $64.9 million for the three months ended June 30,
2009, compared to $64.8 million for the three months ended June 30, 2008, an increase of $0.1
million. Employee compensation expense increased ($0.9 million) primarily due to compensation rate
increases. There were also increases in aircraft rent ($2.1 million) due to additional aircraft
added to the fleet, outside repair costs ($0.8 million) related to component repairs, and aircraft
warranty costs ($0.2 million). Fuel expense decreased ($4.2 million) as the cost of fuel has
declined compared to the prior year quarter. Total fuel cost is included in direct expense and
reimbursement of a portion of fuel costs above a contracted per-gallon amount is included in
revenue.
Our Oil and Gas segments operating income was $13.7 million for the three months ended June 30,
2009, compared to $16.9 million for the three months ended June 30, 2008. Operating margins were
17% for the three months ended June 30, 2009, compared to 21% for the three months ended June 30,
2008. The decrease in operating income and operating margin is due to decreased revenues as
discussed above. These amounts were offset in part by an increase in revenue for medium aircraft
related to deepwater activity and an increase in light aircraft revenues in the Gulf of Mexico,
which operate at lower rates and margins as compared to medium aircraft. The Oil and Gas segment
revenues are primarily driven by
25
contracted aircraft and flight hours. Costs are primarily fixed and are driven by the number of
aircraft. The variable portion is driven by flight hours.
Air Medical Air Medical segment revenues were $42.6 million for the three months ended June 30,
2009, compared to $46.3 million for the three months ended June 30, 2008, a decrease of $3.7
million. The decrease was due to reduced patient transports in the independent provider programs
($4.8 million) related to the closure in 2009 of six locations and the current economic environment, offset
by an increase in revenue from hospital-based contracts ($1.1 million), primarily due to an
increase in the number of hospital-based contracts. Total patient transports were 5,345 for the
three months ended June 30, 2009, compared to 5,942 for the three months
ended June 30, 2008, a decrease of 597 transports.
There was a decrease of approximately 300 transports due to the base closures. We believe the
remaining decrease in transports was primarily attributable to the current economic environment.
Flight hours were 9,005 for the three months ended June 30, 2009, compared to 9,820 for the three
months ended June 30, 2008. The number of aircraft in the segment was 89 at June 30, 2009,
compared to 85 at June 30, 2008. Since June 30, 2008, we transferred one light aircraft to the Oil
and Gas segment. We added five light aircraft in the Air Medical segment, including one
customer-owned aircraft.
Direct expense in our Air Medical segment was $38.6 million for the three months ended June 30,
2009, compared to $43.3 million for the three months ended June 30, 2008. The $4.7 million
decrease was due to a decrease in employee compensation costs ($1.6 million) due to the closure of
six base locations and related reductions in support personnel. Insurance expense decreased ($0.5
million) due to the additional insurance charge of $1.1 million recorded in the prior year quarter
relating to the accidents during the quarter. There were also decreases in aircraft warranty costs
($0.5 million) and aircraft rent ($0.4 million).
Selling, general and administrative expenses were $1.6 million for the three months ended June 30,
2009, compared to $2.1 million for the three months ended June 30, 2008. The $0.5 million decrease
is due to decreased employee costs in the Air Medical segment. Air Medical operations are
headquartered in Phoenix, Arizona, where we maintain significant separate facilities and
administrative staff dedicated to this segment. Those costs are charged directly to the Air
Medical segment, resulting in higher selling, general and administrative expenses as compared to
our other reportable segments.
Our Air Medical segments operating income was $2.4 million for the three months ended June 30,
2009, compared to $1.0 million for the three months ended June 30, 2008. The improvement in
operating income is primarily due to the closure of six locations and the
related reductions in personnel costs.
Technical Services Technical Services revenues were $1.7 million for the three months ended June
30, 2009 and June 30, 2008. Direct expenses in our Technical Services segment were $1.3 million
for the three months ended June 30, 2009, compared to $1.6 million for the three months ended June
30, 2008. Our Technical Services segments operating income was $0.4 million for the three months
ended June 30, 2009, compared to $0.1 million for the three months ended June 30, 2008.
Six Months Ended June 30, 2009 compared with Six Months Ended June 30, 2008
Combined Operations
Revenues Operating revenues for the six months ended June 30, 2009 were $240.3 million,
compared to $247.3 million for the same period in 2008, a decrease of $7.0 million. Oil and Gas
operating revenues decreased $2.9 million. There was a decrease in flight hours and revenues for
medium aircraft as a result of a voluntary grounding of certain aircraft in the first quarter
related to the January 4, 2009 accident, and a decrease in revenue related to fuel charges. Total
fuel cost is included in direct expense and reimbursement of a portion of these costs above a
contracted per-gallon amount is included in revenue. There was also a decrease in medium aircraft
revenue due to a decrease in activity on the continental
26
shelf, and a decrease in foreign contract revenues due to completion of a contract in 2008. These
were offset in part by an increase in flight hours and revenues for light aircraft in the Oil and
Gas segment, which operate at lower rates and margins as compared to medium aircraft. Air Medical
operating revenues decreased $3.8 million due to decreased patient transports in the independent
provider programs due to the closure during 2009 of six bases and the effects of the current economic
environment. We did not incur any significant costs as a result of these closures.
Total flight hours were 74,310 for the six months ended June 30, 2009, compared to 73,777 for the
six months ended June 30, 2008. Flight hours in the Oil and Gas segment were 56,721 for the six
months ended June 30, 2009, compared to 54,579 for the six months ended June 30, 2008. Air Medical
segment flight hours for the six months ended June 30, 2009 were 17,211, compared to 18,495 for the
six months ended June 30, 2008, a decrease of 1,284 flight hours. This decrease was related to
a decrease of 1,119 patient transports in the independent provider programs. There was a decrease of
approximately 430 transports due to base closures. We believe the remaining decrease in transports
was primarily attributable to the current economic environment.
Other Income and Gains Gain on dispositions of assets was $0.2 million for the six
months ended June 30, 2009, compared to a gain of $4.2 million for the six months ended June 30,
2008. These amounts represent gains on sales of aircraft that no longer meet our strategic needs.
Other income was $0.1 million for the six months ended June 30, 2009, compared to $0.5 million for
the six months ended June 30, 2008. Recent decreases in interest rates have affected interest
income.
Direct Expenses Direct operating expense was $207.0 million for the six months ended
June 30, 2009, compared to $208.0 million for the six months ended June 30, 2008, a decrease of
$1.0 million. Direct expense increased $2.1 million in the Oil and Gas segment and decreased $2.9
million in the Air Medical segment. Technical Services segment direct expense also decreased $0.2
million.
The decrease in total direct expense was due to decreased fuel costs ($8.1 million) due to a
decrease in fuel costs per-gallon compared to the prior year. Fuel costs in the Oil and Gas
segment are invoiced to the customer based on costs above a certain contracted amount and are
included in revenue. There were increases in personnel costs ($2.4 million) due to compensation
rate increase, offset in part by personnel reductions in the Air Medical segment. Additionally,
there were increases in aircraft lease expense ($2.3 million), aircraft insurance ($0.5 million),
aircraft depreciation ($0.7 million) and other items, net ($1.2 million), primarily representing
increases in parts and component repairs. These items are discussed in more detail in the Segment
Discussion below.
Selling, General, and Administrative Expenses Selling, general and administrative
expenses were $16.0 million for the six months ended June 30, 2009, compared to $14.9 million for
the six months ended June 30, 2008. The $1.1 million increase was due to increased legal fees
($1.3 million) and decreases in other items, net ($0.2 million). The increase in legal fees was
related to the pending case with the pilots union.
Interest Expense Interest expense was $7.9 million for the six months ended June 30,
2009, compared to $7.7 million for the six months ended June 30, 2008.
Income Taxes Income tax expense for the six months ended June 30, 2009 was $3.8 million
compared to $8.5 million for the six months ended June 30, 2008. The effective tax rate was 40%
for the six months ended June 30, 2009 and 2008.
Earnings Our net income for the six months ended June 30, 2009 was $5.7 million compared
to $12.8 million for the six months ended June 30, 2008. Earnings before income taxes for the six
months ended June 30, 2009 were $9.6 million compared to $21.4 million for the same period in 2008.
Earnings per diluted share were $0.38 for the six months ended June 30, 2009, compared to earnings
per diluted share
27
of $0.84 for the prior year period. The decrease for the six months ended June 30, 2009 is related
to decreased revenues due to decreased activity on the continental shelf, decreased revenues as a
result of the completion of a foreign contract, and decreased revenues related to fuel charges.
Total fuel cost is included in direct expense and reimbursement of a portion of these costs above a
contracted per-gallon amount is included in revenue. Included in earnings before income taxes for
the six months ended June 30, 2008 are gains on disposition of assets of $4.2 million, offset by a
$2.1 million charge for our aviation insurance and workers compensation as mentioned previously.
We had 15.3 million common shares outstanding during the six months ended June 30, 2009 and 2008.
Segment Discussion
Oil and Gas Oil and Gas segment revenues were $153.8 million for the six months ended June 30,
2009, compared to $156.7 million for the six months ended June 30, 2008, a decrease of $2.9
million. Flight hours were 56,721 for the current year compared to 54,579 for the same period in
2008. There was a decrease in flight hours and revenues for medium aircraft as a result of a
voluntary grounding of certain aircraft in the first quarter related to the January 4, 2009
accident, and a decrease in revenue related to fuel charges. Total fuel cost is included in direct
expense and reimbursement of a portion of these costs above a contracted per-gallon amount is
included in revenue. There was also a decrease in medium aircraft revenue due to a decrease in
activity on the continental shelf, and a decrease in foreign contract revenues due to completion of
a contract in 2008. These amounts were offset in part by an increase in revenue for medium
aircraft related to deepwater activity and an increase in flight hours and revenues for light
aircraft in the Oil and Gas segment, which operate at lower rates and margins as compared to medium
aircraft.
Direct expense in our Oil and Gas segment was $126.2 million for the six months ended June 30,
2009, compared to $124.1 million for the six months ended June 30, 2008, an increase of $2.1
million. Employee compensation expense increased ($2.5 million) primarily due to a compensation
rate increase. Primarily as a result of additional aircraft in the fleet, we experienced increases
in aircraft lease expense ($2.9 million), aircraft depreciation ($0.9 million), aircraft parts usage
($0.5 million) and aircraft insurance ($0.7 million). These increases were offset by a decrease in
fuel expense ($6.3 million) as a result of a decrease in per-gallon fuel costs. Total fuel costs
is included in direct expense and reimbursement of a portion of fuel costs above a contracted
per-gallon amount is included in revenue.
Selling, general and administrative expenses were $0.7 million for the six months ended June 30,
2009 and 2008.
Our Oil and Gas segments operating income was $26.8 million for the six months ended June 30,
2009, compared to $31.9 million for the six months ended June 30, 2008. The $5.1 million decrease
was due to the decrease in revenues of $2.9 million and the increase in direct expenses of $2.1
million. Operating margins were 17% for the six months ended June 30, 2009, compared to 20% for
the six months ended June 30, 2008. The reduction in operating income and margin is primarily due
to decreased medium aircraft revenue due to a decrease in activity on the continental shelf,
decreased foreign contract revenues, and decreased revenue related to fuel charges. The Oil and
Gas segment revenues are primarily driven by contracted aircraft and flight hours. Costs are
primarily fixed and are driven by the number of aircraft, and a portion is variable which is driven
by flight hours.
Air Medical Air Medical segment revenues were $81.7 million for the six months ended June 30,
2009, compared to $85.6 million for the six months ended June 30, 2008, a decrease of $3.9 million
or 5%. The decrease was related to decreased patient transports in the independent provider
programs and also due to the closure of six locations. Patient transports were 10,303 for the six
months ended June 30, 2009, compared to 11,422 for the six
months ended June 30, 2008, a decrease of 1,119. Patient
transports decreased by approximately 430 due to the base closures. We believe the remaining
decrease in transports was primarily attributable to the current economic environment. There was
an increase in hospital-based
28
contracts for the period ended June 30, 2009, due to additional contract awards. Flight hours were
17,211 for the six months ended June 30, 2009, compared to 18,495 for the six months ended June 30,
2008.
Direct expense in our Air Medical segment was $77.5 million for the six months ended June 30, 2009,
compared to $80.4 million for the six months ended June 30, 2008. The $2.9 million decrease was
due to decreases in employee compensation costs ($0.9 million) primarily due to a decrease in
personnel related to independent provider programs closed since June 30, 2008 and also due to a
reduction in support personnel. Fuel expense decreased ($1.7 million) due to a decrease in fuel
costs, and other items decreased, net ($0.3 million).
Selling, general and administrative expenses were $3.1 million for the six months ended June 30,
2009, compared to $4.2 million for the six months ended June 30, 2008. The decrease is due to a
reduction in personnel. Air Medical operations are headquartered in Phoenix, Arizona, where we
maintain significant separate facilities and administrative staff dedicated to this segment. Those
costs are charged directly to the Air Medical segment, resulting in higher selling, general and
administrative expenses as compared to our other reportable segments.
Our Air Medical segments operating income was $1.1 million for the six months ended June 30, 2009,
compared to $1.0 million for the six months ended June 30, 2008. The operating margin was 1% for
the six months ended June 30, 2009 and 2008.
Operating margins in our Air Medical segment have been lower compared to our other segments. There
have been cost reductions recently and six locations have been closed. We will continue to focus
efforts on this segment to improve earnings. The accidents in 2008 and 2009 affected direct
expense due to increased insurance expense. In addition, flight volume was unfavorably affected
following the accidents. Margins in this segment can also be affected by adverse weather
conditions, which reduces volume, and by the payor mix.
Technical Services Technical Services revenues were $4.8 million for the six months ended June
30, 2009, compared to $5.0 million for the six months ended June 30, 2008. Direct expenses in our
Technical Services segment were $3.3 for the six months ended June 30, 2009, compared to $3.5
million for the six months ended June 30, 2008. Our Technical Services segments operating income
was $1.5 million for the six months ended June 30, 2009 and 2008. Operating margins were 30% for
the six months ended June 30, 2009, compared to 29% for the six months ended June 30, 2008.
Technical Services provides maintenance and repairs performed for our existing customers that own
their aircraft. These services are generally labor intensive with higher operating margins as
compared to other segments. In addition, the Technical Services segment also conducts flight
operations which are unrelated to the other segments. Those flight operations are typically
conducted in the first and fourth quarters each year.
Liquidity and Capital Resources
General
Our ongoing liquidity requirements arise primarily from the funding of working capital needs, the
acquisition or leasing of aircraft, the maintenance and refurbishment of aircraft, improvement of
facilities, and acquisition of equipment and inventory. Our principal sources of liquidity
historically have been net cash provided by our operations and borrowings under our revolving
credit facility, as augmented in recent years by the issuance of our Senior Notes in 2002, which
were refinanced in 2006, and the sale of non-voting common stock in 2005 and 2006. To the extent
we do not use cash, short-term investments or borrowings to finance our aircraft acquisitions, we
can typically enter into operating leases to fund these acquisitions. The continued credit crisis
and related turmoil in the global financial system may have an
29
adverse impact on our business and our financial condition. We cannot predict our ability to
obtain lease financing due to the current credit crisis, and this could limit our ability to fund
our future growth and operations. While we are able to currently obtain proposals for lease
financing, we cannot predict future availability nor the effects on pricing for lease financing.
We currently are obtaining operating lease proposals at a cost that is approximately 75 to 100
basis points higher as compared to a year ago.
Cash Flow
Our cash position was $3.4 million at June 30, 2009 compared to $1.2 million at December 31, 2008.
Short-term investments were $59.1 million at June 30, 2009, compared to $42.1 million at December
31, 2008. Working capital was $195.8 million at June 30, 2009, as compared to $174.0 million at
December 31, 2008, an increase of $21.8 million. The increase in working capital was due to an
increase in cash and cash equivalents of $2.3 million, an increase in short-term investments of
$17.0 million due to receipt of proceeds from the disposition of an aircraft and from refunds of
deposits on aircraft, a decrease in accounts receivable of $4.1 million due to decreased revenues,
an increase in inventory of $3.6 million, and a decrease in accounts payable and accrued
liabilities of $3.1 million.
Net cash provided by operating activities was $20.1 million for the six months ended June 30, 2009,
compared to $13.2 million for the six months ended June 30, 2008, an increase of $6.9 million.
There was a decrease in net earnings of $7.1 million. There was also a decrease in accounts
receivable of $4.1 million at June 30, 2009 compared to an increase of $14.1 million at June 30,
2008, producing an increase of $18.1 million in cash from operating activities. Additionally,
inventory increased $3.6 million in the current six-month period compared to an increase of $3.5
million in the prior six-month period, producing a decrease in cash from operating activities of
$0.1 million. Accounts payable and accrued liabilities decreased $3.1 million compared to an
increase of $1.3 million in the same period of 2008, producing a decrease in cash from operating
activities of $4.4 million.
Capital expenditures were $27.7 million for the six months ended June 30, 2009 compared to $38.1
million for the six months ended June 30, 2008. Capital expenditures for 2009 included $25.5
million for aircraft purchases, upgrades, and refurbishments. Capital expenditures for 2008
included $37.1 million for aircraft purchases, upgrades, and refurbishments. Gross proceeds from
aircraft sales and dispositions were $8.9 million for the six months ended June 30, 2009 compared
to $9.0 million for the six months end June 30, 2008.
Credit Facility
At June 30, 2009, we had a $50 million revolving credit facility with a commercial bank that was
due to expire on September 1, 2010. At June 30, 2009, we had $13.4 million in borrowings and $5.1
million in letters of credit outstanding under that facility. Effective August 5, 2009, we
executed a new credit agreement with a syndicate of three commercial banks providing a $75 million
revolving credit facility maturing in September 2011. The interest
rate was reduced to our choice of the prime rate or LIBOR plus 100
basis points. Other terms are substantially similar to the
prior facility. The new facility includes covenants related to
working capital, and funded debt to net
worth, identical to the previous credit agreement, and the
consolidated net worth covenant was increase from $400 million to
$425 million. As of June 30,
2009, we were in compliance with the covenants under that previous agreement.
Contractual Obligations
At June 30, 2009, we had an order for four additional transport category aircraft at an approximate
cost of $86.9 million with delivery dates throughout 2009. The aircraft are planned for service in
the Oil and Gas segment. We intend to fund these aircraft with operating leases.
The table below sets out our contractual obligations as of June 30, 2009 related to our revolving
credit facility, operating lease obligations, the 7.125% Senior Notes due 2013, as well as our
aircraft purchase commitments. The operating leases are not recorded as liabilities on our balance
sheet. Each contractual
30
obligation included in the table contains various terms, conditions, and covenants that, if
violated, accelerate the payment of that obligation. We currently lease 21 aircraft included in
the lease obligations below.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beyond |
|
|
|
Total |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2013 |
|
|
|
|
|
|
|
(Thousands of dollars) |
|
Aircraft purchase
obligations (1) |
|
$ |
86,896 |
|
|
$ |
86,896 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft lease
obligations |
|
|
187,344 |
|
|
|
11,918 |
|
|
|
24,439 |
|
|
|
25,706 |
|
|
|
26,374 |
|
|
|
26,739 |
|
|
|
72,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other lease
obligations |
|
|
19,892 |
|
|
|
1,781 |
|
|
|
3,335 |
|
|
|
2,806 |
|
|
|
1,918 |
|
|
|
1,437 |
|
|
|
8,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
213,350 |
|
|
|
|
|
|
|
13,350 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
507,482 |
|
|
$ |
100,595 |
|
|
$ |
41,124 |
|
|
$ |
28,512 |
|
|
$ |
28,292 |
|
|
$ |
228,176 |
|
|
$ |
80,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
These commitments are for aircraft that we intend to fund from operating leases. |
New Accounting Pronouncements
For a discussion of applicable new accounting pronouncements, see Note 8 to the Condensed
Consolidated Financial Statements.
|
|
|
Item 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The fair market value of our 7.125% Senior Notes will vary as changes occur to general market
interest rates, the remaining maturity of the notes, and our credit worthiness. At June 30, 2009,
the market value of the notes was approximately $178.0 million, based on quoted market indications.
The recent global credit and financial crisis has caused sharp decreases in demand and market
prices for high-yield notes such as ours.
|
|
|
Item 4. |
|
CONTROLS AND PROCEDURES |
The Companys management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by
this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures were effective as of such date to ensure
that information required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange Commission,
including to ensure that such information is accumulated and communicated to management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
There have been no changes in our internal control over financial reporting that occurred during
our most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
31
PART II OTHER INFORMATION
|
|
|
Item 1. |
|
LEGAL PROCEEDINGS |
With respect to the previously reported litigation involving the union representing our domestic
pilots, the trial date on strike-related matters has been postponed from June 29, 2009 to July 6,
2010; otherwise, there have been no material developments regarding those proceedings.
Superior Offshore International Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor Holdings
Inc., ERA Group Inc., ERA Aviation, Inc., and PHI, Inc., Civil Action No. 1:09-cv-00438 on the
docket of the United States District Court for the District of Delaware. This purported class
action was filed on June 12, 2009, on behalf of a class defined to include all direct purchasers of
offshore helicopter services in the Gulf of Mexico from the defendants at any time from January 1,
2001 through December 31, 2005. The suit alleges that the defendants acted jointly to fix,
maintain, or stabilize prices for offshore helicopter services during the above time frame in
violation of the federal antitrust laws. The plaintiff seeks unspecified treble damages,
injunctive relief, costs, and attorneys fees. The outcome of this matter cannot be reasonably
assessed at this time. The Company intends to aggressively defend itself in this matter.
For information regarding Legal Proceedings, see Item 3 of our 2008 Form 10-K.
|
|
|
Potential health care legislation and regulations could
have a material impact on our business. |
The federal and state governments
continue to seriously consider many broad-based
legislative and regulatory proposals that could materially impact various aspects of the health
care system. The proposals vary, and include a public health plan that would compete with public
and private health plans for individual and small business customers, individual insurance
requirements, the expansion of eligibility under existing Medicaid and/or Federal Employees Health
Benefit Plan programs, minimum medical benefit ratios for health plans, mandatory issuance of
insurance coverage, and requirements that would limit the ability of health plans and insurers to
vary premiums based on assessments of underlying risk. While certain of these measures would
adversely affect collection rates in our Air Medical operations, at this time we cannot predict the
extent of the impact of these proposals on our business or results of operations.
Item 1.A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2008
includes a discussion of our risk factors.
|
|
|
Item 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
|
|
|
Item 3. |
|
DEFAULTS UPON SENIOR SECURITIES |
None.
32
|
|
|
Item 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
At an annual meeting of stockholders on May 5, 2009, the following proposals were adopted by the
margins indicated:
|
1. |
|
To elect a Board of Directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified. |
|
|
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|
|
|
|
|
Name of Director |
|
Number of Shares |
|
|
|
For |
|
|
Withheld |
|
Al A. Gonsoulin |
|
|
1,500,580 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Lance F. Bospflug |
|
|
1,500,580 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Arthur J. Breault, Jr. |
|
|
1,500,580 |
|
|
|
0 |
|
|
|
|
|
|
|
|
C. Russell Luigs |
|
|
1,500,580 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Richard H. Matzke |
|
|
1,500,580 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Thomas H. Murphy |
|
|
1,500,580 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
2. |
|
To ratify the appointment of Deloitte & Touche as PHIs independent registered
public accounting firm for the fiscal year ending December 31,
2009 For: 1,500,580; Against: 0; Abstain: 0. |
|
|
|
Item 5. |
|
OTHER INFORMATION |
None.
(a) Exhibits
|
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|
|
|
3.1 |
|
|
(i)
|
|
Composite Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to PHIs Report on Form 10-Q filed on August 7, 2008). |
|
|
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|
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|
|
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|
(ii)
|
|
Amended and Restated By-laws of the Company (incorporated by reference to Exhibit
3.1 to PHIs Report on Form 8-K filed December 18, 2007). |
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
Amended and Restated Loan Agreement dated as of March 31,
2008 by and among PHI,
Inc., Air Evac Services, Inc., PHI Tech Services, Inc. (formerly Evangeline Airmotive,
Inc.), and International Helicopter Transport, Inc. and Whitney National Bank
(incorporated by reference to Exhibit 4.1 to PHIs Report on Form 10-Q filed on May 8,
2008). |
|
|
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4.2 |
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First Amendment dated as of August
5, 2009 to Amended and Restated Loan Agreement dated as of
March 31, 2008 by and among PHI, Inc., Air Evac Services, Inc.,
PHI Tech Services, Inc. (formerly Evangeline Airmotive, Inc.), and
International Helicopter Transport, Inc. and Whitney National Bank. |
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4.3 |
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Indenture dated April 12, 2006 among PHI, Inc., the Subsidiary Guarantors named
therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.2 to
PHIs Report on Form 8-K filed on April 13, 2006). |
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31.1 |
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chairman and Chief Executive Officer. |
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31.2 |
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Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 by Michael J. McCann, Chief
Financial Officer. |
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32.1 |
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Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 by Al A. Gonsoulin,
Chairman and Chief Executive Officer. |
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32.2 |
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Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 by Michael J. McCann, Chief
Financial Officer. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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PHI, Inc.
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August 10, 2009 |
By: |
/s/ Al A. Gonsoulin
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Al A. Gonsoulin |
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Chairman and Chief Executive Officer |
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August 10, 2009 |
By: |
/s/ Michael J. McCann
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Michael J. McCann |
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Chief Financial Officer |
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