##### 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: June 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 July 31, 2009Voting Common Stock
    
    2,852,616 sharesNon-Voting Common Stock
    
    12,458,992 shares




---



##### 



PHI, INC.
 Index  Form 10-Q
 Part I  Financial InformationItem 1. Financial Statements  UnauditedCondensed Consolidated Balance Sheets  June 30, 2009
and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations  Quarter
and Six Months ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Shareholders Equity 
Six Months ended June 30, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows  Six Months
ended June 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
    
    
    31Item 4. Controls and Procedures
    
    
    31Part II  Other InformationItem 1. Legal Proceedings
    
    
    32Item 1.A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33Signatures
    
    
    34EX-4.2EX-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)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    3,429
    
    
    $
    1,159Short-term investments
    
    
    59,074
    
    
    
    42,121Accounts receivable  netTrade
    
    
    100,532
    
    
    
    104,912Other
    
    
    6,821
    
    
    
    6,510Inventories of spare parts  net
    
    
    61,859
    
    
    
    58,249Other current assets
    
    
    10,909
    
    
    
    10,687Income taxes receivable
    
    
    785
    
    
    
    982Total current assets
    
    
    243,409
    
    
    
    224,620Other
    
    
    15,413
    
    
    
    23,988Property and equipment  net
    
    
    534,983
    
    
    
    528,574Total assets
    
    $
    793,805
    
    
    $
    777,182LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    21,109
    
    
    $
    25,449Accrued liabilities
    
    
    26,483
    
    
    
    25,193Total current liabilities
    
    
    47,592
    
    
    
    50,642Long-term debt
    
    
    213,350
    
    
    
    203,000Deferred income taxes
    
    
    68,638
    
    
    
    65,175Other long-term liabilities
    
    
    6,005
    
    
    
    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
    
    
    (14
    )
    
    
    45Retained earnings
    
    
    165,300
    
    
    
    159,559Total shareholders equity
    
    
    458,220
    
    
    
    452,396Total liabilities and shareholders equity
    
    $
    793,805
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating revenues
    
    $
    123,321
    
    
    $
    130,111
    
    
    $
    240,273
    
    
    $
    247,256(Loss) gain on dispositions of
assets, net
    
    
    (107
    )
    
    
    1,255
    
    
    
    165
    
    
    
    4,204Other, principally interest income
    
    
    65
    
    
    
    201
    
    
    
    128
    
    
    
    503123,279
    
    
    
    131,567
    
    
    
    240,566
    
    
    
    251,963Expenses:Direct expenses
    
    
    104,912
    
    
    
    109,757
    
    
    
    207,039
    
    
    
    207,983Selling, general and
administrative expenses
    
    
    8,218
    
    
    
    7,534
    
    
    
    16,042
    
    
    
    14,923Interest expense
    
    
    4,039
    
    
    
    3,854
    
    
    
    7,918
    
    
    
    7,688117,169
    
    
    
    121,145
    
    
    
    230,999
    
    
    
    230,594Earnings before income taxes
    
    
    6,110
    
    
    
    10,422
    
    
    
    9,567
    
    
    
    21,369Income tax expense
    
    
    2,444
    
    
    
    4,169
    
    
    
    3,826
    
    
    
    8,548Net earnings
    
    $
    3,666
    
    
    $
    6,253
    
    
    $
    5,741
    
    
    $
    12,821Weighted average shares
outstanding:Basic
    
    
    15,303
    
    
    
    15,277
    
    
    
    15,302
    
    
    
    15,277Diluted
    
    
    15,307
    
    
    
    15,286
    
    
    
    15,305
    
    
    
    15,285Net earnings per share:Basic
    
    $
    0.24
    
    
    $
    0.41
    
    
    $
    0.38
    
    
    $
    0.84Diluted
    
    $
    0.24
    
    
    $
    0.41
    
    
    $
    0.38
    
    
    $
    0.84
  4




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 CONDENSED 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,741
    
    
    
    5,741Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,682Stock options exercised
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    142Balance at June 30, 2009
    
    
    2,853
    
    
    $
    285
    
    
    
    12,459
    
    
    $
    1,246
    
    
    $
    291,403
    
    
    $
    (14
    )
    
    $
    165,300
    
    
    $
    458,220
 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,821
    
    
    
    12,821Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,824Balance at June 30, 2008
    
    
    2,853
    
    
    $
    285
    
    
    
    12,439
    
    
    $
    1,244
    
    
    $
    291,035
    
    
    $
    64
    
    
    $
    148,865
    
    
    $
    441,493
  5




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PHI, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 Six Months EndedJune 30,2009
    
    
    2008Operating activities:Net earnings
    
    $
    5,741
    
    
    $
    12,821Adjustments to reconcile net earnings to net cash
provided
by operating activities:Depreciation
    
    
    13,901
    
    
    
    13,186Deferred income taxes
    
    
    3,463
    
    
    
    8,117Gain on asset dispositions, net
    
    
    (165
    )
    
    
    (4,204
    )Other
    
    
    464
    
    
    
    456Changes in operating assets and liabilities
    
    
    (3,336
    )
    
    
    (17,148
    )Net cash provided by operating activities
    
    
    20,068
    
    
    
    13,228Investing activities:Purchase of property and equipment
    
    
    (27,693
    )
    
    
    (38,106
    )Proceeds from asset dispositions
    
    
    8,897
    
    
    
    8,983Purchase of short-term investments
    
    
    (31,639
    )
    
    
    (21,584
    )Proceeds from sale of short-term investments
    
    
    14,687
    
    
    
    49,075Deposits on aircraft
    
    
    7,600
    
    
    
    (11,546
    )Net cash used in investing activities
    
    
    (28,148
    )
    
    
    (13,178
    )Financing activities:Proceeds from line of credit
    
    
    10,350
    
    
    
    3,800Payment on line of credit
    
    
    
    
    
    
    (3,800
    )Net cash provided by financing activities
    
    
    10,350
    
    
    
    Increase in cash and cash equivalents
    
    
    2,270
    
    
    
    50Cash and cash equivalents, beginning of period
    
    
    1,159
    
    
    
    1,425Cash and cash equivalents, end of period
    
    $
    3,429
    
    
    $
    1,475Supplemental Disclosures Cash Flow InformationInterest paid
    
    $
    7,424
    
    
    $
    7,201Income taxes paid
    
    $
    763
    
    
    $
    232Accrued payables related to purchase of property and
equipment
    
    $
    237
    
    
    $
    356
  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
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Gross billings
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Provision for contractual
discounts
    
    
    53
    %
    
    
    45
    %
    
    
    53
    %
    
    
    47
    %Provision for uncompensated care
    
    
    10
    %
    
    
    11
    %
    
    
    9
    %
    
    
    10
    %
   Quarter Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Medicaid
    
    
    13
    %
    
    
    10
    %
    
    
    13
    %
    
    
    12
    %Medicare
    
    
    16
    %
    
    
    17
    %
    
    
    18
    %
    
    
    17
    %Insurance
    
    
    67
    %
    
    
    69
    %
    
    
    66
    %
    
    
    67
    %Self-Pay
    
    
    4
    %
    
    
    4
    %
    
    
    3
    %
    
    
    4
    %
 8




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Technical Services Segment.
   9




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##### Table of Contents



Quarter Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Thousands of dollars)
    
    
    (Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    78,970
    
    
    $
    82,063
    
    
    $
    153,795
    
    
    $
    156,663Air Medical
    
    
    42,628
    
    
    
    46,311
    
    
    
    81,721
    
    
    
    85,571Technical Services
    
    
    1,723
    
    
    
    1,737
    
    
    
    4,757
    
    
    
    5,022Total operating revenues
    
    
    123,321
    
    
    
    130,111
    
    
    
    240,273
    
    
    
    247,256Segment direct expenses (1)Oil and Gas
    
    
    64,963
    
    
    
    64,824
    
    
    
    126,247
    
    
    
    124,083Air Medical
    
    
    38,620
    
    
    
    43,286
    
    
    
    77,498
    
    
    
    80,369Technical Services
    
    
    1,329
    
    
    
    1,647
    
    
    
    3,294
    
    
    
    3,531Total direct expenses
    
    
    104,912
    
    
    
    109,757
    
    
    
    207,039
    
    
    
    207,983Segment selling, general and administrative expensesOil and Gas
    
    
    319
    
    
    
    342
    
    
    
    706
    
    
    
    655Air Medical
    
    
    1,619
    
    
    
    2,075
    
    
    
    3,108
    
    
    
    4,192Technical Services
    
    
    3
    
    
    
    8
    
    
    
    17
    
    
    
    34Total selling, general and administrative expenses
    
    
    1,941
    
    
    
    2,425
    
    
    
    3,831
    
    
    
    4,881Total direct and selling, general and administrative expenses
    
    
    106,853
    
    
    
    112,182
    
    
    
    210,870
    
    
    
    212,864Net segment profitOil and Gas
    
    
    13,688
    
    
    
    16,897
    
    
    
    26,842
    
    
    
    31,925Air Medical
    
    
    2,389
    
    
    
    950
    
    
    
    1,115
    
    
    
    1,010Technical Services
    
    
    391
    
    
    
    82
    
    
    
    1,446
    
    
    
    1,457Total
    
    
    16,468
    
    
    
    17,929
    
    
    
    29,403
    
    
    
    34,392Other, net (2)
    
    
    (42
    )
    
    
    1,456
    
    
    
    293
    
    
    
    4,707Unallocated selling, general and administrative costs (1)
    
    
    (6,277
    )
    
    
    (5,109
    )
    
    
    (12,211
    )
    
    
    (10,042
    )Interest expense
    
    
    (4,039
    )
    
    
    (3,854
    )
    
    
    (7,918
    )
    
    
    (7,688
    )Earnings before income taxes
    
    $
    6,110
    
    
    $
    10,422
    
    
    $
    9,567
    
    
    $
    21,369
 
 (1)
    
    Included in direct expenses and unallocated selling, general, and administrative costs are
the depreciation expense amounts below: Quarter Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Oil and Gas
    
    $
    4,107
    
    
    $
    3,780
    
    
    $
    8,350
    
    
    $
    7,479Air Medical
    
    
    1,969
    
    
    
    2,055
    
    
    
    3,954
    
    
    
    4,043Technical Services
    
    
    11
    
    
    
    15
    
    
    
    111
    
    
    
    119Total
    
    $
    6,087
    
    
    $
    5,850
    
    
    $
    12,415
    
    
    $
    11,641Unallocated SG&A
    
    $
    735
    
    
    $
    751
    
    
    $
    1,486
    
    
    $
    1,545
 (2)
    
    Consists of (losses) 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
    June 30,
    
    December 31,2009
    
    2008Gross Accounts Receivable
    
    
    100
    %
    
    
    100
    %Allowance for Contractual Discounts
    
    
    36
    %
    
    
    35
    %Allowance for Uncompensated Care
    
    
    24
    %
    
    
    20
    %
 12




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##### Table of Contents



6. Employees
 Employee Incentive Compensation 
   7. Fair Value Measurements
      June 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
    
    $
    59,074
    
    
    $
    42,121Investments in other assets
    
    
    3,640
    
    
    
    3,297Total
    
    $
    62,714
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Thousands of dollars)
    
    
    (Thousands of dollars)Net earnings
    
    $
    3,666
    
    
    $
    6,253
    
    
    $
    5,741
    
    
    $
    12,821Changes in pension plan assets
and benefit obligations
    
    
    (10
    )
    
    
    4
    
    
    
    (59
    )
    
    
    3Comprehensive income
    
    $
    3,656
    
    
    $
    6,257
    
    
    $
    5,682
    
    
    $
    12,824
 11. Condensed Consolidating Financial Information
   15




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PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 June 30, 2009ParentCompany
    
    
    Guarantor
    
    
    Non-GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    399
    
    
    $
    433
    
    
    $
    2,597
    
    
    $
    
    
    
    $
    3,429Short-term investments
    
    
    59,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,074Accounts receivable  net
    
    
    96,082
    
    
    
    11,271
    
    
    
    
    
    
    
    
    
    
    
    107,353Intercompany receivable
    
    
    
    
    
    
    63,064
    
    
    
    
    
    
    
    (63,064
    )
    
    
    Inventories of spare parts  net
    
    
    61,859
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,859Other current assets
    
    
    10,893
    
    
    
    10
    
    
    
    6
    
    
    
    
    
    
    
    10,909Income taxes receivable
    
    
    785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    785Total current assets
    
    
    229,092
    
    
    
    74,778
    
    
    
    2,603
    
    
    
    (63,064
    )
    
    
    243,409Investment in subsidiaries and other
    
    
    68,125
    
    
    
    
    
    
    
    
    
    
    
    (68,125
    )
    
    
    Other assets
    
    
    15,253
    
    
    
    152
    
    
    
    8
    
    
    
    
    
    
    
    15,413Property and equipment-net
    
    
    517,795
    
    
    
    17,188
    
    
    
    
    
    
    
    
    
    
    
    534,983Total assets
    
    $
    830,265
    
    
    $
    92,118
    
    
    $
    2,611
    
    
    $
    (131,189
    )
    
    $
    793,805LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    18,579
    
    
    $
    197
    
    
    $
    2,333
    
    
    $
    
    
    
    $
    21,109Accrued liabilities
    
    
    21,818
    
    
    
    4,651
    
    
    
    14
    
    
    
    
    
    
    
    26,483Intercompany payable
    
    
    63,064
    
    
    
    
    
    
    
    
    
    
    
    (63,064
    )
    
    
    Total current liabilities
    
    
    103,461
    
    
    
    4,848
    
    
    
    2,347
    
    
    
    (63,064
    )
    
    
    47,592Long-term debt
    
    
    213,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213,350Deferred income taxes and other
long-term
liabilities
    
    
    55,234
    
    
    
    19,401
    
    
    
    8
    
    
    
    
    
    
    
    74,643Shareholders Equity:Paid-in capital
    
    
    292,934
    
    
    
    2,354
    
    
    
    320
    
    
    
    (2,674
    )
    
    
    292,934Accumulated other comprehensive loss
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Retained earnings
    
    
    165,300
    
    
    
    65,515
    
    
    
    (64
    )
    
    
    (65,451
    )
    
    
    165,300Total shareholders equity
    
    
    458,220
    
    
    
    67,869
    
    
    
    256
    
    
    
    (68,125
    )
    
    
    458,220Total liabilities and
shareholders equity
    
    $
    830,265
    
    
    $
    92,118
    
    
    $
    2,611
    
    
    $
    (131,189
    )
    
    $
    793,805
 16




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 December 31, 2008ParentCompany
    
    
    GuarantorOnly (1)
    
    
    Subsidiaries (1)(2)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    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 others
    
    
    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 year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 June 30, 2009ParentCompany
    
    
    Guarantor
    
    
    Non-GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    105,519
    
    
    $
    17,796
    
    
    $
    6
    
    
    $
    
    
    
    $
    123,321Management fees
    
    
    712
    
    
    
    
    
    
    
    
    
    
    
    (712
    )
    
    
    Loss on dispositions of assets, net
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Other, principally interest income
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65106,189
    
    
    
    17,796
    
    
    
    6
    
    
    
    (712
    )
    
    
    123,279Expenses:
    
    
    
    
    
    
    
    
    
    
    Direct expenses
    
    
    92,177
    
    
    
    12,735
    
    
    
    
    
    
    
    
    
    
    
    104,912Management fees
    
    
    
    
    
    
    712
    
    
    
    
    
    
    
    (712
    )
    
    
    Selling,
general and administrative expenses
    
    
    7,786
    
    
    
    399
    
    
    
    33
    
    
    
    
    
    
    
    8,218Equity in
net income of consolidated subsidiaries
    
    
    (2,354
    )
    
    
    
    
    
    
    
    
    
    
    2,354
    
    
    
    Interest expense
    
    
    4,039
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,039101,648
    
    
    
    13,846
    
    
    
    33
    
    
    
    1,642
    
    
    
    117,169Earnings before income taxes
    
    
    4,541
    
    
    
    3,950
    
    
    
    (27
    )
    
    
    (2,354
    )
    
    
    6,110Income tax expense
    
    
    875
    
    
    
    1,580
    
    
    
    (11
    )
    
    
    
    
    
    
    2,444Net earnings
    
    $
    3,666
    
    
    $
    2,370
    
    
    $
    (16
    )
    
    $
    (2,354
    )
    
    $
    3,666For the quarter ended June 30, 2008ParentCompany
    
    
    GuarantorOnly (1)
    
    
    Subsidiaries (1)(2)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
        
        
    
    $
    111,149
    
    
    $
    18,962
    
    
    $
    
    
    
    $
    130,111Management fees
        
        
    
    
    759
    
    
    
    
    
    
    
    (759
    )
    
    
    Gain on dispositions of assets, net
        
        
    
    
    1,255
    
    
    
    
    
    
    
    
    
    
    
    1,255Other, principally interest income
        
        
    
    
    201
    
    
    
    
    
    
    
    
    
    
    
    201113,364
    
    
    
    18,962
    
    
    
    (759
    )
    
    
    131,567Expenses:Direct expenses
        
        
    
    
    95,423
    
    
    
    14,334
    
    
    
    
    
    
    
    109,757Management fees
        
        
    
    
    
    
    
    
    759
    
    
    
    (759
    )
    
    
    Selling, general and administrative expenses
        
        
    
    
    6,600
    
    
    
    934
    
    
    
    
    
    
    
    7,534Equity in net income of consolidated subsidiaries
        
        
    
    
    (2,329
    )
    
    
    
    
    
    
    2,329
    
    
    
    Interest expense
        
        
    
    
    3,854
    
    
    
    
    
    
    
    
    
    
    
    3,854103,548
    
    
    
    16,027
    
    
    
    1,570
    
    
    
    121,145Earnings before income taxes
        
        
    
    
    9,816
    
    
    
    2,935
    
    
    
    (2,329
    )
    
    
    10,422Income tax expense
        
        
    
    
    3,563
    
    
    
    606
    
    
    
    
    
    
    
    4,169Net earnings
        
        
    
    $
    6,253
    
    
    $
    2,329
    
    
    $
    (2,329
    )
    
    $
    6,253
 
 (1)
    
    Certain revisions were made to conform to the current years presentation.(2)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 18




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
 For the six months ended June 30, 2009ParentCompany
    
    
    Guarantor
    
    
    Non-GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    205,733
    
    
    $
    34,514
    
    
    $
    26
    
    
    $
    
    
    
    $
    240,273Management fees
    
    
    1,382
    
    
    
    
    
    
    
    
    
    
    
    (1,382
    )
    
    
    Gain on dispositions of assets, net
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165Other, principally interest income
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128207,408
    
    
    
    34,514
    
    
    
    26
    
    
    
    (1,382
    )
    
    
    240,566Expenses:
    
    
    
    
    
    
    
    
    
    
    Direct expenses
    
    
    179,756
    
    
    
    27,283
    
    
    
    
    
    
    
    
    
    
    
    207,039Management fees
    
    
    
    
    
    
    1,381
    
    
    
    1
    
    
    
    (1,382
    )
    
    
    Selling, general and administrative
    
    
    
    
    
    
    
    
    
    
    expenses
    
    
    14,997
    
    
    
    984
    
    
    
    61
    
    
    
    
    
    
    
    16,042Equity in net income of consolidated
    
    
    
    
    
    
    
    
    
    
    subsidiaries
    
    
    (2,898
    )
    
    
    
    
    
    
    
    
    
    
    2,898
    
    
    
    Interest expense
    
    
    7,918
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,918199,773
    
    
    
    29,648
    
    
    
    62
    
    
    
    1,516
    
    
    
    230,999Earnings before income taxes
    
    
    7,635
    
    
    
    4,866
    
    
    
    (36
    )
    
    
    (2,898
    )
    
    
    9,567Income tax expense
    
    
    1,894
    
    
    
    1,946
    
    
    
    (14
    )
    
    
    
    
    
    
    3,826Net earnings
    
    $
    5,741
    
    
    $
    2,920
    
    
    $
    (22
    )
    
    $
    (2,898
    )
    
    $
    5,741
 For the six months ended June 30, 2008ParentCompany
    
    
    GuarantorOnly (1)
    
    
    Subsidiaries (1) (2)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    208,216
    
    
    $
    39,040
    
    
    $
    
    
    
    $
    247,256Management fees
    
    
    1,562
    
    
    
    
    
    
    
    (1,562
    )
    
    
    Gain on dispositions of assets, net
    
    
    4,204
    
    
    
    
    
    
    
    
    
    
    
    4,204Other, principally interest income
    
    
    503
    
    
    
    
    
    
    
    
    
    
    
    503214,485
    
    
    
    39,040
    
    
    
    (1,562
    )
    
    
    251,963Expenses:Direct expenses
    
    
    179,644
    
    
    
    28,339
    
    
    
    
    
    
    
    207,983Management fees
    
    
    
    
    
    
    1,562
    
    
    
    (1,562
    )
    
    
    Selling, general and administrativeexpenses
    
    
    13,096
    
    
    
    1,827
    
    
    
    
    
    
    
    14,923Equity in net income of consolidatedsubsidiaries
    
    
    (6,151
    )
    
    
    
    
    
    
    6,151
    
    
    
    Interest expense
    
    
    7,688
    
    
    
    
    
    
    
    
    
    
    
    7,688194,277
    
    
    
    31,728
    
    
    
    4,589
    
    
    
    230,594Earnings before income taxes
    
    
    20,208
    
    
    
    7,312
    
    
    
    (6,151
    )
    
    
    21,369Income tax expense
    
    
    7,387
    
    
    
    1,161
    
    
    
    
    
    
    
    8,548Net earnings
    
    $
    12,821
    
    
    $
    6,151
    
    
    $
    (6,151
    )
    
    $
    12,821
 
 (1)
    
    Certain revisions were made to conform to the current years presentation.(2)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 19




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 For the six months ended June 30, 2009ParentCompany
    
    
    Guarantor
    
    
    Non-GuarantorOnly
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    15,992
    
    
    $
    1,673
    
    
    $
    2,403
    
    
    $
    
    
    
    $
    20,068Investing activities:
    
    
    
    
    
    
    
    
    
    
    Purchase of property and equipment
    
    
    (26,047
    )
    
    
    (1,646
    )
    
    
    
    
    
    
    
    
    
    
    (27,693
    )Proceeds from asset dispositions
    
    
    8,897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,897Purchase of short-term investments, net
    
    
    (16,952
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,952
    )Deposits on aircraft
    
    
    7,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,600Net cash used in investing activities
    
    
    (26,502
    )
    
    
    (1,646
    )
    
    
    
    
    
    
    
    
    
    
    (28,148
    )Financing activities:Proceeds from line of credit
    
    
    10,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,350Net cash provided by financing activities
    
    
    10,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,350(Decrease) increase in cash and cash
equivalents
    
    
    (160
    )
    
    
    27
    
    
    
    2,403
    
    
    
    
    
    
    
    2,270Cash and cash equivalents, beginning of
period
    
    
    559
    
    
    
    406
    
    
    
    194
    
    
    
    
    
    
    
    1,159Cash and cash equivalents, end of period
    
    $
    399
    
    
    $
    433
    
    
    $
    2,597
    
    
    $
    
    
    
    $
    3,429
 For the six months ended June 30, 2008ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries (1)(2)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    12,242
    
    
    $
    986
    
    
    $
    
    
    
    $
    13,228Investing activities:Purchase of property and equipment
    
    
    (37,149
    )
    
    
    (957
    )
    
    
    
    
    
    
    (38,106
    )Proceeds from asset dispositions
    
    
    8,983
    
    
    
    
    
    
    
    
    
    
    
    8,983Proceeds from sale of short-term investments, net
    
    
    27,491
    
    
    
    
    
    
    
    
    
    
    
    27,491Deposits on aircraft
    
    
    (11,546
    )
    
    
    
    
    
    
    
    
    
    
    (11,546
    )Net cash used in investing activities
    
    
    (12,221
    )
    
    
    (957
    )
    
    
    
    
    
    
    (13,178
    )Increase in cash and cash equivalents
    
    
    21
    
    
    
    29
    
    
    
    
    
    
    
    50Cash and cash equivalents, beginning of
period
    
    
    1,004
    
    
    
    421
    
    
    
    
    
    
    
    1,425Cash and cash equivalents, end of period
    
    $
    1,025
    
    
    $
    450
    
    
    $
    
    
    
    $
    1,475
 
 (1)
    
    Certain revisions were made to cash flows provided by (used in) operating and investing
activities to conform to the current years presentation.(2)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 20




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##### Table of Contents



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




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##### Table of Contents



22




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##### Table of Contents



Operating Statistics
  Quarter Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Flight hours:Oil and Gas
    
    
    30,241
    
    
    
    29,748
    
    
    
    56,721
    
    
    
    54,579Air Medical (1)
    
    
    9,005
    
    
    
    9,820
    
    
    
    17,211
    
    
    
    18,495Technical Services
    
    
    
    
    
    
    62
    
    
    
    378
    
    
    
    703Total
    
    
    39,246
    
    
    
    39,630
    
    
    
    74,310
    
    
    
    73,777Air Medical Transports(2)
    
    
    5,345
    
    
    
    5,942
    
    
    
    10,303
    
    
    
    11,422
 June 30,2009
    
    
    2008Aircraft operated at period end:Oil and Gas
    
    
    158
    
    
    
    147Air Medical
    
    
    89
    
    
    
    85Technical Services
    
    
    4
    
    
    
    4Total (3)
    
    
    251
    
    
    
    236
 
 (1)
    
    Flight hours include 2,260 flight hours associated with hospital-based contracts, compared
to 1,804 flight hours in the prior year quarter.(2)
    
    Represents individual patient transports for the period.(3)
    
    Includes 16 aircraft as of June 30, 2009 and 15 aircraft as of June 30, 2008 that are
customer owned. 23




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##### Table of Contents



Results of Operations
 Quarter Ended June 30, 2009 compared with Quarter Ended June 30, 2008
 Combined Operations
 Revenues
  Other Income and Gains
  Direct Expenses
 Selling, General, and Administrative Expenses
 Interest Expense
 24




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Income Taxes
 Earnings
 Segment Discussion
 Oil and Gas
    25




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Air Medical
     Technical Services
 Six Months Ended June 30, 2009 compared with Six Months Ended June 30, 2008
 Combined Operations
 Revenues
 26




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##### Table of Contents



Other Income and Gains
  Direct Expenses
  Selling, General, and Administrative Expenses
 Interest Expense
 Income Taxes
 Earnings
 27




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##### Table of Contents



Segment Discussion
 Oil and Gas
    Air Medical
 28




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##### Table of Contents



Technical Services
  Liquidity and Capital Resources
 General
  29




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##### Table of Contents



Cash Flow
    Credit Facility
  Contractual Obligations
   30




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##### Table of Contents



Payment Due by YearBeyondTotal
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2013(Thousands of dollars)Aircraft purchase
obligations (1)
    
    $
    86,896
    
    
    $
    86,896
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Aircraft lease
obligations
    
    
    187,344
    
    
    
    11,918
    
    
    
    24,439
    
    
    
    25,706
    
    
    
    26,374
    
    
    
    26,739
    
    
    
    72,168Other lease
obligations
    
    
    19,892
    
    
    
    1,781
    
    
    
    3,335
    
    
    
    2,806
    
    
    
    1,918
    
    
    
    1,437
    
    
    
    8,615Long-term debt
    
    
    213,350
    
    
    
    
    
    
    
    13,350
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    $
    507,482
    
    
    $
    100,595
    
    
    $
    41,124
    
    
    $
    28,512
    
    
    $
    28,292
    
    
    $
    228,176
    
    
    $
    80,783
 
 1)
    
    These commitments are for aircraft that we intend to fund from operating leases. New Accounting Pronouncements
  
 Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4.
    
    CONTROLS AND PROCEDURES
   31




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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
  32




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##### Table of Contents



Item 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    To elect a Board of Directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified.
 Name of Director
    
    Number of SharesFor
    
    
    WithheldAl A. Gonsoulin
    
    
    1,500,580
    
    
    
    0Lance F. Bospflug
    
    
    1,500,580
    
    
    
    0Arthur J. Breault, Jr.
    
    
    1,500,580
    
    
    
    0C. Russell Luigs
    
    
    1,500,580
    
    
    
    0Richard H. Matzke
    
    
    1,500,580
    
    
    
    0Thomas H. Murphy
    
    
    1,500,580
    
    
    
    0
 2.
    
    To ratify the appointment of Deloitte & Touche as PHIs independent registered
public accounting firm for the fiscal year ending December 31,
2009  For: 1,500,580; Against: 0; Abstain: 0.
 
 Item 5.
    
    OTHER INFORMATION
  
 Item 6.
    
    EXHIBITS
  3.1
    
    
    (i)
    
    Composite Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to PHIs Report on Form 10-Q filed on August 7, 2008).(ii)
    
    Amended and Restated By-laws of the Company (incorporated by reference to Exhibit
3.1 to PHIs Report on Form 8-K filed December 18, 2007).
 4.1
    
    
    Amended and Restated Loan Agreement dated as of March 31,
2008 by and among PHI,
Inc., Air Evac Services, Inc., PHI Tech Services, Inc. (formerly Evangeline Airmotive,
Inc.), and International Helicopter Transport, Inc. and Whitney National Bank
(incorporated by reference to Exhibit 4.1 to PHIs Report on Form 10-Q filed on May 8,
2008).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.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.
 33




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##### Table of Contents



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.August 10, 2009
    By:
    /s/ Al A. GonsoulinAl A. GonsoulinChairman and Chief Executive OfficerAugust 10, 2009
    By:
    /s/ Michael J. McCannMichael J. McCannChief Financial Officer 34