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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 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
(State or other jurisdiction of incorporation or organization)
    
    72-0395707
(I.R.S. Employer Identification No.)
 2001 SE Evangeline Thruway 
Lafayette, Louisiana
(Address of principal office)
    
    70508
(Zip Code)
 (337) 235-2452
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredVoting Common Stock 
Non-Voting Common Stock
    
    The NASDAQ Global Market
The NASDAQ Global Market
  o þ
 o þ
 þ o
 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
    Documents Incorporated by Reference




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##### 



PHI, INC.
 INDEX  FORM 10-K
 PART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    4Item 1B.
    
    Unresolved Staff Comments
    
    
    10Item 2.
    
    Properties
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    (Removed and Reserved)
    
    
    13PART IIItem 5.
    
    Market for Registrants Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities
    
    
    13Item 6.
    
    Selected Financial Data
    
    
    15Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 8.
    
    Financial Statements and Supplementary Data PHI, Inc. and Consolidated Subsidiaries:
    
    
    27Report of Independent Registered Public Accounting Firm
    
    
    27Consolidated Balance Sheets - Years ended December 31, 2009 and 2008
    
    
    28Consolidated Statements of Operations - Years ended December 31, 2009, 2008 and 2007
    
    
    29Consolidated Statements of Shareholders Equity - Years ended December 31, 2009, 2008, and 2007
    
    
    30Consolidated Statements of Cash Flows - Years ended December 31, 2009, 2008, and 2007
    
    
    31Notes to Consolidated Financial Statements
    
    
    32Item 9.
    
    Changes in and Disagreements
with Accountants on Accounting and Financial Disclosures
    
    
    55Item 9A.
    
    Controls and Procedures
    
    
    55Report of Independent Registered
Public Accounting Firm
    
    
    56Item 9B.
    
    Other Information
    
    
    57PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    57Item 11.
    
    Executive Compensation
    
    
    57Item 12.
    
    Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
    
    
    57Item 13.
    
    Certain Relationships and
Related Transactions, and Director Independence
    
    
    57Item 14.
    
    Principal Accounting Fees and Services
    
    
    57PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    58Signatures
    
    
    61EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  i




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PART I
 Forward-Looking Statements
  
 ITEM 1. BUSINESS
 General
  Description of Operations
  Oil and Gas.
  1




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Air Medical
   Revenue
    
    
    Accounts ReceivableYear Ended December 31,
    
    
    Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Gross billings
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Provision for contractual discounts (1)
    
    
    52
    %
    
    
    47
    %
    
    
    44
    %
    
    
    34
    %
    
    
    35
    %
    
    
    33
    %Provision for uncompensated care
    
    
    11
    %
    
    
    11
    %
    
    
    12
    %
    
    
    30
    %
    
    
    20
    %
    
    
    20
    %
 
 1)
    
    The increase in the provision for contractual discounts is related to rate increases in
gross billings, as a higher percentage of the rate increase portion of the gross billing is
not collected.  Year Ended December 31,2009
    
    
    2008
    
    
    2007Medicaid
    
    
    12
    %
    
    
    11
    %
    
    
    10
    %Medicare
    
    
    18
    %
    
    
    18
    %
    
    
    16
    %Insurance
    
    
    68
    %
    
    
    67
    %
    
    
    71
    %Self Pay
    
    
    2
    %
    
    
    4
    %
    
    
    3
    %
  2




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Technical Services.
  Seasonal Aspects
  Inventories
  Customers
  Competition
    3




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Employees
   Environmental Matters
  Availability of SEC filings and other information
 www.phihelico.com www.sec.gov
 
 ITEM 1A. Risk Factors
  RISKS INHERENT IN OUR BUSINESS
 The failure to maintain our safety record would seriously harm our ability to attract new customers
and maintain our existing customers.
  4




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Helicopter operations involve risks that may not be covered by our insurance or may increase the
cost of our insurance.
    Our operations are affected by adverse weather conditions and seasonal factors.
  Ø
    
    poor weather conditions that often prevail during winter but can develop in any season;Ø
    
    the tropical storm and hurricane season in the Gulf of Mexico; andØ
    
    reduced daylight hours during the winter months.
    We may not be able to obtain acceptable customer contracts covering some of our new helicopters,
and there will be a delay between the time that a helicopter is delivered to us and the time that
it can begin generating revenues.
   5




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Our contracts generally can be terminated or downsized by our customers without penalty.
  Increased governmental regulations could increase our costs or reduce our ability to operate
successfully.
      The helicopter services business is highly competitive.
    6




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Our air medical operations expose us to numerous special risks, including collection risks and
potential medical malpractice claims.
   Potential health care legislation and regulations could have a material impact on our business.
  Our international operations are subject to political, economic and regulatory uncertainty.
  Ø
    
    political, social and economic instability;Ø
    
    terrorism, kidnapping and extortion;Ø
    
    potential seizure or nationalization of assets;Ø
    
    import-export quotas; andØ
    
    currency fluctuations or devaluation.
  Ø
    
    the awarding of contracts to local contractors;Ø
    
    the employment of local citizens; andØ
    
    the establishment of foreign subsidiaries with significant
ownership positions reserved by the foreign government for local
ownership.
 Our failure to attract and retain qualified personnel could adversely affect us.
  7




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RISKS SPECIFIC TO OUR COMPANY
 We are highly dependent on the offshore oil and gas industry.
  Ø
    
    the supply of, and demand for, oil and natural gas and market expectations regarding supply and demand;Ø
    
    weather-related or other natural causes;Ø
    
    actions of OPEC, and Middle Eastern and other oil producing countries, to control prices or change production levels;Ø
    
    general economic conditions in the United States and worldwide;Ø
    
    war, civil unrest or terrorist activities;Ø
    
    governmental regulation; andØ
    
    the price and availability of alternative fuels.
    Our pilot workforce is represented by the Office and Professional Employees International Union,
with which the Company is engaged in strike-related litigation.
  We depend on a small number of large oil and gas industry customers for a significant portion of
our revenues, and our credit exposure within this industry is significant.
  8




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Although credit markets have improved following the credit crisis in late 2008 and 2009, there
remains a risk that these markets may have an adverse impact on our business and financial
condition in ways that we currently cannot predict.
  General economic conditions and recent market events may expose our Company to new risks.
  Our Chairman of the Board and Chief Executive Officer is also our principal stockholder and has
voting control of the Company.
  Our substantial indebtedness could adversely affect our financial condition and impair our ability
to operate our business.
    Ø
    
    require us to dedicate a substantial portion of our cash flow from operations to pay principal of, and interest on, our
indebtedness, and make lease payments on our operating leases, thereby reducing the availability of our cash flow to
fund working capital, capital expenditures or other general corporate purposes, or to carry out other aspects of our
business plan;Ø
    
    increase our vulnerability to general adverse economic and industry conditions and limit our ability to withstand
competitive pressures;Ø
    
    limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities;
 9




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Ø
    
    place us at a competitive disadvantage compared to our competitors that have less debt; andØ
    
    limit our ability to obtain additional financing for working capital, capital expenditures and other aspects of our
business plan.
  Our stock has a low trading volume.
  We do not pay dividends.
  Provisions in our articles of incorporation and by-laws and Louisiana law make it more difficult to
effect a change in control of us, which could discourage a takeover of our company and adversely
affect the price of our common stock.
    
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  10




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ITEM 2. PROPERTIES
 Aircraft
  Cruise
    
    Appr.Number
    
    
    
    
    
    
    
    Speed
    
    RangeManufacturer
    
    Type
    
    in Fleet
    
    Engine
    
    Passengers
    
    (mph)
    
    (miles)(2)Light AircraftBell
    
    206 / 407
    
    
    99
    
    
    Turbine
    
    
    46
    
    
    
    130150
    
    
    
    300420Eurocopter
    
    BK-117 / BO-105
    
    
    8
    
    
    Twin Turbine
    
    
    46
    
    
    
    135
    
    
    
    255270Eurocopter
    
    EC-135 (1)
    
    
    36
    
    
    Twin Turbine
    
    
    7
    
    
    
    143
    
    
    
    382Eurocopter
    
    AS350 B2 / B3
    
    
    23
    
    
    Turbine
    
    
    5
    
    
    
    140
    
    
    
    337385Medium AircraftBell
    
    212 (1) / 222 (1)230 (1) / 412 (1)/ 430 (1)
    
    
    16
    
    
    Twin Turbine
    
    
    813
    
    
    
    115160
    
    
    
    300370Sikorsky
    
    S-76 (1) A++, C+, C++
    
    
    46
    
    
    Twin Turbine
    
    
    12
    
    
    
    150
    
    
    
    400Agusta
Westland
    
    AW-139
    
    
    2
    
    
    Twin Turbine
    
    
    15
    
    
    
    160
    
    
    
    573Transport AircraftSikorsky
    
    S-92A(1)
    
    
    16
    
    
    Twin Turbine
    
    
    19
    
    
    
    160
    
    
    
    495Total Helicopters
    
    
    246Fixed WingRockwell(3)
    
    Aero Commander
    
    
    2
    
    
    Turboprop
    
    
    6
    
    
    
    300-340
    
    
    
    1,200-1,600Lear Jet(4)
    
    31A(1)
    
    
    1
    
    
    Turbojet
    
    
    8
    
    
    
    527
    
    
    
    1,437Cessna(4)
    
    Conquest 441(1)
    
    
    2
    
    
    Turboprop
    
    
    6
    
    
    
    330
    
    
    
    1,200Cessna(3)
    
    U206(1)
    
    
    1
    
    
    Single/Piston
    
    
    6
    
    
    
    174
    
    
    
    900Beech(4)
    
    King Air(1)
    
    
    3
    
    
    Turboprop
    
    
    8
    
    
    
    300
    
    
    
    1,380Total Fixed Wing
    
    
    9Total Aircraft
    
    
    255
 
 (1)
    
    Equipped to fly under instrument flight rules (IFR). All other types listed
can only fly under visual flight rules (VFR). See Item 1A. Business  Risk
Factors, Risks Inherent In Our Business  Our operations are affected by adverse
weather conditions and seasonal factors.(2)
    
    Based on maintaining a 30-minute fuel reserve.(3)
    
    Aircraft used for corporate purposes.(4)
    
    Aircraft used in the Air Medical segment, along with 79 of the rotary wing
aircraft listed above.   Facilities
  11




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Facility
    
    Lease Expiration
    
    Area
    
    Facilities
    
    CommentsMorgan City
     (Louisiana)
    
    June 30, 2013
    
    53 acres
    
    Operational and maintenance facilities, landing pads for 46 helicopters
    
    Options to extend to June 30, 2018Intracoastal City
     (Louisiana)
    
    December 31, 2010
    
    18 acres
    
    Operational and maintenance facilities, landing pads for 45 helicopters
    
    Options to extend to December 31, 2016Houma-Terrebonne Airport (Louisiana)
    
    July 31, 2017
    
    95 acres
    
    Operational and maintenance facilities, landing pads for 30 helicopters
    
    Facility under five separate leases, of which two contain options to extend thru 2027Galveston (Texas)
    
    May 31, 2021
    
    4 acres
    
    Operational and maintenance facilities, landing pads for 30 helicopters
    
    Lease period to May 31, 2021 with certain cancellation provisionsFourchon
     (Louisiana)
    
    February 28, 2013
    
    8 acres
    
    Operational and maintenance facilities, landing pads for 10 helicopters
    
    Facility under three separate leases, of which two contain options to extend thru 2026 and 2028.
    
 ITEM 3. LEGAL PROCEEDINGS
  12




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ITEM 4.
    
    RESERVED
 
 PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Voting
    
    
    Non-VotingPeriod
    
    High
    
    
    Low
    
    
    High
    
    
    LowJanuary 1, 2009 to March 31, 2009
    
    $
    18.88
    
    
    $
    10.90
    
    
    $
    16.28
    
    
    $
    7.10April 1, 2009 to June 30, 2009
    
    
    21.43
    
    
    
    10.99
    
    
    
    19.95
    
    
    
    9.12July 1, 2009 to September 30, 2009
    
    
    22.48
    
    
    
    16.80
    
    
    
    22.98
    
    
    
    16.01October 1, 2009 to December 31, 2009
    
    
    21.57
    
    
    
    17.17
    
    
    
    22.63
    
    
    
    16.31January 1, 2008 to March 31, 2008
    
    $
    33.38
    
    
    $
    26.08
    
    
    $
    33.18
    
    
    $
    28.06April 1, 2008 to June 30, 2008
    
    
    42.00
    
    
    
    30.50
    
    
    
    40.69
    
    
    
    32.14July 1, 2008 to September 30, 2008
    
    
    42.78
    
    
    
    33.65
    
    
    
    41.74
    
    
    
    35.17October 1, 2008 to December 31, 2008
    
    
    39.74
    
    
    
    12.20
    
    
    
    36.99
    
    
    
    8.82
    13




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Stock Performance Graph
   
 Cumulative Total Returns as of December 31,
 Index
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009PHI
    
    
    100.00
    
    
    
    120.25
    
    
    
    128.01
    
    
    
    120.33
    
    
    
    54.34
    
    
    
    80.29Peer Group
    
    
    100.00
    
    
    
    123.85
    
    
    
    163.30
    
    
    
    197.38
    
    
    
    113.88
    
    
    
    141.17OSX
    
    
    100.00
    
    
    
    146.96
    
    
    
    161.29
    
    
    
    243.35
    
    
    
    97.94
    
    
    
    157.27Russell 2000
    
    
    100.00
    
    
    
    103.32
    
    
    
    120.89
    
    
    
    117.57
    
    
    
    76.65
    
    
    
    95.98
 14




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ITEM 6.
    
    SELECTED FINANCIAL DATA
  Year EndedDecember 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Thousands, except per share amounts)Income Statement DataOperating revenues
    
    $
    487,175
    
    
    $
    509,514
    
    
    $
    446,406
    
    
    $
    413,118
    
    
    $
    363,610Gain on disposition of assets, net
    
    
    111
    
    
    
    4,468
    
    
    
    34,953
    
    
    
    1,910
    
    
    
    1,173Net earnings (loss) (1) (2) (3)
    
    
    12,968
    
    
    
    23,515
    
    
    
    28,218
    
    
    
    (667
    )
    
    
    14,154Net earnings (loss) per shareBasic
    
    
    0.85
    
    
    
    1.54
    
    
    
    1.85
    
    
    
    (0.05
    )
    
    
    1.76Diluted
    
    
    0.85
    
    
    
    1.54
    
    
    
    1.85
    
    
    
    (0.05
    )
    
    
    1.76Weighted average shares outstandingBasic
    
    
    15,307
    
    
    
    15,295
    
    
    
    15,279
    
    
    
    13,911
    
    
    
    8,040Diluted
    
    
    15,307
    
    
    
    15,301
    
    
    
    15,288
    
    
    
    13,911
    
    
    
    8,063Cash Flow DataNet cash provided by operating activities
    
    $
    55,272
    
    
    $
    43,798
    
    
    $
    25,226
    
    
    $
    30,324
    
    
    $
    28,020Net cash used in investing activities
    
    
    (69,235
    )
    
    
    (47,292
    )
    
    
    (19,464
    )
    
    
    (178,928
    )
    
    
    (137,464
    )Net cash provided by (used in) financing activities
    
    
    15,305
    
    
    
    3,228
    
    
    
    (5,157
    )
    
    
    146,388
    
    
    
    108,947Balance Sheet Data (4)Current assets
    
    $
    245,301
    
    
    $
    224,620
    
    
    $
    230,029
    
    
    $
    307,689
    
    
    $
    224,265Working capital
    
    
    207,024
    
    
    
    173,978
    
    
    
    176,633
    
    
    
    254,099
    
    
    
    162,527Property and equipment, net
    
    
    548,536
    
    
    
    528,574
    
    
    
    484,119
    
    
    
    369,465
    
    
    
    311,678Total assets
    
    
    805,506
    
    
    
    777,182
    
    
    
    741,296
    
    
    
    700,970
    
    
    
    549,209Total debt
    
    
    218,305
    
    
    
    203,000
    
    
    
    200,000
    
    
    
    205,500
    
    
    
    204,300Shareholders equity
    
    
    465,448
    
    
    
    452,396
    
    
    
    428,669
    
    
    
    400,125
    
    
    
    239,051
 
 (1)
    
    Net earnings in 2008 includes an after tax goodwill impairment charge of $1.6 million
related to our Air Medical segment.(2)
    
    Net earnings in 2007 was impacted due to the pilots strike that commenced September
20, 2006.(3)
    
    Net loss in 2006 includes an after tax charge of $7.7 million related to the
refinancing of our 9 3/8% Senior Notes.(4)
    
    As of the year ended December 31. 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Overview
  15




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Results of Operations
  Year EndedDecember 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    316,198
    
    
    $
    324,147
    
    
    $
    286,118Air Medical
    
    
    160,113
    
    
    
    174,739
    
    
    
    149,590Technical Services
    
    
    10,864
    
    
    
    10,628
    
    
    
    10,698Total operating revenues
    
    
    487,175
    
    
    
    509,514
    
    
    
    446,406Segment direct expenses (1)Oil and Gas
    
    
    263,818
    
    
    
    258,160
    
    
    
    250,110Air Medical
    
    
    147,630
    
    
    
    160,910
    
    
    
    137,703Technical Services
    
    
    7,179
    
    
    
    6,883
    
    
    
    6,608Total direct expenses
    
    
    418,627
    
    
    
    425,953
    
    
    
    394,421Segment selling, general and administrative expensesOil and Gas
    
    
    1,075
    
    
    
    1,335
    
    
    
    1,531Air Medical
    
    
    6,484
    
    
    
    8,716
    
    
    
    7,883Technical Services
    
    
    51
    
    
    
    76
    
    
    
    59Total selling, general and administrative expenses
    
    
    7,610
    
    
    
    10,127
    
    
    
    9,473Total segment direct and selling, general and administrative expenses
    
    
    426,237
    
    
    
    436,080
    
    
    
    403,894Net segment operating profitOil and Gas
    
    
    51,305
    
    
    
    64,652
    
    
    
    34,477Air Medical
    
    
    5,999
    
    
    
    5,113
    
    
    
    4,004Technical Services
    
    
    3,634
    
    
    
    3,669
    
    
    
    4,031Total
    
    
    60,938
    
    
    
    73,434
    
    
    
    42,512Other, net (2)
    
    
    336
    
    
    
    4,990
    
    
    
    40,051Unallocated selling, general and administrative expenses (1)
    
    
    (23,396
    )
    
    
    (21,530
    )
    
    
    (20,753
    )Interest expense
    
    
    (16,037
    )
    
    
    (15,515
    )
    
    
    (16,121
    )Goodwill impairment charge
    
    
    
    
    
    
    (2,747
    )
    
    
    Earnings before income taxes
    
    $
    21,841
    
    
    $
    38,632
    
    
    $
    45,689Flight hoursOil and Gas
    
    
    111,527
    
    
    
    112,341
    
    
    
    107,812Air Medical
    
    
    33,483
    
    
    
    36,732
    
    
    
    31,341Technical Services
    
    
    1,304
    
    
    
    1,613
    
    
    
    1,216Total
    
    
    146,314
    
    
    
    150,686
    
    
    
    140,369Air Medical Transports
    
    
    19,798
    
    
    
    22,647
    
    
    
    21,710Aircraft operated at period endOil and Gas
    
    
    164
    
    
    
    153
    
    
    
    156Air Medical
    
    
    85
    
    
    
    90
    
    
    
    77Technical Services
    
    
    6
    
    
    
    6
    
    
    
    4Total (3)
    
    
    255
    
    
    
    249
    
    
    
    237
 
 (1)
    
    Included in segment direct expense and unallocated selling, general, and administrative
costs are the depreciation expense amounts below: Year Ended December 31,2009
    
    
    2008
    
    
    2007O&G
    
    $
    16,853
    
    
    $
    15,408
    
    
    $
    16,860Air Medical
    
    
    7,926
    
    
    
    8,283
    
    
    
    8,651Tech Services
    
    
    285
    
    
    
    276
    
    
    
    642Total
    
    
    25,064
    
    
    
    23,967
    
    
    
    26,153Unallocated SG&A
    
    $
    2,700
    
    
    $
    2,977
    
    
    $
    3,861
 
 (2)
    
    Includes gains on disposition of property and equipment, and other income.(3)
    
    Includes 16 aircraft as of December 31, 2009 and 2008, and 12 aircraft as of December
31, 2007 that are customer owned or leased by customers but operated by us. 17




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##### Table of Contents



Year Ended December 31, 2009 compared with Year Ended December 31, 2008
 Combined Operations
 Operating Revenues
 Other Income and Losses
 Direct Expenses
 Selling, General and Administrative Expenses
 Interest Expense
 Income Taxes
 Net Earnings
 18




---



##### Table of Contents



Segment Discussion
 Oil and Gas
     Air Medical
   19




---



##### Table of Contents



Technical Services
  Year Ended December 31, 2008 compared with Year Ended December 31, 2007
 Combined Operations
 Operating Revenues
 Other Income and Losses
 Direct Expenses
 Selling, General and Administrative Expenses
 Interest Expense
 20




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##### Table of Contents



Goodwill Impairment
 Income Taxes
 Net Earnings
 Segment Discussion
 Oil and Gas
     Air Medical
 21




---



##### Table of Contents



Technical Services
  Liquidity and Capital Resources
 General
  22




---



##### Table of Contents



Cash Flow
      Credit Facility
    23




---



##### Table of Contents



Contractual Obligations
  Payment Due by YearBeyondTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2014(Thousands of dollars)Aircraft lease obligations
    
    
    231,396
    
    
    
    32,604
    
    
    
    33,872
    
    
    
    34,539
    
    
    
    34,904
    
    
    
    34,904
    
    
    
    60,573Other lease obligations
    
    
    18,392
    
    
    
    3,409
    
    
    
    2,908
    
    
    
    1,976
    
    
    
    1,465
    
    
    
    1,292
    
    
    
    7,342Long term debt
    
    
    218,305
    
    
    
    
    
    
    
    18,305
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    $
    468,093
    
    
    $
    36,013
    
    
    $
    55,085
    
    
    $
    36,515
    
    
    $
    236,369
    
    
    $
    36,196
    
    
    $
    67,915
   Critical Accounting Policies and Estimates
    24




---



##### Table of Contents



Goodwill
   25




---



##### Table of Contents



New Accounting Pronouncements
  ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   26




---



##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework
  
 27




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 
 CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data)
 December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    2,501
    
    
    $
    1,159Short-term investments
    
    
    75,138
    
    
    
    42,121Accounts receivable  netTrade
    
    
    90,518
    
    
    
    104,912Other
    
    
    3,885
    
    
    
    6,510Inventories of spare parts  net
    
    
    61,501
    
    
    
    58,249Other current assets
    
    
    11,018
    
    
    
    10,687Income taxes receivable
    
    
    740
    
    
    
    982Total current assets
    
    
    245,301
    
    
    
    224,620Other
    
    
    11,669
    
    
    
    23,988Property and equipment  net
    
    
    548,536
    
    
    
    528,574Total assets
    
    $
    805,506
    
    
    $
    777,182LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    14,935
    
    
    $
    25,449Accrued liabilities
    
    
    23,342
    
    
    
    25,193Total current liabilities
    
    
    38,277
    
    
    
    50,642Long-term debt
    
    
    218,305
    
    
    
    203,000Deferred income taxes
    
    
    73,409
    
    
    
    65,175Other long-term liabilities
    
    
    10,067
    
    
    
    5,969Commitments and contingencies (Note 9)Shareholders Equity:Voting common stock  par value of $0.10;
12,500,000 shares authorized,2,852,616 issued and
outstanding
    
    
    285
    
    
    
    285Non-voting common stock  par value of $0.10;25,000,000 shares authorizedIssued and outstanding:2009 
12,458,992; 2008  12,448,992
    
    
    1,246
    
    
    
    1,245Additional paid-in capital
    
    
    291,403
    
    
    
    291,262Accumulated other comprehensive (loss) income
    
    
    (13
    )
    
    
    45Retained earnings
    
    
    172,527
    
    
    
    159,559Total shareholders equity
    
    
    465,448
    
    
    
    452,396Total liabilities and shareholders equity
    
    $
    805,506
    
    
    $
    777,182
  28




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars and shares, except per share data)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Operating revenues, net
    
    $
    487,175
    
    
    $
    509,514
    
    
    $
    446,406Gain on disposition of assets, net
    
    
    111
    
    
    
    4,468
    
    
    
    34,953Other, principally interest income
    
    
    225
    
    
    
    522
    
    
    
    5,098487,511
    
    
    
    514,504
    
    
    
    486,457Expenses:Direct expenses
    
    
    418,627
    
    
    
    425,953
    
    
    
    394,421Selling, general and
administrative expenses
    
    
    31,006
    
    
    
    31,657
    
    
    
    30,226Interest expense
    
    
    16,037
    
    
    
    15,515
    
    
    
    16,121Goodwill impairment charges
    
    
    
    
    
    
    2,747
    
    
    
    465,670
    
    
    
    475,872
    
    
    
    440,768Earnings before income taxes
    
    
    21,841
    
    
    
    38,632
    
    
    
    45,689Income tax expense
    
    
    8,873
    
    
    
    15,117
    
    
    
    17,471Net earnings
    
    $
    12,968
    
    
    $
    23,515
    
    
    $
    28,218Earnings per share:Basic
    
    $
    0.85
    
    
    $
    1.54
    
    
    $
    1.85Diluted
    
    $
    0.85
    
    
    $
    1.54
    
    
    $
    1.85Weighted average shares outstanding:Basic
    
    
    15,307
    
    
    
    15,295
    
    
    
    15,279Diluted
    
    
    15,307
    
    
    
    15,301
    
    
    
    15,288
  29




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Thousands of dollars and shares)
 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, 2006
    
    
    2,853
    
    
    $
    285
    
    
    
    12,424
    
    
    $
    1,242
    
    
    $
    290,695
    
    
    $
    77
    
    
    $
    107,826
    
    
    $
    400,125Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,218
    
    
    
    28,218Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,202Stock options exercised
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    2
    
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    342Balance at December 31, 2007
    
    
    2,853
    
    
    
    285
    
    
    
    12,439
    
    
    
    1,244
    
    
    
    291,035
    
    
    
    61
    
    
    
    136,044
    
    
    
    428,669Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,515
    
    
    
    23,515Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,499Stock options exercised
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    227
    
    
    
    
    
    
    
    
    
    
    
    228Balance at December 31, 2008
    
    
    2,853
    
    
    
    285
    
    
    
    12,449
    
    
    
    1,245
    
    
    
    291,262
    
    
    
    45
    
    
    
    159,559
    
    
    
    452,396Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,968
    
    
    
    12,968Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,910Stock options exercised
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    142Balance at December 31, 2009
    
    
    2,853
    
    
    $
    285
    
    
    
    12,459
    
    
    $
    1,246
    
    
    $
    291,403
    
    
    $
    (13
    )
    
    $
    172,527
    
    
    $
    465,448
  30




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Operating activities:Net earnings
    
    $
    12,968
    
    
    $
    23,515
    
    
    $
    28,218Adjustments to reconcile net earnings to net
cash provided by operating activities:Depreciation and amortization
    
    
    27,764
    
    
    
    26,944
    
    
    
    30,047Goodwill impairment
    
    
    
    
    
    
    2,747
    
    
    
    Deferred income taxes
    
    
    8,603
    
    
    
    13,531
    
    
    
    16,498Gain on asset dispositions
    
    
    (111
    )
    
    
    (4,468
    )
    
    
    (34,953
    )Other
    
    
    930
    
    
    
    922
    
    
    
    868Changes in operating assets and liabilities:Accounts receivable
    
    
    17,019
    
    
    
    (13,338
    )
    
    
    (8,790
    )Inventories of spare parts
    
    
    (3,252
    )
    
    
    (2,418
    )
    
    
    (1,492
    )Income taxes receivable
    
    
    242
    
    
    
    (457
    )
    
    
    110Other current assets
    
    
    (1,714
    )
    
    
    1,208
    
    
    
    (1,824
    )Accounts payable and accrued liabilities
    
    
    (11,360
    )
    
    
    (2,754
    )
    
    
    (2,100
    )Other long-term liabilities
    
    
    4,183
    
    
    
    (1,634
    )
    
    
    (1,356
    )Net cash provided by operating activities
    
    
    55,272
    
    
    
    43,798
    
    
    
    25,226Investing activities:Purchase of property and equipment
    
    
    (57,035
    )
    
    
    (77,590
    )
    
    
    (159,715
    )Proceeds from asset dispositions
    
    
    9,217
    
    
    
    18,394
    
    
    
    58,105Purchase of short-term investments
    
    
    (47,704
    )
    
    
    (43,976
    )
    
    
    (134,241
    )Proceeds from sale of short-term investments
    
    
    14,687
    
    
    
    64,826
    
    
    
    224,685Refund (payment) of deposits on aircraft
    
    
    11,600
    
    
    
    (8,946
    )
    
    
    (8,298
    )Net cash used in investing activities
    
    
    (69,235
    )
    
    
    (47,292
    )
    
    
    (19,464
    )Financing activities:Proceeds from line of credit
    
    
    37,750
    
    
    
    15,800
    
    
    
    37,200Payments on line of credit
    
    
    (22,445
    )
    
    
    (12,800
    )
    
    
    (42,700
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    228
    
    
    
    343Net cash provided by (used in) financing activities
    
    
    15,305
    
    
    
    3,228
    
    
    
    (5,157
    )Increase (decrease) in cash and cash equivalents
    
    
    1,342
    
    
    
    (266
    )
    
    
    605Cash and cash equivalents, beginning of year
    
    
    1,159
    
    
    
    1,425
    
    
    
    820Cash and cash equivalents, end of year
    
    $
    2,501
    
    
    $
    1,159
    
    
    $
    1,425Supplemental Disclosures Cash Flow InformationAccrued payables related to purchases of property
and equipment
    
    $
    312
    
    
    $
    1,510
    
    
    $
    1,906
  31




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations, Basis of Consolidation, and Other General Principles
    Revenue Recognition
  Use of Estimates
   
 Cash Equivalents
  32




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##### Table of Contents



Short-term Investments
   Inventories of Spare Parts
  Property and Equipment
    Self-Insurance
  33




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##### Table of Contents



Concentration of Credit Risk
    Stock Compensation
  Income Taxes
   34




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##### Table of Contents



Earnings per Share
  Deferred Financing Costs
  Derivative Financial Instruments
  New Accounting Pronouncements
   Comprehensive Income
   Year Ended December 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Net earnings
    
    $
    12,968
    
    
    $
    23,515
    
    
    $
    28,218Changes in pension plan assets
and benefit obligations
    
    
    (58
    )
    
    
    (16
    )
    
    
    (16
    )Comprehensive income
    
    $
    12,910
    
    
    $
    23,499
    
    
    $
    28,202
 35




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##### Table of Contents



Goodwill
   (2)
    
    PROPERTY AND EQUIPMENT
  December 31,
    
    
    December 31,2009
    
    
    2008(Thousands of dollars)Flight equipment
    
    $
    674,920
    
    
    $
    635,733Facility & improvements
    
    
    36,788
    
    
    
    30,406Operating equipment
    
    
    19,436
    
    
    
    18,477Data processing equipment
    
    
    22,312
    
    
    
    24,153Vehicles
    
    
    7,005
    
    
    
    5,957Medical equipment
    
    
    3,933
    
    
    
    3,993Other
    
    
    3,810
    
    
    
    7,256768,204
    
    
    
    725,975Less accumulated depreciation and
amortization
    
    
    (219,668
    )
    
    
    (197,401
    )Property and equipment, net
    
    $
    548,536
    
    
    $
    528,574
 36




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##### Table of Contents



(3)
    
    ACCRUED LIABILITIES
  December 31,
    
    
    December 31,2009
    
    
    2008(Thousands of dollars)Salaries & wages
    
    $
    6,501
    
    
    $
    7,076Vacation payable
    
    
    3,621
    
    
    
    3,619Interest
    
    
    3,173
    
    
    
    3,009Operating lease
    
    
    2,326
    
    
    
    4,271Group medical
    
    
    2,059
    
    
    
    1,689Transportations tax
    
    
    1,173
    
    
    
    1,039Workers compensation
    
    
    1,510
    
    
    
    1,501Other
    
    
    2,979
    
    
    
    2,989Total accrued liabilities
    
    $
    23,342
    
    
    $
    25,193
 (4)
    
    LONG-TERM DEBT
      37




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##### Table of Contents



(5)
    
    INCOME TAXES
  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)CurrentFederal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    193
    
    
    
    178
    
    
    
    Foreign
    
    
    77
    
    
    
    808
    
    
    
    973Deferred  principally
Federal
    
    
    8,603
    
    
    
    14,131
    
    
    
    16,498Total
    
    $
    8,873
    
    
    $
    15,117
    
    
    $
    17,471
  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007(Thousands of dollars, except percentage amounts)Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Income taxes at statutory rate
    
    $
    7,644
    
    
    
    35
    
    
    $
    13,519
    
    
    
    35
    
    
    $
    15,991
    
    
    
    35Increase (decrease) in taxes
resulting from:Hurricane relief credit
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    
    
    
    
    (134
    )
    
    
    Effect of state income taxes
    
    
    844
    
    
    
    4
    
    
    
    1371
    
    
    
    3
    
    
    
    1,479
    
    
    
    3Other items  net
    
    
    385
    
    
    
    2
    
    
    
    399
    
    
    
    1
    
    
    
    135
    
    
    
    Total
    
    $
    8,873
    
    
    
    41
    
    
    $
    15,117
    
    
    
    39
    
    
    $
    17,471
    
    
    
    38
  December 31,
    
    
    December 31,2009
    
    
    2008(Thousands of dollars)Deferred tax assets:Deferred compensation
    
    $
    1,990
    
    
    $
    1,654Foreign tax credits
    
    
    5,413
    
    
    
    6,359Vacation accrual
    
    
    1,543
    
    
    
    2,010Inventory valuation
    
    
    4,262
    
    
    
    4,164Rental accrual
    
    
    2,230
    
    
    
    1,634Allowance for uncollectible accounts
    
    
    19
    
    
    
    19Hurricane relief credit
    
    
    1,255
    
    
    
    1,255Goodwill impairment
    
    
    674
    
    
    
    1,051Other
    
    
    671
    
    
    
    347Net operating loss
    
    
    47,513
    
    
    
    34,201Total deferred tax assets
    
    
    65,570
    
    
    
    52,694Valuation allowance  state NOL
    
    
    (138
    )
    
    
    Valuation allowance  tax credit carryforwards
    
    
    (700
    )
    
    
    (1,320
    )Total deferred tax assets, net
    
    
    64,732
    
    
    
    51,374Deferred tax liabilities:Tax depreciation in excess of book depreciation
    
    
    (132,325
    )
    
    
    (110,242
    )Other
    
    
    
    
    
    
    (84
    )Total deferred tax liabilities
    
    
    (132,325
    )
    
    
    (110,326
    )Net deferred tax liabilities
    
    $
    (67,593
    )
    
    $
    (58,952
    )
 38




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##### Table of Contents



(6)
    
    EMPLOYEE BENEFIT PLANS
 Savings and Retirement Plans
     Years Ended December 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Interest cost
    
    $
    62
    
    
    $
    80
    
    
    $
    56Recognized actuarial (gain) loss
    
    
    (7
    )
    
    
    (24
    )
    
    
    (4
    )Net periodic plan cost
    
    $
    55
    
    
    $
    56
    
    
    $
    52
 39




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##### Table of Contents



December 31,2009
    
    
    2008(Thousands of dollars)Change in benefit obligation:Benefit obligation at the beginning of the year
    
    $
    953
    
    
    $
    1,012Interest cost
    
    
    62
    
    
    
    80Actuarial loss (gain)
    
    
    100
    
    
    
    (8
    )Benefits paid
    
    
    (131
    )
    
    
    (131
    )Benefit obligation at the end of the year
    
    $
    984
    
    
    $
    953Weighted average assumptionsDiscount rate
    
    
    3.93
    %
    
    
    5.7
    %
  December 31,2009
    
    
    2008(Thousands of dollars)Accrued liabilities
    
    $
    131
    
    
    $
    131Other long-term liabilities
    
    
    853
    
    
    
    822Total
    
    $
    984
    
    
    $
    953
  December 31,2009
    
    
    2008(Thousands of dollars)Net loss (gain)
    
    $
    100
    
    
    $
    (8
    )Amortization of net loss (gain)
    
    
    7
    
    
    
    24Total recognized in other comprehensive income
    
    $
    107
    
    
    $
    16Total recognized in net periodic benefit cost and
other comprehensive income
    
    $
    105
    
    
    $
    72
  Years Ending December 31,2010
    
    $
    1312011
    
    
    1312012
    
    
    1312013
    
    
    1312014
    
    
    131Years 2015  2019
    
    
    462$
    1,117
  40




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Stock Based Compensation
    Incentive Compensation
  41




---



##### Table of Contents



(7)
    
    OTHER ASSETS
  December 31,
    
    
    December 31,2009
    
    
    2008(Thousands of dollars)Nonrefundable
deposits on operating leases for aircraft
    
    $
    3,000
    
    
    $
    15,183Deferred financing cost
    
    
    2,903
    
    
    
    3,701Investments (Officers Deferred Compensation Plan)
    
    
    4,242
    
    
    
    3,519Other
    
    
    1,524
    
    
    
    1,585Total
    
    $
    11,669
    
    
    $
    23,988
 (8)
    
    FAIR VALUE
      December 31, 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
    
    $
    75,138
    
    
    $
    42,121Investments in other assets
    
    
    4,239
    
    
    
    3,297Total
    
    $
    79,377
    
    
    $
    45,418
  42




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##### Table of Contents



.
 December 31, 2009


    

December 31, 2008(Thousands of dollars)Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmounts
    
    Fair Value
    
    Amounts
    
    Fair ValueLong-term debt
    
    $
    218,305
    
    
    $
    194,000
    
    
    $
    203,000
    
    
    $
    118,000
 (9)
    
    COMMITMENTS AND CONTINGENCIES
 Operating Leases
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Aircraft
    
    $
    26,028
    
    
    $
    20,424
    
    
    $
    19,110Other
    
    
    7,201
    
    
    
    6,652
    
    
    
    6,715Total
    
    $
    33,229
    
    
    $
    27,076
    
    
    $
    25,825
   Aircraft
    
    
    Other
    
    
    Total(Thousands of dollars)2010
    
    $
    32,604
    
    
    $
    3,409
    
    
    $
    36,0132011
    
    
    33,872
    
    
    
    2,908
    
    
    
    36,7802012
    
    
    34,539
    
    
    
    1,976
    
    
    
    36,5152013
    
    
    34,904
    
    
    
    1,465
    
    
    
    36,3692014
    
    
    34,904
    
    
    
    1,292
    
    
    
    36,196Thereafter
    
    
    60,573
    
    
    
    7,342
    
    
    
    67,915$
    231,396
    
    
    $
    18,392
    
    
    $
    249,788
 Purchase Commitments
 Environmental Matters
 43




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##### Table of Contents



Legal Matters 
  Employee Matters
 (10)
    
    BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
   44




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##### Table of Contents



Accounts Receivable
    
    Operating RevenuesDecember 31,
    
    Years Ended December 31,2009
    
    2008
    
    2009
    
    2008
    
    2007Customer A
    
    
    14
    %
    
    
    10
    %
    
    
    15
    %
    
    
    13
    %
    
    
    12
    %Customer B
    
    
    11
    %
    
    
    10
    %
    
    
    13
    %
    
    
    14
    %
    
    
    15
    %
  45




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##### Table of Contents



Year EndedDecember 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    316,198
    
    
    $
    324,147
    
    
    $
    286,118Air Medical
    
    
    160,113
    
    
    
    174,739
    
    
    
    149,590Technical Services
    
    
    10,864
    
    
    
    10,628
    
    
    
    10,698Total operating revenues
    
    
    487,175
    
    
    
    509,514
    
    
    
    446,406Segment direct expensesOil and Gas
    
    
    263,818
    
    
    
    258,160
    
    
    
    250,110Air Medical
    
    
    147,630
    
    
    
    160,910
    
    
    
    137,703Technical Services
    
    
    7,179
    
    
    
    6,883
    
    
    
    6,608Total direct expenses
    
    
    418,627
    
    
    
    425,953
    
    
    
    394,421Segment selling, general and administrative expensesOil and Gas
    
    
    1,075
    
    
    
    1,335
    
    
    
    1,531Air Medical
    
    
    6,484
    
    
    
    8,716
    
    
    
    7,883Technical Services
    
    
    51
    
    
    
    76
    
    
    
    59Total selling, general and administrative expenses
    
    
    7,610
    
    
    
    10,127
    
    
    
    9,473Total direct and selling, general and administrative
expenses
    
    
    426,237
    
    
    
    436,080
    
    
    
    403,894Net segment profitOil and Gas
    
    
    51,305
    
    
    
    64,652
    
    
    
    34,477Air Medical
    
    
    5,999
    
    
    
    5,113
    
    
    
    4,004Technical Services
    
    
    3,634
    
    
    
    3,669
    
    
    
    4,031Total
    
    
    60,938
    
    
    
    73,434
    
    
    
    42,512Other, net (1)
    
    
    336
    
    
    
    4,990
    
    
    
    40,051Unallocated selling, general and administrative expenses
    
    
    (23,396
    )
    
    
    (21,530
    )
    
    
    (20,753
    )Interest expense
    
    
    (16,037
    )
    
    
    (15,515
    )
    
    
    (16,121
    )Goodwill impairment charge
    
    
    
    
    
    
    (2,747
    )
    
    
    Earnings before income taxes
    
    $
    21,841
    
    
    $
    38,632
    
    
    $
    45,689
 
 (1)
    
    Including gains on disposition of property and equipment and other income. Year EndedDecember 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Expenditures for long lived
assetsOil and Gas
    
    $
    36,674
    
    
    $
    45,530
    
    
    $
    130,574Air Medical
    
    
    20,205
    
    
    
    40,034
    
    
    
    35,053Corporate
    
    
    1,301
    
    
    
    793
    
    
    
    971Total
    
    $
    58,180
    
    
    $
    86,357
    
    
    $
    166,598
 46




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##### Table of Contents



Year EndedDecember 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Depreciation and AmortizationOil and Gas
    
    $
    15,926
    
    
    $
    15,669
    
    
    $
    17,211Air Medical
    
    
    7,934
    
    
    
    7,910
    
    
    
    8,303Technical Services
    
    
    234
    
    
    
    235
    
    
    
    252Corporate
    
    
    3,670
    
    
    
    3,130
    
    
    
    4,281Total
    
    $
    27,764
    
    
    $
    26,944
    
    
    $
    30,047AssetsOil and Gas
    
    $
    408,802
    
    
    $
    397,903
    
    
    $
    392,154Air Medical
    
    
    227,766
    
    
    
    226,642
    
    
    
    184,435Technical Services
    
    
    8,382
    
    
    
    6,597
    
    
    
    7,481Corporate
    
    
    160,556
    
    
    
    146,040
    
    
    
    157,226Total
    
    $
    805,506
    
    
    $
    777,182
    
    
    $
    741,296
  Year EndedDecember 31,2009
    
    
    2008
    
    
    2007(Thousands of dollars)Operating revenues:United States
    
    $
    480,128
    
    
    $
    489,611
    
    
    $
    424,268International
    
    
    7,047
    
    
    
    19,903
    
    
    
    22,138Total
    
    $
    487,175
    
    
    $
    509,514
    
    
    $
    446,406Long-Lived Assets:United States
    
    $
    546,077
    
    
    $
    523,626
    
    
    $
    478,795International
    
    
    2,459
    
    
    
    4,948
    
    
    
    5,324Total
    
    $
    548,536
    
    
    $
    528,574
    
    
    $
    484,119
 (11)
    
    QUARTERLY FINANCIAL DATA (UNAUDITED)
  Quarter EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2009
    
    2009
    
    2009
    
    2009(Thousands of dollars, except per share data)Operating revenues
    
    $
    116,952
    
    
    $
    123,321
    
    
    $
    124,183
    
    
    $
    122,719Gain (loss) on disposition
of assets, net
    
    
    272
    
    
    
    (107
    )
    
    
    7
    
    
    
    (61
    )Earnings before income taxes
    
    
    3,457
    
    
    
    6,110
    
    
    
    11,589
    
    
    
    685Net earnings
    
    
    2,075
    
    
    
    3,666
    
    
    
    6,953
    
    
    
    274Net earnings per shareBasic
    
    
    0.14
    
    
    
    0.24
    
    
    
    0.45
    
    
    
    0.02Diluted
    
    
    0.14
    
    
    
    0.24
    
    
    
    0.45
    
    
    
    0.02
  47




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##### Table of Contents



Quarter EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2008
    
    2008
    
    2008
    
    2008(Thousands of dollars, except per share data)Operating revenues
    
    $
    117,145
    
    
    $
    130,111
    
    
    $
    135,460
    
    
    $
    126,798Gain on disposition of assets, net
    
    
    2,949
    
    
    
    1,255
    
    
    
    249
    
    
    
    15Earnings before income taxes
    
    
    10,947
    
    
    
    10,422
    
    
    
    13,160
    
    
    
    4,103
    (1)Net earnings
    
    
    6,568
    
    
    
    6,253
    
    
    
    7,897
    
    
    
    2,797Net earnings per shareBasic
    
    
    0.43
    
    
    
    0.41
    
    
    
    0.52
    
    
    
    0.18Diluted
    
    
    0.43
    
    
    
    0.41
    
    
    
    0.52
    
    
    
    0.18
 
 (1)
    
    Includes a $2.7 million goodwill impairment charge related to our Air Medical segment. (12)
    
    SHAREHOLDERS EQUITY
   (13)
    
    CONDENSED FINANCIAL INFORMATION  GUARANTOR SUBSIDIARIES
    48




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)
 December 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,678
    
    
    $
    823
    
    
    $
    
    
    
    $
    2,501Short-term investments
    
    
    75,138
    
    
    
    
    
    
    
    
    
    
    
    75,138Accounts receivable  net
    
    
    83,247
    
    
    
    11,156
    
    
    
    
    
    
    
    94,403Intercompany receivable
    
    
    
    
    
    
    71,484
    
    
    
    (71,484
    )
    
    
    Inventories of spare parts  net
    
    
    61,501
    
    
    
    
    
    
    
    
    
    
    
    61,501Other current assets
    
    
    11,001
    
    
    
    17
    
    
    
    
    
    
    
    11,018Income taxes receivable
    
    
    740
    
    
    
    
    
    
    
    
    
    
    
    740Total current assets
    
    
    233,305
    
    
    
    83,480
    
    
    
    (71,484
    )
    
    
    245,301Investment in subsidiaries and others
    
    
    71,291
    
    
    
    
    
    
    
    (71,291
    )
    
    
    Other assets
    
    
    11,549
    
    
    
    120
    
    
    
    
    
    
    
    11,669Property and equipment, net
    
    
    535,539
    
    
    
    12,997
    
    
    
    
    
    
    
    548,536Total assets
    
    $
    851,684
    
    
    $
    96,597
    
    
    $
    (142,775
    )
    
    $
    805,506LIABILITIES AND
SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    13,746
    
    
    $
    1,189
    
    
    $
    
    
    
    $
    14,935Accrued liabilities
    
    
    19,028
    
    
    
    4,314
    
    
    
    
    
    
    
    23,342Intercompany payable
    
    
    71,484
    
    
    
    
    
    
    
    (71,484
    )
    
    
    Total current liabilities
    
    
    104,258
    
    
    
    5,503
    
    
    
    (71,484
    )
    
    
    38,277Long-term debt
    
    
    218,305
    
    
    
    
    
    
    
    
    
    
    
    218,305Deferred income taxes and other long-term
liabilities
    
    
    63,673
    
    
    
    19,803
    
    
    
    
    
    
    
    83,476Shareholders Equity:Common stock and paid-in capital
    
    
    292,934
    
    
    
    2,674
    
    
    
    (2,674
    )
    
    
    292,934Accumulated other comprehensive
loss
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Retained earnings
    
    
    172,527
    
    
    
    68,617
    
    
    
    (68,617
    )
    
    
    172,527Total shareholders equity
    
    
    465,448
    
    
    
    71,291
    
    
    
    (71,291
    )
    
    
    465,448Total liabilities and
shareholders equity
    
    $
    851,684
    
    
    $
    96,597
    
    
    $
    (142,775
    )
    
    $
    805,506
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 49




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
 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:Common stock and 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. 50




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)
 For the year ended December 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    419,075
    
    
    $
    68,100
    
    
    $
    
    
    
    $
    487,175Management fees
    
    
    2,724
    
    
    
    
    
    
    
    (2,724
    )
    
    
    Gain on disposition of assets, net
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    111Other, principally interest income
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    225422,135
    
    
    
    68,100
    
    
    
    (2,724
    )
    
    
    487,511Expenses:Direct expenses
    
    
    365,385
    
    
    
    53,242
    
    
    
    
    
    
    
    418,627Management fees
    
    
    
    
    
    
    2,724
    
    
    
    (2,724
    )
    
    
    Selling, general, and administrative
    
    
    28,979
    
    
    
    2,027
    
    
    
    
    
    
    
    31,006Equity in net income of consolidated
subsidiaries
    
    
    (6,064
    )
    
    
    
    
    
    
    6,064
    
    
    
    Interest expense
    
    
    16,037
    
    
    
    
    
    
    
    
    
    
    
    16,037404,337
    
    
    
    57,993
    
    
    
    3,340
    
    
    
    465,670Earnings before income taxes
    
    
    17,798
    
    
    
    10,107
    
    
    
    (6,064
    )
    
    
    21,841Income tax expense
    
    
    4,830
    
    
    
    4,043
    
    
    
    
    
    
    
    8,873Net earnings
    
    $
    12,968
    
    
    $
    6,064
    
    
    $
    (6,064
    )
    
    $
    12,968
 For the year ended December 31, 2008ParentCompany
    
    
    GuarantorOnly(2)
    
    
    Subsidiaries(1) (2)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    437,881
    
    
    $
    71,633
    
    
    $
    
    
    
    $
    509,514Management fees
    
    
    2,865
    
    
    
    
    
    
    
    (2,865
    )
    
    
    Gain on disposition of assets, net
    
    
    4,468
    
    
    
    
    
    
    
    
    
    
    
    4,468Other, principally interest income
    
    
    522
    
    
    
    
    
    
    
    
    
    
    
    522445,736
    
    
    
    71,633
    
    
    
    (2,865
    )
    
    
    514,504Expenses:Direct expenses
    
    
    369,600
    
    
    
    56,353
    
    
    
    
    
    
    
    425,953Management fees
    
    
    
    
    
    
    2,865
    
    
    
    (2,865
    )
    
    
    Selling, general, and administrative
    
    
    27,842
    
    
    
    3,815
    
    
    
    
    
    
    
    31,657Equity in
net income of consolidated subsidiaries
    
    
    (7,571
    )
    
    
    
    
    
    
    7,571
    
    
    
    Interest expense
    
    
    15,515
    
    
    
    
    
    
    
    
    
    
    
    15,515Goodwill impairment charge
    
    
    2,747
    
    
    
    
    
    
    
    
    
    
    
    2,747408,133
    
    
    
    63,033
    
    
    
    4,706
    
    
    
    475,872Earnings before income taxes
    
    
    37,603
    
    
    
    8,600
    
    
    
    (7,571
    )
    
    
    38,632Income tax expense
    
    
    14,088
    
    
    
    1,029
    
    
    
    
    
    
    
    15,117Net earnings
    
    $
    23,515
    
    
    $
    7,571
    
    
    $
    (7,571
    )
    
    $
    23,515
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors subsidiaries amounts.(2)
    
    Certain revisions were made to conform to the current years presentation. 51




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)
 For the year ended December 31, 2007ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    378,092
    
    
    $
    68,314
    
    
    $
    
    
    
    $
    446,406Management fees
    
    
    2,733
    
    
    
    
    
    
    
    (2,733
    )
    
    
    Gain on disposition of assets, net
    
    
    34,953
    
    
    
    
    
    
    
    
    
    
    
    34,953Other, principally interest income
    
    
    5,090
    
    
    
    8
    
    
    
    
    
    
    
    5,098420,868
    
    
    
    68,322
    
    
    
    (2,733
    )
    
    
    486,457Expenses:Direct expenses
    
    
    347,397
    
    
    
    47,024
    
    
    
    
    
    
    
    394,421Management fees
    
    
    
    
    
    
    2,733
    
    
    
    (2,733
    )
    
    
    Selling, general, and administrative
    
    
    27,140
    
    
    
    3,086
    
    
    
    
    
    
    
    30,226Equity in
net income of consolidated subsidiaries
    
    
    (13,158
    )
    
    
    
    
    
    
    13,158
    
    
    
    Interest expense
    
    
    16,121
    
    
    
    
    
    
    
    
    
    
    
    16,121377,500
    
    
    
    52,843
    
    
    
    10,425
    
    
    
    440,768Earnings before income taxes
    
    
    43,368
    
    
    
    15,479
    
    
    
    (13,158
    )
    
    
    45,689Income tax expense
    
    
    15,150
    
    
    
    2,321
    
    
    
    
    
    
    
    17,471Net earnings
    
    $
    28,218
    
    
    $
    13,158
    
    
    $
    (13,158
    )
    
    $
    28,218
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors subsidiaries amounts. 52




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)
 For the year ended December 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    53,442
    
    
    $
    1,830
    
    
    $
    
    
    
    $
    55,272Investing activities:Purchase of property and equipment
    
    
    (55,428
    )
    
    
    (1,607
    )
    
    
    
    
    
    
    (57,035
    )Proceeds from asset dispositions
    
    
    9,217
    
    
    
    
    
    
    
    
    
    
    
    9,217Purchase of short-term investments, net
    
    
    (33,017
    )
    
    
    
    
    
    
    
    
    
    
    (33,017
    )Other
    
    
    11,600
    
    
    
    
    
    
    
    
    
    
    
    11,600Net cash used in investing activities
    
    
    (67,628
    )
    
    
    (1,607
    )
    
    
    
    
    
    
    (69,235
    )Financing activities:Proceeds on line of credit, net
    
    
    15,305
    
    
    
    
    
    
    
    
    
    
    
    15,305Net cash provided by financing activities
    
    
    15,305
    
    
    
    
    
    
    
    
    
    
    
    15,305Increase in cash and cash
equivalents
    
    
    1,119
    
    
    
    223
    
    
    
    
    
    
    
    1,342Cash and cash equivalents, beginning of
year
    
    
    559
    
    
    
    600
    
    
    
    
    
    
    
    1,159Cash and cash equivalents, end of year
    
    $
    1,678
    
    
    $
    823
    
    
    $
    
    
    
    $
    2,501
 For the year ended December 31, 2008ParentCompany
    
    
    GuarantorOnly(1)
    
    

Subsidiaries(1) (2)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    41,171
    
    
    $
    2,627
    
    
    $
    
    
    
    $
    43,798Investing activities:Purchase of property and equipment
    
    
    (75,142
    )
    
    
    (2,448
    )
    
    
    
    
    
    
    (77,590
    )Proceeds from asset dispositions
    
    
    18,394
    
    
    
    
    
    
    
    
    
    
    
    18,394Proceeds
from sale of short-term investments, net
    
    
    20,850
    
    
    
    
    
    
    
    
    
    
    
    20,850Other
    
    
    (8,946
    )
    
    
    
    
    
    
    
    
    
    
    (8,946
    )Net cash used in investing activities
    
    
    (44,844
    )
    
    
    (2,448
    )
    
    
    
    
    
    
    (47,292
    )Financing activities:Proceeds on line of credit, net
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Proceeds from exercise of stock options
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228Net cash provided by financing activities
    
    
    3,228
    
    
    
    
    
    
    
    
    
    
    
    3,228Increase (decrease) in cash and cash
equivalents
    
    
    (445
    )
    
    
    179
    
    
    
    
    
    
    
    (266
    )Cash and cash equivalents, beginning of
year
    
    
    1,004
    
    
    
    421
    
    
    
    
    
    
    
    1,425Cash and cash equivalents, end of year
    
    $
    559
    
    
    $
    600
    
    
    $
    
    
    
    $
    1,159
 
 (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
years presentation. 53




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)
 For the year ended December 31, 2007ParentCompany
    
    
    GuarantorOnly
    
    
    Subsidiaries(1)(2)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    14,975
    
    
    $
    10,251
    
    
    $
    
    
    
    $
    25,226Investing activities:Purchase of property and equipment
    
    
    (149,450
    )
    
    
    (10,265
    )
    
    
    
    
    
    
    (159,715
    )Proceeds from asset dispositions
    
    
    58,105
    
    
    
    
    
    
    
    
    
    
    
    58,105Proceeds
from sale of short-term investments, net
    
    
    90,444
    
    
    
    
    
    
    
    
    
    
    
    90,444Other
    
    
    (8,298
    )
    
    
    
    
    
    
    
    
    
    
    (8,298
    )Net cash used in investing activities
    
    
    (9,199
    )
    
    
    (10,265
    )
    
    
    
    
    
    
    (19,464
    )Financing activities:Payments on line of credit, net
    
    
    (5,500
    )
    
    
    
    
    
    
    
    
    
    
    (5,500
    )Proceeds from exercise of stock options
    
    
    343
    
    
    
    
    
    
    
    
    
    
    
    343Net cash used in financing activities
    
    
    (5,157
    )
    
    
    
    
    
    
    
    
    
    
    (5,157
    )Increase
(decrease) in cash and cash equivalents
    
    
    619
    
    
    
    (14
    )
    
    
    
    
    
    
    605Cash and
cash equivalents, beginning of year
    
    
    385
    
    
    
    435
    
    
    
    
    
    
    
    820Cash and cash equivalents, end of year
    
    $
    1,004
    
    
    $
    421
    
    
    $
    
    
    
    $
    1,425
 
 (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 years presentation. 54




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Managements Report on Internal Control over Financial Reporting
  Internal
Control-Integrated Framework
  55




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
     
 56




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##### Table of Contents



ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  57




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 1.
    
    
    Financial Statements
    
    PageIncluded in Part II of this report:Report of Independent Registered Public Accounting Firm
    
    
    27Consolidated Balance Sheets  December 31, 2009 and December 31, 2008.
    
    
    28Consolidated Statements of Operations for the years ended December 31, 2009, December 31, 2008, and December 31, 2007.
    
    
    29Consolidated Statements of Shareholders Equity for the years ended December 31, 2009, December 31,
2008, and December 31, 2007.
    
    
    30Consolidated Statements of Cash Flows for the years ended December 31, 2009, December 31
2008, and December 31, 2007.
    
    
    31Notes to Consolidated Financial Statements.
    
    
    322.
    
    
    Financial Statement SchedulesSchedule II  Valuation and Qualifying accounts for the years ended December 31, 2009, December 31, 2008 and December 31, 2007.
    
    
    60
 3.
    
    Exhibits
 3
    
    Articles of Incorporation and By-laws3.1
    
    (i) Composite Articles of Incorporation of the
Company (incorporated by reference to Exhibit
No. 3.1(i) to PHIs Report on Form 10-Q for
the quarterly period ended June 30, 2008,
filed 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
    
    Instruments defining the rights of security holders, including indentures.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 for the
quarterly period ended March 31, 2008, filed 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).10
    
    Material Contracts10.1
    
    Senior Management Bonus Plan (incorporated by reference to Exhibit 10.1 to
PHIs Report on Form 10-K filed March 16, 2009).
 58




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##### Table of Contents



10.2
    
    Amended and Restated PHI, Inc. 1995 Incentive Compensation Plan adopted by
PHIs Board effective July 11, 1995 and approved by the shareholders of PHI on
September 22, 1995 (incorporated by reference to Exhibit 10.3 to PHIs Report on Form
10-K for the year ended December 31, 2006).10.3
    
    Form of Non-Qualified Stock Option Agreement under the PHI, Inc. 1995 Incentive
Compensation Plan between PHI and certain of its key employees (incorporated by
reference to Exhibit 10.4 to PHIs Report on Form 10-K for the year ended December 31,
2006).10.4
    
    Officer Deferred Compensation Plan II adopted by PHIs Board effective January
1, 2005 (incorporated by reference to Exhibit 10.5 to PHIs Report on Form 10-K for the
year ended December 31, 2006).10.5
    
    Articles of Agreement Between PHI, Inc. & Office & Professional Employees
International Union and its Local 108 dated June 13, 2001 (incorporated by reference to
Exhibit 10.6 to PHIs Report on Form 10-K for the year ended December 31, 2006).10.5
    
    Terms of employment of Lance Bospflug, August 6, 2008 (incorporated by
reference to Exhibit 10.1 to PHIs Report on Form 10-Q for the quarterly period ended
September 30, 2008).21
    
    Subsidiaries of the Registrant23.1
    
    Consent of Deloitte & Touche LLP31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, 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, Chief Executive Officer.32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer.
 59




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##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 Schedule II  Valuation and Qualifying Accounts
(Thousands of dollars)
 AdditionsBalance at
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    
    
    
    
    EndDescription
    
    of Year
    
    
    Expenses
    
    
    Deductions
    
    
    of YearYear ended December 31, 2009:Allowance for doubtful accounts
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50Allowance for inventory
    
    
    7,857
    
    
    
    1,325
    
    
    
    
    
    
    
    9,182Allowance for contractual discounts
    
    
    37,590
    
    
    
    183,294
    
    
    
    188,760
    
    
    
    32,124Allowance for uncompensated care
    
    
    20,805
    
    
    
    43,626
    
    
    
    36,317
    
    
    
    28,114Year ended December 31, 2008:Allowance for doubtful accounts
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50Allowance for inventory
    
    
    7,460
    
    
    
    397
    
    
    
    
    
    
    
    7,857Allowance for contractual discounts
    
    
    31,858
    
    
    
    173,964
    
    
    
    168,232
    
    
    
    37,590Allowance for uncompensated care
    
    
    19,130
    
    
    
    38,224
    
    
    
    36,549
    
    
    
    20,805Year ended December 31, 2007:Allowance for doubtful accounts
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50Allowance for inventory
    
    
    7,256
    
    
    
    843
    
    
    
    639
    
    
    
    7,460Allowance for contractual discounts
    
    
    29,930
    
    
    
    130,753
    
    
    
    128,825
    
    
    
    31,858Allowance for uncompensated care
    
    
    20,099
    
    
    
    42,190
    
    
    
    43,159
    
    
    
    19,130
 60




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##### Table of Contents



PHI, INC.By:
    /s/  Michael J. McCannMichael J. McCannChief Financial Officer
(Principal Financial and
Accounting Officer)  Signature
    
    Title
    
    Date/s/ Al A. Gonsoulin

Al A. Gonsoulin
    
    Chairman of the Board
Chief Executive Officer
and Director
(Principal Executive Officer)
    
    March 8, 2010/s/ Lance F. Bospflug

Lance F. Bospflug
    
    Director
    
    March 8, 2010/s/ Arthur J. Breault, Jr.

Arthur J. Breault, Jr.
    
    Director
    
    March 8, 2010/s/ Thomas H. Murphy

Thomas H. Murphy
    
    Director
    
    March 8, 2010/s/ Richard H. Matzke

Richard H. Matzke
    
    Director
    
    March 8, 2010/s/ C. Russell Luigs

C. Russell Luigs
    
    Director
    
    March 8, 2010/s/ Michael J. McCann

Michael J. McCann
    
    Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    March 8, 2010
 61