##### 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, 2008
 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
  Large accelerated filer: o
    
    Accelerated filer: þ
    
    Non-accelerated filer: o
    
    Smaller reporting company: o(Do not check if a smaller reporting company)
 o þ
   Class
    
    Outstanding at April 30, 2008Voting Common Stock
    
    2,852,616 sharesNon-Voting Common Stock
    
    12,438,992 shares




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##### 



PHI, INC.
 Index  Form 10-Q
 Part I  Financial InformationItem 1. Financial Statements  UnauditedCondensed Consolidated Balance Sheets  March 31, 2008
and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations  Quarter
Ended March 31, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows  Quarter
Ended March 31, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and
Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24Part II  Other InformationItem 1. Legal Proceedings
    
    
    25Item 1.A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25Signatures
    
    
    26Amended and Restated Loan AgreementCertification of Al A. Gonsoulin and CEO Pursuant to Section 302Certification of Michael J. McCann and CFO Pursuant to Section 302Certification of Al A. Gonsoulin and CEO Pursuant to Section 906Certification of Michael J. McCann and CFO Pursuant to Section 906
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Thousands of dollars, except share data)
 (Unaudited)
 March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,423
    
    
    $
    1,425Short-term investments
    
    
    56,266
    
    
    
    62,970Accounts receivable  net of allowance:Trade
    
    
    95,356
    
    
    
    95,111Other
    
    
    3,395
    
    
    
    2,973Inventories of spare parts and supplies
    
    
    58,096
    
    
    
    55,831Other current assets
    
    
    11,544
    
    
    
    11,194Refundable income taxes
    
    
    534
    
    
    
    525Total current assets
    
    
    226,614
    
    
    
    230,029Other
    
    
    37,405
    
    
    
    27,148Property and equipment, net
    
    
    489,360
    
    
    
    484,119Total assets
    
    $
    753,379
    
    
    $
    741,296LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    24,682
    
    
    $
    28,454Accrued liabilities
    
    
    28,484
    
    
    
    24,942Total current liabilities
    
    
    53,166
    
    
    
    53,396Long-term debt
    
    
    201,800
    
    
    
    200,000Deferred income taxes
    
    
    55,735
    
    
    
    51,644Other long-term liabilities
    
    
    7,442
    
    
    
    7,587Commitments 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
    
    
    1,242
    
    
    
    1,242Additional paid-in capital
    
    
    291,037
    
    
    
    291,037Accumulated other comprehensive income
    
    
    60
    
    
    
    61Retained earnings
    
    
    142,612
    
    
    
    136,044Total shareholders equity
    
    
    435,236
    
    
    
    428,669Total liabilities and shareholders equity
    
    $
    753,379
    
    
    $
    741,296
  3




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PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Quarter EndedMarch 31,2008
    
    
    2007Operating revenues
    
    $
    117,145
    
    
    $
    101,753Gain on disposition of assets, net
    
    
    2,949
    
    
    
    2,534Other
    
    
    302
    
    
    
    1,654120,396
    
    
    
    105,941Expenses:Direct expenses
    
    
    98,226
    
    
    
    93,233Selling, general and
administrative expenses
    
    
    7,389
    
    
    
    7,537Interest expense
    
    
    3,834
    
    
    
    4,107109,449
    
    
    
    104,877Earnings before income taxes
    
    
    10,947
    
    
    
    1,064Income taxes
    
    
    4,379
    
    
    
    401Net earnings
    
    $
    6,568
    
    
    $
    663Weighted average common shares
outstanding:Basic
    
    
    15,277
    
    
    
    15,288Diluted
    
    
    15,286
    
    
    
    15,308Net earnings per common shareBasic
    
    $
    0.43
    
    
    $
    0.04Diluted
    
    $
    0.43
    
    
    $
    0.04
  4




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PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Thousands of dollars)
 (Unaudited)
 Quarter EndedMarch 31,2008
    
    
    2007Operating activities:Net earnings
    
    $
    6,568
    
    
    $
    663Adjustments to reconcile net earnings to net cash
provided
by (used in) operating activities:Depreciation
    
    
    6,585
    
    
    
    7,970Deferred income taxes
    
    
    4,091
    
    
    
    307Gain on asset dispositions
    
    
    (2,949
    )
    
    
    (2,534
    )Other
    
    
    231
    
    
    
    215Changes in operating assets and liabilities
    
    
    (3,365
    )
    
    
    (15,341
    )Net cash provided by (used in) operating activities
    
    
    11,161
    
    
    
    (8,720
    )Investing activities:Purchase of property and equipment
    
    
    (12,172
    )
    
    
    (34,227
    )Proceeds from asset dispositions
    
    
    4,005
    
    
    
    4,660Purchase of short-term investments
    
    
    (8,585
    )
    
    
    (7,004
    )Proceeds from sale of short-term investments
    
    
    15,289
    
    
    
    40,525Deposits on aircraft
    
    
    (11,500
    )
    
    
    (2,123
    )Net cash (used in) provided by investing activities
    
    
    (12,963
    )
    
    
    1,831Financing activities:Proceeds from line of credit
    
    
    1,800
    
    
    
    28,000Payments on line of credit
    
    
    
    
    
    
    (13,000
    )Net cash provided by financing activities
    
    
    1,800
    
    
    
    15,000(Decrease) increase in cash and cash equivalents
    
    
    (2
    )
    
    
    8,111Cash and cash equivalents, beginning of period
    
    
    1,425
    
    
    
    820Cash and cash equivalents, end of period
    
    $
    1,423
    
    
    $
    8,931Supplemental Disclosures Cash Flow InformationInterest paid
    
    $
    31
    
    
    $
    261Taxes paid
    
    $
    4
    
    
    $
    3Accrued payables related to purchase of
property and
equipment
    
    $
    338
    
    
    $
    3,066
  5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. General
   2. Segment Information
    Oil and Gas Segment.
 6




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Air Medical Segment.
   AccountsRevenue
    
    ReceivableQuarter EndedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Gross billings
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Provision for contractual discounts
    
    
    49
    %
    
    
    45
    %
    
    
    33
    %
    
    
    33
    %Provision for uncompensated care
    
    
    9
    %
    
    
    10
    %
    
    
    19
    %
    
    
    21
    %
  Quarter EndedMarch 31,2008
    
    2007Medicaid
    
    
    13
    %
    
    
    9
    %Medicare
    
    
    18
    %
    
    
    15
    %Insurance
    
    
    64
    %
    
    
    74
    %Self Pay
    
    
    5
    %
    
    
    2
    %
  Technical Services Segment.
 7




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Quarter EndedMarch 31,2008
    
    
    2007(Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    74,601
    
    
    $
    65,300Air Medical
    
    
    39,260
    
    
    
    33,545Technical Services
    
    
    3,284
    
    
    
    2,908Total operating revenues
    
    
    117,145
    
    
    
    101,753Segment direct expense (1)Oil and Gas
    
    
    59,258
    
    
    
    57,435Air Medical
    
    
    37,084
    
    
    
    33,828Technical Services
    
    
    1,884
    
    
    
    1,970Total direct expense
    
    
    98,226
    
    
    
    93,233Segment selling, general and administrative expensesOil and Gas
    
    
    313
    
    
    
    391Air Medical
    
    
    2,116
    
    
    
    1,941Technical Services
    
    
    26
    
    
    
    8Total selling, general and administrative expenses
    
    
    2,455
    
    
    
    2,340Total direct and selling, general and administrative
expenses
    
    
    100,681
    
    
    
    95,573Net segment profitOil and Gas
    
    
    15,030
    
    
    
    7,474Air Medical
    
    
    60
    
    
    
    (2,224
    )Technical Services
    
    
    1,374
    
    
    
    930Total
    
    
    16,464
    
    
    
    6,180Other, net (2)
    
    
    3,251
    
    
    
    4,188Unallocated selling, general and administrative expenses
    
    
    (4,934
    )
    
    
    (5,197
    )Interest expense
    
    
    (3,834
    )
    
    
    (4,107
    )Earnings before income taxes
    
    $
    10,947
    
    
    $
    1,064
 
 (1)
    
    Included in direct expense are the depreciation and amortization expense amounts below: Quarter EndedMarch 312008
    
    
    2007Oil and Gas
    
    $
    3,698
    
    
    $
    4,392Air Medical
    
    
    1,988
    
    
    
    2,295Technical Services
    
    
    104
    
    
    
    234Total
    
    $
    5,790
    
    
    $
    6,921Unallocated SG&A
    
    $
    795
    
    
    $
    1,049
 
 (2)
    
    Including gains on disposition of property and equipment, and other income. 8




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3. Commitments and Contingencies
 Environmental Matters 
 Legal Matters
  Long-term Debt
  9




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##### Table of Contents



Operating Leases
  Purchase Commitments
 4. Property and Equipment
  5. Valuation Accounts
   6. Employees
 Union Related Matters 
 10




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Employee Incentive Compensation 
 7. Recent Accounting Pronouncements
      March 31, 2008Quoted market
    
    Significant Otherprices in active
    
    Observable InputsTotal
    
    markets (Level 1)
    
    (Level 2)Short-term
investments
    
    $
    56,266
    
    
    
    
    
    
    $
    56,266Investments
in other assets
    
    $
    3,732
    
    
    
    
    
    
    $
    3,732
   11




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8. Shareholders Equity
   9. Comprehensive Income
  Quarter EndedMarch 31,2008
    
    
    2007(Thousands of dollars)Net earnings
    
    $
    6,568
    
    
    $
    663SFAS No. 158 adjustment
    
    
    (1
    )
    
    
    (18
    )Comprehensive income
    
    $
    6,567
    
    
    $
    645
 10. Condensed Consolidating Financial Information
    12




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PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
 March 31, 2008ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    931
    
    
    $
    492
    
    
    $
    
    
    
    $
    1,423Short-term investments
    
    
    56,266
    
    
    
    
    
    
    
    
    
    
    
    56,266Accounts receivable  net
    
    
    84,896
    
    
    
    13,855
    
    
    
    
    
    
    
    98,751Inventories of spare parts and supplies
    
    
    58,096
    
    
    
    
    
    
    
    
    
    
    
    58,096Other current assets
    
    
    11,515
    
    
    
    29
    
    
    
    
    
    
    
    11,544Refundable income taxes
    
    
    525
    
    
    
    9
    
    
    
    
    
    
    
    534Total current assets
    
    
    212,229
    
    
    
    14,385
    
    
    
    
    
    
    
    226,614Investment in subsidiaries and other
    
    
    64,010
    
    
    
    
    
    
    
    (64,010
    )
    
    
    Intercompany receivable
    
    
    
    
    
    
    58,849
    
    
    
    (58,849
    )
    
    
    Other assets
    
    
    37,071
    
    
    
    334
    
    
    
    
    
    
    
    37,405Property and equipment, net
    
    
    472,982
    
    
    
    16,378
    
    
    
    
    
    
    
    489,360Total assets
    
    $
    786,292
    
    
    $
    89,946
    
    
    $
    (122,859
    )
    
    $
    753,379LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    22,398
    
    
    $
    2,284
    
    
    $
    
    
    
    $
    24,682Accrued liabilities
    
    
    23,048
    
    
    
    5,436
    
    
    
    
    
    
    
    28,484Intercompany payable
    
    
    58,849
    
    
    
    
    
    
    
    (58,849
    )
    
    
    Total current liabilities
    
    
    104,295
    
    
    
    7,720
    
    
    
    (58,849
    )
    
    
    53,166Long-term debt
    
    
    201,800
    
    
    
    
    
    
    
    
    
    
    
    201,800Deferred income taxes and other long-term
liabilities
    
    
    44,961
    
    
    
    18,216
    
    
    
    
    
    
    
    63,177Shareholders Equity:Paid-in capital
    
    
    292,564
    
    
    
    4,402
    
    
    
    (4,402
    )
    
    
    292,564Accumulated other comprehensive
income
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    60Retained earnings
    
    
    142,612
    
    
    
    59,608
    
    
    
    (59,608
    )
    
    
    142,612Total shareholders equity
    
    
    435,236
    
    
    
    64,010
    
    
    
    (64,010
    )
    
    
    435,236Total liabilities and
shareholders equity
    
    $
    786,292
    
    
    $
    89,946
    
    
    $
    (122,859
    )
    
    $
    753,379
 
 1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 13




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PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
 December 31, 2007ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,004
    
    
    $
    421
    
    
    $
    
    
    
    $
    1,425Short-term investments
    
    
    62,970
    
    
    
    
    
    
    
    
    
    
    
    62,970Accounts receivable  net of allowance
    
    
    84,318
    
    
    
    13,766
    
    
    
    
    
    
    
    98,084Inventories of spare parts and supplies
    
    
    55,831
    
    
    
    
    
    
    
    
    
    
    
    55,831Other current assets
    
    
    11,184
    
    
    
    10
    
    
    
    
    
    
    
    11,194Refundable income taxes
    
    
    525
    
    
    
    
    
    
    
    
    
    
    
    525Total current assets
    
    
    215,832
    
    
    
    14,197
    
    
    
    
    
    
    
    230,029Investment in subsidiaries and others
    
    
    59,384
    
    
    
    
    
    
    
    (59,384
    )
    
    
    Intercompany receivable
    
    
    
    
    
    
    50,729
    
    
    
    (50,729
    )
    
    
    Other assets
    
    
    26,878
    
    
    
    270
    
    
    
    
    
    
    
    27,148Property and equipment, net
    
    
    468,070
    
    
    
    16,049
    
    
    
    
    
    
    
    484,119Total assets
    
    $
    770,164
    
    
    $
    81,245
    
    
    $
    (110,113
    )
    
    $
    741,296LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    24,696
    
    
    $
    3,758
    
    
    $
    
    
    
    $
    28,454Accrued liabilities
    
    
    24,942
    
    
    
    
    
    
    
    
    
    
    
    24,942Intercompany payable
    
    
    50,729
    
    
    
    
    
    
    
    (50,729
    )
    
    
    Total current liabilities
    
    
    100,367
    
    
    
    3,758
    
    
    
    (50,729
    )
    
    
    53,396Long-term debt
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    200,000Deferred income taxes and other long-term
liabilities
    
    
    41,128
    
    
    
    18,103
    
    
    
    
    
    
    
    59,231Shareholders EquityPaid-in capital
    
    
    292,564
    
    
    
    4,402
    
    
    
    (4,402
    )
    
    
    292,564Accumulated other comprehensive
income
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    61Retained earnings
    
    
    136,044
    
    
    
    54,982
    
    
    
    (54,982
    )
    
    
    136,044Total shareholders equity
    
    
    428,669
    
    
    
    59,384
    
    
    
    (59,384
    )
    
    
    428,669Total liabilities and
shareholders equity
    
    $
    770,164
    
    
    $
    81,245
    
    
    $
    (110,113
    )
    
    $
    741,296
 
 1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 14




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PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
 For the quarter ended March 31, 2008ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    97,067
    
    
    $
    20,078
    
    
    $
    
    
    
    $
    117,145Management fees
    
    
    803
    
    
    
    
    
    
    
    (803
    )
    
    
    Gain on dispositions of assets, net
    
    
    2,949
    
    
    
    
    
    
    
    
    
    
    
    2,949Other
    
    
    302
    
    
    
    
    
    
    
    
    
    
    
    302101,121
    
    
    
    20,078
    
    
    
    (803
    )
    
    
    120,396Expenses:Direct expenses
    
    
    85,025
    
    
    
    13,201
    
    
    
    
    
    
    
    98,226Management fees
    
    
    
    
    
    
    803
    
    
    
    (803
    )
    
    
    Selling, general, and administrative
expenses
    
    
    6,496
    
    
    
    893
    
    
    
    
    
    
    
    7,389Equity in net income of consolidated
subsidiaries
    
    
    (4,626
    )
    
    
    
    
    
    
    4,626
    
    
    
    Interest expense
    
    
    3,834
    
    
    
    
    
    
    
    
    
    
    
    3,83490,729
    
    
    
    14,897
    
    
    
    3,823
    
    
    
    109,449Earnings before income taxes
    
    
    10,392
    
    
    
    5,181
    
    
    
    (4,626
    )
    
    
    10,947Income taxes
    
    
    3,824
    
    
    
    555
    
    
    
    
    
    
    
    4,379Net earnings
    
    $
    6,568
    
    
    $
    4,626
    
    
    $
    (4,626
    )
    
    $
    6,568
 For the quarter ended March 31, 2007ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    86,707
    
    
    $
    15,046
    
    
    $
    
    
    
    $
    101,753Management fees
    
    
    602
    
    
    
    
    
    
    
    (602
    )
    
    
    Gain on dispositions of assets, net
    
    
    2,534
    
    
    
    
    
    
    
    
    
    
    
    2,534Other
    
    
    1,650
    
    
    
    4
    
    
    
    
    
    
    
    1,65491,493
    
    
    
    15,050
    
    
    
    (602
    )
    
    
    105,941Expenses:Direct expenses
    
    
    81,792
    
    
    
    11,441
    
    
    
    
    
    
    
    93,233Management fees
    
    
    
    
    
    
    602
    
    
    
    (602
    )
    
    
    Selling, general, and administrative
expenses
    
    
    6,785
    
    
    
    752
    
    
    
    
    
    
    
    7,537Equity in net income of consolidated
subsidiaries
    
    
    (1,777
    )
    
    
    
    
    
    
    1,777
    
    
    
    Interest expense
    
    
    4,107
    
    
    
    
    
    
    
    
    
    
    
    4,10790,907
    
    
    
    12,795
    
    
    
    1,175
    
    
    
    104,877Earnings before income taxes
    
    
    586
    
    
    
    2,255
    
    
    
    (1,777
    )
    
    
    1,064Income taxes
    
    
    (77
    )
    
    
    478
    
    
    
    
    
    
    
    401Net earnings
    
    $
    663
    
    
    $
    1,777
    
    
    $
    (1,777
    )
    
    $
    663
 
 1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 15




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
 For the quarter ended March 31, 2008ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    11,090
    
    
    $
    71
    
    
    $
    
    
    
    $
    11,161Investing activities:Purchase of property and equipment
    
    
    (12,172
    )
    
    
    
    
    
    
    
    
    
    
    (12,172
    )Proceeds from asset dispositions
    
    
    4,005
    
    
    
    
    
    
    
    
    
    
    
    4,005Purchase (sale) of short-term
investments
    
    
    6,704
    
    
    
    
    
    
    
    
    
    
    
    6,704Deposits on aircraft
    
    
    (11,500
    )
    
    
    
    
    
    
    
    
    
    
    (11,500
    )Net cash used in investing activities
    
    
    (12,963
    )
    
    
    
    
    
    
    
    
    
    
    (12,963
    )Financing activities:Proceeds from line of credit, net
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    1,800Net cash provided by financing activities
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    1,800Decrease (increase) in cash and cash
equivalents
    
    
    (73
    )
    
    
    71
    
    
    
    
    
    
    
    (2
    )Cash and cash equivalents, beginning of
period
    
    
    1,004
    
    
    
    421
    
    
    
    
    
    
    
    1,425Cash and cash equivalents, end of period
    
    $
    931
    
    
    $
    492
    
    
    $
    
    
    
    $
    1,423
 For the quarter ended March 31, 2007ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by operating
activities
    
    $
    (8,740
    )
    
    $
    20
    
    
    $
    
    
    
    $
    (8,720
    )Investing activities:Purchase of property and equipment
    
    
    (34,214
    )
    
    
    (13
    )
    
    
    
    
    
    
    (34,227
    )Proceeds from asset dispositions
    
    
    4,660
    
    
    
    
    
    
    
    
    
    
    
    4,660Purchase (sale) of short-term
investments
    
    
    33,521
    
    
    
    
    
    
    
    
    
    
    
    33,521Other
    
    
    (2,123
    )
    
    
    
    
    
    
    
    
    
    
    (2,123
    )Net cash provided by (used) in investing
activities
    
    
    1,844
    
    
    
    (13
    )
    
    
    
    
    
    
    1,831Financing activities:Proceeds from line of credit, net
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    15,000Net cash provided by financing activities
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    15,000Increase in cash and cash equivalents
    
    
    8,104
    
    
    
    7
    
    
    
    
    
    
    
    8,111Cash and cash equivalents, beginning of
period
    
    
    385
    
    
    
    435
    
    
    
    
    
    
    
    820Cash and cash equivalents, end of period
    
    $
    8,489
    
    
    $
    442
    
    
    $
    
    
    
    $
    8,931
 
 1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 16




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Overview
   17




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18




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Operating Statistics
  Quarter EndedMarch 31,2008
    
    
    2007Flight hours:Oil and Gas
    
    
    24,831
    
    
    
    26,086Air Medical
    
    
    8,675
    
    
    
    6,992Technical Services
    
    
    641
    
    
    
    408Total
    
    
    34,147
    
    
    
    33,486Air Medical Transports(1)
    
    
    5,480
    
    
    
    4,922Aircraft operated at period end:Oil and Gas
    
    
    152
    
    
    
    164Air Medical
    
    
    83
    
    
    
    71Technical Services
    
    
    4
    
    
    
    4Total (2)
    
    
    239
    
    
    
    239
 
 (1)
    
    Represents individual patient transports for the period. Flight hours for these transports
are included above.(2)
    
    Includes 14 aircraft as of March 31, 2008 and 12 aircraft as of March 31, 2007 that are
customer owned. Quarter Ended March 31, 2008 compared with Quarter Ended March 31, 2007
 Combined Operations
 Revenues
  Other Income and Gains
  19




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##### Table of Contents



Direct Expenses
 Selling, General, and Administrative Expenses
 Interest Expense
 Income Taxes
 Earnings
 Segment Discussion
 Oil and Gas
  20




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Air Medical
     21




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Technical Services
    Liquidity and Capital Resources
 General
  Cash Flow
   22




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Credit Facility
  Contractual Obligations
   23




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##### Table of Contents



Payment Due by YearBeyondTotal
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2012(Thousands of dollars)New aircraft purchase
commitments (1)
    
    $
    126,515
    
    
    $
    74,795
    
    
    $
    51,720
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    New aircraft purchase
commitments (2)
    
    
    127,407
    
    
    
    20,256
    
    
    
    107,151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Existing aircraft lease
obligations
    
    
    164,581
    
    
    
    13,705
    
    
    
    18,274
    
    
    
    18,876
    
    
    
    20,144
    
    
    
    20,811
    
    
    
    72,771Other lease
obligations
    
    
    20,580
    
    
    
    2,617
    
    
    
    2,749
    
    
    
    2,378
    
    
    
    1,959
    
    
    
    1,508
    
    
    
    9,369Long-term debt
    
    
    201,800
    
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000$
    634,883
    
    
    $
    113,173
    
    
    $
    173,894
    
    
    $
    21,254
    
    
    $
    22,103
    
    
    $
    22,319
    
    
    $
    282,140
 
 (1)
    
    These commitments are for aircraft that we intend to fund from existing cash,
short-term investments, and operating leases.(2)
    
    These commitments are for aircraft that we intend to finance with an operating lease.
Once the leases are entered into, the lease payments will be made over the term of the
leases. New Accounting Pronouncements
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
   24




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1. A. RISK FACTORS
  
 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
  
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
 (a)
    
    Exhibits
 3.1
    (i)
    Amended and Restated 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 June 30, 2006).(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.4.2
    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).4.3
    First Supplemental 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 10.1 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.
 25




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##### Table of Contents



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 8, 2008
    
    By:
    
    /s/ Al A. GonsoulinAl A. GonsoulinChairman and Chief Executive OfficerMay 8, 2008
    
    By:
    
    /s/ Michael J. McCannMichael J. McCannChief Financial Officer
 26




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##### Table of Contents



EXHIBIT INDEX
 (a)
    
    Exhibits
 3.1
    (i)
    Amended and Restated 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 June 30, 2006).(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.4.2
    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).4.3
    First Supplemental 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 10.1 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.