##### Table of Contents



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, 2010
 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
    
    The NASDAQ Global MarketNon-Voting Common Stock
    
    The NASDAQ Global Market
  o þ
 o þ
 þ o
 o o
 þ
  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
   Voting Common Stock
    
    2,852,616 shares.
    
    Non-Voting Common Stock
    
    12,458,992 shares.
 Documents Incorporated by Reference




---



##### 



PHI, INC.
 INDEX  FORM 10-K
 PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    5Item 1B. Unresolved Staff Comments
    
    
    13Item 2. Properties
    
    
    14Item 3. Legal Proceedings
    
    
    15Item 4. (Removed and Reserved)
    
    
    16PART IIItem 5. Market for Registrants Common Equity, Related
Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    17Item 6. Selected Financial Data
    
    
    19Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    20Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 8. Financial Statements and Supplementary Data
    
    
    34PHI, Inc. and Consolidated Subsidiaries:Report of Independent Registered Public Accounting Firm
    
    
    34Consolidated Balance Sheets
- Years ended December 31, 2010 and 2009
    
    
    35Consolidated Statements of Operations
- Years ended December 31, 2010, 2009 and 2008
    
    
    36Consolidated Statements of Shareholders Equity
- Years ended December 31, 2010, 2009, and 2008
    
    
    37Consolidated Statements of Cash Flows
- Years ended December 31, 2010, 2009, and 2008
    
    
    38Notes to Consolidated Financial Statements
    
    
    39Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
    
    
    61Item 9A. Controls and Procedures
Report of Independent Registered Public Accounting Firm
    
    
    61Item 9B. Other Information
    
    
    64PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    64Item 11. Executive Compensation
    
    
    64Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    64Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    64Item 14. Principal Accounting Fees and Services
    
    
    64PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    65Signatures
    
    
    68EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  i




---



##### Table of Contents



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




---



##### Table of Contents



Air Medical
 2




---



##### Table of Contents



Revenue
    
    
    Accounts ReceivableYear Ended December 31,
    
    
    Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008Gross billings
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Provision for contractual discounts
    
    
    52
    %
    
    
    52
    %
    
    
    47
    %
    
    
    33
    %
    
    
    34
    %
    
    
    35
    %Provision for uncompensated care (1)
    
    
    11
    %
    
    
    11
    %
    
    
    11
    %
    
    
    37
    %
    
    
    30
    %
    
    
    20
    %
 
 1)
    
    The increase in the provision for uncompensated care related to Accounts Receivable at
December 31, 2010, is due to increased open accounts compared to the prior year end
accounts receivable.  Year Ended December 31,2010
    
    
    2009
    
    
    2008Medicaid
    
    
    16
    %
    
    
    12
    %
    
    
    11
    %Medicare
    
    
    22
    %
    
    
    18
    %
    
    
    18
    %Insurance
    
    
    61
    %
    
    
    68
    %
    
    
    67
    %Self Pay
    
    
    1
    %
    
    
    2
    %
    
    
    4
    %
  Technical Services.
  Seasonal Aspects
  3




---



##### Table of Contents



Inventories
  Customers
  Competition
    Employees
   Governmental Regulation
  4




---



##### Table of Contents



Environmental Matters
  Corporate Information
    Availability of SEC filings and other information
 www.phihelico.com www.sec.gov
 
 ITEM 1A. Risk Factors
  5




---



##### Table of Contents



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.
  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.
  
    
    poor weather conditions that often prevail during winter but can develop in any season;
    
    the tropical storm and hurricane season in the Gulf of Mexico; and
    
    reduced daylight hours during the winter months.
    6




---



##### Table of Contents



Our helicopters may not always be profitably deployed.
   Our contracts generally can be terminated or downsized by our customers without penalty.
  The helicopter services business is highly competitive.
    Our Air Medical operations expose us to numerous special risks, including collection risks and
potential medical malpractice claims.
  7




---



##### Table of Contents



Increased governmental regulations could increase our costs or reduce our ability to operate
successfully.
       Our operations are subject to stringent and comprehensive environmental laws and regulations that
may expose us to significant costs and liabilities.
  8




---



##### Table of Contents



New and proposed health care legislation and regulation could have a material impact on our
business.
  New and proposed health care legislation and regulation could increase the cost of providing
medical benefits to employees, which could have an adverse impact on our results of operations.
  9




---



##### Table of Contents



Our international operations are subject to political, economic and regulatory uncertainty.
  
    
    political, social and economic instability;
    
    terrorism, kidnapping and extortion;
    
    potential seizure or nationalization of assets;
    
    import-export quotas; and
    
    currency fluctuations or devaluation.
  
    
    the awarding of contracts to local contractors;
    
    the employment of local citizens; and
    
    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.
  RISKS SPECIFIC TO OUR COMPANY
 The Macondo incident could have a material adverse effect on our business.
   10




---



##### Table of Contents



We are highly dependent on the offshore oil and gas industry, particularly in the Gulf of Mexico.
  
    
    the extent to which increased government regulation or other factors may impose increased costs, including as
a result of the Macondo incident, as discussed above;
    
    the supply of, and demand for, oil and natural gas and market expectations regarding supply and demand;
    
    weather-related or other natural causes;
    
    actions of the Organization of the Petroleum Exporting Countries, and Middle Eastern and other oil producing
countries, to control prices or change production levels;
    
    general economic conditions in the United States and worldwide;
    
    war, civil unrest or terrorist activities; and
    
    the price and availability of alternative fuels.
  11




---



##### Table of Contents



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.
  Our domestic pilot workforce is represented by the OPEIU although the Company and the Union do not
have a current agreed upon collective bargaining agreement and the Company, the Union and
individual pilots are engaged in litigation.
  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 us to new risks.
  12




---



##### Table of Contents



Our Chairman of the Board and Chief Executive Officer is also our principal stockholder and has
voting control of the Company.
  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
  13




---



##### Table of Contents



ITEM 2. PROPERTIES
 Aircraft
  Manufacturer
    
    Type
    
    Number in Fleet
    
    Engine
    
    Passengers
    
    Cruise Speed (mph)
    
    Appr. Range (miles)(2)Light AircraftBell
    
    206 / 407
    
    
    99
    
    
    Turbine
    
    
    4    6
    
    
    
    130      150
    
    
    300    420Eurocopter
    
    BK-117 / BO-105
    
    
    7
    
    
    Twin Turbine
    
    
    4    6
    
    
    
    135
    
    
    255  270Eurocopter
    
    EC-135 (1)
    
    
    37
    
    
    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)
    
    
    15
    
    
    Twin Turbine
    
    
    8  13
    
    
    
    115    160
    
    
    300  370Sikorsky
    
    S-76 (1) A++, C+, C++
    
    
    46
    
    
    Twin Turbine
    
    
    12
    
    
    
    150
    
    
    400AgustaWestland
    
    AW-139
    
    
    2
    
    
    Twin Turbine
    
    
    15
    
    
    
    160
    
    
    573Transport AircraftSikorsky
    
    S-92A(1)
    
    
    16
    
    
    Twin Turbine
    
    
    19
    
    
    
    160
    
    
    495Total Helicopters
    
    
    245Fixed WingRockwell(3)
    
    Aero Commander
    
    
    2
    
    
    Turboprop
    
    
    6
    
    
    
    300-340
    
    
    1,200-1,600Lear Jet(4)
    
    31A(1)
    
    
    2
    
    
    Turbojet
    
    
    8
    
    
    
    527
    
    
    1,437Cessna(4)
    
    Conquest 441(1)
    
    
    2
    
    
    Turboprop
    
    
    6
    
    
    
    330
    
    
    1,200Cessna
    
    U206(1)
    
    
    1
    
    
    Single/Piston
    
    
    6
    
    
    
    174
    
    
    900Beech(4)
    
    King Air(1)
    
    
    4
    
    
    Turboprop
    
    
    8
    
    
    
    300
    
    
    1,380Total Fixed Wing
    
    
    11Total Aircraft
    
    
    256
 
 (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 81 of the rotary wing
aircraft listed above.   Facilities
  14




---



##### Table of Contents



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, 2012
    
    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
through 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 ten
helicopters
    
    Facility under
three separate
leases, of which
two contain options
to extend through
2026 and 2028.
    
 ITEM 3. LEGAL PROCEEDINGS
  15




---



##### Table of Contents



ITEM 4. (REMOVED AND RESERVED)
 16




---



##### Table of Contents



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, 2010 to March 31, 2010
    
    $
    24.10
    
    
    $
    17.33
    
    
    $
    23.15
    
    
    $
    17.32April 1, 2010 to June 30, 2010
    
    
    22.92
    
    
    
    14.70
    
    
    
    23.09
    
    
    
    14.01July 1, 2010 to September 30, 2010
    
    
    17.55
    
    
    
    13.15
    
    
    
    16.38
    
    
    
    12.65October 1, 2010 to December 31, 2010
    
    
    22.32
    
    
    
    14.54
    
    
    
    20.16
    
    
    
    15.17January 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
    
    
    
    16.31
    17




---



##### Table of Contents



Stock Performance Graph
   
 Cumulative Total Returns as of December 31,
 Index
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010PHI
    
    
    100.00
    
    
    
    128.01
    
    
    
    120.33
    
    
    
    54.34
    
    
    
    80.29
    
    
    
    60.77Peer Group
    
    
    100.00
    
    
    
    163.30
    
    
    
    197.38
    
    
    
    113.88
    
    
    
    141.17
    
    
    
    153.14OSX
    
    
    100.00
    
    
    
    161.29
    
    
    
    243.35
    
    
    
    97.94
    
    
    
    157.27
    
    
    
    134.58Russell 2000
    
    
    100.00
    
    
    
    120.89
    
    
    
    117.57
    
    
    
    76.65
    
    
    
    95.98
    
    
    
    116.40
 18




---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  Year EndedDecember 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Thousands, except per share amounts)Income Statement DataOperating revenues
    
    $
    516,935
    
    
    $
    487,175
    
    
    $
    509,514
    
    
    $
    446,406
    
    
    $
    413,118Gain on disposition of assets, net
    
    
    239
    
    
    
    111
    
    
    
    4,468
    
    
    
    34,953
    
    
    
    1,910Net earnings (loss) (1) (2) (3) (4)
    
    
    7,117
    
    
    
    12,968
    
    
    
    23,515
    
    
    
    28,218
    
    
    
    (667
    )Net earnings (loss) per shareBasic
    
    
    0.46
    
    
    
    0.85
    
    
    
    1.54
    
    
    
    1.85
    
    
    
    (0.05
    )Diluted
    
    
    0.46
    
    
    
    0.85
    
    
    
    1.54
    
    
    
    1.85
    
    
    
    (0.05
    )Weighted average shares outstandingBasic
    
    
    15,312
    
    
    
    15,307
    
    
    
    15,295
    
    
    
    15,279
    
    
    
    13,911Diluted
    
    
    15,312
    
    
    
    15,307
    
    
    
    15,301
    
    
    
    15,288
    
    
    
    13,911Cash Flow DataNet cash provided by operating activities
    
    $
    76,857
    
    
    $
    55,272
    
    
    $
    43,798
    
    
    $
    25,226
    
    
    $
    30,324Net cash used in investing activities
    
    
    (175,510
    )
    
    
    (69,235
    )
    
    
    (47,292
    )
    
    
    (19,464
    )
    
    
    (178,928
    )Net cash provided by (used in) financing activities
    
    
    99,780
    
    
    
    15,305
    
    
    
    3,228
    
    
    
    (5,157
    )
    
    
    146,388Balance Sheet Data(5)Current assets
    
    $
    319,486
    
    
    $
    245,301
    
    
    $
    224,620
    
    
    $
    230,029
    
    
    $
    307,689Working capital
    
    
    268,763
    
    
    
    207,024
    
    
    
    173,978
    
    
    
    176,633
    
    
    
    254,099Property and equipment, net
    
    
    596,533
    
    
    
    548,536
    
    
    
    528,574
    
    
    
    484,119
    
    
    
    369,465Total assets
    
    
    945,139
    
    
    
    805,506
    
    
    
    777,182
    
    
    
    741,296
    
    
    
    700,970Total debt
    
    
    331,074
    
    
    
    218,305
    
    
    
    203,000
    
    
    
    200,000
    
    
    
    205,500Shareholders equity
    
    
    472,416
    
    
    
    465,448
    
    
    
    452,396
    
    
    
    428,669
    
    
    
    400,125Calculation of Ratio of Earnings to Fixed ChargesEarningsPre-tax income from continuing operations before
adjustments for income or loss from equity
investees
    
    $
    14,593
    
    
    $
    21,841
    
    
    $
    38,632
    
    
    $
    45,689
    
    
    $
    (1,080
    )Fixed charges
    
    
    37,707
    
    
    
    31,425
    
    
    
    27,478
    
    
    
    26,365
    
    
    
    25,236Earnings, as adjusted
    
    $
    52,300
    
    
    $
    53,266
    
    
    $
    66,110
    
    
    $
    72,054
    
    
    $
    24,156Fixed ChargesInterest expensed and capitalized
    
    $
    18,583
    
    
    $
    15,144
    
    
    $
    14,630
    
    
    $
    15,261
    
    
    $
    16,276Amortized premiums, discounts and capitalized
expenses related to indebtedness
    
    
    806
    
    
    
    893
    
    
    
    885
    
    
    
    860
    
    
    
    967Estimate of the interest within rental expense
    
    
    18,318
    
    
    
    15,388
    
    
    
    11,963
    
    
    
    10,244
    
    
    
    7,993Fixed charges
    
    $
    37,707
    
    
    $
    31,425
    
    
    $
    27,478
    
    
    $
    26,365
    
    
    $
    24,156Ratio of earnings to fixed charges (6)
    
    
    1.4
    x
    
    
    1.7
    x
    
    
    2.4
    x
    
    
    2.7
    x
    
    
    1.0
    x
 
 (1)
    
    Net earnings in 2010 includes an after tax charge of $5.7 million related to the
refinancing of our 7.125% Senior Notes.(2)
    
    Net earnings in 2008 includes an after tax goodwill impairment charge of $1.6 million
related to our Air Medical segment.(3)
    
    Net earnings in 2007 was impacted due to the pilots strike that commenced September
20, 2006.(4)
    
    Net loss in 2006 includes an after tax charge of $7.7 million related to the
refinancing of our 9 3/8% Senior Notes.(5)
    
    As of the year ended December 31.(6)
    
    The term fixed charges means the sum of interest and the estimated interest component
of our rent expense. For this calculation, fixed charges are added back to net earnings
before income taxes. Ratio of earnings to fixed charges does not reflect the pro forma
effect of the issuance of our $300 million 8.625% Senior Notes due 2018 or the redemption
and repurchase of our $200 million 7.125% Senior Notes due 2013. 19




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Overview
     20




---



##### Table of Contents



21




---



##### Table of Contents



22




---



##### Table of Contents



Results of Operations
  Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    345,402
    
    
    $
    316,198
    
    
    $
    324,147Air Medical
    
    
    160,517
    
    
    
    160,113
    
    
    
    174,739Technical Services
    
    
    11,016
    
    
    
    10,864
    
    
    
    10,628Total operating revenues
    
    
    516,935
    
    
    
    487,175
    
    
    
    509,514Segment direct expenses (1)Oil and Gas
    
    
    289,331
    
    
    
    263,818
    
    
    
    258,160Air Medical
    
    
    146,131
    
    
    
    147,630
    
    
    
    160,910Technical Services
    
    
    8,240
    
    
    
    7,179
    
    
    
    6,883Total direct expenses
    
    
    443,702
    
    
    
    418,627
    
    
    
    425,953Segment selling, general and administrative expensesOil and Gas
    
    
    759
    
    
    
    1,075
    
    
    
    1,335Air Medical
    
    
    4,195
    
    
    
    6,484
    
    
    
    8,716Technical Services
    
    
    31
    
    
    
    51
    
    
    
    76Total selling, general and administrative expenses
    
    
    4,985
    
    
    
    7,610
    
    
    
    10,127Total segment direct and selling, general and administrative expenses
    
    
    448,687
    
    
    
    426,237
    
    
    
    436,080Net segment operating profitOil and Gas
    
    
    55,312
    
    
    
    51,305
    
    
    
    64,652Air Medical
    
    
    10,191
    
    
    
    5,999
    
    
    
    5,113Technical Services
    
    
    2,745
    
    
    
    3,634
    
    
    
    3,669Total
    
    
    68,248
    
    
    
    60,938
    
    
    
    73,434Other, net (2)
    
    
    417
    
    
    
    336
    
    
    
    4,990Unallocated selling, general and administrative expenses (1)
    
    
    (25,162
    )
    
    
    (23,396
    )
    
    
    (21,530
    )Interest expense
    
    
    (19,389
    )
    
    
    (16,037
    )
    
    
    (15,515
    )Loss on debt restructuring
    
    
    (9,521
    )
    
    
    
    
    
    
    Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    (2,747
    )Earnings before income taxes
    
    $
    14,593
    
    
    $
    21,841
    
    
    $
    38,632Flight hoursOil and Gas
    
    
    114,122
    
    
    
    111,527
    
    
    
    112,341Air Medical
    
    
    33,222
    
    
    
    33,483
    
    
    
    36,732Technical Services
    
    
    1,676
    
    
    
    1,304
    
    
    
    1,613Total
    
    
    149,020
    
    
    
    146,314
    
    
    
    150,686Air Medical Transports
    
    
    18,480
    
    
    
    19,798
    
    
    
    22,647Aircraft operated at period endOil and Gas
    
    
    162
    
    
    
    164
    
    
    
    153Air Medical
    
    
    89
    
    
    
    85
    
    
    
    90Technical Services
    
    
    5
    
    
    
    6
    
    
    
    6Total (3)
    
    
    256
    
    
    
    255
    
    
    
    249
 
 (1)
    
    Included in segment direct expense and unallocated selling, general, and administrative
costs are the depreciation expense amounts below: Year Ended December 31,2010
    
    
    2009
    
    
    2008Oil & Gas
    
    $
    18,143
    
    
    $
    16,853
    
    
    $
    15,408Air Medical
    
    
    7,982
    
    
    
    7,926
    
    
    
    8,283Technical Services
    
    
    260
    
    
    
    285
    
    
    
    276Total
    
    
    26,385
    
    
    
    25,064
    
    
    
    23,967Unallocated SG&A
    
    $
    1,696
    
    
    $
    2,700
    
    
    $
    2,977
 
 (2)
    
    Includes gains on disposition of property and equipment, and other income.(3)
    
    Includes 16 aircraft as of December 31, 2010, December 31, 2009 and 2008 that are
customer owned or leased by customers but operated by us. 23




---



##### Table of Contents



Year Ended December 31, 2010 compared with Year Ended December 31, 2009
 Combined Operations
 Operating Revenues
 Other Income and Losses
 Direct Expenses
 Selling, General and Administrative Expenses
 Interest Expense
 Loss on Debt Restructuring
 Income Taxes
 Net Earnings
 24




---



##### Table of Contents



Segment Discussion
 Oil and Gas
     Air Medical
 25




---



##### Table of Contents



Technical Services
   Year Ended December 31, 2009 compared with Year Ended December 31, 2008
 Combined Operations
 Operating Revenues
 26




---



##### Table of Contents



Other Income and Losses
 Direct Expenses
 Selling, General and Administrative Expenses
 Interest Expense
 Income Taxes
 Net Earnings
 Segment Discussion
 Oil and Gas
  27




---



##### Table of Contents



Air Medical
     Technical Services
  28




---



##### Table of Contents



Liquidity and Capital Resources
 General
  Cash Flow
       29




---



##### Table of Contents



Long Term Debt
      30




---



##### Table of Contents



Contractual Obligations
  Payment Due by YearBeyondTotal
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    2015(Thousands of dollars)Aircraft purchase
commitments (1)
    
    $
    97,628
    
    
    $
    35,937
    
    
    $
    61,691
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Aircraft lease
obligations
    
    
    168,126
    
    
    
    27,157
    
    
    
    27,824
    
    
    
    28,190
    
    
    
    28,190
    
    
    
    27,912
    
    
    
    28,853Other lease
obligations
    
    
    16,347
    
    
    
    3,233
    
    
    
    2,276
    
    
    
    1,698
    
    
    
    1,515
    
    
    
    1,452
    
    
    
    6,173Long term debt (2)
    
    
    331,074
    
    
    
    
    
    
    
    31,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000$
    613,175
    
    
    $
    66,327
    
    
    $
    122,865
    
    
    $
    29,888
    
    
    $
    29,705
    
    
    $
    29,364
    
    
    $
    335,026
 
 (1)
    
    In 2010, we executed a contract to acquire ten new medium aircraft for the aggregate
acquisition costs of approximately $127.0 million, related to our new contract with Shell
Offshore, Inc., a subsidiary of Shell, two of which were delivered in December 2010. The
purchase price of these two aircraft was financed through our revolving credit facility.
The remaining eight are scheduled for delivery in 2011 and through late 2012, with an
aggregate acquisition cost aircraft of approximately $97.6 million. We have traded in two
aircraft in exchange for a credit of approximately $20.3 million towards these acquisition
costs, of which a credit of $17.6 million remained on deposit as of December 31, 2010. We
may finance some of the remaining acquisition costs with net proceeds from our 8.625%
Senior Notes, and expect to finance the balance through some combination of cash on hand or
generated from operations, operating leases and borrowings under our revolving credit
facility.(2)
    
    Long-term debt consists of borrowings under our revolving credit facility and the
principal amount of our 8.625% Senior Notes. Estimated interest costs on the long-term
debt obligations set forth above, assuming the amounts outstanding at December 31, 2010
stayed constant, are $25.9 million annually for the 8.625% Senior Notes and $1.3 million
annually for our revolving credit facility, based on an effective rate of 4.25%. Theses
amounts are not included in the table above.  Critical Accounting Policies and Estimates
  31




---



##### Table of Contents



Goodwill
   32




---



##### Table of Contents



New Accounting Pronouncements
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
   33




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework
  
 34




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Thousands of dollars, except share data)
 December 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent Assets:Cash
    
    $
    3,628
    
    
    $
    2,501Short-term investments
    
    
    150,072
    
    
    
    75,138Accounts receivable  netTrade
    
    
    84,768
    
    
    
    90,518Other
    
    
    4,891
    
    
    
    3,885Inventories of spare parts  net
    
    
    59,336
    
    
    
    61,501Other current assets
    
    
    16,233
    
    
    
    11,018Income taxes receivable
    
    
    558
    
    
    
    740Total current assets
    
    
    319,486
    
    
    
    245,301Other
    
    
    29,120
    
    
    
    11,669Property and equipment  net
    
    
    596,533
    
    
    
    548,536Total assets
    
    $
    945,139
    
    
    $
    805,506LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    22,404
    
    
    $
    14,935Accrued liabilities
    
    
    28,319
    
    
    
    23,342Total current liabilities
    
    
    50,723
    
    
    
    38,277Long-term debt
    
    
    331,074
    
    
    
    218,305Deferred income taxes
    
    
    81,988
    
    
    
    73,409Other long-term liabilities
    
    
    8,938
    
    
    
    10,067Commitments and contingencies (Note 10)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 authorized, 12,458,992 issued and
outstanding
    
    
    1,246
    
    
    
    1,246Additional paid-in capital
    
    
    291,403
    
    
    
    291,403Accumulated other comprehensive loss
    
    
    (162
    )
    
    
    (13
    )Retained earnings
    
    
    179,644
    
    
    
    172,527Total shareholders equity
    
    
    472,416
    
    
    
    465,448Total liabilities and shareholders equity
    
    $
    945,139
    
    
    $
    805,506
  35




---



##### 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 31,2010
    
    
    2009
    
    
    2008Operating revenues, net
    
    $
    516,935
    
    
    $
    487,175
    
    
    $
    509,514Gain on disposition of assets, net
    
    
    239
    
    
    
    111
    
    
    
    4,468Other, principally interest income
    
    
    178
    
    
    
    225
    
    
    
    522517,352
    
    
    
    487,511
    
    
    
    514,504Expenses:Direct expenses
    
    
    443,702
    
    
    
    418,627
    
    
    
    425,953Selling, general and
administrative expenses
    
    
    30,147
    
    
    
    31,006
    
    
    
    31,657Interest expense
    
    
    19,389
    
    
    
    16,037
    
    
    
    15,515Loss on debt restructuring
    
    
    9,521
    
    
    
    
    
    
    
    Goodwill impairment charges
    
    
    
    
    
    
    
    
    
    
    2,747502,759
    
    
    
    465,670
    
    
    
    475,872Earnings before income taxes
    
    
    14,593
    
    
    
    21,841
    
    
    
    38,632Income tax expense
    
    
    7,476
    
    
    
    8,873
    
    
    
    15,117Net earnings
    
    $
    7,117
    
    
    $
    12,968
    
    
    $
    23,515Earnings per share:Basic
    
    $
    0.46
    
    
    $
    0.85
    
    
    $
    1.54Diluted
    
    $
    0.46
    
    
    $
    0.85
    
    
    $
    1.54Weighted average shares outstanding:Basic
    
    
    15,312
    
    
    
    15,307
    
    
    
    15,295Diluted
    
    
    15,312
    
    
    
    15,307
    
    
    
    15,301
  36




---



##### 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, 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
    
    
    
    465,448Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,117
    
    
    
    7,117Unrealized loss on short-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (142
    )
    
    
    
    
    
    
    (142
    )Changes in pension plan assets and
benefit obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,968Balance at December 31, 2010
    
    
    2,853
    
    
    $
    285
    
    
    
    12,459
    
    
    $
    1,246
    
    
    $
    291,403
    
    
    $
    (162
    )
    
    $
    179,644
    
    
    $
    472,416
  37




---



##### 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 31,2010
    
    
    2009
    
    
    2008Operating activities:Net earnings
    
    $
    7,117
    
    
    $
    12,968
    
    
    $
    23,515Adjustments to reconcile net earnings to net
cash provided by operating activities:Depreciation and amortization
    
    
    28,081
    
    
    
    27,764
    
    
    
    26,944Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    2,747Deferred income taxes
    
    
    8,579
    
    
    
    8,603
    
    
    
    13,531Gain on asset dispositions
    
    
    (239
    )
    
    
    (111
    )
    
    
    (4,468
    )Loss on debt restructuring
    
    
    9,521
    
    
    
    
    
    
    
    Other
    
    
    1,124
    
    
    
    930
    
    
    
    922Changes in operating assets and liabilities:Accounts receivable
    
    
    4,744
    
    
    
    17,019
    
    
    
    (13,338
    )Inventories of spare parts
    
    
    2,165
    
    
    
    (3,252
    )
    
    
    (2,418
    )Income taxes receivable
    
    
    182
    
    
    
    242
    
    
    
    (457
    )Other assets
    
    
    3,753
    
    
    
    (1,714
    )
    
    
    1,208Accounts payable and accrued liabilities
    
    
    13,106
    
    
    
    (11,360
    )
    
    
    (2,754
    )Other long-term liabilities
    
    
    (1,276
    )
    
    
    4,183
    
    
    
    (1,634
    )Net cash provided by operating activities
    
    
    76,857
    
    
    
    55,272
    
    
    
    43,798Investing activities:Purchase of property and equipment
    
    
    (98,230
    )
    
    
    (57,035
    )
    
    
    (77,590
    )Proceeds from asset dispositions
    
    
    1,171
    
    
    
    9,217
    
    
    
    18,394Purchase of short-term investments
    
    
    (450,188
    )
    
    
    (47,704
    )
    
    
    (43,976
    )Proceeds from sale of short-term investments
    
    
    375,517
    
    
    
    14,687
    
    
    
    64,826Payments of deposits on aircraft
    
    
    (3,780
    )
    
    
    
    
    
    
    (12,546
    )Refund of deposits on aircraft
    
    
    
    
    
    
    11,600
    
    
    
    3,600Net cash used in investing activities
    
    
    (175,510
    )
    
    
    (69,235
    )
    
    
    (47,292
    )Financing activities:Proceeds from issuance of Senior Notes due 2018
    
    
    300,000
    
    
    
    
    
    
    
    Premium and costs to retire debt early
    
    
    (7,667
    )
    
    
    
    
    
    
    Repayment of Senior Notes due 2013
    
    
    (200,000
    )
    
    
    
    
    
    
    Debt issuance costs
    
    
    (5,322
    )
    
    
    
    
    
    
    Proceeds from line of credit
    
    
    59,287
    
    
    
    37,750
    
    
    
    15,800Payments on line of credit
    
    
    (46,518
    )
    
    
    (22,445
    )
    
    
    (12,800
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    228Net cash provided by financing activities
    
    
    99,780
    
    
    
    15,305
    
    
    
    3,228Increase (decrease) in cash
    
    
    1,127
    
    
    
    1,342
    
    
    
    (266
    )Cash, beginning of year
    
    
    2,501
    
    
    
    1,159
    
    
    
    1,425Cash, end of year
    
    $
    3,628
    
    
    $
    2,501
    
    
    $
    1,159Supplemental Disclosures Cash Flow InformationAccrued payables related to purchases of property and equipment
    
    $
    352
    
    
    $
    312
    
    
    $
    1,510
  38




---



##### 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
   
 Short-term Investments
   39




---



##### Table of Contents



Inventories of Spare Parts
  Property and Equipment
   Self-Insurance
    40




---



##### Table of Contents



Concentration of Credit Risk
     Income Taxes
   Earnings per Share
  41




---



##### Table of Contents



Deferred Financing Costs
  New Accounting Pronouncements
  Comprehensive Income
   Year Ended December 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Net earnings
    
    $
    7,117
    
    
    $
    12,968
    
    
    $
    23,515Unrealized loss on short-term
investments
    
    
    (142
    )
    
    
    
    
    
    
    Changes in pension plan assets
and benefit obligations
    
    
    (7
    )
    
    
    (58
    )
    
    
    (16
    )Comprehensive income
    
    $
    6,968
    
    
    $
    12,910
    
    
    $
    23,499
  42




---



##### Table of Contents



(2) PROPERTY AND EQUIPMENT
  December 31,
    
    
    December 31,2010
    
    
    2009(Thousands of dollars)Flight equipment
    
    $
    734,963
    
    
    $
    674,920Facility & improvements
    
    
    42,993
    
    
    
    36,788Operating equipment
    
    
    21,030
    
    
    
    19,436Data processing equipment
    
    
    22,957
    
    
    
    22,312Vehicles
    
    
    7,216
    
    
    
    7,005Medical equipment
    
    
    6,506
    
    
    
    3,933Other
    
    
    3,950
    
    
    
    3,810839,615
    
    
    
    768,204Less accumulated depreciation and
amortization
    
    
    (243,082
    )
    
    
    (219,668
    )Property and equipment, net
    
    $
    596,533
    
    
    $
    548,536
 (3) ACCRUED LIABILITIES
  December 31,
    
    
    December 31,2010
    
    
    2009(Thousands of dollars)Salaries & wages
    
    $
    7,560
    
    
    $
    6,501Vacation payable
    
    
    3,800
    
    
    
    3,621Interest
    
    
    7,210
    
    
    
    3,173Operating lease
    
    
    1,130
    
    
    
    2,326Group medical
    
    
    1,895
    
    
    
    2,059Transportations tax
    
    
    1,168
    
    
    
    1,173Workers compensation
    
    
    631
    
    
    
    1,510Other
    
    
    4,925
    
    
    
    2,979Total accrued liabilities
    
    $
    28,319
    
    
    $
    23,342
 (4)
LONG-TERM DEBT
     43




---



##### Table of Contents



(5) INCOME TAXES
  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)CurrentFederal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    185
    
    
    
    193
    
    
    
    178Foreign
    
    
    
    
    
    
    77
    
    
    
    808Deferred  principally
Federal
    
    
    7,291
    
    
    
    8,603
    
    
    
    14,131Total
    
    $
    7,476
    
    
    $
    8,873
    
    
    $
    15,117
 44




---



##### Table of Contents



Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008(Thousands of dollars, except percentage amounts)Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Income taxes at statutory rate
    
    $
    5,108
    
    
    
    35
    
    
    $
    7,644
    
    
    
    35
    
    
    $
    13,519
    
    
    
    35Increase (decrease) in taxes
resulting from:Valuation allowance  foreign tax
credit
    
    
    1,175
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hurricane relief credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    State income taxes, net of federal
benefit
    
    
    987
    
    
    
    7
    
    
    
    844
    
    
    
    4
    
    
    
    1371
    
    
    
    3Other items  net
    
    
    206
    
    
    
    1
    
    
    
    385
    
    
    
    2
    
    
    
    399
    
    
    
    1Total
    
    $
    7,476
    
    
    
    51
    
    
    $
    8,873
    
    
    
    41
    
    
    $
    15,117
    
    
    
    39
  December 31,
    
    
    December 31,2010
    
    
    2009(Thousands of dollars)Deferred tax assets:Deferred compensation
    
    $
    1,691
    
    
    $
    1,990Foreign tax credits
    
    
    5,423
    
    
    
    5,413Vacation accrual
    
    
    1,901
    
    
    
    1,543Inventory valuation
    
    
    5,279
    
    
    
    4,262Rental accrual
    
    
    1,773
    
    
    
    2,230Allowance for uncollectible accounts
    
    
    19
    
    
    
    19Hurricane relief credit
    
    
    1,255
    
    
    
    1,255Goodwill impairment
    
    
    
    
    
    
    674Other
    
    
    741
    
    
    
    671Net operating loss
    
    
    61,140
    
    
    
    47,513Total deferred tax assets
    
    
    79,222
    
    
    
    65,570Valuation allowance  state NOL
    
    
    (541
    )
    
    
    (138
    )Valuation allowance  tax credit carryforwards
    
    
    (1,876
    )
    
    
    (700
    )Total deferred tax assets, net
    
    
    76,805
    
    
    
    64,732Deferred tax liabilities:Tax depreciation in excess of book depreciation
    
    
    (151,544
    )
    
    
    (132,325
    )Total deferred tax liabilities
    
    
    (151,544
    )
    
    
    (132,325
    )Net deferred tax liabilities
    
    $
    (74,739
    )
    
    $
    (67,593
    )
   45




---



##### Table of Contents



(6) EMPLOYEE BENEFIT PLANS
  Stock Based Compensation
     Incentive Compensation
  46




---



##### Table of Contents



(7) OTHER ASSETS
  December 31,
    
    
    December 31,2010
    
    
    2009(Thousands of dollars)Deposits on future purchases of medium aircraft
    
    $
    17,553
    
    
    $
    Deposits on operating leases for aircraft
    
    
    1,000
    
    
    
    3,000Deferred financing cost
    
    
    5,400
    
    
    
    2,903Investments (Officers Deferred Compensation Plan)
    
    
    3,547
    
    
    
    4,242Other
    
    
    1,620
    
    
    
    1,524Total
    
    $
    29,120
    
    
    $
    11,669
 (8) FAIR VALUE
      December 31, 2010
    
    
    December 31, 2009Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 1)Short-term investments:Money Market Mutual Funds
    
    $
    33,968
    
    
    $
    33,968
    
    
    $
    
    
    
    $
    75,138Commercial Paper
    
    
    42,455
    
    
    
    
    
    
    
    42,455
    
    
    
    U.S. Government Agencies
    
    
    8,013
    
    
    
    
    
    
    
    8,013
    
    
    
    Corporate bonds and notes
    
    
    65,636
    
    
    
    
    
    
    
    65,636
    
    
    
    150,072
    
    
    
    33,968
    
    
    
    116,104
    
    
    
    75,138Investments in other assets
    
    
    3,547
    
    
    
    3,547
    
    
    
    
    
    
    
    4,239Total
    
    $
    153,619
    
    
    $
    37,515
    
    
    $
    116,104
    
    
    $
    79,377
  47




---



##### Table of Contents



reviewed and can be challenged with the independent parties and/or overridden by the
Company, if it is believed such would be more reflective of fair value. Investments
included in other assets, which relate to the liability for the Officers Deferred
Compensation Plan, consist mainly of multiple investment funds that are highly liquid and
diversified.Cash, accounts receivable, accounts payable and accrued liabilities all had fair values
approximating their carrying amounts at December 31, 2010 and 2009.(9)
    
    INVESTMENTSWe classify all of our short term investments as available-for-sale. We carry these at fair
value and report unrealized gains and losses, net of taxes, in other comprehensive income
until realized. These gains and losses are reflected as a separate component of
shareholders equity in our consolidated balance sheets and our consolidated statements of
shareholders equity. Cost, gains, and losses are determined using the specific
identification method.Investments consisted of the following as of December 31, 2010:
 Unrealized
    
    
    Unrealized
    
    
    FairCosts
    
    
    Gains
    
    
    Losses
    
    
    Value(Thousands of dollars)Short-term investments:Money Market Mutual Funds
    
    
    33,968
    
    
    
    
    
    
    
    
    
    
    
    33,968Commercial Paper
    
    
    42,471
    
    
    
    
    
    
    
    (16
    )
    
    
    42,455U.S. Government Agencies
    
    
    8,022
    
    
    
    
    
    
    
    (10
    )
    
    
    8,012Corporate bonds and notes
    
    
    65,847
    
    
    
    4
    
    
    
    (214
    )
    
    
    65,637Subtotal
    
    
    150,308
    
    
    
    4
    
    
    
    (240
    )
    
    
    150,072Investments in other assets
    
    
    3,547
    
    
    
    
    
    
    
    
    
    
    
    3,547Total
    
    
    153,855
    
    
    
    4
    
    
    
    (240
    )
    
    
    153,619
 Investments consisted of the following as of December 31, 2009:
 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCosts
    
    
    Gains
    
    
    Losses
    
    
    Value(Thousands of dollars)Short-term investments:Money Market Mutual Funds
    
    
    75,138
    
    
    
    
    
    
    
    
    
    
    
    75,138Subtotal
    
    
    75,138
    
    
    
    
    
    
    
    
    
    
    
    75,138Investments in other assets
    
    
    4,239
    
    
    
    
    
    
    
    
    
    
    
    4,239Total
    
    
    79,377
    
    
    
    
    
    
    
    
    
    
    
    79,377
 The following table presents the cost and fair value of our debt investments based on
maturities as of December 31, 2010.
 Amortized
    
    
    FairCosts
    
    
    Value(Thousands of dollars)Due in one year or less
    
    
    58,740
    
    
    
    58,704Due within two years
    
    
    57,600
    
    
    
    57,400Total
    
    
    116,340
    
    
    
    116,104
 48




---



##### Table of Contents



The following table presents the average coupon rate percentage and the average days to
maturity of our debt investments as of December 31, 2010.
 Average
    
    
    AverageCoupon
    
    
    Days ToRate%
    
    
    MaturityCommercial Paper
    
    
    0.226
    
    
    
    100U.S. Government Agencies
    
    
    0.956
    
    
    
    555Corporate bonds and notes
    
    
    5.051
    
    
    
    460
 The following table presents the fair value and unrealized losses related to our investments
that have been in a continuous unrealized loss position for less than twelve months as of
December 31, 2010. There were no investments in a continuous unrealized loss position for
less than twelve months as of December 31, 2009.
 UnrealizedFair Value
    
    
    Losses(Thousands of dollars)Commercial Paper
    
    
    42,471
    
    
    
    (16
    )U.S. Government Agencies
    
    
    3,993
    
    
    
    (10
    )Corporate bonds and notes
    
    
    60,501
    
    
    
    (214
    )106,965
    
    
    
    (240
    )
 As of December 31, 2010 and December 31, 2009, we had no investments in a continuous
unrealized loss position for more than twelve months.We consider the decline in market value to be due to market conditions, and we do not plan
to sell these investments prior to a recovery of cost. For these reasons, we do not
consider any of our investments to be other than temporarily impaired at December 31, 2010.
The assessment of whether an investment in a debt security has suffered an
other-than-temporary impairment is based on whether the Company has the intent to sell or
more likely than not will be required to sell the debt security before recovery of its
amortized costs. Further, if the Company does not expect to recover the entire amortized
cost basis of the debt security, an other-than-temporary impairment is considered to have
occurred and it is measured by the present value of cash flows expected to be collected less
the amortized cost basis (credit loss). The Company did not have any other-than-temporary
impairments relating to credit losses on debt securities for the year ended December 31,
2010.(10)
    
    COMMITMENTS AND CONTINGENCIESOperating Leases The Company leases certain aircraft, facilities,
and equipment used in its operations. The related lease agreements,
which include both non-cancelable and month-to-month terms, generally
provide for fixed monthly rentals and, for certain real estate
leases, renewal options. The Company generally pays all insurance,
taxes, and maintenance expenses associated with these aircraft leases
and some of these leases contain renewal and purchase options at fair
market values. Rental expense incurred under these leases consisted
of the following:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Aircraft
    
    $
    30,219
    
    
    $
    26,028
    
    
    $
    20,424Other
    
    
    7,258
    
    
    
    7,201
    
    
    
    6,652Total
    
    $
    37,477
    
    
    $
    33,229
    
    
    $
    27,076
 49




---



##### Table of Contents



In September 2001, the Company began leasing a principal operating facility at Lafayette,
Louisiana for twenty years. The lease expires in 2021 and has three five-year renewal
options.The following table presents the remaining aggregate lease commitments under operating
leases having initial non-cancelable terms in excess of one year. The table includes
renewal periods on the principal operating facility lease.
 Aircraft
    
    
    Other
    
    
    Total(Thousands of dollars)2011
    
    $
    27,157
    
    
    $
    3,233
    
    
    $
    30,3902012
    
    
    27,824
    
    
    
    2,276
    
    
    
    30,1002013
    
    
    28,190
    
    
    
    1,698
    
    
    
    29,8882014
    
    
    28,190
    
    
    
    1,515
    
    
    
    29,7052015
    
    
    27,912
    
    
    
    1,452
    
    
    
    29,364Thereafter
    
    
    28,853
    
    
    
    6,173
    
    
    
    35,026$
    168,126
    
    
    $
    16,347
    
    
    $
    184,473
 On April 1, 2010, we purchased two heavy aircraft off lease pursuant to purchase options in
the lease contract. This purchase was funded with our revolving line of credit and we drew
$24.7 million for the acquisition. On October 1, 2010, we purchased two heavy aircraft
pursuant to a purchase option in the lease contract. The total purchase price was $25.3
million for both aircraft and was funded with proceeds from the 8.625% Senior Notes. As of
December 31, 2010 we had options to purchase aircraft under lease becoming exercisable in
2011 through 2014 for the following aggregate purchase prices, respectively: $33.5 million,
$44.9 million, $38.8 million and $114.4 million. Subject to market conditions, we intend to
exercise these options as they become exercisable, and intend to finance some of these
acquisition costs with the net proceeds of our 8.625% Senior Notes.Purchase Commitments  In mid-2010, the Company executed a new contract with Shell Offshore,
Inc., a subsidiary of Shell, to provide helicopter transportation services in the Gulf of
Mexico through mid-2016. The contract covers 11 aircraft, and requires the Company to
replace, between June 2011 and January 2013, certain of the aircraft currently on contract
with ten new medium aircraft. In connection with this new contract, the Company executed a
contract to acquire ten new medium aircraft with deliveries scheduled from late 2010 through
late 2012, with an aggregate acquisition cost of approximately $127.0 million. The Company
took delivery of two of the medium aircraft in December, 2010, financed with our revolving
credit facility. During 2010, the Company traded in two aircraft in exchange for a credit
of approximately $20.3 million towards the total acquisition costs, of which a credit of
$17.6 remained as of December 31, 2010, recorded as a deposit against future deliveries.
The Company may finance some of the remaining acquisition costs with net proceeds from the
8.625% Senior Notes, and expects to finance the balance through some combination of cash on
hand or cash flows generated from operations, operating leases and borrowings under the
revolving credit facility.In 2010, in addition to the two medium aircraft described above, the Company took delivery
of one light aircraft in the Oil & Gas segment, and also took delivery of one medium
customer owned aircraft and two fixed wing aircraft for service in the Air Medical segment.Environmental Matters We have recorded an aggregate estimated probable liability of $0.2
million as of December 31, 2010 for environmental response costs. The Company has conducted
environmental surveys of its former Lafayette facility located at the Lafayette Regional
Airport, which it vacated in 2001, and has determined that limited soil and groundwater
contamination exists at the facility. The Company has installed groundwater monitoring
wells at the facility and periodically monitors and reports on the contamination to the
Louisiana Department of Environmental Quality (LDEQ). The Company previously submitted a
Risk Evaluation/Corrective Action Plan (RECAP) Standard Site Assessment Report to the LDEQ
fully delineating the extent and type of contamination and updated the Report to include
additional analytical data in April 2006. LDEQ reviewed the Assessment Report and requested
an Action Plan from the Company. That Plan has been approved by LDEQ and the estimated
resulting cost of remediation has been determined to be just over $0.1 million that will
likely be incurred over the next two years. Based upon the May 2003 Site Assessment Report,
the April 2006 update and ongoing monitoring,
 50




---



##### Table of Contents



the Company believes the ultimate remediation costs for the former Lafayette facility will
not be material to its consolidated financial position, results of operations, or cash
flows.Legal Matters The Company is named as a defendant in various legal actions that have
arisen in the ordinary course of business and have not been finally adjudicated. In the
opinion of management, the amount of the ultimate liability with respect to these actions
will not have a material adverse effect on the Companys consolidated financial position,
results of operations, or cash flows.
 Superior Offshore International Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor
Holdings Inc., ERA Group Inc., ERA Aviation, Inc., and PHI, Inc., Civil Action No.
1:09-cv-00438 on the docket of the United States District Court for the District of
Delaware. This purported class action was filed on June 12, 2009, on behalf of a class
defined to include all direct purchasers of offshore helicopter services in the Gulf of
Mexico from the defendants at any time from January 1, 2001 through December 31, 2005. The
suit alleged that the defendants acted jointly to fix, maintain, or stabilize prices for
offshore helicopter services during the above time frame in violation of the federal
antitrust laws. The plaintiff sought unspecified treble damages, injunctive relief, costs,
and attorneys fees. On September 14, 2010, the Court granted defendants motion to dismiss
(filed on September 4, 2009) and dismissed the complaint. On November 30, 2010, the court
granted plaintiff leave to amend the complaint, limited discovery to the new allegations,
and established a schedule for briefing dispositive motions in February 2011. The permitted
discovery is now complete, and defendants filed a motion for summary judgment on February
11, 2011. Management is unable to estimate a range of reasonably possible loss for the case
because a dispositive motion is pending, and discovery relating to potential damages has not
commenced.Employee Matters As previously reported, the Company has been involved in Federal Court
litigation in the Western District of Louisiana and the Fifth Circuit Court of Appeals with
the Office and Professional Employees International Union (OPEIU), the union representing
the Companys domestic pilots. This litigation involves claims of bad faith bargaining,
compensation of striking pilots both at the time of the strike and upon their return to work
under both the Railway Labor Act (RLA) and Louisiana state law, and the terms of
employment for the Companys pilots since the strike ended including non-payment of
retention bonuses. After approximately two years of bargaining between the Company and OPEIU
for a second collective bargaining agreement, including negotiations mediated by the
National Mediation Board, both parties entered a self-help period as defined by the
applicable labor law, the RLA. At that time the pilots commenced a strike in September 2006
and immediately prior to that strike the Company implemented its own terms and conditions of
employment for the pilots. The strike ended in November 2006 and a court-approved return to
work process began in January 2007 for those pilots who had not already returned to work or
left the Companys employment. This process was essentially completed in April 2007. The
Companys pilots continue to work under the terms and conditions of employment determined by
the Company since the strike began. By Order dated July 9, 2010, the Court dismissed both
the Companys and OPEIUs claims that the other had violated the RLA by bargaining in bad
faith before exercising self-help. By Order dated July 30, 2010, the Court dismissed all
claims that the Company violated the RLA in the manner in which it returned pilots to work
following the strike. Also, the Court dismissed all but claims by 47 pilots under Louisiana
state law. On August 27, 2010, the OPEIU and the individual pilot plaintiffs filed a notice
of appeal with the Fifth Circuit Court of Appeals. Then, by Order entered September 27,
2010, the district court dismissed the Louisiana-law claims of the remaining 47 individual
pilots. On October 22, 2010, the unions and the individual pilots filed a second notice of
appeal to the Fifth Circuit Court of Appeals, by which they appeal the district courts
dismissal of all their RLA and Louisiana-law wage payment claims against PHI. On November
5, 2010, PHI filed a cross-appeal of the district courts dismissal of PHIs bad-faith
bargaining claim against the unions. On December 31, 2009, the OPEIU filed another case
against the Company in the Western District of Louisiana in which the OPEIU asserts that its
acceptance in 2009 of the terms and conditions of employment for the Companys pilots
initially implemented by the Company prior to the strike has created a binding collective
bargaining agreement and that the Company has inappropriately made unilateral revisions to
those terms including failing to pay a retention bonus. That case has been stayed by the
Court until approximately April 2011, when the parties will have completed the briefing of
the cross-appeals in the other litigation. Management does not expect the outcome of this
litigation to have a material adverse effect on our consolidated financial position, results
of operations or cash flows.
 51




---



##### Table of Contents



(11)
    
    BUSINESS SEGMENTS AND GEOGRAPHIC AREASPHI is primarily a provider of helicopter services, including
helicopter maintenance and repair services. The Company has used a
combination of factors to identify its reportable segments as
required by ASC 280, Segment Reporting. The overriding
determination of the Companys segments is based on how the chief
operating decision-maker of the Company, the Chairman of the Board
and Chief Executive Officer, evaluates the Companys results of
operations. The underlying factors include customer bases, types of
service, operational management, physical locations, and underlying
economic characteristics of the types of work the Company performs.The Oil and Gas segment provides helicopter services to oil and gas
customers operating in the Gulf of Mexico, the Democratic Republic of
Congo, and Israel. The Air Medical segment provides helicopter
services to hospitals and medical programs in several U.S. states,
and also to individuals under which the Company is paid by either a
commercial insurance company, federal or state agency, or the
patient. The Companys Air Evac subsidiary is included in the Air
Medical segment. The Technical Services segment provides helicopter
repair and overhaul services for existing flight operations
customers. The Company also operates five aircraft for the National
Science Foundation in Antarctica under the Technical Services
segment.Each segment has a portion of selling, general and administrative
expenses that is charged directly to the segment and a portion that
is allocated. Direct charges represent the vast majority of segment
selling, general and administrative expenses. Allocated selling,
general and administrative expenses is based primarily on total
segment costs as a percentage of total operating costs.Air Medical operations are headquartered in Phoenix, Arizona, where
the Company maintains significant separate facilities and
administrative staff dedicated to this segment. Those costs are
charged directly to the Air Medical segment, resulting in a
disproportionate share of selling, general and administrative
expenses compared to the Companys other reportable segments.Customers of the Company in the Oil and Gas segment consist
principally of major integrated energy companies and independent
exploration and production companies. The customers, individually or
considered as a group under common ownership, which accounted for
greater than 10% of accounts receivable or 10% of operating revenues
during the periods reflected were as follows:
 Accounts Receivable
    
    
    Operating RevenuesDecember 31,
    
    
    Years Ended December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2008Customer A
    
    
    15
    %
    
    
    14
    %
    
    
    17
    %
    
    
    15
    %
    
    
    13
    %Customer B
    
    
    7
    %
    
    
    11
    %
    
    
    14
    %
    
    
    13
    %
    
    
    14
    %
 The following table shows information about the profit or loss and assets of each of the
Companys reportable segments for the years ended December 31, 2010, 2009, and 2008. The
information contains certain allocations, including allocations of depreciation, rents,
insurance, and overhead expenses that the Company deems reasonable and appropriate for the
evaluation of results of operations. The Company does not allocate gains on dispositions of
property and equipment, other income, interest expense, income taxes, and corporate selling,
general, and administrative expenses to the segments. Where applicable, the tables present
the unallocated amounts to reconcile the totals to the Companys consolidated financial
statements. Corporate assets are principally cash, short-term investments, other assets,
and certain property, and equipment.
 52




---



##### Table of Contents



Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Segment operating revenuesOil and Gas
    
    $
    345,402
    
    
    $
    316,198
    
    
    $
    324,147Air Medical
    
    
    160,517
    
    
    
    160,113
    
    
    
    174,739Technical Services
    
    
    11,016
    
    
    
    10,864
    
    
    
    10,628Total operating revenues
    
    
    516,935
    
    
    
    487,175
    
    
    
    509,514Segment direct expensesOil and Gas
    
    
    289,331
    
    
    
    263,818
    
    
    
    258,160Air Medical
    
    
    146,131
    
    
    
    147,630
    
    
    
    160,910Technical Services
    
    
    8,240
    
    
    
    7,179
    
    
    
    6,883Total direct expenses
    
    
    443,702
    
    
    
    418,627
    
    
    
    425,953Segment selling, general and administrative expensesOil and Gas
    
    
    759
    
    
    
    1,075
    
    
    
    1,335Air Medical
    
    
    4,195
    
    
    
    6,484
    
    
    
    8,716Technical Services
    
    
    31
    
    
    
    51
    
    
    
    76Total selling, general and administrative expenses
    
    
    4,985
    
    
    
    7,610
    
    
    
    10,127Total direct and selling, general and administrative
expenses
    
    
    448,687
    
    
    
    426,237
    
    
    
    436,080Net segment profitOil and Gas
    
    
    55,312
    
    
    
    51,305
    
    
    
    64,652Air Medical
    
    
    10,191
    
    
    
    5,999
    
    
    
    5,113Technical Services
    
    
    2,745
    
    
    
    3,634
    
    
    
    3,669Total
    
    
    68,248
    
    
    
    60,938
    
    
    
    73,434Other, net (1)
    
    
    417
    
    
    
    336
    
    
    
    4,990Unallocated selling, general and administrative expenses
    
    
    (25,162
    )
    
    
    (23,396
    )
    
    
    (21,530
    )Interest expense
    
    
    (19,389
    )
    
    
    (16,037
    )
    
    
    (15,515
    )Loss on debt restructuring
    
    
    (9,521
    )
    
    
    
    
    
    
    Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    (2,747
    )Earnings before income taxes
    
    $
    14,593
    
    
    $
    21,841
    
    
    $
    38,632
 
 (1)
    
    Including gains on disposition of property and equipment and other income. Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Expenditures for long-lived assetsOil and Gas
    
    $
    88,146
    
    
    $
    36,674
    
    
    $
    45,530Air Medical
    
    
    8,789
    
    
    
    20,205
    
    
    
    40,034Corporate
    
    
    1,522
    
    
    
    1,301
    
    
    
    793Total
    
    $
    98,457
    
    
    $
    58,180
    
    
    $
    86,357
 53




---



##### Table of Contents



Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Depreciation and AmortizationOil and Gas
    
    $
    18,143
    
    
    $
    15,926
    
    
    $
    15,669Air Medical
    
    
    7,982
    
    
    
    7,934
    
    
    
    7,910Technical Services
    
    
    260
    
    
    
    234
    
    
    
    235Corporate
    
    
    1,696
    
    
    
    3,670
    
    
    
    3,130Total
    
    $
    28,081
    
    
    $
    27,764
    
    
    $
    26,944AssetsOil and Gas
    
    $
    447,973
    
    
    $
    408,802
    
    
    $
    397,903Air Medical
    
    
    232,645
    
    
    
    227,766
    
    
    
    226,642Technical Services
    
    
    8,347
    
    
    
    8,382
    
    
    
    6,597Corporate
    
    
    256,174
    
    
    
    160,556
    
    
    
    146,040Total
    
    $
    945,139
    
    
    $
    805,506
    
    
    $
    777,182
  Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(Thousands of dollars)Operating revenues:United States
    
    $
    509,221
    
    
    $
    480,128
    
    
    $
    489,611International
    
    
    7,714
    
    
    
    7,047
    
    
    
    19,903Total
    
    $
    516,935
    
    
    $
    487,175
    
    
    $
    509,514Long-Lived Assets:United States
    
    $
    592,333
    
    
    $
    546,077
    
    
    $
    523,626International
    
    
    4,200
    
    
    
    2,459
    
    
    
    4,948Total
    
    $
    596,533
    
    
    $
    548,536
    
    
    $
    528,574
 (12)
    
    QUARTERLY FINANCIAL DATA (UNAUDITED)The condensed quarterly results of operations for the years ended
December 31, 2010 and 2009 (in thousands of dollars, except per share
data) are as follows:
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2010
    
    
    2010
    
    
    2010
    
    
    2010(Thousands of dollars, except per share data)Operating revenues, net
    
    $
    121,609
    
    
    $
    139,597
    
    
    $
    135,669
    
    
    $
    120,260Gain on disposition of assets, net
    
    
    
    
    
    
    117
    
    
    
    98
    
    
    
    18Earnings (loss) before income taxes
    
    
    6,718
    
    
    
    11,757
    
    
    
    (1,440
    )(1)
    
    
    (2,442
    )Net earnings (loss)
    
    
    4,031
    
    
    
    7,054
    
    
    
    (2,443
    )(1)
    
    
    (1,525
    )Net earnings (loss) per shareBasic
    
    
    0.26
    
    
    
    0.46
    
    
    
    (0.16
    )(1)
    
    
    (0.10
    )Diluted
    
    
    0.26
    
    
    
    0.46
    
    
    
    (0.16
    )(1)
    
    
    (0.10
    )
 
 (1)
    
    Includes a $9.5 million charge ($5.7 million after tax) related to the refinancing of
our 7.125% Senior Notes.. 54




---



##### Table of Contents



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
 (13)
    
    CONDENSED FINANCIAL INFORMATION  GUARANTOR SUBSIDIARIESOur 8.625% Senior Notes are fully and unconditionally guaranteed on a
joint and several, senior basis by all of our domestic subsidiaries.
All of our domestic subsidiaries are 100% owned.The following supplemental condensed financial information sets
forth, on a consolidated basis, the balance sheet, statement of
operations, and statement of cash flows information for PHI, Inc.
(Parent Company Only) and the guarantor subsidiaries. The
eliminating entries eliminate investments in subsidiaries,
intercompany balances, and intercompany revenues and expenses. The
condensed consolidating financial statements have been prepared on
the same basis as the consolidated financial statements of PHI, Inc.
The equity method is followed by the parent company within these
financials.
 55




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
 December 31, 2010ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash
    
    $
    2,957
    
    
    $
    671
    
    
    $
    
    
    
    $
    3,628Short-term investments
    
    
    150,072
    
    
    
    
    
    
    
    
    
    
    
    150,072Accounts receivable  net
    
    
    81,393
    
    
    
    8,266
    
    
    
    
    
    
    
    89,659Intercompany receivable
    
    
    
    
    
    
    79,810
    
    
    
    (79,810
    )
    
    
    Inventories of spare parts  net
    
    
    59,336
    
    
    
    
    
    
    
    
    
    
    
    59,336Other current assets
    
    
    16,224
    
    
    
    9
    
    
    
    
    
    
    
    16,233Income taxes receivable
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    558Total current assets
    
    
    310,540
    
    
    
    88,756
    
    
    
    (79,810
    )
    
    
    319,486Investment in subsidiaries and others
    
    
    75,114
    
    
    
    
    
    
    
    (75,114
    )
    
    
    Other assets
    
    
    29,099
    
    
    
    21
    
    
    
    
    
    
    
    29,120Property and equipment, net
    
    
    583,091
    
    
    
    13,442
    
    
    
    
    
    
    
    596,533Total assets
    
    $
    997,844
    
    
    $
    102,219
    
    
    $
    (154,924
    )
    
    $
    945,139LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    22,191
    
    
    $
    213
    
    
    $
    
    
    
    $
    22,404Accrued liabilities
    
    
    23,482
    
    
    
    4,837
    
    
    
    
    
    
    
    28,319Intercompany payable
    
    
    79,810
    
    
    
    
    
    
    
    (79,810
    )
    
    
    Total current liabilities
    
    
    125,483
    
    
    
    5,050
    
    
    
    (79,810
    )
    
    
    50,723Long-term debt
    
    
    331,074
    
    
    
    
    
    
    
    
    
    
    
    331,074Deferred income taxes and other long-term
liabilities
    
    
    68,871
    
    
    
    22,055
    
    
    
    
    
    
    
    90,926Shareholders Equity:Common stock and paid-in capital
    
    
    292,934
    
    
    
    2,674
    
    
    
    (2,674
    )
    
    
    292,934Accumulated other comprehensive
loss
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    (162
    )Retained earnings
    
    
    179,644
    
    
    
    72,440
    
    
    
    (72,440
    )
    
    
    179,644Total shareholders equity
    
    
    472,416
    
    
    
    75,114
    
    
    
    (75,114
    )
    
    
    472,416Total liabilities and
shareholders equity
    
    $
    997,844
    
    
    $
    102,219
    
    
    $
    (154,924
    )
    
    $
    945,139
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 56




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
 December 31, 2009ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash
    
    $
    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. 57




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
 For the year ended December 31, 2010ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues, net
    
    $
    455,041
    
    
    $
    61,894
    
    
    $
    
    
    
    $
    516,935Management fees
    
    
    2,476
    
    
    
    
    
    
    
    (2,476
    )
    
    
    Gain on disposition of assets, net
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    239Other, principally interest income
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178457,934
    
    
    
    61,894
    
    
    
    (2,476
    )
    
    
    517,352Expenses:Direct expenses
    
    
    392,077
    
    
    
    51,625
    
    
    
    
    
    
    
    443,702Management fees
    
    
    
    
    
    
    2,476
    
    
    
    (2,476
    )
    
    
    Selling, general, and administrative
    
    
    28,725
    
    
    
    1,422
    
    
    
    
    
    
    
    30,147Equity in net earnings of consolidated
subsidiaries
    
    
    (3,823
    )
    
    
    
    
    
    
    3,823
    
    
    
    Interest expense
    
    
    19,389
    
    
    
    
    
    
    
    
    
    
    
    19,389Loss on debt restructuring
    
    
    9,521
    
    
    
    
    
    
    
    
    
    
    
    9,521445,889
    
    
    
    55,523
    
    
    
    1,347
    
    
    
    502,759Earnings before income taxes
    
    
    12,045
    
    
    
    6,371
    
    
    
    (3,823
    )
    
    
    14,593Income tax expense
    
    
    4,928
    
    
    
    2,548
    
    
    
    
    
    
    
    7,476Net earnings
    
    $
    7,117
    
    
    $
    3,823
    
    
    $
    (3,823
    )
    
    $
    7,117
 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 earnings 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
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 58




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
 For the year ended December 31, 2008ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    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 earnings 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. 59




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
 For the year ended December 31, 2010ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    74,648
    
    
    $
    2,209
    
    
    $
    
    
    
    $
    76,857Investing activities:Purchase of property and equipment
    
    
    (95,869
    )
    
    
    (2,361
    )
    
    
    
    
    
    
    (98,230
    )Proceeds from asset dispositions
    
    
    1,171
    
    
    
    
    
    
    
    
    
    
    
    1,171Purchase of short-term investments, net
    
    
    (74,671
    )
    
    
    
    
    
    
    
    
    
    
    (74,671
    )Other
    
    
    (3,780
    )
    
    
    
    
    
    
    
    
    
    
    (3,780
    )Net cash used in investing activities
    
    
    (173,149
    )
    
    
    (2,361
    )
    
    
    
    
    
    
    (175,510
    )Financing activities:Proceeds from issuance of Senior Notes
due 2018
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    300,000Premium and costs to retire debt early
    
    
    (7,667
    )
    
    
    
    
    
    
    
    
    
    
    (7,667
    )Repayment of Senior Notes, due 2013
    
    
    (200,000
    )
    
    
    
    
    
    
    
    
    
    
    (200,000
    )Debt issuance costs
    
    
    (5,322
    )
    
    
    
    
    
    
    
    
    
    
    (5,322
    )Proceeds on line of credit
    
    
    59,287
    
    
    
    
    
    
    
    
    
    
    
    59,287Payments on line of credit
    
    
    (46,518
    )
    
    
    
    
    
    
    
    
    
    
    (46,518
    )Net cash provided by financing activities
    
    
    99,780
    
    
    
    
    
    
    
    
    
    
    
    99,780Increase (decrease) in cash
    
    
    1,279
    
    
    
    (152
    )
    
    
    
    
    
    
    1,127Cash, beginning of year
    
    
    1,678
    
    
    
    823
    
    
    
    
    
    
    
    2,501Cash, end of year
    
    $
    2,957
    
    
    $
    671
    
    
    $
    
    
    
    $
    3,628
 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
    
    
    37,750
    
    
    
    
    
    
    
    
    
    
    
    37,750Payments on line of credit
    
    
    (22,445
    )
    
    
    
    
    
    
    
    
    
    
    (22,445
    )Net cash provided by financing activities
    
    
    15,305
    
    
    
    
    
    
    
    
    
    
    
    15,305Increase in cash
    
    
    1,119
    
    
    
    223
    
    
    
    
    
    
    
    1,342Cash, beginning of year
    
    
    559
    
    
    
    600
    
    
    
    
    
    
    
    1,159Cash, end of year
    
    $
    1,678
    
    
    $
    823
    
    
    $
    
    
    
    $
    2,501
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 60




---



##### Table of Contents



PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
 For the year ended December 31, 2008ParentCompany
    
    
    GuarantorOnly
    
    

Subsidiaries (1)
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    3,228(Decrease) increase in cash
    
    
    (445
    )
    
    
    179
    
    
    
    
    
    
    
    (266
    )Cash, beginning of year
    
    
    1,004
    
    
    
    421
    
    
    
    
    
    
    
    1,425Cash, end of year
    
    $
    559
    
    
    $
    600
    
    
    $
    
    
    
    $
    1,159
 
 (1)
    
    Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. 
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  61




---



##### Table of Contents



Managements Annual Report on Internal Control over Financial Reporting
  Internal
Control-Integrated Framework
  62




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
  /s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaMarch 14, 2011 63




---



##### 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
  64




---



##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Page1.      Financial StatementsIncluded in Part II of this report:Report of Independent Registered Public Accounting Firm
    
    
    34Consolidated Balance Sheets  December 31, 2010 and December 31, 2009.
    
    
    35Consolidated Statements of Operations for the years ended December 31, 2010,
December 31, 2009, and December 31, 2008.
    
    
    36Consolidated Statements of Shareholders Equity for the years ended December 31, 2010,
December 31, 2009, and December 31, 2008.
    
    
    37Consolidated Statements of Cash Flows for the years ended December 31, 2010,
December 31, 2009, and December 31, 2008.
    
    
    38Notes to Consolidated Financial Statements.
    
    
    392.      Financial Statement SchedulesSchedule II  Valuation and Qualifying accounts for the years ended
December 31, 2010, December 31, 2009 and December 31,
2008.
    
    
    673.      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
    
    Second Amendment dated September 13, 2010 to Amended and Restated Loan
Agreement dated March 31, 2008 by and among PHI, Inc., Air Evac Services, Inc., PHI
Tech Services, Inc. and International Helicopter Transport, Inc., and Whitney National
Bank (incorporated by reference to Exhibit 4.3 to PHIs Report on Form 10-Q filed on
November 8, 2010).4.4
    
    Indenture dated as of September 23, 2010 by and among PHI, Inc., the subsidiary
guarantors and The Bank of New York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to PHIs Report on Form 8-K filed on
September 23, 2010).4.5
    
    Form of 8.625% Senior Note due 2018 (incorporated by reference to Exhibit 4.2
to PHIs Report on Form 8-K filed on September 23, 2010).
 65




---



##### Table of Contents



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).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 PHI, Inc. Restricted Stock Unit Agreement under the Amended and
Restated Petroleum Helicopters, Inc. 1995 Incentive Compensation Plan (incorporated by
reference to Exhibit 10.2 to PHIs Report on Form 10-Q filed on November 8, 2010).10.4
    
    Form of PHI, Inc. Restricted Stock Unit Agreement under the Amended and
Restated Petroleum Helicopters, Inc. 1995 Incentive Compensation Plan (incorporated by
reference to Exhibit 10.3 to PHIs Report on Form 10-Q filed on November 8, 2010).10.5
    
    Amendment No. 1 to the Amended and Restated Petroleum Helicopters, Inc. 1995
Incentive Compensation Plan (incorporated by reference to Exhibit 10.4 to PHIs Report
on Form 10-Q filed on November 8, 2010).10.6
    
    Amendment No. 2 to the Amended and Restated Petroleum Helicopters, Inc. 1995
Incentive Compensation Plan (incorporated by reference to Exhibit 10.5 to PHIs Report
on Form 10-Q filed on November 8, 2010).10.7
    
    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).10.8
    
    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.
 66




---



##### 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 (1)
    
    
    of YearYear ended December 31, 2010:Allowance for doubtful accounts
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50Allowance for inventory
    
    
    9,182
    
    
    
    2,227
    
    
    
    
    
    
    
    11,409Allowance for contractual discounts
    
    
    32,124
    
    
    
    183,877
    
    
    
    181,284
    
    
    
    34,717Allowance for uncompensated care
    
    
    28,114
    
    
    
    38,311
    
    
    
    27,144
    
    
    
    39,281Year 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
    
    
    
    20,805
 
 (1)
    
    Deductions from provisions represent losses or expenses for which the respective
provisions were created. In the case of the provision for contractual discounts and
uncompensated care, such deductions are reduced by recoveries of amounts previously written
off. 67




---



##### 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
    
    Chairman of the Board
    
    March 14, 2011Al A. Gonsoulin
    
    Chief
Executive Officerand Director(Principal Executive Officer)/s/       Lance F. Bospflug

           Lance F. Bospflug
    
    Director
    
    March 14, 2011/s/       Arthur J. Breault, Jr.

           Arthur J. Breault, Jr.
    
    Director
    
    March 14, 2011/s/       Thomas H. Murphy

           Thomas H. Murphy
    
    Director
    
    March 14, 2011/s/       Richard H. Matzke

           Richard H. Matzke
    
    Director
    
    March 14, 2011/s/       C. Russell Luigs

           C. Russell Luigs
    
    Director
    
    March 14, 2011/s/       Michael J. McCann
    
    Chief Financial Officer
    
    March 14, 2011Michael J. McCann
    
    (Principal
Financial andAccounting Officer)
 68