##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended: March 31, 2010
 or
 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.
  Louisiana
    
    72-0395707(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)2001 SE Evangeline ThruwayLafayette, Louisiana
    
    70508(Address of principal executive offices)
    
    (Zip Code)
 (337) 235-2452
 þ o
 o o
  Large accelerated filer: o
    
    Accelerated filer: þ
    
    Non-accelerated filer:   o(Do not check if a smaller reporting company)
    
    Smaller Reporting Company: o
 o þ
  Class
    
    Outstanding at April 30, 2010Voting Common Stock
    
    2,852,616 sharesNon-Voting Common Stock
    
    12,458,992 shares




---



##### 



PHI, INC.
 Index  Form 10-Q
 Part I  Financial InformationItem 1. Financial Statements  UnauditedCondensed Consolidated Balance Sheets  March 31, 2010
and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations  Three
months ended March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Shareholders Equity 
Three months ended March 31, 2010 and 2009
    
    
    5Condensed Consolidated Statements of Cash Flows  Three
months ended March 31, 2010 and 2009
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II  Other InformationItem 1. Legal Proceedings
    
    
    27Item 1.A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Thousands of dollars)
 (Unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent Assets:Cash
    
    $
    7,353
    
    
    $
    2,501Short-term investments
    
    
    76,140
    
    
    
    75,138Accounts receivable  netTrade
    
    
    85,723
    
    
    
    90,518Other
    
    
    4,367
    
    
    
    3,885Inventories of spare parts  net
    
    
    62,184
    
    
    
    61,501Other current assets
    
    
    11,399
    
    
    
    11,018Income taxes receivable
    
    
    729
    
    
    
    740Total current assets
    
    
    247,895
    
    
    
    245,301Other
    
    
    10,819
    
    
    
    11,669Property and equipment  net
    
    
    548,128
    
    
    
    548,536Total assets
    
    $
    806,842
    
    
    $
    805,506LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    12,728
    
    
    $
    14,935Accrued liabilities
    
    
    30,663
    
    
    
    23,342Total current liabilities
    
    
    43,391
    
    
    
    38,277Long-term debt
    
    
    208,105
    
    
    
    218,305Deferred income taxes
    
    
    76,089
    
    
    
    73,409Other long-term liabilities
    
    
    9,786
    
    
    
    10,067Total liabilities
    
    
    337,371
    
    
    
    340,058Commitments and contingencies (Note 3)Shareholders Equity:Voting common stock
    
    
    285
    
    
    
    285Non-voting common stock
    
    
    1,246
    
    
    
    1,246Additional paid-in capital
    
    
    291,403
    
    
    
    291,403Accumulated other comprehensive loss
    
    
    (21
    )
    
    
    (13
    )Retained earnings
    
    
    176,558
    
    
    
    172,527Total shareholders equity
    
    
    469,471
    
    
    
    465,448Total liabilities and shareholders equity
    
    $
    806,842
    
    
    $
    805,506
  3




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PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Thousands of dollars and shares, except per share data)
 (Unaudited)
 Quarter EndedMarch 31,2010
    
    
    2009Operating revenues, net
    
    $
    121,609
    
    
    $
    116,952Gain on disposition of assets, net
    
    
    
    
    
    
    272Other, principally interest income
    
    
    37
    
    
    
    63121,646
    
    
    
    117,287Expenses:Direct expenses
    
    
    104,207
    
    
    
    102,127Selling, general and
administrative expenses
    
    
    6,725
    
    
    
    7,824Interest expense
    
    
    3,996
    
    
    
    3,879114,928
    
    
    
    113,830Earnings before income taxes
    
    
    6,718
    
    
    
    3,457Income tax expense
    
    
    2,687
    
    
    
    1,382Net earnings
    
    $
    4,031
    
    
    $
    2,075Weighted average shares
outstanding:Basic
    
    
    15,312
    
    
    
    15,302Diluted
    
    
    15,312
    
    
    
    15,317Net earnings per shareBasic
    
    $
    0.26
    
    
    $
    0.14Diluted
    
    $
    0.26
    
    
    $
    0.14
  4




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PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 (Thousands of dollars and shares)
 (Unaudited)
 Accumulated
    
    
    
    
    
    
    TotalVoting
    
    
    Non-Voting
    
    
    Additional
    
    
    Other Com-
    
    
    
    
    
    
    Share-Common Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    prehensive
    
    
    Retained
    
    
    HoldersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance at December 31, 2009
    
    
    2,853
    
    
    $
    285
    
    
    
    12,459
    
    
    $
    1,246
    
    
    $
    291,403
    
    
    $
    (13
    )
    
    $
    172,527
    
    
    $
    465,448Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,031
    
    
    
    4,031Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Total comprehensive income,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,023Balance at March 31, 2010
    
    
    2,853
    
    
    $
    285
    
    
    
    12,459
    
    
    $
    1,246
    
    
    $
    291,403
    
    
    $
    (21
    )
    
    $
    176,558
    
    
    $
    469,471
 Accumulated
    
    
    
    
    
    
    TotalVoting
    
    
    Non-Voting
    
    
    Additional
    
    
    Other Com-
    
    
    
    
    
    
    Share-Common Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    prehensive
    
    
    Retained
    
    
    HoldersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance at December 31, 2008
    
    
    2,853
    
    
    $
    285
    
    
    
    12,449
    
    
    $
    1,245
    
    
    $
    291,262
    
    
    $
    45
    
    
    $
    159,559
    
    
    $
    452,396Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,075
    
    
    
    2,075Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (49
    )Total comprehensive income,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,026Balance at March 31, 2009
    
    
    2,853
    
    
    $
    285
    
    
    
    12,449
    
    
    $
    1,245
    
    
    $
    291,262
    
    
    $
    (4
    )
    
    $
    161,634
    
    
    $
    454,422
  5




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PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Thousands of dollars)
 (Unaudited)
 Quarter EndedMarch 31,2010
    
    
    2009Operating activities:Net earnings
    
    $
    4,031
    
    
    $
    2,075Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation
    
    
    6,689
    
    
    
    7,079Deferred income taxes
    
    
    2,680
    
    
    
    1,349Gain on asset dispositions
    
    
    
    
    
    
    (272
    )Other
    
    
    233
    
    
    
    233Changes in operating assets and liabilities
    
    
    8,383
    
    
    
    646Net cash provided by operating activities
    
    
    22,016
    
    
    
    11,110Investing activities:Purchase of property and equipment
    
    
    (5,963
    )
    
    
    (11,254
    )Proceeds from asset dispositions
    
    
    
    
    
    
    8,826Purchase of short-term investments
    
    
    (1,001
    )
    
    
    (14,368
    )Proceeds from sale of short-term investments
    
    
    
    
    
    
    7,562Net cash used in investing activities
    
    
    (6,964
    )
    
    
    (9,234
    )Financing activities:Payments on line of credit
    
    
    (10,200
    )
    
    
    Net cash used in financing activities
    
    
    (10,200
    )
    
    
    Increase in cash and cash equivalents
    
    
    4,852
    
    
    
    1,876Cash and cash equivalents, beginning of period
    
    
    2,501
    
    
    
    1,159Cash and cash equivalents, end of period
    
    $
    7,353
    
    
    $
    3,035Supplemental Disclosures Cash Flow InformationCash paid during the period for:Interest
    
    $
    243
    
    
    $
    93Income taxes
    
    $
    5
    
    
    $
    12Noncash investing activities:Accrued payables related to purchase of property and
equipment
    
    $
    376
    
    
    $
    153
  6




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. General
   2. Segment Information
    Oil and Gas Segment.
   7




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Air Medical Segment.
    AccountsRevenue
    
    ReceivableQuarter Ended
    
    Quarter EndedMarch 31,
    
    March 31,2010
    
    2009
    
    2010
    
    2009Gross billings
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Provision for contractual
discounts (1)
    
    
    55
    %
    
    
    53
    %
    
    
    38
    %
    
    
    35
    %Provision for uncompensated care
    
    
    8
    %
    
    
    9
    %
    
    
    30
    %
    
    
    20
    %
 
 1)
    
    The increase in the provision for contractual discounts is related to rate increases
in gross billings, as a higher percentage of the rate increase portion of the gross
billing is not collected. 8




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Quarter EndedMarch 31,2010
    
    2009Medicaid
    
    
    17
    %
    
    
    13
    %Medicare
    
    
    21
    %
    
    
    19
    %Insurance
    
    
    61
    %
    
    
    65
    %Self Pay
    
    
    1
    %
    
    
    3
    %
  Technical Services Segment.
  9




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Quarter EndedMarch 31,2010
    
    
    2009(Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    84,940
    
    
    $
    74,825Air Medical
    
    
    33,569
    
    
    
    39,093Technical Services
    
    
    3,100
    
    
    
    3,034Total operating revenues
    
    
    121,609
    
    
    
    116,952Segment direct expenses (1)Oil and Gas
    
    
    70,253
    
    
    
    61,284Air Medical
    
    
    31,626
    
    
    
    38,878Technical Services
    
    
    2,328
    
    
    
    1,965Total direct expenses
    
    
    104,207
    
    
    
    102,127Segment selling, general and administrative expensesOil and Gas
    
    
    267
    
    
    
    387Air Medical
    
    
    1,295
    
    
    
    1,489Technical Services
    
    
    7
    
    
    
    14Total selling, general and administrative expenses
    
    
    1,569
    
    
    
    1,890Total direct and selling, general and administrative expenses
    
    
    105,776
    
    
    
    104,017Net segment profit (loss)Oil and Gas
    
    
    14,420
    
    
    
    13,154Air Medical
    
    
    648
    
    
    
    (1,274
    )Technical Services
    
    
    765
    
    
    
    1,055Total net segment profit
    
    
    15,833
    
    
    
    12,935Other, net (2)
    
    
    37
    
    
    
    335Unallocated selling, general and administrative costs (1)
    
    
    (5,156
    )
    
    
    (5,934
    )Interest expense
    
    
    (3,996
    )
    
    
    (3,879
    )Earnings before income taxes
    
    $
    6,718
    
    
    $
    3,457
 
 (1)
    
    Included in direct expenses and unallocated selling, general, and administrative costs are
the depreciation expense amounts below: Quarter EndedMarch 31,2010
    
    
    2009Oil and Gas
    
    $
    4,240
    
    
    $
    4,243Air Medical
    
    
    1,989
    
    
    
    1,985Technical Services
    
    
    127
    
    
    
    100Total
    
    $
    6,356
    
    
    $
    6,328Unallocated SG&A
    
    $
    333
    
    
    $
    751
 
 (2)
    
    Consists of gains on disposition of property and equipment, and other income. 10




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3. Commitments and Contingencies
 Environmental Matters 
 Legal Matters
  Superior Offshore International Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor Holdings
Inc., ERA Group Inc., ERA Aviation, Inc., and PHI, Inc.,
 Operating Leases
 11




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4. Long-term Debt
 - - -
   5. Valuation Accounts
  12




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March 31,
    
    December 31,2010
    
    2009Gross Accounts Receivable
    
    
    100
    %
    
    
    100
    %Allowance for Contractual Discounts
    
    
    38
    %
    
    
    34
    %Allowance for Uncompensated Care
    
    
    30
    %
    
    
    30
    %
  6. Employees
 Employee Incentive Compensation 
  7. Fair Value Measurements
     13




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March 31, 2010
    
    
    December 31, 2009Quoted prices in
    
    
    Quoted prices inactive markets for
    
    
    active markets forIdentical Assets
    
    
    Identical Assets(Level 1)
    
    
    (Level 1)(Thousands of dollars)Short-term investments
    
    $
    76,140
    
    
    $
    75,138Investments in other assets
    
    
    3,859
    
    
    
    4,239Total
    
    $
    79,999
    
    
    $
    79,377
  8. Recent Accounting Pronouncements
  9. Shareholders Equity
  10. Condensed Consolidating Financial Information
   14




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PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 March 31, 2010ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    6,633
    
    
    $
    720
    
    
    $
    
    
    
    $
    7,353Short-term investments
    
    
    76,140
    
    
    
    
    
    
    
    
    
    
    
    76,140Accounts receivable  net
    
    
    79,017
    
    
    
    11,073
    
    
    
    
    
    
    
    90,090Intercompany receivable
    
    
    
    
    
    
    74,495
    
    
    
    (74,495
    )
    
    
    Inventories of spare parts  net
    
    
    62,184
    
    
    
    
    
    
    
    
    
    
    
    62,184Other current assets
    
    
    11,375
    
    
    
    24
    
    
    
    
    
    
    
    11,399Income taxes receivable
    
    
    729
    
    
    
    
    
    
    
    
    
    
    
    729Total current assets
    
    
    236,078
    
    
    
    86,312
    
    
    
    (74,495
    )
    
    
    247,895Investment in subsidiaries and other
    
    
    73,281
    
    
    
    
    
    
    
    (73,281
    )
    
    
    Other assets
    
    
    10,791
    
    
    
    28
    
    
    
    
    
    
    
    10,819Property and equipment  net
    
    
    535,299
    
    
    
    12,829
    
    
    
    
    
    
    
    548,128Total assets
    
    $
    855,449
    
    
    $
    99,169
    
    
    $
    (147,776
    )
    
    $
    806,842LIABILITIES AND
SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    11,923
    
    
    $
    805
    
    
    $
    
    
    
    $
    12,728Accrued liabilities
    
    
    25,628
    
    
    
    5,035
    
    
    
    
    
    
    
    30,663Intercompany payable
    
    
    74,495
    
    
    
    
    
    
    
    (74,495
    )
    
    
    Total current liabilities
    
    
    112,046
    
    
    
    5,840
    
    
    
    (74,495
    )
    
    
    43,391Long-term debt
    
    
    208,105
    
    
    
    
    
    
    
    
    
    
    
    208,105Deferred income taxes and other long-term
liabilities
    
    
    65,827
    
    
    
    20,048
    
    
    
    
    
    
    
    85,875Shareholders Equity:Paid-in capital
    
    
    292,934
    
    
    
    2,674
    
    
    
    (2,674
    )
    
    
    292,934Accumulated other comprehensive loss
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Retained earnings
    
    
    176,558
    
    
    
    70,607
    
    
    
    (70,607
    )
    
    
    176,558Total shareholders equity
    
    
    469,471
    
    
    
    73,281
    
    
    
    (73,281
    )
    
    
    469,471Total liabilities and
shareholders equity
    
    $
    855,449
    
    
    $
    99,169
    
    
    $
    (147,776
    )
    
    $
    806,842
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 15




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PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
 December 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,678
    
    
    $
    823
    
    
    $
    
    
    
    $
    2,501Short-term investments
    
    
    75,138
    
    
    
    
    
    
    
    
    
    
    
    75,138Accounts receivable  net
    
    
    83,247
    
    
    
    11,156
    
    
    
    
    
    
    
    94,403Intercompany receivable
    
    
    
    
    
    
    71,484
    
    
    
    (71,484
    )
    
    
    Inventories of spare parts  net
    
    
    61,501
    
    
    
    
    
    
    
    
    
    
    
    61,501Other current assets
    
    
    11,001
    
    
    
    17
    
    
    
    
    
    
    
    11,018Income taxes receivable
    
    
    740
    
    
    
    
    
    
    
    
    
    
    
    740Total current assets
    
    
    233,305
    
    
    
    83,480
    
    
    
    (71,484
    )
    
    
    245,301Investment in subsidiaries and others
    
    
    71,291
    
    
    
    
    
    
    
    (71,291
    )
    
    
    Other assets
    
    
    11,549
    
    
    
    120
    
    
    
    
    
    
    
    11,669Property and equipment, net
    
    
    535,539
    
    
    
    12,997
    
    
    
    
    
    
    
    548,536Total assets
    
    $
    851,684
    
    
    $
    96,597
    
    
    $
    (142,775
    )
    
    $
    805,506LIABILITIES AND
SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    13,746
    
    
    $
    1,189
    
    
    $
    
    
    
    $
    14,935Accrued liabilities
    
    
    19,028
    
    
    
    4,314
    
    
    
    
    
    
    
    23,342Intercompany payable
    
    
    71,484
    
    
    
    
    
    
    
    (71,484
    )
    
    
    Total current liabilities
    
    
    104,258
    
    
    
    5,503
    
    
    
    (71,484
    )
    
    
    38,277Long-term debt
    
    
    218,305
    
    
    
    
    
    
    
    
    
    
    
    218,305Deferred income taxes and other long-term
liabilities
    
    
    63,673
    
    
    
    19,803
    
    
    
    
    
    
    
    83,476Shareholders Equity:Common stock and paid-in capital
    
    
    292,934
    
    
    
    2,674
    
    
    
    (2,674
    )
    
    
    292,934Accumulated other comprehensive
loss
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Retained earnings
    
    
    172,527
    
    
    
    68,617
    
    
    
    (68,617
    )
    
    
    172,527Total shareholders equity
    
    
    465,448
    
    
    
    71,291
    
    
    
    (71,291
    )
    
    
    465,448Total liabilities and
shareholders equity
    
    $
    851,684
    
    
    $
    96,597
    
    
    $
    (142,775
    )
    
    $
    805,506
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 16




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
 For the quarter ended March 31, 2010ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    104,050
    
    
    $
    17,559
    
    
    $
    
    
    
    $
    121,609Management fees
    
    
    702
    
    
    
    
    
    
    
    (702
    )
    
    
    Other, principally interest income
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37104,789
    
    
    
    17,559
    
    
    
    (702
    )
    
    
    121,646Expenses:Direct expenses
    
    
    91,112
    
    
    
    13,095
    
    
    
    
    
    
    
    104,207Management fees
    
    
    
    
    
    
    702
    
    
    
    (702
    )
    
    
    Selling, general, and administrative
    
    
    6,280
    
    
    
    445
    
    
    
    
    
    
    
    6,725Equity in net income of consolidated
subsidiaries
    
    
    (1,990
    )
    
    
    
    
    
    
    1,990
    
    
    
    Interest expense
    
    
    3,996
    
    
    
    
    
    
    
    
    
    
    
    3,99699,398
    
    
    
    14,242
    
    
    
    1,288
    
    
    
    114,928Earnings before income taxes
    
    
    5,391
    
    
    
    3,317
    
    
    
    (1,990
    )
    
    
    6,718Income tax expense
    
    
    1,360
    
    
    
    1,327
    
    
    
    
    
    
    
    2,687Net earnings
    
    $
    4,031
    
    
    $
    1,990
    
    
    $
    (1,990
    )
    
    $
    4,031
 For the quarter ended March 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    100,214
    
    
    $
    16,738
    
    
    $
    
    
    
    $
    116,952Management fees
    
    
    670
    
    
    
    
    
    
    
    (670
    )
    
    
    Gain on dispositions of assets, net
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    272Other, principally interest income
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    63101,219
    
    
    
    16,738
    
    
    
    (670
    )
    
    
    117,287Expenses:Direct expenses
    
    
    87,579
    
    
    
    14,548
    
    
    
    
    
    
    
    102,127Management fees
    
    
    
    
    
    
    670
    
    
    
    (670
    )
    
    
    Selling, general, and administrative
    
    
    7,211
    
    
    
    613
    
    
    
    
    
    
    
    7,824Equity in net income of consolidated
subsidiaries
    
    
    (544
    )
    
    
    
    
    
    
    544
    
    
    
    Interest expense
    
    
    3,879
    
    
    
    
    
    
    
    
    
    
    
    3,87998,125
    
    
    
    15,831
    
    
    
    (126
    )
    
    
    113,830Earnings before income taxes
    
    
    3,094
    
    
    
    907
    
    
    
    (544
    )
    
    
    3,457Income tax expense
    
    
    1,019
    
    
    
    363
    
    
    
    
    
    
    
    1,382Net earnings
    
    $
    2,075
    
    
    $
    544
    
    
    $
    (544
    )
    
    $
    2,075
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 17




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 For the quarter ended March 31, 2010ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    21,849
    
    
    $
    167
    
    
    $
    
    
    
    $
    22,016Investing activities:Purchase of property and equipment
    
    
    (5,693
    )
    
    
    (270
    )
    
    
    
    
    
    
    (5,963
    )Purchase of short-term investments
    
    
    (1,001
    )
    
    
    
    
    
    
    
    
    
    
    (1,001
    )Net cash used in investing activities
    
    
    (6,694
    )
    
    
    (270
    )
    
    
    
    
    
    
    (6,964
    )Financing activities:Payments on line of credit
    
    
    (10,200
    )
    
    
    
    
    
    
    
    
    
    
    (10,200
    )Net cash used in financing activities
    
    
    (10,200
    )
    
    
    
    
    
    
    
    
    
    
    (10,200
    )Increase in cash and cash equivalents
    
    
    4,955
    
    
    
    (103
    )
    
    
    
    
    
    
    4,852Cash and cash equivalents, beginning of
period
    
    
    1,678
    
    
    
    823
    
    
    
    
    
    
    
    2,501Cash and cash equivalents, end of period
    
    $
    6,633
    
    
    $
    720
    
    
    $
    
    
    
    $
    7,353
 For the quarter ended March 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    10,597
    
    
    $
    513
    
    
    $
    
    
    
    $
    11,110Investing activities:Purchase of property and equipment
    
    
    (10,957
    )
    
    
    (297
    )
    
    
    
    
    
    
    (11,254
    )Proceeds from asset dispositions
    
    
    8,826
    
    
    
    
    
    
    
    
    
    
    
    8,826Purchase of short-term investments, net
    
    
    (6,806
    )
    
    
    
    
    
    
    
    
    
    
    (6,806
    )Net cash used in investing activities
    
    
    (8,937
    )
    
    
    (297
    )
    
    
    
    
    
    
    (9,234
    )Increase in cash and cash equivalents
    
    
    1,660
    
    
    
    216
    
    
    
    
    
    
    
    1,876Cash and cash equivalents, beginning of
period
    
    
    559
    
    
    
    600
    
    
    
    
    
    
    
    1,159Cash and cash equivalents, end of period
    
    $
    2,219
    
    
    $
    816
    
    
    $
    
    
    
    $
    3,035
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 18




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Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Overview
  19




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20




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Operating Statistics
  Quarter EndedMarch 31,2010
    
    
    2009Flight hours:Oil and Gas
    
    
    27,036
    
    
    
    26,480Air Medical (1)
    
    
    7,091
    
    
    
    8,205Technical Services
    
    
    485
    
    
    
    378Total
    
    
    34,612
    
    
    
    35,063Air Medical Transports(2)
    
    
    3,973
    
    
    
    4,958Aircraft operated at period end:Oil and Gas (3)
    
    
    163
    
    
    
    155Air Medical (4)
    
    
    86
    
    
    
    89Technical Services
    
    
    6
    
    
    
    6Total (3) (4)
    
    
    255
    
    
    
    250
 
 (1)
    
    Flight hours include 1,801 flight hours associated with hospital-based contracts, compared
to 1,871 flight hours in the prior year quarter.(2)
    
    Represents individual patient transports for the period.(3)
    
    Includes nine aircraft as of March 31, 2010 and 2009 that are customer owned.(4)
    
    Includes seven aircraft as of March 31, 2010 and March 31, 2009 that are customer owned. Results of Operations
 Quarter Ended March 31, 2010 compared with Quarter Ended March 31, 2009
 Combined Operations
 Revenues
  21




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##### Table of Contents



Other Income and Gains
  Direct Expenses
 Selling, General, and Administrative Expenses
 Interest Expense
 Income Taxes
 Net Earnings
 Segment Discussion
 Oil and Gas
 22




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Air Medical
   23




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##### Table of Contents



Technical Services
 Liquidity and Capital Resources
 General
   Cash Flow
  24




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Long Term Debt
    Contractual Obligations
  25




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##### Table of Contents



Payment Due by YearBeyondTotal
    
    
    2010 (1)
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2014(Thousands of dollars)Aircraft
lease obligations
    
    $
    221,549
    
    
    $
    24,245
    
    
    $
    33,500
    
    
    $
    34,167
    
    
    $
    34,532
    
    
    $
    34,532
    
    
    $
    60,573Other lease obligations (2)
    
    
    17,540
    
    
    
    2,557
    
    
    
    2,908
    
    
    
    1,976
    
    
    
    1,465
    
    
    
    1,292
    
    
    
    7,342Long-term debt
    
    
    208,105
    
    
    
    
    
    
    
    8,105
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    $
    447,194
    
    
    $
    26,802
    
    
    $
    44,513
    
    
    $
    36,143
    
    
    $
    235,997
    
    
    $
    35,824
    
    
    $
    67,915
 
 (1)
    
    These amounts are subsequent to March 31, 2010. Aircraft rent expense for the three
months ended March 31, 2010 was $8.3 million.(2)
    
    There are two additional lease option purchases that we intend to exercise this year.
The total for the two aircraft is $25.3 million. We will fund this purchase with cash flow
from operations and our credit facility. New Accounting Pronouncements
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 Item 4. CONTROLS AND PROCEDURES
   26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
   
 Item 1. A. RISK FACTORS
 The April 20, 2010 oil rig explosion in the Gulf of Mexico and subsequent flow of oil into the
waters of the Gulf of Mexico could have a material adverse effect on our business.
  New and proposed health care legislation and regulation could have a material impact on our
business.
  New and proposed health care legislation and regulation could increase the cost of providing
medical benefits to employees, which could have an adverse impact on our results of operations.
  27




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##### Table of Contents



Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 Item 3. DEFAULTS UPON SENIOR SECURITIES
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  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.
 Number of SharesName of Director
    
    For
    
    WithheldAl A. Gonsoulin
    
    
    1,501,580
    
    
    
    0Lance F. Bospflug
    
    
    1,501,580
    
    
    
    0Arthur J. Breault, Jr.
    
    
    1,501,580
    
    
    
    0C. Russell Luigs
    
    
    1,501,580
    
    
    
    0Richard H. Matzke
    
    
    1,501,580
    
    
    
    0Thomas H. Murphy
    
    
    1,501,580
    
    
    
    0
  
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
  3.1
    
    (i)
    
    Composite Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to PHIs Report on Form 10-Q filed on August 7, 2008).
 (ii)
    
    Amended and Restated By-laws of the Company (incorporated by reference to Exhibit
3.1 to PHIs 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 PHIs Report on Form 10-Q filed on
May 8, 2008).
 28




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##### Table of Contents



4.2
    
    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 (incorporated by reference to
Exhibit 4.2 to PHIs Report on Form 10-Q filed on August 10, 2009).4.3
    
    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
PHIs Report on Form 8-K filed on April 13, 2006).31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chairman and Chief Executive Officer.31.2
    
    Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 by Michael J. McCann, Chief
Financial Officer.32.1
    
    Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 by Al A. Gonsoulin,
Chairman and Chief Executive Officer.32.2
    
    Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 by Michael J. McCann, Chief
Financial Officer.
 
 SIGNATURES
  PHI, Inc.May 5, 2010
    By:
    /s/ Al A. GonsoulinAl A. GonsoulinChairman and Chief Executive OfficerMay 5, 2010
    By:
    /s/ Michael J. McCannMichael J. McCannChief Financial Officer 29