##### 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: September 30, 2009
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number: 0-9827
 PHI, Inc.
  Louisiana
    
    72-0395707(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)2001 SE Evangeline ThruwayLafayette, Louisiana
    
    70508(Address of principal executive offices)
    
    (Zip Code)
 (337) 235-2452
 þ o
 o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
  Class
    
    Outstanding at October 30, 2009Voting Common Stock
    
    2,852,616 sharesNon-Voting Common Stock
    
    12,458,992 shares




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##### 



PHI, INC.
 Index  Form 10-Q
 Part I  Financial InformationItem 1.
    
    Financial Statements  UnauditedCondensed Consolidated Balance Sheets  September 30, 2009
and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations  Quarter
and Nine months ended September 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Shareholders Equity 
Nine months ended September 30, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows  Nine
months ended September 30, 2009 and 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    32Part II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    33Item 1.A.
    
    Risk Factors
    
    
    33Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3.
    
    Defaults Upon Senior Securities
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 5.
    
    Other Information
    
    
    33Item 6.
    
    Exhibits
    
    
    34Signatures
    
    
    35EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
 PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent Assets:Cash
    
    $
    3,882
    
    
    $
    1,159Short-term investments
    
    
    73,925
    
    
    
    42,121Accounts receivable  netTrade
    
    
    103,575
    
    
    
    104,912Other
    
    
    6,578
    
    
    
    6,510Inventories of spare parts  net
    
    
    61,645
    
    
    
    58,249Other current assets
    
    
    11,207
    
    
    
    10,687Income taxes receivable
    
    
    628
    
    
    
    982Total current assets
    
    
    261,440
    
    
    
    224,620Other
    
    
    13,733
    
    
    
    23,988Property and equipment  net
    
    
    532,079
    
    
    
    528,574Total assets
    
    $
    807,252
    
    
    $
    777,182LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    15,845
    
    
    $
    25,449Accrued liabilities
    
    
    36,401
    
    
    
    25,193Total current liabilities
    
    
    52,246
    
    
    
    50,642Long-term debt
    
    
    210,350
    
    
    
    203,000Deferred income taxes
    
    
    73,215
    
    
    
    65,175Other long-term liabilities
    
    
    6,269
    
    
    
    5,969Commitments and contingencies (Note 3)Shareholders Equity:Voting common stock
    
    
    285
    
    
    
    285Non-voting common stock
    
    
    1,246
    
    
    
    1,245Additional paid-in capital
    
    
    291,403
    
    
    
    291,262Accumulated other comprehensive (loss) income
    
    
    (15
    )
    
    
    45Retained earnings
    
    
    172,253
    
    
    
    159,559Total shareholders equity
    
    
    465,172
    
    
    
    452,396Total liabilities and shareholders equity
    
    $
    807,252
    
    
    $
    777,182
  3




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PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars, except per share data)
(Unaudited)
 Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating revenues, net
    
    $
    124,183
    
    
    $
    135,460
    
    
    $
    364,456
    
    
    $
    382,716Gain on dispositions of assets, net
    
    
    7
    
    
    
    249
    
    
    
    172
    
    
    
    4,453Other, principally interest income
    
    
    53
    
    
    
    29
    
    
    
    181
    
    
    
    532124,243
    
    
    
    135,738
    
    
    
    364,809
    
    
    
    387,701Expenses:Direct expenses
    
    
    100,972
    
    
    
    110,370
    
    
    
    308,011
    
    
    
    318,353Selling, general and
administrative expenses
    
    
    7,706
    
    
    
    8,368
    
    
    
    23,748
    
    
    
    23,291Interest expense
    
    
    3,976
    
    
    
    3,840
    
    
    
    11,894
    
    
    
    11,528112,654
    
    
    
    122,578
    
    
    
    343,653
    
    
    
    353,172Earnings before income taxes
    
    
    11,589
    
    
    
    13,160
    
    
    
    21,156
    
    
    
    34,529Income tax expense
    
    
    4,636
    
    
    
    5,263
    
    
    
    8,462
    
    
    
    13,811Net earnings
    
    $
    6,953
    
    
    $
    7,897
    
    
    $
    12,694
    
    
    $
    20,718Weighted average shares
outstanding:Basic
    
    
    15,312
    
    
    
    15,277
    
    
    
    15,306
    
    
    
    15,277Diluted
    
    
    15,312
    
    
    
    15,282
    
    
    
    15,306
    
    
    
    15,281Net earnings per share:Basic
    
    $
    0.45
    
    
    $
    0.52
    
    
    $
    0.83
    
    
    $
    1.36Diluted
    
    $
    0.45
    
    
    $
    0.52
    
    
    $
    0.83
    
    
    $
    1.36
  4




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PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Thousands of dollars and shares)
(Unaudited)
 Accumulated
    
    
    
    
    
    
    TotalVoting
    
    
    Non-Voting
    
    
    Additional
    
    
    Other Com-
    
    
    
    
    
    
    Share-Common Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    prehensive
    
    
    Retained
    
    
    HoldersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance at December 31, 2008
    
    
    2,853
    
    
    $
    285
    
    
    
    12,449
    
    
    $
    1,245
    
    
    $
    291,262
    
    
    $
    45
    
    
    $
    159,559
    
    
    $
    452,396Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,694
    
    
    
    12,694Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    
    
    
    
    (60
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,634Stock options exercised
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    142Balance at September 30, 2009
    
    
    2,853
    
    
    $
    285
    
    
    
    12,459
    
    
    $
    1,246
    
    
    $
    291,403
    
    
    $
    (15
    )
    
    $
    172,253
    
    
    $
    465,172
 Accumulated
    
    
    
    
    
    
    TotalVoting
    
    
    Non-Voting
    
    
    Additional
    
    
    Other Com-
    
    
    
    
    
    
    Share-Common Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    prehensive
    
    
    Retained
    
    
    HoldersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    EquityBalance at December 31, 2007
    
    
    2,853
    
    
    $
    285
    
    
    
    12,439
    
    
    $
    1,244
    
    
    $
    291,035
    
    
    $
    61
    
    
    $
    136,044
    
    
    $
    428,669Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,718
    
    
    
    20,718Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,743Stock options exercised
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    227
    
    
    
    
    
    
    
    
    
    
    
    228Balance at September 30, 2008
    
    
    2,853
    
    
    $
    285
    
    
    
    12,449
    
    
    $
    1,245
    
    
    $
    291,262
    
    
    $
    86
    
    
    $
    156,762
    
    
    $
    449,640
  5




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 Nine Months EndedSeptember 30,2009
    
    
    2008Operating activities:Net earnings
    
    $
    12,694
    
    
    $
    20,718Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation
    
    
    20,778
    
    
    
    19,941Deferred income taxes
    
    
    8,040
    
    
    
    13,102Gain on asset dispositions, net
    
    
    (172
    )
    
    
    (4,453
    )Other
    
    
    697
    
    
    
    689Changes in operating assets and liabilities
    
    
    (1,581
    )
    
    
    (19,582
    )Net cash provided by operating activities
    
    
    40,456
    
    
    
    30,415Investing activities:Purchase of property and equipment
    
    
    (31,777
    )
    
    
    (55,737
    )Proceeds from asset dispositions
    
    
    8,897
    
    
    
    9,033Purchase of short-term investments
    
    
    (46,490
    )
    
    
    (27,722
    )Proceeds from sale of short-term investments
    
    
    14,687
    
    
    
    54,750Refund (payment) of deposits on aircraft
    
    
    9,600
    
    
    
    (11,546
    )Net cash used in investing activities
    
    
    (45,083
    )
    
    
    (31,222
    )Financing activities:Proceeds from line of credit
    
    
    10,350
    
    
    
    3,800Payment on line of credit
    
    
    (3,000
    )
    
    
    (3,800
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    228Net cash provided by financing activities
    
    
    7,350
    
    
    
    228Increase (decrease) in cash and cash equivalents
    
    
    2,723
    
    
    
    (579
    )Cash, beginning of period
    
    
    1,159
    
    
    
    1,425Cash, end of period
    
    $
    3,882
    
    
    $
    846Supplemental Disclosures of Cash Flow Information:Interest paid
    
    $
    7,600
    
    
    $
    7,239Income taxes paid
    
    $
    770
    
    
    $
    234Accrued payables related to purchase of property and
equipment
    
    $
    273
    
    
    $
    791
  6




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




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##### Table of Contents



Air Medical Segment.
   RevenueQuarter Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Gross billings
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Provision for contractual
discounts
    
    
    51
    %
    
    
    46
    %
    
    
    53
    %
    
    
    47
    %Provision for uncompensated care
    
    
    12
    %
    
    
    12
    %
    
    
    10
    %
    
    
    11
    %
   Quarter Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Medicaid
    
    
    10
    %
    
    
    11
    %
    
    
    12
    %
    
    
    11
    %Medicare
    
    
    18
    %
    
    
    17
    %
    
    
    18
    %
    
    
    17
    %Insurance
    
    
    70
    %
    
    
    67
    %
    
    
    67
    %
    
    
    67
    %Self-Pay
    
    
    2
    %
    
    
    5
    %
    
    
    3
    %
    
    
    5
    %
 8




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Technical Services Segment.
  9




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##### Table of Contents



Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Thousands of dollars)
    
    
    (Thousands of dollars)Segment operating revenues, netOil and Gas
    
    $
    79,216
    
    
    $
    86,689
    
    
    $
    233,011
    
    
    $
    243,352Air Medical
    
    
    43,321
    
    
    
    47,534
    
    
    
    125,042
    
    
    
    133,105Technical Services
    
    
    1,646
    
    
    
    1,237
    
    
    
    6,403
    
    
    
    6,259Total operating revenues, net
    
    
    124,183
    
    
    
    135,460
    
    
    
    364,456
    
    
    
    382,716Segment direct expenses (1)Oil and Gas
    
    
    65,690
    
    
    
    68,074
    
    
    
    191,937
    
    
    
    192,157Air Medical
    
    
    34,023
    
    
    
    41,125
    
    
    
    111,521
    
    
    
    121,494Technical Services
    
    
    1,259
    
    
    
    1,171
    
    
    
    4,553
    
    
    
    4,702Total direct expenses
    
    
    100,972
    
    
    
    110,370
    
    
    
    308,011
    
    
    
    318,353Segment selling, general and administrative expensesOil and Gas
    
    
    285
    
    
    
    321
    
    
    
    991
    
    
    
    976Air Medical
    
    
    1,795
    
    
    
    2,045
    
    
    
    4,903
    
    
    
    6,237Technical Services
    
    
    24
    
    
    
    15
    
    
    
    41
    
    
    
    49Total selling, general and administrative expenses
    
    
    2,104
    
    
    
    2,381
    
    
    
    5,935
    
    
    
    7,262Total direct and selling, general and administrative expenses
    
    
    103,076
    
    
    
    112,751
    
    
    
    313,946
    
    
    
    325,615Net segment profitOil and Gas
    
    
    13,241
    
    
    
    18,294
    
    
    
    40,083
    
    
    
    50,219Air Medical
    
    
    7,503
    
    
    
    4,364
    
    
    
    8,618
    
    
    
    5,374Technical Services
    
    
    363
    
    
    
    51
    
    
    
    1,809
    
    
    
    1,508Total
    
    
    21,107
    
    
    
    22,709
    
    
    
    50,510
    
    
    
    57,101Other, net (2)
    
    
    60
    
    
    
    278
    
    
    
    353
    
    
    
    4,985Unallocated selling, general and administrative costs (1)
    
    
    (5,602
    )
    
    
    (5,987
    )
    
    
    (17,813
    )
    
    
    (16,029
    )Interest expense
    
    
    (3,976
    )
    
    
    (3,840
    )
    
    
    (11,894
    )
    
    
    (11,528
    )Earnings before income taxes
    
    $
    11,589
    
    
    $
    13,160
    
    
    $
    21,156
    
    
    $
    34,529
 
 (1)
    
    Included in direct expenses and unallocated selling, general, and administrative costs
are the depreciation expense amounts below: Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Thousands of dollars)
    
    
    (Thousands of dollars)Oil and Gas
    
    $
    4,142
    
    
    $
    3,915
    
    
    $
    12,492
    
    
    $
    11,394Air Medical
    
    
    1,985
    
    
    
    2,054
    
    
    
    5,939
    
    
    
    6,097Technical Services
    
    
    14
    
    
    
    16
    
    
    
    125
    
    
    
    135Total
    
    $
    6,141
    
    
    $
    5,985
    
    
    $
    18,556
    
    
    $
    17,626Unallocated SG&A
    
    $
    736
    
    
    $
    770
    
    
    $
    2,222
    
    
    $
    2,315
 
 (2)
    
    Consists of gains on disposition of property and equipment, and other income. 10




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




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##### Table of Contents



Purchase Commitments
 4. Long-term Debt
   5. Valuation Accounts
    September 30,
    
    December 31,2009
    
    2008Gross Accounts Receivable
    
    
    100
    %
    
    
    100
    %Allowance for Contractual Discounts
    
    
    36
    %
    
    
    35
    %Allowance for Uncompensated Care
    
    
    26
    %
    
    
    20
    %
 12




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6. Employees
 Employee Incentive Compensation 
   7. Fair Value Measurements
      September 30, 2009
    
    
    December 31, 2008Quoted prices in
    
    
    Quoted prices inactive markets for
    
    
    active markets forIdentical Assets
    
    
    Identical Assets(Level 1)
    
    
    (Level 1)(Thousands of dollars)Short-term investments
    
    $
    73,925
    
    
    $
    42,121Investments in other assets
    
    
    3,692
    
    
    
    3,297Total
    
    $
    77,617
    
    
    $
    45,418
 13




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##### Table of Contents



8. Recent Accounting Pronouncements
    14




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##### Table of Contents



9. Shareholders Equity
  10. Comprehensive Income
  Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Thousands of dollars)
    
    
    (Thousands of dollars)Net earnings
    
    $
    6,953
    
    
    $
    7,897
    
    
    $
    12,694
    
    
    $
    20,718Changes in pension plan assets
and benefit obligations
    
    
    (1
    )
    
    
    22
    
    
    
    (60
    )
    
    
    25Comprehensive income
    
    $
    6,952
    
    
    $
    7,919
    
    
    $
    12,634
    
    
    $
    20,743
 11. Condensed Consolidating Financial Information
   15




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PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 September 30, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash
    
    $
    3,173
    
    
    $
    709
    
    
    $
    
    
    
    $
    3,882Short-term investments
    
    
    73,925
    
    
    
    
    
    
    
    
    
    
    
    73,925Accounts receivable  net
    
    
    98,480
    
    
    
    11,673
    
    
    
    
    
    
    
    110,153Intercompany receivable
    
    
    
    
    
    
    65,451
    
    
    
    (65,451
    )
    
    
    Inventories of spare parts  net
    
    
    61,645
    
    
    
    
    
    
    
    
    
    
    
    61,645Other current assets
    
    
    11,196
    
    
    
    11
    
    
    
    
    
    
    
    11,207Income taxes receivable
    
    
    628
    
    
    
    
    
    
    
    
    
    
    
    628Total current assets
    
    
    249,047
    
    
    
    77,844
    
    
    
    (65,451
    )
    
    
    261,440Investment in subsidiaries and other
    
    
    68,951
    
    
    
    
    
    
    
    (68,951
    )
    
    
    Other assets
    
    
    13,574
    
    
    
    159
    
    
    
    
    
    
    
    13,733Property and equipment-net
    
    
    515,307
    
    
    
    16,772
    
    
    
    
    
    
    
    532,079Total assets
    
    $
    846,879
    
    
    $
    94,775
    
    
    $
    (134,402
    )
    
    $
    807,252LIABILITIES AND
SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    15,338
    
    
    $
    507
    
    
    $
    
    
    
    $
    15,845Accrued liabilities
    
    
    30,731
    
    
    
    5,670
    
    
    
    
    
    
    
    36,401Intercompany payable
    
    
    65,451
    
    
    
    
    
    
    
    (65,451
    )
    
    
    Total current liabilities
    
    
    111,520
    
    
    
    6,177
    
    
    
    (65,451
    )
    
    
    52,246Long-term debt
    
    
    210,350
    
    
    
    
    
    
    
    
    
    
    
    210,350Deferred income taxes and other long-term
liabilities
    
    
    59,837
    
    
    
    19,647
    
    
    
    
    
    
    
    79,484Shareholders Equity:Paid-in capital
    
    
    292,934
    
    
    
    2,674
    
    
    
    (2,674
    )
    
    
    292,934Accumulated other comprehensive loss
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )Retained earnings
    
    
    172,253
    
    
    
    66,277
    
    
    
    (66,277
    )
    
    
    172,253Total shareholders equity
    
    
    465,172
    
    
    
    68,951
    
    
    
    (68,951
    )
    
    
    465,172Total liabilities and
shareholders equity
    
    $
    846,879
    
    
    $
    94,775
    
    
    $
    (134,402
    )
    
    $
    807,252
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 16




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PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 December 31, 2008Parent
    
    
    GuarantorCompany
    
    
    SubsidiariesOnly(1)
    
    
    (1) (2)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash
    
    $
    559
    
    
    $
    600
    
    
    $
    
    
    
    $
    1,159Short-term investments
    
    
    42,121
    
    
    
    
    
    
    
    
    
    
    
    42,121Accounts receivable  net
    
    
    97,618
    
    
    
    13,804
    
    
    
    
    
    
    
    111,422Intercompany receivable
    
    
    
    
    
    
    57,722
    
    
    
    (57,722
    )
    
    
    Inventories of spare parts  net
    
    
    58,249
    
    
    
    
    
    
    
    
    
    
    
    58,249Other current assets
    
    
    10,671
    
    
    
    16
    
    
    
    
    
    
    
    10,687Income taxes receivable
    
    
    982
    
    
    
    
    
    
    
    
    
    
    
    982Total current assets
    
    
    210,200
    
    
    
    72,142
    
    
    
    (57,722
    )
    
    
    224,620Investment in subsidiaries and other
    
    
    65,227
    
    
    
    
    
    
    
    (65,227
    )
    
    
    Other assets
    
    
    23,761
    
    
    
    227
    
    
    
    
    
    
    
    23,988Property and equipment-net
    
    
    511,986
    
    
    
    16,588
    
    
    
    
    
    
    
    528,574Total assets
    
    $
    811,174
    
    
    $
    88,957
    
    
    $
    (122,949
    )
    
    $
    777,182LIABILITIES AND
SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    25,174
    
    
    $
    275
    
    
    $
    
    
    
    $
    25,449Accrued liabilities
    
    
    20,886
    
    
    
    4,307
    
    
    
    
    
    
    
    25,193Intercompany payable
    
    
    57,722
    
    
    
    
    
    
    
    (57,722
    )
    
    
    Total current liabilities
    
    
    103,782
    
    
    
    4,582
    
    
    
    (57,722
    )
    
    
    50,642Long-term debt
    
    
    203,000
    
    
    
    
    
    
    
    
    
    
    
    203,000Deferred income taxes and other long-term
liabilities
    
    
    51,996
    
    
    
    19,148
    
    
    
    
    
    
    
    71,144Shareholders Equity:Paid-in capital
    
    
    292,792
    
    
    
    2,674
    
    
    
    (2,674
    )
    
    
    292,792Accumulated other comprehensive
income
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Retained earnings
    
    
    159,559
    
    
    
    62,553
    
    
    
    (62,553
    )
    
    
    159,559Total shareholders equity
    
    
    452,396
    
    
    
    65,227
    
    
    
    (65,227
    )
    
    
    452,396Total liabilities and
shareholders equity
    
    $
    811,174
    
    
    $
    88,957
    
    
    $
    (122,949
    )
    
    $
    777,182
 
 (1)
    
    Certain revisions were made to conform to the current periods presentation.(2)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 17




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)
(Unaudited)
 For the quarter ended September 30, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    109,088
    
    
    $
    15,095
    
    
    $
    
    
    
    $
    124,183Management fees
    
    
    603
    
    
    
    
    
    
    
    (603
    )
    
    
    Gain on dispositions of assets, net
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Other, principally interest income
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53109,751
    
    
    
    15,095
    
    
    
    (603
    )
    
    
    124,243Expenses:Direct expenses
    
    
    88,393
    
    
    
    12,579
    
    
    
    
    
    
    
    100,972Management fees
    
    
    
    
    
    
    603
    
    
    
    (603
    )
    
    
    Selling, general and administrative
expenses
    
    
    7,193
    
    
    
    513
    
    
    
    
    
    
    
    7,706Equity in net income of consolidated
subsidiaries
    
    
    (840
    )
    
    
    
    
    
    
    840
    
    
    
    Interest expense
    
    
    3,976
    
    
    
    
    
    
    
    
    
    
    
    3,97698,722
    
    
    
    13,695
    
    
    
    237
    
    
    
    112,654Earnings before income taxes
    
    
    11,029
    
    
    
    1,400
    
    
    
    (840
    )
    
    
    11,589Income tax expense
    
    
    4,076
    
    
    
    560
    
    
    
    
    
    
    
    4,636Net earnings
    
    $
    6,953
    
    
    $
    840
    
    
    $
    (840
    )
    
    $
    6,953
 For the quarter ended September 30, 2008ParentCompany
    
    
    GuarantorOnly(2)
    
    
    Subsidiaries(1) (2)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    117,647
    
    
    $
    17,813
    
    
    $
    
    
    
    $
    135,460Management fees
    
    
    712
    
    
    
    
    
    
    
    (712
    )
    
    
    Gain on disposition of assets, net
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    249Other, principally interest income
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    29118,637
    
    
    
    17,813
    
    
    
    (712
    )
    
    
    135,738Expenses:Direct expenses
    
    
    96,405
    
    
    
    13,965
    
    
    
    
    
    
    
    110,370Management fees
    
    
    
    
    
    
    712
    
    
    
    (712
    )
    
    
    Selling, general, and administrative
expenses
    
    
    7,421
    
    
    
    947
    
    
    
    
    
    
    
    8,368Equity in net income of consolidated
subsidiaries
    
    
    (2,069
    )
    
    
    
    
    
    
    2,069
    
    
    
    Interest expense
    
    
    3,840
    
    
    
    
    
    
    
    
    
    
    
    3,840105,597
    
    
    
    15,624
    
    
    
    1,357
    
    
    
    122,578Earnings before income taxes
    
    
    13,040
    
    
    
    2,189
    
    
    
    (2,069
    )
    
    
    13,160Income taxes
    
    
    5,143
    
    
    
    120
    
    
    
    
    
    
    
    5,263Net earnings
    
    $
    7,897
    
    
    $
    2,069
    
    
    $
    (2,069
    )
    
    $
    7,897
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts.(2)
    
    Certain revisions were made to conform to the current periods presentation. 18




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)
(Unaudited)
 For the nine months ended September 30, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    314,821
    
    
    $
    49,635
    
    
    $
    
    
    
    $
    364,456Management fees
    
    
    1,985
    
    
    
    
    
    
    
    (1,985
    )
    
    
    Gain on dispositions of assets, net
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    172Other, principally interest income
    
    
    181
    
    
    
    
    
    
    
    
    
    
    
    181317,159
    
    
    
    49,635
    
    
    
    (1,985
    )
    
    
    364,809Expenses:Direct expenses
    
    
    268,149
    
    
    
    39,862
    
    
    
    
    
    
    
    308,011Management fees
    
    
    
    
    
    
    1,985
    
    
    
    (1,985
    )
    
    
    Selling, general and administrative
expenses
    
    
    22,190
    
    
    
    1,558
    
    
    
    
    
    
    
    23,748Equity in net income of consolidated
subsidiaries
    
    
    (3,738
    )
    
    
    
    
    
    
    3,738
    
    
    
    Interest expense
    
    
    11,894
    
    
    
    
    
    
    
    
    
    
    
    11,894298,495
    
    
    
    43,405
    
    
    
    1,753
    
    
    
    343,653Earnings before income taxes
    
    
    18,664
    
    
    
    6,230
    
    
    
    (3,738
    )
    
    
    21,156Income tax expense
    
    
    5,970
    
    
    
    2,492
    
    
    
    
    
    
    
    8,462Net earnings
    
    $
    12,694
    
    
    $
    3,738
    
    
    $
    (3,738
    )
    
    $
    12,694
 For the nine months ended September 30, 2008ParentCompany
    
    
    GuarantorOnly(2)
    
    
    Subsidiaries(1) (2)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    325,863
    
    
    $
    56,853
    
    
    $
    
    
    
    $
    382,716Management fees
    
    
    2,274
    
    
    
    
    
    
    
    (2,274
    )
    
    
    Gain on disposition of assets, net
    
    
    4,453
    
    
    
    
    
    
    
    
    
    
    
    4,453Other, principally interest income
    
    
    532
    
    
    
    
    
    
    
    
    
    
    
    532333,122
    
    
    
    56,853
    
    
    
    (2,274
    )
    
    
    387,701Expenses:Direct expenses
    
    
    276,049
    
    
    
    42,304
    
    
    
    
    
    
    
    318,353Management fees
    
    
    
    
    
    
    2,274
    
    
    
    (2,274
    )
    
    
    Selling, general, and administrative
expenses
    
    
    20,517
    
    
    
    2,774
    
    
    
    
    
    
    
    23,291Equity in
net income of consolidated subsidiaries
    
    
    (8,219
    )
    
    
    
    
    
    
    8,219
    
    
    
    Interest expense
    
    
    11,528
    
    
    
    
    
    
    
    
    
    
    
    11,528299,875
    
    
    
    47,352
    
    
    
    5,945
    
    
    
    353,172Earnings before income taxes
    
    
    33,247
    
    
    
    9,501
    
    
    
    (8,219
    )
    
    
    34,529Income taxes
    
    
    12,529
    
    
    
    1,282
    
    
    
    
    
    
    
    13,811Net earnings
    
    $
    20,718
    
    
    $
    8,219
    
    
    $
    (8,219
    )
    
    $
    20,718
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts.(2)
    
    Certain revisions were made to conform to the current periods presentation. 19




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)
(Unaudited)
 For the nine months ended September 30, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    38,740
    
    
    $
    1,716
    
    
    $
    
    
    
    $
    40,456Investing activities:Purchase of property and equipment
    
    
    (30,170
    )
    
    
    (1,607
    )
    
    
    
    
    
    
    (31,777
    )Proceeds from asset dispositions
    
    
    8,897
    
    
    
    
    
    
    
    
    
    
    
    8,897Purchase of short-term investments, net
    
    
    (31,803
    )
    
    
    
    
    
    
    
    
    
    
    (31,803
    )Refund of deposits on aircraft
    
    
    9,600
    
    
    
    
    
    
    
    
    
    
    
    9,600Net cash used in investing activities
    
    
    (43,476
    )
    
    
    (1,607
    )
    
    
    
    
    
    
    (45,083
    )Financing activities:Proceeds from line of credit
    
    
    10,350
    
    
    
    
    
    
    
    
    
    
    
    10,350Payment on line of credit
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Net cash provided by financing activities
    
    
    7,350
    
    
    
    
    
    
    
    
    
    
    
    7,350Increase in cash
    
    
    2,614
    
    
    
    109
    
    
    
    
    
    
    
    2,723Cash, beginning of period
    
    
    559
    
    
    
    600
    
    
    
    
    
    
    
    1,159Cash, end of period
    
    $
    3,173
    
    
    $
    709
    
    
    $
    
    
    
    $
    3,882
 For the nine months ended September 30, 2008ParentCompany
    
    
    GuarantorOnly(2)
    
    
    Subsidiaries(1) (2)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    28,250
    
    
    $
    2,165
    
    
    $
    
    
    
    $
    30,415Investing activities:Purchase of property and equipment
    
    
    (53,785
    )
    
    
    (1,952
    )
    
    
    
    
    
    
    (55,737
    )Proceeds from asset dispositions
    
    
    9,033
    
    
    
    
    
    
    
    
    
    
    
    9,033Proceeds
from sale of short-term investments, net
    
    
    27,028
    
    
    
    
    
    
    
    
    
    
    
    27,028Payment of deposits on aircraft
    
    
    (11,546
    )
    
    
    
    
    
    
    
    
    
    
    (11,546
    )Net cash used in investing activities
    
    
    (29,270
    )
    
    
    (1,952
    )
    
    
    
    
    
    
    (31,222
    )Financing activities:Proceeds from line of credit
    
    
    3,800
    
    
    
    
    
    
    
    
    
    
    
    3,800Payment on line of credit
    
    
    (3,800
    )
    
    
    
    
    
    
    
    
    
    
    (3,800
    )Proceeds from exercise of stock options
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228Net cash provided by financing activities
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228(Decrease) increase in cash
    
    
    (792
    )
    
    
    213
    
    
    
    
    
    
    
    (579
    )Cash, beginning of period
    
    
    1,004
    
    
    
    421
    
    
    
    
    
    
    
    1,425Cash, end of period
    
    $
    212
    
    
    $
    634
    
    
    $
    
    
    
    $
    846
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts.(2)
    
    Certain revisions were made to cash flows provided by (used in) operating and
investing activities to conform to the current periods presentation. 20




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Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  Overview
   21




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22




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23




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##### Table of Contents



Operating Statistics
  Quarter Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Flight hours:Oil and Gas
    
    
    28,749
    
    
    
    29,623
    
    
    
    85,470
    
    
    
    84,202Air Medical (1)
    
    
    8,898
    
    
    
    9,860
    
    
    
    26,108
    
    
    
    28,355Technical Services
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    703Total
    
    
    37,647
    
    
    
    39,483
    
    
    
    111,956
    
    
    
    113,260Air Medical Transports(2)
    
    
    5,226
    
    
    
    6,046
    
    
    
    15,529
    
    
    
    17,468
 September 30,2009
    
    2008Aircraft operated at period end:Oil and Gas (3)
    
    
    163
    
    
    
    152Air Medical (4)
    
    
    87
    
    
    
    88Technical Services
    
    
    4
    
    
    
    4Total
    
    
    254
    
    
    
    244
 
 (1)
    
    Flight hours include 2,342 flight hours associated with hospital-based contracts, compared to
2,044 flight hours in the prior year quarter. For the nine months ended September 30, 2009
and 2008, flight hours associated with hospital-based contracts were 6,575 and 5,518
respectively.(2)
    
    Represents individual patient transports for the period.(3)
    
    Includes nine aircraft as of September 30, 2009 and 2008 that are customer owned.(4)
    
    Includes eight aircraft as of September 30, 2009 and seven aircraft as of September 30, 2008
that are customer owned. Results of Operations
 Quarter Ended September 30, 2009 compared with Quarter Ended September 30, 2008
 Combined Operations
 Revenues
  24




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##### Table of Contents



Other Income and Gains
  Direct Expenses
 Selling, General, and Administrative Expenses
 Interest Expense
 Income Taxes
 Net Earnings
 Segment Discussion
 Oil and Gas
 25




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Air Medical
   26




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##### Table of Contents



Technical
Services
 Nine months Ended September 30, 2009 compared with Nine months Ended September 30, 2008
 Combined Operations
 Revenues
  27




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##### Table of Contents



Other Income and Gains
  Direct Expenses
  Selling, General, and Administrative Expenses
 Interest Expense
 Income Taxes
 Net Earnings
 28




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Segment Discussion
 Oil and Gas
    Air Medical
  29




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Technical Services
  Liquidity and Capital Resources
 General
  30




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Cash Flow
    Credit Facility
  Contractual Obligations
   31




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##### Table of Contents



Payment Due by YearBeyondTotal
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2013(Thousands of dollars)Aircraft purchase
obligations (1)
    
    $
    43,517
    
    
    $
    43,517
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Aircraft lease
obligations
    
    
    209,671
    
    
    
    6,976
    
    
    
    28,504
    
    
    
    29,772
    
    
    
    30,439
    
    
    
    30,804
    
    
    
    83,176Other lease
obligations
    
    
    19,093
    
    
    
    880
    
    
    
    3,343
    
    
    
    2,851
    
    
    
    1,951
    
    
    
    1,445
    
    
    
    8,623Long-term debt
    
    
    210,350
    
    
    
    
    
    
    
    
    
    
    
    10,350
    
    
    
    
    
    
    
    200,000
    
    
    
    $
    482,631
    
    
    $
    51,373
    
    
    $
    31,847
    
    
    $
    42,973
    
    
    $
    32,390
    
    
    $
    232,249
    
    
    $
    91,799
 
 1)
    
    These commitments are for aircraft that we intend to fund from operating leases, cash, or our
revolving credit facility. New Accounting Pronouncements
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
   32




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  Superior Offshore International Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor Holdings
Inc., ERA Group Inc., ERA Aviation, Inc., and PHI, Inc.,
  
 Item 1. A. RISK FACTORS
 Potential health care legislation and regulations could have a material impact on our business.
   
 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
  33




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##### Table of Contents



Item 6. EXHIBITS
 (a)
    
    Exhibits
 3.1
    (i)
    Composite Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to PHIs Report on Form 10-Q filed on August 7, 2008).(ii)
    Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.1 to PHIs Report on Form 8-K filed December 18, 2007).
 4.1
    
    Amended and Restated Loan Agreement dated as of March 31, 2008 by and among
PHI, Inc., Air Evac Services, Inc., PHI Tech Services, Inc. (formerly Evangeline
Airmotive, Inc.), and International Helicopter Transport, Inc. and Whitney National
Bank (incorporated by reference to Exhibit 4.1 to PHIs Report on Form 10-Q filed on
May 8, 2008).4.2
    
    First Amendment dated as of August 5, 2009 to Amended and Restated Loan
Agreement dated as of March 31, 2008 by and among PHI, Inc., Air Evac Services, Inc.,
PHI Tech Services, Inc. (formerly Evangeline Airmotive, Inc.), and International
Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to
Exhibit 4.2 to PHIs Report on Form 10-Q filed on August 10, 2009).4.3
    
    Indenture dated April 12, 2006 among PHI, Inc., the Subsidiary Guarantors named
therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.2
to PHIs Report on Form 8-K filed on April 13, 2006).31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chairman and Chief Executive Officer.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chairman and Chief Executive Officer.32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer.
 34




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##### Table of Contents



SIGNATURES
  PHI, Inc.November 9, 2009
    By:
    /s/ Al A. GonsoulinAl A. GonsoulinChairman and Chief Executive OfficerNovember 9, 2009
    By:
    /s/ Michael J. McCannMichael J. McCannChief Financial Officer 35