##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
 FORM 10-Q þQuarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934  OR o
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 
 Commission file number: 0-9827 PETROLEUM HELICOPTERS, INC.  Louisiana
(State or other jurisdiction of incorporation or organization)
    
    72-0395707
(I.R.S. Employer Identification No.)2001 SE Evangeline Thruway
Lafayette, Louisiana
(Address of principal executive offices)
    
    70508
(Zip Code)
 Registrants 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 is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes: þ No: o APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date. Class
    
    Outstanding at April 15, 2005Voting Common Stock
Non-Voting Common Stock
    
    2,852,616 shares
2,531,392 shares




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PETROLEUM HELICOPTERS, INC. Index  Form 10-Q Part I  Financial InformationItem 1. Financial Statements  UnauditedCondensed Consolidated Balance Sheets  March 31, 2005
and December 31, 2004
    
    
    3Condensed Consolidated Statements of Operations  Quarter
Ended March 31, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows  Quarter
Ended March 31, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    .        6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about
Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22Part II  Other InformationItem 1. Legal Proceedings
    
    
    23Item 6. Exhibits and Reports on Form 8-K
    
    
    23Signatures
    
    
    24Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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PART I  FINANCIAL INFORMATION 
 Item 1. FINANCIAL STATEMENTS PETROLEUM HELICOPTERS,
INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data)
(Unaudited)
 March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    20,242
    
    
    $
    18,008Accounts receivable  net of allowance:Trade
    
    
    59,140
    
    
    
    58,242Other
    
    
    3,434
    
    
    
    1,134Inventory, net
    
    
    41,884
    
    
    
    39,225Other current assets
    
    
    11,069
    
    
    
    10,695Refundable income taxes
    
    
    1,102
    
    
    
    1,101Total current assets
    
    
    136,871
    
    
    
    128,405Property and equipment, net
    
    
    251,295
    
    
    
    253,241Other
    
    
    12,024
    
    
    
    12,527Total Assets
    
    $
    400,190
    
    
    $
    394,173LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    21,693
    
    
    $
    22,735Accrued liabilities
    
    
    7,966
    
    
    
    6,472Accrued vacation payable
    
    
    3,977
    
    
    
    3,775Accrued insurance payable
    
    
    
    
    
    
    1,526Accrued interest payable
    
    
    7,865
    
    
    
    3,181Notes payable
    
    
    2,000
    
    
    
    2,000Total current liabilities
    
    
    43,501
    
    
    
    39,689Long-term debt
    
    
    210,275
    
    
    
    208,275Deferred income taxes
    
    
    29,764
    
    
    
    29,805Other long-term liabilities
    
    
    6,316
    
    
    
    6,429Commitments and contingencies (Note 3)Shareholders Equity:Voting common stock  par value of $0.10;
authorized shares of 12,500,000
    
    
    285
    
    
    
    285Non-voting common stock  par value of $0.10;
authorized shares of 12,500,000
    
    
    253
    
    
    
    253Additional paid-in capital
    
    
    15,098
    
    
    
    15,098Retained earnings
    
    
    94,698
    
    
    
    94,339Total shareholders equity
    
    
    110,334
    
    
    
    109,975Total liabilities and shareholders equity
    
    $
    400,190
    
    
    $
    394,173
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3




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PETROLEUM HELICOPTERS,
INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Quarter EndedMarch 31,2005
    
    
    2004Operating revenues
    
    $
    74,239
    
    
    $
    66,973Gain on disposition of property
and equipment, net
    
    
    646
    
    
    
    673Other
    
    
    96
    
    
    
    8374,981
    
    
    
    67,729Expenses:Direct expenses
    
    
    64,036
    
    
    
    57,285Selling, general and
administrative expenses
    
    
    5,229
    
    
    
    5,144Interest expense
    
    
    5,117
    
    
    
    5,01674,382
    
    
    
    67,445Earnings before income taxes
    
    
    599
    
    
    
    284Income taxes
    
    
    240
    
    
    
    281Net earnings
    
    $
    359
    
    
    $
    3Weighted average common shares
outstanding:Basic
    
    
    5,383
    
    
    
    5,383Diluted
    
    
    5,467
    
    
    
    5,486Net earnings per common shareBasic
    
    $
    0.07
    
    
    $
    Diluted
    
    $
    0.07
    
    
    $
    
 The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements. 4




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PETROLEUM HELICOPTERS,
INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 Quarter EndedMarch 31,2005
    
    
    2004Cash flows from operating activities:Net earnings
    
    $
    359
    
    
    $
    3Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation
    
    
    7,066
    
    
    
    6,710Deferred income taxes
    
    
    (41
    )
    
    
    14Gain on disposition of property & equipment, net
    
    
    (646
    )
    
    
    (673
    )Other
    
    
    342
    
    
    
    331Changes in operating assets and liabilities
    
    
    (2,372
    )
    
    
    889Net cash provided by operating activities
    
    
    4,708
    
    
    
    7,274Cash flows from investing activities:Purchase of property and equipment
    
    
    (6,298
    )
    
    
    (13,006
    )Proceeds from asset dispositions
    
    
    1,824
    
    
    
    5,981Net cash used in investing activities
    
    
    (4,474
    )
    
    
    (7,025
    )Cash flows from financing activities:Proceeds from line of credit, net
    
    
    2,000
    
    
    
    3,000Net cash provided by financing activities
    
    
    2,000
    
    
    
    3,000Increase in cash and cash equivalents
    
    
    2,234
    
    
    
    3,249Cash and cash equivalents, beginning of period
    
    
    18,008
    
    
    
    19,872Cash and cash equivalents, end of period
    
    $
    20,242
    
    
    $
    23,121Supplemental Disclosures Cash Flow InformationInterest paid
    
    $
    188
    
    
    $
    69Taxes paid, net
    
    $
    650
    
    
    $
    1
 The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements. 5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 1. General The accompanying unaudited condensed consolidated financial statements include the amounts of
Petroleum Helicopters, 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 financial statements contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2004 and the accompanying notes and Managements Discussion and Analysis of Financial
Condition and Results of Operations. The Companys financial results, particularly as they relate to the Companys Domestic Oil and Gas
operations, are influenced by seasonal fluctuations as discussed in the Companys Annual Report on
Form 10-K for the year ended December 31, 2004. 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. 2. Segment Information The Company has identified four principal segments: Domestic Oil and Gas, Air Medical,
International and Technical Services. The Domestic Oil and Gas segment primarily provides
helicopter services to oil and gas customers operating in the Gulf of Mexico. The Company, both
directly and through its subsidiary, Air Evac Services, Inc. (Air Evac), provides air medical
transportation services for hospitals and medical programs under the independent provider model in
12 states. The International segment, which primarily consists of operations off the West Coast of
Africa, provides helicopter services to oil and gas customers. The Technical Services segment
provides helicopter repair and overhaul services, primarily to flight operations customers, and
original equipment manufacturers. Segment operating income is operating revenues less direct expenses and selling, general, and
administrative costs allocated to the operating segment. Unallocated overhead consists primarily
of corporate selling, general, and administrative costs that the Company does not allocate to the
operating segments. 6




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Summarized financial information concerning the Companys reportable operating segments for the
quarters ended March 31, 2005 and 2004 is as follows: Quarter EndedMarch 31,2005
    
    
    2004(Thousands of dollars)Segment operating revenuesDomestic Oil and Gas
    
    
    44,867
    
    
    
    42,177Air Medical
    
    
    20,784
    
    
    
    16,016International
    
    
    7,018
    
    
    
    5,959Technical Services
    
    
    1,570
    
    
    
    2,821Total operating revenues
    
    
    74,239
    
    
    
    66,973Segment direct expenseDomestic Oil and Gas
    
    
    36,850
    
    
    
    36,674Air Medical
    
    
    21,324
    
    
    
    12,759International
    
    
    4,660
    
    
    
    5,331Technical Services
    
    
    1,202
    
    
    
    2,521Total direct expense
    
    
    64,036
    
    
    
    57,285Segment selling, general and administrative expenseDomestic Oil and Gas
    
    
    246
    
    
    
    26Air Medical
    
    
    1,366
    
    
    
    1,800International
    
    
    44
    
    
    
    3Technical Services
    
    
    3
    
    
    
    4Total selling, general and administrative expense
    
    
    1,659
    
    
    
    1,833Total direct and selling, general and administrative
expense
    
    
    65,694
    
    
    
    59,118Net segment profitDomestic Oil and Gas
    
    
    7,771
    
    
    
    5,477Air Medical
    
    
    (1,906
    )
    
    
    1,457International
    
    
    2,314
    
    
    
    625Technical Services
    
    
    365
    
    
    
    296Total
    
    
    8,544
    
    
    
    7,855Other, net (1)
    
    
    742
    
    
    
    756Unallocated selling, general and administrative costs
    
    
    (3,570
    )
    
    
    (3,311
    )Interest expense
    
    
    (5,117
    )
    
    
    (5,016
    )Earnings before income taxes
    
    
    599
    
    
    
    284
   (1)  

Including gains on disposition of property and equipment, equity in losses of
unconsolidated subsidiaries, and other income. 7




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3. Commitments and Contingencies Environmental Matters The Company has an aggregate estimated liability of $0.2 million as of
March 31, 2005 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. Periodic monitoring and reporting are being conducted. In May, 2003, PHI
submitted a Louisiana Risk Evaluation/Corrective Action Plan (RECAP) standard Site Assessment
Report to the Louisiana Department of Environmental Quality (LDEQ) fully defining the extent and
type of contamination. Once LDEQ completes its review of the site assessment 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 of contamination and, based on the May, 2003 Site
Assessment Report and ongoing monitoring, the Company believes the ultimate remediation costs for
the former Lafayette facility will not be material to the Companys consolidated financial
position, results of operation or liquidity. During 2004, LDEQ advised the Company that groundwater contaminants impacting monitor wells at its
new Lafayette Heliport were originating from an off-site location and that PHI would not be
required to perform further monitoring at the site. On September 1, 2004, LDEQ advised that based
on its review of our Risk Evaluation/Corrective Action Program (RECAP) Reports dated September 28,
2001 and December 16, 2003, it was determined that no further action was necessary at the Amelia
facility. Also during 2004, the Texas Commission on Environmental Quality (TCEQ) agreed that remediation of
the Rockport facility was at a point at which site closure has been granted and no further action
would be required. Final documents granting closure were issued by TCEQ during the first quarter
of 2005. These three developments resulted in a reduction of $0.2 million of the Companys
environmental reserves in 2004 and $0.1 million in 2005. Legal Matters The Company is named as a defendant in various legal actions that have arisen in
the ordinary course of its business and have not been finally adjudicated. The amount, if any, of
ultimate liability with respect to such matters cannot be determined, but in the opinion of
management, the Companys ultimate liability with respect to these actions will not have a material
adverse effect on the Companys consolidated financial position or results of operations or
liquidity. Long-term Debt On April 23, 2002, the Company issued $200 million in principal amount of 9 3/8%
Series A Senior Unsecured Notes due 2009 in a private offering that was exempt from registration
under Rule 144A under the Securities Act of 1933 (the Securities Act). All of the notes were
subsequently exchanged for the Companys 9 3/8% Series B Unsecured Senior Notes due 2009 (the
Series B Senior Notes), pursuant to an exchange offer that was registered under the Securities
Act. The Series B Senior Notes bear annual interest at 9 3/8% payable semi-annually on May 1 and
November 1 of each year and mature in May 2009. The Series B Senior 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 or sales of assets.
As of March 31, 2005, the Company was in compliance with these covenants. We have a $35 million revolving credit facility with a commercial bank, which is scheduled to
expire on July 31, 2006. As of March 31, 2005, we had borrowings of $10.3 million at an interest
rate of 6% and $2.6 million in letters of credit outstanding under the revolving credit facility.
The credit facility includes covenants related to working capital, funded debt to net worth, and
consolidated net worth. As of March 31, 2005, we were in compliance with these covenants. 8




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Operating Leases The Company leases certain aircraft, facilities, and equipment used in its
operations. The related lease agreements, which include both non-cancelable and month-to-month
terms, generally provide for fixed monthly rentals and, for certain real estate leases, renewal
options. The Company generally pays all insurance, taxes, and maintenance expenses associated with
these aircraft, and some leases contain renewal and purchase options. At March 31, 2005, the
Company had approximately $63.0 million in aggregate commitments under operating leases of which
approximately $5.2 million is payable through December 31, 2005, and $6.9 million in total for the
next twelve months. Of the total lease commitments, $44.6 million represents lease commitments for
aircraft and $18.4 million represents facility lease commitments, primarily for the Companys
facilities in Lafayette, Louisiana. Additionally, we will take delivery of two additional heavy transport aircraft in the second
quarter of 2005 and we intend to execute an operating lease with a commercial lender for these
aircraft upon delivery on terms similar to the first two aircraft. Purchase Commitments At March 31, 2005, the Company had purchase commitments or intended to
exercise purchase options for aircraft at an aggregate cost of $187.8 million. As mentioned above, we will take delivery of two additional heavy transport category aircraft in
the second quarter of 2005. The total cost of these additional two aircraft is $32.1 million and
we intend to execute an operating lease for these aircraft. In addition, we have an option to
acquire two additional heavy transport category aircraft from the same manufacturer, which would be
exercised based on customer requirements. Based on customer commitments and discussions with our customers regarding their planned
activities, we have placed orders or intend to exercise purchase options for an additional 21
medium and light aircraft for service in our Domestic Oil and Gas segment at a total cost of $109.4
million with deliveries scheduled in 2005 and 2006. Not included in this total are six aircraft on
order at December 31, 2004, which were delivered in the first quarter 2005. Additionally, we will continue the expansion of the Air Medical operations in 2005, and have placed
orders for an additional twelve aircraft. The cost of these aircraft is $46.3 million and
deliveries are scheduled throughout 2005. 4. Valuation Accounts The Company establishes 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 $0.2 million at March 31, 2005 and December 31, 2004. The Company also establishes valuation reserves related to obsolescent and excess inventory. The
inventory valuation reserves were $6.6 million and $7.0 million at March 31, 2005 and December 31,
2004, respectively. 5. Employee Incentive Compensation In 2002, the Company implemented an incentive compensation plan for non-executive and
non-represented employees. The plan allows the Company to pay up to 7% of earnings before tax upon
achieving a specified earnings threshold. Pursuant to the plan, the Company did not record
incentive compensation expense for the quarter ended March 31, 2005 or the year ended December 31,
2004, because the earnings threshold was not met in either period. 9




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6. Recent Accounting Pronouncements In January 2003, FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities
(FIN 46). FIN 46 requires companies that control another entity through an interest other than a
voting interest to consolidate the controlled entity (for purposes of FIN 46, a variable interest
entity). In December 2003, the FASB issued modifications to FIN 46 (FIN 46R), resulting in
multiple effective dates based on the nature as well as creation date of the particular variable
interest entity. We do not believe that the Company has interests that would be considered
variable interest entities under FIN 46. In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 123R, Share Based Payment. SFAS No. 123R supersedes Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and amends
SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123R is similar to the
approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the Companys income
statement based on their fair values. Pro forma disclosure is no longer an alternative. As
permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees
using the intrinsic value method and, as such, generally recognizes no compensation expense for
employee stock options. Accordingly, the adoption of SFAS No. 123R will have an impact on our
results of operations. The impact of the adoption of this Statement cannot be predicted at this
time because it will depend on levels of share-based payments granted in the future. However, had
we adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the
impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per
share in Note 1 to our audited consolidated financial statements for the year ended December 31,
2004, which are included in our Annual Report on Form 10-K. SFAS No. 123R must be adopted by
January 1, 2006. The Company plans to adopt SFAS No. 123R using the modified-prospective method. In December 2004, FASB issued SFAS No. 153, Exchange of Nonmonetary Assets, an amendment of APB
Opinion No. 29. SFAS No. 153 is based on the principle that exchanges of nonmonetary assets
should be measured based on the fair value of the assets exchanged. ABP Opinion No. 29,
Accounting for Nonmonetary Transactions, previously provided an exception to the basic
measurement principle (fair value) for exchanges of similar productive assets. Under APB Opinion
No. 29, an exchange of a productive asset for a similar productive asset was based on the recorded
amount of the asset relinquished. SFAS No. 153 eliminates this exception and replaces it with an
exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153
becomes effective on July 1, 2005. The Company will apply the requirements of SFAS No. 153
prospectively. 7. Condensed Consolidated Financial Information On April 23, 2002, the Company issued $200 million in principal amount of 9 3/8% Series A Senior
Notes in a private offering. Shortly thereafter, the Series A Notes were exchanged for Series B
Senior Notes, which are fully and unconditionally guaranteed on a senior basis, jointly and
severally, by all of the Companys existing 100% owned operating subsidiaries (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 Petroleum
Helicopters, Inc. (Parent Company Only) and the Guarantor Subsidiaries. The principal
eliminating entries eliminate investments in subsidiaries, intercompany balances, and intercompany
revenues and expenses. 10




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PETROLEUM HELICOPTERS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars) March 31, 2005ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    19,952
    
    
    $
    290
    
    
    $
    
    
    
    $
    20,242Accounts receivable  net of allowance
    
    
    54,579
    
    
    
    7,995
    
    
    
    
    
    
    
    62,574Inventory
    
    
    41,884
    
    
    
    
    
    
    
    
    
    
    
    41,884Other current assets
    
    
    10,489
    
    
    
    580
    
    
    
    
    
    
    
    11,069Refundable income taxes
    
    
    917
    
    
    
    185
    
    
    
    
    
    
    
    1,102Total current assets
    
    
    127,821
    
    
    
    9,050
    
    
    
    
    
    
    
    136,871Property and equipment, net
    
    
    245,973
    
    
    
    5,322
    
    
    
    
    
    
    
    251,295Investment in subsidiaries and other
    
    
    14,407
    
    
    
    30,557
    
    
    
    (32,940
    )
    
    
    12,024Total Assets
    
    $
    388,201
    
    
    $
    44,929
    
    
    $
    (32,940
    )
    
    $
    400,190LIABILITIES AND
SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    28,728
    
    
    $
    1,739
    
    
    $
    (808
    )
    
    $
    29,659Accrued vacation payable
    
    
    3,721
    
    
    
    256
    
    
    
    
    
    
    
    3,977Accrued interest payable
    
    
    7,865
    
    
    
    
    
    
    
    
    
    
    
    7,865Notes payable
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Total current liabilities
    
    
    42,314
    
    
    
    1,995
    
    
    
    (808
    )
    
    
    43,501Long-term debt
    
    
    210,275
    
    
    
    
    
    
    
    
    
    
    
    210,275Deferred income taxes and other long-term
liabilities
    
    
    25,278
    
    
    
    10,609
    
    
    
    193
    
    
    
    36,080Shareholders Equity:Paid-in capital
    
    
    15,636
    
    
    
    4,402
    
    
    
    (4,402
    )
    
    
    15,636Retained earnings
    
    
    94,698
    
    
    
    27,923
    
    
    
    (27,923
    )
    
    
    94,698Total shareholders equity
    
    
    110,334
    
    
    
    32,325
    
    
    
    (32,325
    )
    
    
    110,334Total Liabilities and
Shareholders Equity
    
    $
    388,201
    
    
    $
    44,929
    
    
    $
    (32,940
    )
    
    $
    400,190
 11




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PETROLEUM HELICOPTERS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars) December 31, 2004ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    17,701
    
    
    $
    307
    
    
    $
    
    
    
    $
    18,008Accounts receivable  net of allowance
    
    
    51,868
    
    
    
    7,508
    
    
    
    
    
    
    
    59,376Inventory
    
    
    39,225
    
    
    
    
    
    
    
    
    
    
    
    39,225Other current assets
    
    
    10,631
    
    
    
    64
    
    
    
    
    
    
    
    10,695Refundable income taxes
    
    
    916
    
    
    
    185
    
    
    
    
    
    
    
    1,101Total current assets
    
    
    120,341
    
    
    
    8,064
    
    
    
    
    
    
    
    128,405Property and equipment, net
    
    
    247,798
    
    
    
    5,443
    
    
    
    
    
    
    
    253,241Investment in subsidiaries and other
    
    
    14,910
    
    
    
    27,855
    
    
    
    (30,238
    )
    
    
    12,527Total Assets
    
    $
    383,049
    
    
    $
    41,362
    
    
    $
    (30,238
    )
    
    $
    394,173LIABILITIES AND
SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    29,617
    
    
    $
    1,768
    
    
    $
    (652
    )
    
    $
    30,733Accrued vacation payable
    
    
    3,519
    
    
    
    256
    
    
    
    
    
    
    
    3,775Accrued interest payable
    
    
    3,181
    
    
    
    
    
    
    
    
    
    
    
    3,181Notes payable
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Total current liabilities
    
    
    38,317
    
    
    
    2,024
    
    
    
    (652
    )
    
    
    39,689Long-term debt
    
    
    208,275
    
    
    
    
    
    
    
    
    
    
    
    208,275Deferred income taxes and other long-term
liabilities
    
    
    26,482
    
    
    
    9,559
    
    
    
    193
    
    
    
    36,234Shareholders EquityPaid-in capital
    
    
    15,636
    
    
    
    4,402
    
    
    
    (4,402
    )
    
    
    15,636Retained earnings
    
    
    94,339
    
    
    
    25,377
    
    
    
    (25,377
    )
    
    
    94,339Total shareholders equity
    
    
    109,975
    
    
    
    29,779
    
    
    
    (29,779
    )
    
    
    109,975Total Liabilities and
Shareholders Equity
    
    $
    383,049
    
    
    $
    41,362
    
    
    $
    (30,238
    )
    
    $
    394,173
 12




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##### Table of Contents



PETROLEUM HELICOPTERS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars) For the quarter ended March 31, 2005ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    61,727
    
    
    $
    12,512
    
    
    $
    
    
    
    $
    74,239Management fees
    
    
    626
    
    
    
    
    
    
    
    (626
    )
    
    
    Gain on dispositions of property and
equipment, net
    
    
    646
    
    
    
    
    
    
    
    
    
    
    
    646Other
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    9663,095
    
    
    
    12,512
    
    
    
    (626
    )
    
    
    74,981Expenses:Direct expenses
    
    
    56,416
    
    
    
    7,620
    
    
    
    
    
    
    
    64,036Management fees
    
    
    
    
    
    
    626
    
    
    
    (626
    )
    
    
    Selling, general, and administrative
    
    
    4,560
    
    
    
    669
    
    
    
    
    
    
    
    5,229Equity in net income of consolidated
subsidiaries
    
    
    (2,546
    )
    
    
    
    
    
    
    2,546
    
    
    
    Interest expense
    
    
    5,117
    
    
    
    
    
    
    
    
    
    
    
    5,11763,547
    
    
    
    8,915
    
    
    
    1,920
    
    
    
    74,382Earnings before income taxes
    
    
    (452
    )
    
    
    3,597
    
    
    
    (2,546
    )
    
    
    599Income taxes
    
    
    (811
    )
    
    
    1,051
    
    
    
    
    
    
    
    240Net earnings
    
    $
    359
    
    
    $
    2,546
    
    
    $
    (2,546
    )
    
    $
    359
 For the quarter ended March 31, 2004ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    48,505
    
    
    $
    18,468
    
    
    $
    
    
    
    $
    66,973Management fees
    
    
    942
    
    
    
    
    
    
    
    (942
    )
    
    
    Gain on dispositions of property and
equipment, net
    
    
    673
    
    
    
    
    
    
    
    
    
    
    
    673Other
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    8350,203
    
    
    
    18,468
    
    
    
    (942
    )
    
    
    67,729Expenses:Direct expenses
    
    
    42,060
    
    
    
    15,225
    
    
    
    
    
    
    
    57,285Management fees
    
    
    
    
    
    
    942
    
    
    
    (942
    )
    
    
    Selling, general, and administrative
    
    
    3,328
    
    
    
    1,816
    
    
    
    
    
    
    
    5,144Equity in net income of consolidated
subsidiaries
    
    
    (291
    )
    
    
    
    
    
    
    291
    
    
    
    Interest expense
    
    
    5,016
    
    
    
    
    
    
    
    
    
    
    
    5,01650,113
    
    
    
    17,983
    
    
    
    (651
    )
    
    
    67,445Earnings before income taxes
    
    
    90
    
    
    
    485
    
    
    
    (291
    )
    
    
    284Income taxes
    
    
    87
    
    
    
    194
    
    
    
    
    
    
    
    281Net earnings
    
    $
    3
    
    
    $
    291
    
    
    $
    (291
    )
    
    $
    3
 13




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##### Table of Contents



PETROLEUM HELICOPTERS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars) For the quarter ended March 31, 2005ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    4,724
    
    
    $
    (16
    )
    
    $
    
    
    
    $
    4,708Cash flows from investing activities:Purchase of property and equipment
    
    
    (6,297
    )
    
    
    (1
    )
    
    
    
    
    
    
    (6,298
    )Proceeds from asset dispositions
    
    
    1,824
    
    
    
    
    
    
    
    
    
    
    
    1,824Net cash used in investing activities
    
    
    (4,473
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4,474
    )Cash flows from financing activities:Proceeds from line of credit, net
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Net cash provided by financing
activities
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Increase in cash and cash equivalents
    
    
    2,251
    
    
    
    (17
    )
    
    
    
    
    
    
    2,234Cash and cash equivalents, beginning of
period
    
    
    17,701
    
    
    
    307
    
    
    
    
    
    
    
    18,008Cash and cash equivalents, end of period
    
    $
    19,952
    
    
    $
    290
    
    
    $
    
    
    
    $
    20,242
 For the quarter ended March 31, 2004ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    7,288
    
    
    $
    (14
    )
    
    $
    
    
    
    $
    7,274Cash flows from investing activities:Purchase of property and equipment
    
    
    (13,006
    )
    
    
    
    
    
    
    
    
    
    
    (13,006
    )Proceeds from asset dispositions
    
    
    5,981
    
    
    
    
    
    
    
    
    
    
    
    5,981Net cash used in investing activities
    
    
    (7,025
    )
    
    
    
    
    
    
    
    
    
    
    (7,025
    )Cash flows from financing activities:Proceeds from line of credit
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Net cash provided by financing
activities
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Increase in cash and cash equivalents
    
    
    3,263
    
    
    
    (14
    )
    
    
    
    
    
    
    3,249Cash and cash equivalents, beginning of
period
    
    
    19,821
    
    
    
    51
    
    
    
    
    
    
    
    19,872Cash and cash equivalents, end of period
    
    $
    23,084
    
    
    $
    37
    
    
    $
    
    
    
    $
    23,121
 14




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
should be read in conjunction with the accompanying unaudited condensed consolidated financial
statements and the notes thereto as well as our financial statements and notes thereto contained in
our Annual Report on Form 10-K for the year ended December 31, 2004 and the MD&A and other
information contained therein. Forward-Looking Statements All statements other than statements of historical fact contained in this Form 10-Q, other periodic
reports filed by us with the Securities and Exchange Commission, and other written and oral
statements made by us or on our behalf, are forward-looking statements. When used herein, the
words anticipates, expects, believes, goals, intends, plans, or projects and similar
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 Companys actual results to differ materially
from the expectations, beliefs, and estimates expressed or implied in such forward-looking
statements. Although we believe 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 our 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, the effect on our operating costs of volatile fuel prices,
adverse weather effects, the availability and cost of capital required to acquire aircraft,
environmental risks, the activities of our competitors, changes in government regulation, union,
activities or labor strife, 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. All forward-looking statements in this
document are expressly qualified in their entirety by the cautionary statements in this paragraph
and in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31,
2004. PHI undertakes no obligation to update any forward-looking statements, whether as a result
of new information, future events, or otherwise. Overview Our operating revenues increased in the current quarter compared to the same quarter of 2004 in all
segments other than our Technical Services segment. Although our Air Medical segment revenues
increased, they were substantially affected by unfavorable weather conditions which limited our
ability to conduct flight operations, and therefore reduced the number of patient transports in the
quarter. This is further discussed below and in the Air Medical segment. Operating revenues in
our Domestic Oil and Gas segment increased $2.7 million due to more aircraft on contract and
certain contractual rate increases. Flight hours in our Domestic Oil and Gas segment were similar
to the same quarter last year, in spite of a larger degree of unfavorable weather conditions in the
current quarter. As discussed in our December 31, 2004 Form 10-K, the expansion of our Air Medical segment continued
in the first quarter. At March 31, 2005, we operated 24 Air Medical locations opened since
September 2003, compared to ten locations at March 31, 2004 opened since the same date. Although
there was an increase of $4.8 million in operating revenues in the Air Medical segment for the
quarter, revenues were unfavorably affected by adverse weather. The impact on revenues of adverse
weather combined with the increased costs associated with the additional operating locations,
resulted in a loss in the Air Medical segment for the quarter. The additional costs were at
planned levels. Direct expense was $64.0 million for the quarter ended March 31, 2005, compared to $57.3 million
for the quarter ended March 31, 2004, an increase of $6.7 million. Our Air Medical segments
direct expense 15




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##### Table of Contents



increased $8.6 million, due to the additional 14 operating locations. In addition,
there was an increase of $0.2 million in our Domestic Oil and Gas segment. There were decreases in
direct expense in our International segment ($0.7 million) and the Technical Services segment ($1.3
million). The decreases were due in part to recording an insurance premium credit ($2.8 million)
on our aircraft hull and liability insurance resulting from our favorable loss experience for the
current policy year. Earnings before tax were $0.6 million for the quarter ended March 31, 2005, compared to earnings
before tax of less than $0.3 million for the quarter ended March 31, 2004. Our earnings were
essentially flat because the improvements in our Domestic Oil and Gas and International segments
were essentially offset by the loss in our Air Medical segment. In 2004, we took delivery of two heavy transport category aircraft, both of which commenced
operating for a customer in 2005 in our Domestic Oil and Gas segment. In the second quarter of
2005, we will take delivery of two additional heavy transport category aircraft, which are also
currently committed to customers for service in the Domestic Oil and Gas segment. The cost of the
two additional aircraft is $32.1 million. We intend to enter into an operating lease for these
aircraft. Funding for the additional aircraft is discussed below. During the quarter, we received delivery of two light aircraft and one medium aircraft, and
subsequent to quarters end we received delivery of five light aircraft. Of these, the medium
aircraft and two light aircraft were funded with operating leases. Based on customer commitments and discussions with our customers regarding their planned
activities, we have placed orders or intend to exercise purchase options for an additional 21
medium and light aircraft for service in our Domestic Oil and Gas segment at a total cost of $109.4
million with deliveries scheduled in 2005 and 2006. Not included in this total are six aircraft on
order at December 31, 2004, which were delivered in the first quarter 2005. Additionally, we will continue the expansion of the Air Medical operations in 2005, and have placed
orders for an additional twelve aircraft. The cost of these aircraft is $46.3 million and
deliveries are scheduled throughout 2005. Deliveries of the above aircraft are scheduled throughout 2005 and 2006. We expect to fund the above
aircraft orders with the issuance of equity or debt
securities, operating leases, or some combination thereof. 16




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##### Table of Contents



Operating Statistics The following tables present certain non-financial operational statistics for the quarters ended
March 31, 2005 and 2004: Quarter EndedMarch 31,2005
    
    
    2004Flight hours:Domestic Oil and Gas
    
    
    22,306
    
    
    
    22,731Air Medical
    
    
    4,630
    
    
    
    4,090International
    
    
    3,872
    
    
    
    3,955Total
    
    
    30,808
    
    
    
    30,776Air Medical Transports(1)
    
    
    3,147
    
    
    
    2,397Aircraft operated at period end:Domestic Oil and Gas
    
    
    153
    
    
    
    157Air Medical
    
    
    51
    
    
    
    46International
    
    
    17
    
    
    
    19Total (2)
    
    
    221
    
    
    
    222
   (1)  

Represents patient transports for the period. Flight hours for these transports are included above.(2)  

Includes 18 and 14 aircraft as of March 31, 2005 and 2004, respectively that are customer owned or leased. Quarter Ended March 31, 2005 compared with Quarter Ended March 31, 2004 Combined Operations Revenues  Operating revenues for the quarter ended March 31, 2005 were $74.2 million
compared to $67.0 million for the quarter ended March 31, 2004, an increase of $7.2 million. This
increase was due to an increase in our Air Medical and Domestic Oil and Gas segments, offset in
part by a decrease in Technical Services. Flight hours were 30,808 for quarter ended March 31, 2005, compared to 30,776 flight hours for the
quarter ended March 31, 2004. There was a slight reduction in flight hours in our Domestic Oil and Gas and International
segments that were more than offset by increased rates. Although flight hours were essentially the same
for the current quarter compared to the same quarter last year, our Air Medical segments flight
hours were adversely affected by weather. Other Income and Losses  Gain (loss) on equipment dispositions was $0.6 million for the
quarter ended March 31, 2005, compared to $0.7 million for the quarter ended March 31, 2004. These
amounts represent a gain on sales of aircraft that no longer meet the strategic needs of our fleet. Other income was $0.1 million for both periods, which is primarily interest income. Direct Expenses  Direct operating expense was $64.0 million for the quarter ended March
31, 2005, compared to $57.3 million for quarter ended March 31, 2004, an increase of $6.7 million.
This increase was due to the 14 additional Air Medical operating locations at March 31, 2005,
compared to March 31, 2004. This increase is further discussed below in the Segment Discussion. Selling, General, and Administrative Expenses  Selling, general, and administrative
expenses were $5.2 million for the quarter ended March 31, 2005, compared to $5.1 million for the
quarter ended March 31, 2004. 17




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##### Table of Contents



Interest Expense  Interest expense was $5.1 million for the quarter ended March 31, 2005
and $5.0 million for the quarter ended March 31, 2004. The increase in interest expense was due to
an increase in the balance outstanding on the revolving credit facility. Income Taxes  Income tax expense for the quarter ended March 31, 2005 was $0.2 million, an
effective rate of 40%, compared to less than $0.3 million, for the quarter ended March 31, 2004.
Income tax expense in the prior year quarter included $0.2 million related to foreign taxes paid
for which we were unable to take a foreign tax credit for U.S. tax purposes due to the availability
of net operating losses for tax purposes. We anticipate that foreign taxes paid in 2005 will be
utilized as a tax credit in future years based on recent changes in the tax laws. Earnings  Our net income for the quarter ended March 31, 2005 was $0.4 million compared to
net income of less than $0.1 million for the quarter ended March 31, 2004. The loss in the Air
Medical segment related to unfavorable weather adversely affected earnings for the quarter. Segment Discussion Domestic Oil and Gas Domestic Oil and Gas segment revenues were $44.9 million for the quarter
ended March 31, 2005, compared to $42.2 million for the quarter ended March 31, 2004. Flight hours
were 22,306 for the current quarter compared to 22,731 in the same quarter in the prior year. The
increase in revenue was due to additional aircraft under contract and certain contractual rate
increases. The number of aircraft in the segment at March 31, 2005 was 153 compared to 157 at March 31, 2004.
Of this decrease, two aircraft were transferred to our Air Medical segment. Although the quarter to
quarter comparisons reflect a decrease, we are currently increasing the number of aircraft in our
Domestic Oil and Gas segment based on customer commitments and
discussions with our customers regarding their planned activities. Direct expense in our Domestic Oil and Gas segment was $36.9 million for the quarter ended March
31, 2005, compared to $36.7 million for the quarter ended March 31, 2004. The increase of $0.2
million was due to increases in aircraft rent ($0.3 million) due to the addition of two S-92
aircraft in the fourth quarter of 2004 and fuel costs ($0.8 million). In addition, other
operating expenses increased by $1.0 million. This was partially offset by a decrease in insurance
cost ($1.5 million) resulting from a contractual credit of $1.9 million on the aircraft hull and
liability insurance related to favorable loss experience in the policy year that expired in April
2005. Our Domestic Oil and Gas segments operating income was $7.8 million for the quarter ended March
31, 2005, compared to $5.5 million for the quarter ended March 31, 2004. The increase in operating
income was due primarily to the increase in operating revenue. Air Medical Air Medical segment revenues were $20.8 million for the quarter ended March 31, 2005,
compared to $16.0 million for the quarter ended March 31, 2004, an increase of $4.8 million. The
30% increase in revenue is consistent with a 31% increase in medical transports from 2,397 in 2004
to 3,147 in 2005. The increase in revenues was due to the additional 14 operating locations
established since March 31, 2004, for a total of 24 new Air Medical locations opened since
September, 2003. Flight hours were 4,630 for the quarter ended March 31, 2005, compared to 4,090
for the quarter ended March 31, 2004. Although flight hours reflect an increase over the same
quarter prior year, there were more aircraft operational in the current quarter. Additionally,
flight hours in the current quarter were adversely affected by unfavorable weather conditions. The number of aircraft in the segment was 51 at March 31, 2005, compared to 46 at March 31, 2004.
Of the 46 aircraft at March 31, 2004, 14 had recently been placed in service as of the end of that
quarter. 18




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##### Table of Contents



Direct expenses in our Air Medical segment were $21.3 million for the quarter ended March 31, 2005,
compared to $12.8 million for the quarter ended March 31, 2004, an increase of $8.5 million. This
increase was due to the additional operating locations and certain recently-added locations being
in service for a full quarter. The increase was comprised of an increase in employee costs ($5.1
million) due to increased staff related to additional operations, increased depreciation expense
due to increased aircraft ($0.4 million), increased aircraft parts usage ($0.5 million), increased
aircraft fuel ($0.4 million), and increased costs associated with an increase in the number of
operating bases ($2.8 million) which includes rent expense, utilities, and supplies, and temporary
labor. This was partially offset by a decrease in insurance cost ($0.7 million) resulting from
recording a contractual credit on the aircraft hull and liability insurance related to favorable
loss experience in the policy year that expired in April 2005. Selling, general and administrative expense was $1.4 million for the quarter ended March 31, 2005,
compared to $1.8 million for the quarter ended March 31, 2004. The reduction was attributable to
certain start up costs incurred in the prior year quarter and also outsourcing the billing
function. Our Air Medical segment had an operating loss of $1.9 million for the quarter ended March 31, 2005,
compared to operating income of $1.5 million for the quarter ended March 31, 2004. The loss for
the quarter was due to the low flight activity caused by unfavorable weather conditions. Although
direct expense increased due to the additional operating locations, those costs were primarily at
planned levels. International International segment revenues were $7.0 million for the quarter ended March 31,
2005, compared to $6.0 million for the quarter ended March 31, 2004. The increase was due to an
increase in rates in 2004 and 2005. Flight hours for the quarter ended March 31, 2005 decreased to
3,872, compared to 3,955 for the quarter ended March 31, 2004. The number of aircraft in the
segment was 17 at March 31, 2005, compared to 19 at March 31, 2004. Direct expenses in our International segment were $4.7 million for the quarter ended March 31,
2005, compared to $5.3 million for the quarter ended March 31, 2004. The decrease in direct
expenses was due to a decrease in aircraft component repairs in the segment. Our International segment had operating income of $2.3 million for the quarter ended March 31,
2005, compared to operating income of $0.6 million for the quarter ended March 31, 2004. The
increase in operating income was due to the increase in revenue related to the increase in rates
and also due to the decrease in direct expense. Technical Services Technical Services revenues were $1.6 million for the quarter ended March 31,
2005, compared to $2.8 million for the quarter ended March 31, 2004. The decrease was due to
completion of the primary contract for the segment in the third quarter of 2004. Operating
revenues from this contract were $2.3 million for the quarter ended March 31, 2004. Direct expenses in our Technical Services segment were $1.2 million for the quarter ended March 31,
2005, compared to $2.5 million for the quarter ended March 31, 2004. The decrease was also due to
completion of the contract discussed above. Our Technical Services segment had operating income of $0.4 million for the quarter ended March 31,
2005, compared to $0.3 million for the quarter ended March 31, 2004. 19




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##### Table of Contents



Liquidity and Capital Resources Our cash position at March 31, 2005 was $20.2 million, compared to $18.0 million at March 31, 2004.
Working capital was $93.4 million at March 31, 2005, as compared to $88.7 million at December 31,
2004, an increase of $4.7 million. The increase in working capital is due to the increase in
accounts receivable related to the increased Air Medical operating locations. Net cash provided by operating activities was $4.7 million for the quarter ended March 31, 2005,
compared to $7.3 million for the quarter ended March 31, 2004. The decrease in cash provided by
operating activities was due to the increased accounts receivable related to the additional Air
Medical locations. Capital expenditures were $6.3 million, and gross proceeds of aircraft and
other sales were $1.8 million for the quarter ended March 31, 2005, compared to capital
expenditures of $13.0 million and gross proceeds of aircraft and other sales of $6.0 million for
the quarter ended March 31, 2004. Capital expenditures primarily involve purchases, renewals and
capability upgrades of aircraft. On April 23, 2002, we issued $200 million in principal amount of 9 3/8% Series A Unsecured Senior
Notes due 2009 in a private offering that was exempt from registration under Rule 144A under the
Securities Act of 1933 (the Securities Act). All of the notes were subsequently exchanged for
our 9 3/8% Series B Unsecured Senior Notes due 2009 (the Series B Senior Notes), pursuant to an
exchange offer that was registered under the Securities Act. The Series B Senior Notes bear annual
interest at 9 3/8% payable semi-annually on May 1 and November 1 of each year and mature in May
2009. The Series B Senior 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 or sales of assets. As of March 31, 2005,
we were in compliance with these covenants. We have a $35 million revolving credit facility with a commercial bank, which is scheduled to
expire on July 31, 2006. As of March 31, 2005, we had borrowings of $10.3 million at an interest
rate of 6% and $2.6 million in letters of credit outstanding under the revolving credit facility.
The credit facility includes covenants related to working capital, funded debt to net worth, and
consolidated net worth. As of March 31, 2005, we were in compliance with these covenants. We believe that cash flow from operations will be sufficient to fund operating requirements and
required interest payments on the Series B Senior Notes for the
next twelve months. However, we expect to finance
the acquisition of new aircraft, as discussed below, with the
issuance of equity or debt securities, operating leases,
or some combination thereof. On March 23, 2005, we filed a shelf registration statement on Form S-3 with the SEC to register the
offer and sale, from time to time, of our voting common stock, non-voting common stock, preferred
stock, depositary shares, warrants and debt securities, or a combination of any of those
securities, with an aggregate initial offering price of up to $400 million. The SEC declared the
registration statement effective on March 31, 2005. On April 29, 2005, we paid $9.4 million in interest on the Series B Senior Notes. Annual interest
payments are approximately $18.8 million. This excludes amortization of issuance costs of
approximately $0.9 million per year. In 2004, we took delivery of
two heavy transport category aircraft and entered into a 10-year operating
lease with annual payments of approximately $1.4 million for each aircraft. We also exercised our
option to acquire two additional transport category aircraft in response to customer commitments.
These aircraft are scheduled for delivery in the second quarter of 2005. The total cost of these
additional two aircraft is $32.1 million. We intend to exercise an operating lease for these
aircraft. In addition, we have an option 20




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to acquire two additional transport category aircraft
from the same manufacturer, which would be exercised based on customer requirements. Based on customer commitments and discussions with our customers regarding their planned
activities, we have placed orders or intend to exercise purchase options for an additional 21
medium and light aircraft for service in our Domestic Oil and Gas segment at a total cost of $109.4
million with deliveries scheduled in 2005 and 2006. Additionally, we will continue the expansion of the Air Medical operations in 2005, and have placed
orders or intend to exercise purchase options for an additional twelve aircraft. The cost of these
aircraft is $46.3 million and deliveries are scheduled throughout 2005. The table below sets out our contractual obligations related to operating lease obligations, notes
payable and the Series B Senior Notes issued in 2002. The operating leases are not recorded as
liabilities on the balance sheet, but payments are treated as an expense as incurred. Each
contractual obligation included in the table contains various terms, conditions, and covenants
which, if violated, accelerate the payment of that obligation. We currently lease four aircraft
included in the lease obligations below. Payment Due by YearBeyondTotal
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009(Thousands of dollars)Purchase
commitments (1)
    
    $
    187,800
    
    
    $
    123,172
    
    
    $
    64,628
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Aircraft lease
obligations
    
    
    44,610
    
    
    
    3,283
    
    
    
    4,377
    
    
    
    4,377
    
    
    
    4,377
    
    
    
    4,377
    
    
    
    23,819Facility lease
obligations
    
    
    18,383
    
    
    
    1,941
    
    
    
    2,250
    
    
    
    1,742
    
    
    
    1,443
    
    
    
    1,034
    
    
    
    9,973Notes payable
    
    
    2,000
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Revolving credit
facility (2)
    
    
    10,275
    
    
    
    
    
    
    
    10,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Series B Senior
Notes (2)
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    $
    463,068
    
    
    $
    130,396
    
    
    $
    81,530
    
    
    $
    6,119
    
    
    $
    5,820
    
    
    $
    205,411
    
    
    $
    33,792
   (1)

These commitments are for aircraft for which we intend to issue new
equity or debt securities, execute an operating lease, or some
combination thereof. Additionally, these
represent purchase commitments or amounts for purchase options which we intend to exercise.(2)
Long term debt. Estimated interest costs on the Series B Senior Notes due 2009 is $18.8 million per year for
the years 2005 through 2008, and $6.5 million for 2009 when the Notes are due. This excludes
amortization of issuance costs of approximately $0.9 million per year. 21




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##### Table of Contents



Environmental Matters We have an aggregate estimated liability of $0.2 million as of March 31, 2005 for environmental
remediation costs that are probable and estimable. We have conducted environmental surveys of our
former Lafayette facility, which we vacated in 2001, and have determined that limited soil and
ground water contamination exists at the facility. We have installed groundwater monitoring wells
at the facility and periodically monitor and report on these wells. In May, 2003, we submitted a
Louisiana Risk Evaluation/Corrective Action Plan (RECAP) standard Site Assessment Report to the
Louisiana Department of Environmental Quality (LDEQ) fully defining the extent and type of
contamination. Once LDEQ completes its review of the site assessment 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, we will be in a position to develop an appropriate
remediation plan and determine the resulting cost of remediation. We have not recorded any
estimated liability for remediation of contamination, based on the May, 2003 Site Assessment Report
and ongoing monitoring, we believe the ultimate remediation costs for the Lafayette facility will
not be material to our consolidated financial position, results of operation or liquidity. During
2004, LDEQ advised us that groundwater contaminants impacting monitor wells at our new Lafayette
Heliport were originating from an off-site location and that we would not be required to perform
further monitoring at the site. On September 1, 2004, LDEQ advised that based on their review of
our Risk Evaluation/Corrective Action Program (RECAP) Reports dated September 28, 2001 and December
16, 2003, that they had determined that no further action was necessary at the Amelia facility. We received final documents granting closure on the Rockport, Texas facilities during the first
quarter of 2005 from the Texas Commission on Environmental Quality (TCEQ) stating that no further
action at these facilities would be required. New Accounting Pronouncements For a discussion of applicable new accounting pronouncements, see Note 6 to the Financial
Statements. 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market value of our Series B Senior Notes will vary as changes occur to general market interest
rates, the remaining maturity of the notes, and our credit worthiness. At March 31, 2005, the
market value of the notes was approximately $212.5 million. 
 Item 4. CONTROLS AND PROCEDURES Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our
disclosure controls and procedures (as is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this
quarterly report (the Evaluation Date). Based on such evaluation, such officers have concluded
that, as of the Evaluation Date, our disclosure controls and procedures are effective. Since the Evaluation Date, there have not been any significant changes in our internal control over
financial reporting or in other factors that could materially affect such internal control over
financial reporting. 22




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##### Table of Contents



PART II  OTHER INFORMATION 
 Item 1. LEGAL PROCEEDINGS We are named as a defendant in various legal actions that have arisen in the ordinary course of our
business and have not been finally adjudicated. The amount, if any, of ultimate liability with
respect to such matters cannot be determined. In the opinion of management, the amount of the
ultimate liability with respect to these actions is for the most part covered by insurance, and the
uninsured claims will not have a material adverse effect on our consolidated financial statements. 
 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1
    
    (i)
    
    Articles of Incorporation of the Company (incorporated by reference to Exhibit No. 3.1
(i) to PHIs Report on Form 10-Q for the quarterly period ended October 31, 1994).(ii)
    
    By-laws of the Company as amended (incorporated by reference to Exhibit No. 3.1 (ii) to
PHIs Report on Form 10-Q for the quarterly period ended March 31, 2002).
 4.1
    
    Indenture dated April 23, 2002 among Petroleum Helicopters, Inc., the Subsidiary
Guarantors named therein and The Bank of New York, as Trustee (incorporated by reference to
Exhibit 4.1 to PHIs Registration Statement on Form S-4, filed on April 30, 2002, File Nos.
333-87288 through 333-87288-08).4.2
    
    Form of 9 3/8% Senior Note (incorporated by reference to Exhibit A of Exhibit 4.1 to
PHIs Registration Statement on Form S-4, filed on April 30, 2002, File Nos. 333-87288
through 333-87288-08).10.1
    
    Loan Agreement dated as of April 23, 2002 by and among Petroleum Helicopters, Inc., Air
Evac Services, Inc., Evangeline Airmotive, Inc. and International Helicopter Transport,
Inc. and Whitney National Bank (incorporated by reference to Exhibit 10.3 to PHIs Report
on Form 10-Q for the quarterly period ended September 30, 2002).10.2
    
    First Amendment dated June 18, 2004, to Loan Agreement dated as of April 23, 2002 by
and among Petroleum Helicopters, Inc., Air Evac Services, Inc., Evangeline Airmotive, Inc.
and International Helicopter Transport, Inc. and Whitney National Bank (incorporated by
reference to Exhibit 10.4 to PHIs Report on Form 10-Q for the quarterly period ended June
30, 2004.31.1
    
    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.
 23




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##### Table of Contents



(b)
    
    Reports on Form 8-KOn March 17, 2005, the Company filed a Form 8-K, reporting in Item 5 the Companys earnings
for the year ended December 31, 2004.
 
 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. Petroleum Helicopters, Inc.May 6, 2005
    
    By:
    
    /s/ Al A. GonsoulinAl A. GonsoulinChairman and Chief Executive OfficerMay 6, 2005
    
    By:
    
    /s/ Michael J. McCannMichael J. McCannChief Financial Officer and Treasurer
 24