<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM . . . . . . . TO . . . . . .

                           COMMISSION FILE NO. 0-9827

                           PETROLEUM HELICOPTERS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          LOUISIANA                                              72-0395707
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)


      2001 SE EVANGELINE THRUWAY
         LAFAYETTE, LOUISIANA                                       70508
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                          (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (337) 235-2452

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                               VOTING COMMON STOCK
                             NON-VOTING COMMON STOCK
                              (TITLE OF EACH CLASS)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

         The aggregate market value of the voting and non-voting common stock
held by non-affiliates of the registrant as of June 28, 2002 was $119,777,821
based upon the last sales price of the Common Stock on June 28, 2002, as
reported on the Nasdaq SmallCap Market.

         The number of shares outstanding of each of the registrant's classes of
common stock, as of February 21, 2003 was:

          Voting Common Stock..................................2,851,866 shares.
          Non-Voting Common Stock..............................2,525,722 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the registrant's definitive Information Statement for the
2003 Annual Meeting of Shareholders are incorporated by reference into Part III
of this Form 10-K.

================================================================================


<PAGE>

                           PETROLEUM HELICOPTERS, INC.

                                INDEX - FORM 10-K

                                     PART I

<Table>
<S>       <C>                                                                         <C>
Item 1.   Business......................................................................1
Item 2.   Properties....................................................................7
Item 3.   Legal Proceedings.............................................................8
Item 4.   Submission of Matters to a Vote of Security Holders...........................9
Item 4.A. Executive Officers of the Registrant..........................................9

                                  PART II

Item 5.   Market for Registrant's Common Equity and Related
          Shareholder Matters..........................................................10
Item 6.   Selected Financial Data......................................................11
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations....................................................12
Item 7.A. Quantitative and Qualitative Disclosures about Market Risk...................21
Item 8.   Financial Statements and Supplementary Data..................................22
             Petroleum Helicopters, Inc. and Consolidated Subsidiaries:
                Independent Auditors' Reports..........................................22
                Consolidated Balance Sheets
                   - December 31, 2002 and December 31, 2001...........................23
                Consolidated Statements of Operations
                   - Year ended December 31, 2002, Year ended December 31, 2001, and
                          Year ended December 31, 2000.................................24
                Consolidated Statements of Shareholders' Equity
                   - Year ended December 31, 2002, Year ended December 31, 2001, and
                          Year ended December 31, 2000.................................25
                Consolidated Statements of Comprehensive Income (Loss)
                   - Year ended December 31, 2002, Year ended December 31, 2001, and
                          Year ended December 31, 2000.................................25
                Consolidated Statements of Cash Flows
                   - Year ended December 31, 2002, Year ended December 31, 2001, and
                          Year ended December 31, 2000.................................26
                Notes to Consolidated Financial Statements.............................27
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosures....................................................50

                                 PART III

Item 10.  Directors and Executive Officers of the Registrant...........................51
Item 11.  Executive Compensation.......................................................51
Item 12.  Security Ownership of Certain Beneficial Owners and Management...............51
Item 13.  Certain Relationships and Related Transactions...............................51
Item 14.  Controls and Procedures......................................................51

                                  PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K..............51
          Signatures...................................................................54
          Certifications...............................................................55
</Table>



                                       i
<PAGE>


                                     PART I

FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact contained in this Form
10-K and other periodic reports filed by Petroleum Helicopters, Inc. (the
"Company" or "PHI") under the Securities Exchange Act of 1934 and other written
or oral statements made by it or on its behalf, are forward-looking statements.
When used herein, the words "anticipates", "expects", "believes", "goals",
"intends", "plans", or "projects" and similar expressions are intended to
identify forward-looking statements. It is important to note that
forward-looking statements are based on a number of assumptions about future
events and are subject to various risks, uncertainties, and other factors that
may cause the Company's actual results to differ materially from the views,
beliefs, and estimates expressed or implied in such forward-looking statements.
Although the Company believes that the assumptions reflected in forward-looking
statements are reasonable, no assurance can be given that such assumptions will
prove correct. Factors that could cause the Company's results to differ
materially from the results discussed in such forward-looking statements include
but are not limited to the following: flight variances from expectations,
volatility of oil and gas prices, the substantial capital expenditures and
commitments required to acquire aircraft, environmental risks, weather
conditions, competition, government regulation, unionization, operating hazards,
risks related to international operations, the ability to obtain insurance, and
the ability of the Company to implement its business strategy. For a more
detailed description of risks, see the "Risk Factors" section in Item 1 below.
All forward-looking statements in this document are expressly qualified in their
entirety by the cautionary statements in this paragraph. PHI undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise.

ITEM 1. BUSINESS

GENERAL

PHI, a Louisiana corporation, was incorporated in 1949. Since its inception, the
Company's primary business has been and continues to be the safe and reliable
transportation of personnel and, to a lesser extent, parts and equipment, to,
from, and among offshore platforms for customers engaged in the oil and gas
exploration, development, and production industry, principally in the Gulf of
Mexico. The Company is a leading provider of helicopter transportation services
in the Gulf of Mexico. PHI also provides helicopter services to the oil and gas
industry internationally, and to non-oil and gas customers such as health care
providers and US governmental agencies such as the National Science Foundation.
The Company also provides helicopter maintenance and repair services to certain
customers. At December 31, 2002, the Company owned or operated approximately 236
aircraft domestically and internationally.

On April 23, 2002, the Company issued $200 million in 9 3/8% Senior Unsecured
Notes ("Notes") due May 1, 2009. The proceeds from the offering were used to
retire $62.3 million of existing bank debt ("Terminated Loan Agreement") and
Interest Rate Swaps ("Swaps"), which were contracts to fix the interest rate on
the Company's bank debt, and to acquire 101 aircraft for $118.1 million, that
the Company previously leased. Although the Company expects that these actions
will reduce earnings before income taxes by approximately $4.8 million per year,
management believes that the changes will improve overall liquidity over the
next several years, which will allow the Company to pursue earnings growth
opportunities, by increasing cash from operations by approximately $5.9 million
in 2002 and an expected increase of $10.8 million in 2003, including incremental
tax effects. In later years, this amount reduces due to the effects of lower tax
depreciation. Additionally, until 2009 when the Notes become due, the Company
will be able to retain cash that would have otherwise been needed for bank debt
principal payments.

DESCRIPTION OF OPERATIONS

PHI operates in four business segments: Domestic Oil and Gas, International,
Aeromedical, and Technical Services. For financial information regarding the
Company's operating segments and the geographic areas in which they operate, see
Note 10 of the Notes to Consolidated Financial Statements included elsewhere in
this Form 10-K.

DOMESTIC OIL AND GAS. PHI operates approximately 190 owned, leased, and
customer-owned aircraft related to its Domestic Oil and Gas operations from
several bases or heliports in the Gulf of Mexico region and one base in
California. The operations in the Gulf of Mexico service customers located
offshore Louisiana, Texas, Alabama, and Mississippi.




                                       1
<PAGE>
Operating revenues from the Domestic Oil and Gas segment accounted for 67%, 68%,
and 65% of consolidated operating revenues during the years ended December 31,
2002, December 31, 2001, and December 31, 2000, respectively.

PHI's oil and gas operations derive revenue primarily from the transport of its
customers' workers and equipment to platforms and other offshore locations. Oil
and gas exploration and production companies and other offshore oil service
companies use PHI's services primarily for routine offshore transportation, to
transport personnel during medical and safety emergencies, and to evacuate
personnel during the threat of hurricanes and other adverse weather conditions.
Most of PHI's customers have entered into contracts for transportation services
for a term of one year or longer, although some do hire the Company on an "ad
hoc" or "spot" basis.

Most of the Domestic Oil and Gas aircraft are available for hire by any
customer, but some are dedicated to individual customers. The Company operates
helicopters that have flying ranges of up to 450 miles with a 30-minute fuel
reserve and thus are capable of servicing many of the deepwater oil and gas
operations that are from 50 to 250 miles offshore. (See Item 2. -- Properties,
for specific information by aircraft model.)

INTERNATIONAL. PHI provides helicopter services in Angola, Antarctica, and the
Democratic Republic of Congo. The Company operates approximately 20 aircraft
internationally. Each aircraft operating internationally is typically dedicated
to one customer. The Company's international customers are mostly oil and gas
customers, including national oil companies and US corporations operating
internationally. Operating revenues from the Company's International segment
accounted for 8% of consolidated operating revenues during the years ended
December 31, 2002 and December 31, 2001, and 9% during the year ended December
31, 2000.

AEROMEDICAL. The Company, both directly and through its subsidiary, Air Evac
Services, Inc. ("Air Evac"), provides air medical transportation services for
hospitals and medical programs in 9 states using approximately 26 aircraft. The
aircraft dedicated to this segment are specially outfitted to accommodate
emergency patients and emergency medical equipment. In Arizona, Air Evac
operates 10 of the 26 dedicated aeromedical aircraft and offers its services to
many hospitals and medical programs. Each of the other aircraft operated by the
Aeromedical segment are typically dedicated to one hospital or medical program.
The Aeromedical segment's operating revenues accounted for 17%, 17%, and 19% of
consolidated operating revenues during the years ended December 31, 2002,
December 31, 2001, and December 31, 2000, respectively.

TECHNICAL SERVICES. PHI performs maintenance and repair services at its
Lafayette facility pursuant to an FAA repair station license, primarily for its
existing customers. The license includes authority to repair airframes,
powerplants, accessories, radios, and instruments and to perform specialized
services. Commencing in late 2001, the Company changed the strategic focus of
Technical Services from providing maintenance and overhaul services to any third
party customer, to only those customers that are currently serviced by the
Company's helicopter operations. The Company implemented this change to allow
the Technical Services segment to focus on the Company's aircraft and
components. The Company will continue to fulfill its obligation to provide
maintenance to certain military aircraft.

Operating revenues from the Technical Services segment accounted for 8% of
consolidated operating revenues during each of the years ended December 31, 2002
and December 31, 2001, and 7% for the year ended December 31, 2000.

SEASONAL ASPECTS

Three seasonal related occurrences affect the Company's operations, including
poor weather conditions generally, tropical storm season in the Gulf of Mexico,
and variation in the number of hours of daylight. For a more detailed discussion
of these events, see the "Adverse Weather Conditions" paragraph in the "Risk
Factors" section of this Item 1. The Company's operating results may, and
usually do, vary from quarter to quarter, depending on factors outside of its
control. As a result, full year results are not likely to be a direct multiple
of any particular quarter or combination of quarters.



                                       2
<PAGE>
INVENTORY

For aircraft maintenance and repair related to both PHI-owned helicopters and
those repaired by the Technical Services segment, the Company carries an
inventory of aircraft parts. Many of these inventory items are parts that have
been removed from aircraft, refurbished according to manufacturers' and FAA
specifications, and returned to inventory. The Company uses systematic
procedures to estimate the valuation of these used parts, which includes
consideration of their condition and continuing utility. As a result, the
carrying values of inventory reported in the Company's financial statements are
impacted by these estimates.

CUSTOMERS

The Company's principal customers are major integrated energy companies and
independent exploration and production companies. The Company also serves oil
and gas service companies, hospitals and medical programs, government agencies,
and other aircraft owners and operators. The Company's largest customer, Shell
Oil Company and its affiliates, accounted for 17%, 14%, and 10% of operating
revenues for the years ended December 31, 2002, December 31, 2001, and December
31, 2000, respectively. The Company has entered into contracts with most of its
customers with terms of at least one year, although most include provisions
allowing for earlier termination.

GOVERNMENT REGULATION

PHI is regulated by a number of different federal and state agencies. All of
PHI's flight operations are regulated by the FAA. Aircraft accidents are subject
to the jurisdiction of the National Transportation Safety Board. Standards
relating to the workplace health and safety of PHI's employees are created and
monitored through the federal Occupational Safety and Health Act ("OSHA"). There
are a number of statutes and regulations that govern offshore operations. Also,
PHI is subject to various federal and state environmental statutes that are
discussed separately in the "Environmental Matters" section below.

The FAA has authority to exercise jurisdiction over many aspects of the
Company's business, including personnel, aircraft, and ground facilities. The
Company requires an Air Taxi Certificate, granted by the FAA, to transport
personnel and property in its helicopters. This certificate contains operating
specifications that allow the Company to conduct its present operations, but
this certificate is potentially subject to amendment, suspension, and revocation
in accordance with procedures set forth in the Federal Aviation Act. The Company
is not required to file tariffs showing rates, fares, and other charges with the
FAA. The FAA is responsible for ensuring that PHI complies with all FAA
regulations relating to the operation of its aviation business. It conducts
regular inspections regarding the safety, training and general regulatory
compliance of PHI's US aviation operations. Additionally, the FAA requires the
Company to file reports confirming its continued compliance.

The FAA's regulations, as currently in effect, require that at least 75% of the
Company's voting securities be owned or controlled by citizens of the United
States or one of its possessions, and that the president and at least two-thirds
of the directors of the Company be United States citizens. The Company's
president and all of its directors are United States citizens, and its
organizational documents provide for the automatic reduction in voting power of
each share of voting common stock owned or controlled by a non-United States
citizen if necessary to comply with these regulations.

The Company is subject to OSHA and similar state statutes. The Company has an
extensive health, safety and environmental program. The primary functions of the
safety staff are to develop and improve company policies that meet or exceed the
safety standards set by OSHA, train company personnel, and make inspections of
safety procedures to ensure their compliance with company policies on safety.
Employees are required to attend safety-training meetings at which the
importance of full compliance with safety procedures is emphasized. The Company
believes that it meets or exceeds all OSHA requirements and that its operations
do not expose its employees to unusual health hazards.

The Company is also subject to the Communications Act of 1934 because of its
ownership and operation of a radio communications flight following network
throughout the Gulf of Mexico and off the coast of California.

Numerous other federal statutes and rules regulate the offshore operations of
the Company and the Company's customers, pursuant to which the federal
government has the ability to suspend, curtail, or modify certain or all
offshore operations. A suspension or substantial curtailment of offshore oil and
gas operations for any prolonged period would have an immediate



                                       3
<PAGE>

and materially adverse effect on the Company. A substantial modification of
current offshore operations could adversely affect the economics of such
operations and result in reduced demand for helicopter services.

COMPETITION

The Company's business is highly competitive in each of its markets. Many of the
Company's contracts are awarded after competitive bidding. The principal aspects
of competition are safety, price, reliability, availability, and service.

The Company is a leading operator of helicopters in the Gulf of Mexico. There
are two major and several small competitors operating in the Gulf of Mexico.
Certain of the Company's customers and potential customers in the oil industry
operate their own helicopter fleets; however, oil and gas companies
traditionally contract for most specialty services associated with offshore
operations, including helicopter services.

In the air medical market, the Company competes against local and national
firms, and there is usually more than one competitor per local market. Most of
the Company's customers are independent hospitals who serve only their region.
Competition in the air medical market continues to increase.

The Technical Services segment competes regionally and nationally against
various small and large repair centers in the United States and Canada.
Competition has intensified with aggressive pricing and acquisitions by several
service providers and original equipment manufacturers and their subsidiaries.

The International segment of PHI's business primarily serves customers in the
oil and gas industry, although it does service some government contracts. Most
of PHI's international contracts are subject to competitive bidding.

EMPLOYEES

As of December 31, 2002, the Company employed a total of 1,632 full-time
employees and 57 part-time employees, including approximately 500 pilots and
1,000 aircraft maintenance and support personnel. At December 31, 2001, the
Company employed 1,718 full-time employees and 60 part-time employees.

On June 13, 2001, the Company's domestic pilots ratified a three-year collective
bargaining agreement between the Company and the Office & Professional Employees
International Union ("OPEIU"). The agreement was effective retroactively to June
1, 2001 and remains effective through May 31, 2004. The agreement provides for
automatic base pay increases for pilots and strike protection for the Company.
Union membership under the agreement, which falls under the Railway Labor Act,
is voluntary.

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage, recycling, and
disposal of toxic and hazardous wastes. Operating and maintaining helicopters
requires that the Company use, store, and dispose of materials that are subject
to federal and state environmental regulation. The Company periodically conducts
environmental site surveys at its facilities, and determines whether there is a
need for environmental remediation based on these surveys.

RISK FACTORS

All phases of the Company's operations are subject to a number of uncertainties,
risks, and other influences. Some important factors that could cause actual
results to differ materially from anticipated results or other expectations
include the following:

DEPENDENCE ON THE OIL AND GAS INDUSTRY. Approximately 74% of the Company's 2002
operating revenue is attributable to helicopter support for oil and gas
companies. The Company's business is dependent primarily on the level of
activity by the oil and gas companies, particularly in the Gulf of Mexico. This
level of activity has traditionally been volatile as a result of fluctuations in
oil and natural gas prices and the uncertainty of these prices in the future.
Low oil prices adversely affect demand throughout the oil and natural gas
industry, including the demand for PHI's products and services. As prices
decline, PHI is affected in two significant ways. First, the funds available to
customers for the purchase of goods and services decline. Second, exploration
and drilling activity declines as companies delay or eliminate projects.


                                       4
<PAGE>
Accordingly, when oil prices are relatively low, the Company's revenues and
income are adversely affected. Additionally, as demonstrated in current markets,
commodity prices are high and activity levels in the Gulf of Mexico are
relatively low, attributable to concerns over economic and political
uncertainties.

ADVERSE WEATHER CONDITIONS/SEASONALITY. Three types of weather-related or
seasonal occurrences impact the Company's business: poor weather conditions
generally, tropical storm season in the Gulf of Mexico, and the number of hours
of daylight.

Poor visibility, high winds, and heavy precipitation can affect the operation of
helicopters and result in a reduced number of flight hours. A significant
portion of the Company's operating revenues is dependent on actual flight hours
and a substantial portion of the Company's direct costs is fixed. Thus,
prolonged periods of adverse weather can materially and adversely affect the
Company's operating revenues and net earnings.

In the Gulf of Mexico, the months of December through February have more days of
adverse weather conditions than the other months of the year. Also in the Gulf
of Mexico, June through November is tropical storm season. When a tropical storm
is about to enter or begins developing in the Gulf of Mexico, flight activity
may increase because of evacuations of offshore workers. However, during
tropical storms, the Company is unable to operate in the area of the storm. In
addition, as most of PHI's facilities are located along the Gulf of Mexico
coast, tropical storms may cause substantial damage to its property, including
helicopters. Additionally, the Company incurs costs in evacuating its aircraft
and bases during tropical storms.

The fall and winter months have fewer hours of daylight. Consequently, flight
hours are generally lower at these times, which typically results in a reduction
in operating revenues during those months. The Company currently operates 44
helicopters in its oil and gas operations that are equipped to fly pursuant to
instrument flight rules ("IFR"), which enables these aircraft, when manned by
IFR rated pilots and co-pilots, to operate at times when poor visibility and
darkness prevents flights by aircraft that can fly only by visual flight rules
("VFR").

INTERNATIONAL OPERATIONS ARE SUBJECT TO POLITICAL, ECONOMIC AND REGULATORY
UNCERTAINTY. PHI's International operations are subject to a number of risks
inherent in any international operations including, but not limited to; (i)
political, social, and economic instability; (ii) potential seizure or
nationalization of assets; (iii) import-export quotas; (iv) currency
fluctuations; and (v) other forms of governmental regulation.

The Company's results of operations could be susceptible to adverse events
beyond its control that could occur in any particular country in which it is
conducting operations. PHI's contracts to provide services internationally
generally provide for payment in US dollars. To the extent PHI does make
investments in foreign assets or receives revenues in currencies other than US
dollars, the value of the Company's assets and income could be adversely
affected by fluctuations in the value of local currencies.

Additionally, competitiveness in international market areas may be adversely
affected by regulations, including, but not limited to, regulations requiring;
(i) the awarding of contracts to local contractors, (ii) the employment of local
citizens, and (iii) the establishment of foreign subsidiaries with significant
ownership positions reserved by the foreign government for local citizens.

CONCENTRATION OF CUSTOMERS IN OIL AND GAS INDUSTRY MAY INCREASE THE COMPANY'S
RISK. The majority of PHI's customers are engaged in the oil and gas industry.
This concentration of customers may impact the Company's overall exposure to
credit risk, either positively or negatively, in that customers may be similarly
affected by changes in economic and industry conditions. PHI does not generally
require collateral in support of trade receivables, but does maintain reserves
for potential credit losses, and, generally, actual losses have historically
been within expectations.

SIGNIFICANT CUSTOMERS. The Company derives a significant amount of its revenue
from a small number of major and independent oil and gas companies. The
Company's loss of one of these significant customers, if not offset by sales to
new or other existing customers, would have a material adverse effect on
business and operations. For more information on customer concentration, see
"Customers" above.

SAFETY AND INSURANCE. The operation of helicopters inherently involves a degree
of risk. Hazards such as aircraft accidents, collisions, fire, and adverse
weather are hazards, which must be managed by providers of helicopter services
and may result in (i) loss of life, (ii) serious injury to employees and third
parties, and (iii) losses of equipment and revenues.



                                       5
<PAGE>

The Company's safety record is very favorable in comparison to the record for
both United States and International operators. A favorable safety record is one
of the primary factors a customer reviews in selecting an aviation provider.
Significant emphasis is placed on safety in the Company and it is a very
important factor affecting daily operations.

The Company maintains hull and liability insurance on its aircraft, which
insures the Company against physical loss of, or damage to, its aircraft and
against certain legal liabilities to others. In addition, the Company carries
war risk, expropriation, confiscation, and nationalization insurance for its
aircraft involved in international operations. In some instances, the Company is
covered by indemnity agreements from its customers in lieu of, or in addition to
its insurance. The Company's aircraft are not insured for loss of use. While the
Company believes it is adequately covered by insurance and indemnification
arrangements, the loss, expropriation or confiscation of, or severe damage to, a
material number of its helicopters could adversely affect revenues and profits.

THE PRINCIPAL STOCKHOLDER HAS SUBSTANTIAL CONTROL. Al A. Gonsoulin, Chairman of
the Board, beneficially owns stock representing approximately 52% of the total
voting power. As a result, he exercises control over the election of PHI's
directors and the outcome of matters requiring a stockholder vote.

THE COMPANY DOES NOT PAY DIVIDENDS. The Company has not paid any dividends on
its common stock since 1999 and does not anticipate that it will pay any
dividends on its common stock in the foreseeable future.

LOW TRADING VOLUME. Both the Company's voting (PHEL) and nonvoting (PHELK)
common stock are listed on the Nasdaq SmallCap Market ("Nasdaq"). However,
neither class of shares has substantial trading volume, and on some days no
shares are traded. Because of this limitation, among others, a shareholder may
not be able to sell shares of the Company at the time, in the amounts, or at the
price desired.

AVAILABILITY OF SEC FILINGS AND OTHER INFORMATION. The Company's internet
address is www.phihelico.com. The Company's annual report on Form 10-K for the
year ended December 31, 2002, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to any of these reports, are available free of charge
through Petroleum Helicopters Inc.'s web site, as soon as reasonably practicable
after filing with the SEC.




                                       6
<PAGE>
ITEM 2. PROPERTIES

AIRCRAFT

Certain information regarding the Company's owned and leased fleet as of
December 31, 2002 is set forth in the following table:

<Table>
<Caption>
                                                                                                CRUISE            APPR.
                                           NUMBER IN                                            SPEED             RANGE
MANUFACTURER       TYPE                    FLEET           ENGINE             PASSENGERS        (MPH)           (MILES)(2)
------------       ----                    ---------       ------             ----------        ------          ----------
<S>                <C>                     <C>             <C>                <C>               <C>             <C>
LIGHT
AIRCRAFT

Bell               206 / 407                  123          Turbine                    4 - 6      103 - 144         300 - 420
Eurocopter         BK-117 / BO-105             24          Twin Turbine               4 - 6            135         255 - 270
Aerospatiale       AS350 B2 / B3               13          Turbine                        5            140         337 - 385
MD Helicopter      MD530                        1          Turbine                        4            120               300

MEDIUM
AIRCRAFT

Bell               212(1) / 222(1)
                   230(1) / 412(1)             33          Twin Turbine              8 - 13      115 - 160         300 - 370
Sikorsky           S-76(1) A, A++, C+          17          Twin Turbine                  12            150               400

TRANSPORT
AIRCRAFT

Bell               214ST(1)                     4          Twin Turbine                  18            155               450

MISCELLANEOUS
AIRCRAFT

Kaman              K-Max K-1200                 1          Turbine                        1            100               225
                                            -----
                   Total Helicopters          216
                                            -----

FIXED WING

Rockwell           Aero Commander               2          Turboprop                      6      300 - 340       1,200-1,600
Beechcraft         King Air 200(1)              1          Turboprop                      3            300             1,200
Cessna             Conquest 441(1)              4          Turboprop                      3            330             1,200
                                            -----
                   Total Fixed Wing             7
                                            -----

                   Total Aircraft             223
                                            =====
</Table>

         (1)      Equipped to fly under instrument flight rules ("IFR"). All
                  other types listed can only fly under visual flight rules
                  ("VFR"). See Item 1. "Business - Risk Factors, Adverse weather
                  conditions/Seasonality."

         (2)      Based on maintaining a 30-minute fuel reserve.

Of the 223 aircraft listed, the Company owns 219 and leases 4. Additionally, the
Company operates 13 aircraft that are owned or leased by customers that are not
reflected in the above table. In total the Company owns or operates 236
aircraft.

The Company sells aircraft whenever they (i) become obsolescent, (ii) do not fit
into future fleet plans, or (iii) are surplus to the Company's needs.

FACILITIES

The Company's principal facility is located on property leased from The
Lafayette Airport Commission at the Lafayette Regional Airport in Lafayette,
Louisiana. The lease covers approximately 28 acres and two buildings, with an
aggregate of approximately 256,000 square feet, housing the Company's main
operational, executive, and administrative offices and the main repair and
maintenance facility. The lease for this new facility expires in 2021 and
contains three five-year renewal options following the expiration date.



                                       7
<PAGE>
The Company owns its Boothville, Louisiana operating facility. The property has
a 23,000 square foot building, a 7,000 square foot hangar, and landing pads for
35 helicopters.

The Company also leases property for 12 additional bases to service the oil and
gas industry throughout the Gulf of Mexico and one base in California. Those
bases that represent a significant investment by the Company in leasehold
improvements or which are particularly important to the Company's operations
are:

<Table>
<Caption>
       FACILITY        LEASE EXPIRATION      AREA              FACILITIES                  COMMENTS
       --------        ----------------      ----              ----------                  --------
<S>                  <C>                   <C>         <C>                         <C>
Morgan City          June 20, 2003         53 acres    Operational and             Options to extend to
    (Louisiana)                                        maintenance facilities,     June 20, 2013
                                                       landing pads for 46
                                                       helicopters

Intracoastal City    December 31, 2006     18 acres    Operational and             Options to extend to
    (Louisiana)                                        maintenance facilities,     December 31, 2010
                                                       landing pads for 45
                                                       helicopters

Houma-Terrebonne     August 31, 2003       14 acres    Operational and             Seven renewal options
Airport (Louisiana)                                    maintenance facilities,     to extend for one year
                                                       landing pads for 30         each
                                                       helicopters

Galveston (Texas)    May 31, 2021          4 acres     Operational and             Lease period to May 31,
                                                       maintenance facilities,     2021 with certain
                                                       landing pads for 30         cancellation provisions
                                                       helicopters

Fourchon             May 31, 2006          8 acres     Operational and             Facility under three
    (Louisiana)                                        maintenance facilities,     separate leases, the
                                                       landing pads for 10         earliest of which
                                                       helicopters                 expires May 31, 2006
</Table>


The Company's other operations-related facilities in the United States are
located at New Orleans, Cameron, and Lake Charles, Louisiana; at Port O'Connor,
Sabine Pass, and Rockport, Texas; and at Theodore, Alabama.

The Company also operates from offshore platforms that are provided without
charge by the owners of the platforms, although in certain instances the Company
is required to indemnify the owners against loss in connection with the
Company's use thereof.

The Company also leases facilities for its Aeromedical operations in Phoenix,
Arizona. Other bases for the Company's International and other Aeromedical
operations are generally furnished by the customer.

ITEM 3. LEGAL PROCEEDINGS

The Company is named as a defendant in various legal actions that have arisen in
the ordinary course of its business and have not been finally adjudicated. The
amount, if any, of ultimate liability with respect to such matters cannot be
determined. 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 statements.




                                       8
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information about the executive officers of PHI is set forth in the
following table and accompanying text:

<Table>
<Caption>
           Name           Age                           Position
  --------------------    ----  ------------------------------------------------------------
<S>                       <C>   <C>
  Al A. Gonsoulin          60   Chairman of the Board
  Lance F. Bospflug        48   President and Chief Executive Officer
  Robert P. Bouillion      37   Director of Health, Safety, and Environment
  Glendon R. Cornett       59   Director of Maintenance and FAR 145 Maintenance
  Carlin N. Craig          55   Director of Operations
  Michael C. Hurst         55   Chief Pilot
  Michael J. McCann        55   Chief Financial Officer, Secretary and Treasurer
  Richard A. Rovinelli     54   Chief Administrative Officer and Director of Human Resources
  William P. Sorenson      53   Director of Marketing and Planning
</Table>

Mr. Gonsoulin was elected Chairman of the Board in September 2001. Mr. Gonsoulin
had 35 years of oil and gas service industry experience as a manager, owner, and
investor prior to becoming Chairman of PHI. He is a business graduate of the
University of Louisiana at Lafayette. He founded Sea Mar, Inc. in 1977 and
served as President and CEO of that company until December 2001. In 1998 he sold
Sea Mar to Pool Energy Services, which was subsequently merged into Nabors
Industries, Inc. in 1999.

Mr. Bospflug joined PHI in September 2000 as President. He previously was
President and Chief Executive Officer of T. L. James and Company from 1999 to
2000. Prior to that, he was Executive Vice President and Chief Financial
Officer. Mr. Bospflug holds a business degree from Jamestown College in
Jamestown, North Dakota and a Masters of Business Administration from the
University of South Dakota in Vermillion, South Dakota and is a Chartered
Financial Analyst.

Mr. Bouillion became Director of Health, Safety, and Environment in January
2001. Previously, he was Director of Safety from 1999 to 2000, Assistant
Director of Safety from 1998 to 1999, and Director of Industrial Safety from
1995 to 1998. Mr. Bouillion received the certification as a Certified Safety
Professional in December 2001.

Mr. Cornett became Director of Maintenance and Federal Aviation Regulations
("FAR") 145 Maintenance in January 2001. In this position, Mr. Cornett also
directs the Technical Service segment. He has served PHI in various positions
since 1964 and from 1991 to 2000 was Director of FAR 135 Maintenance.

Mr. Craig became Director of Operations in January 2001. In this position, Mr.
Craig directs the Domestic Oil and Gas, International, and Aeromedical segments.
He has been with PHI since 1977 and held the title of Regional Manager of the
Eastern Gulf of Mexico from 1992 until his recent appointment. Mr. Craig was
also a captain in the U.S. Army and served in the Republic of South Vietnam.

Mr. Hurst has served as Chief Pilot since 1994. Mr. Hurst was a Captain in the
US Army and was awarded several flying and service awards and medals. Mr. Hurst
is also an active member of the HSAV IFR sub-committee, representative of
JAR-OPS Implementation committee. In 1996-97 he was acknowledged as Pilot
Proficiency examiner, staff instructor for HAI (CFI Renewal Course in 1993 - 94,
and FAA's Louisiana Instructor of the Year in 1993).

Mr. McCann has served as Chief Financial Officer ("CFO") and Treasurer since
November 1998. From January 1998 to October 1998, he was the CFO for Global
Industries Ltd. and Chief Administrative Officer ("CAO") from July 1996. Prior
to that, he was CFO for Sub Sea International, Inc. Mr. McCann is a Certified
Public Accountant and holds a Masters of Business Administration from Loyola
University.




                                       9
<PAGE>
Mr. Rovinelli joined the Company in February 1999 as Director of Human Resources
and was also named Chief Administrative Officer in December 1999. From January
1996 to February 1999, he was self-employed. Prior to that, he was Manager,
Human Resources for Arco Alaska, Inc., Headquarters Staff Manager, Human
Resource Services, Arco Oil and Gas Company, as well as numerous other positions
within Arco. Mr. Rovinelli holds a Bachelor of Science Degree in Industrial
Psychology from the University of Houston.

Mr. Sorenson became Director of Marketing and Planning in February 2002.
Previously, he was Director of International, Aeromedical, and Technical
Services beginning in January 2001, after serving as Director of Corporate
Marketing/New Business since 1999 and as General Manager of Aeromedical Services
since November 1995. Mr. Sorenson holds a Bachelor of Science degree in Business
from the University of Wisconsin.



                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's voting and non-voting common stock trades on The Nasdaq Stock
Market, SmallCap Issuers under the symbols PHEL and PHELK, respectively. The
following table sets forth the range of high and low sales prices per share, as
reported by Nasdaq, for the Company's voting and non-voting common stock for the
fiscal quarters indicated.

<Table>
<Caption>
                                                       VOTING                  NON-VOTING
                                              ------------------------- -------------------------
                   PERIOD                        HIGH          LOW         HIGH          LOW
--------------------------------------------- ------------ ------------ ------------ ------------
<S>                                            <C>          <C>          <C>          <C>
     January 1, 2002 to March 31, 2002         $ 25.750     $ 19.200     $ 26.400     $ 19.480
       April 1, 2002 to June 30, 2002            33.500       24.300       30.750       23.890
     July 1, 2002 to September 30, 2002          32.990       25.510       30.990       25.350
    October 1, 2002 to December 31, 2002         31.100       25.750       30.300       25.250

     January 1, 2001 to March 31, 2001         $ 17.500     $ 10.875     $ 18.375     $ 10.500
       April 1, 2001 to June 30, 2001            24.120       15.000       23.000       15.125
     July 1, 2001 to September 30, 2001          21.100       16.330       21.000       16.750
    October 1, 2001 to December 31, 2002         20.000       18.250       19.950       17.750
</Table>

The Company did not pay dividends during the last three fiscal years and does
not expect to pay dividends in the foreseeable future. In addition, the Notes
and a revolving credit facility with a commercial bank restrict the payment of
dividends by the Company. See Item 8. "Financial Statements and Supplementary
Data - Notes to Consolidated Financial Statements, Note 4."

As of February 21, 2003, there were approximately 1,022 holders of record of the
Company's voting common stock and 84 holders of record of the Company's
non-voting common stock.

Information regarding the Company's stock based compensation plan is included in
Item 8, Notes to Consolidated Financial Statements Note (6) EMPLOYEE BENEFIT
PLANS - Stock Based Compensation.

On April 23, 2002, the Company issued $200 million in aggregate principal amount
of 9 3/8% Senior Unsecured Notes that mature on May 1, 2009 in an offering made
pursuant to Rule 144A and Regulation S of the Securities Act of 1933. The net
proceeds from the issuance of Senior Notes were approximately $194.2 million
(net of underwriting discounts and other issuance costs). The net proceeds were
used to purchase leased aircraft and aircraft on capital lease ($118.0 million),
reduce outstanding borrowings under a working capital facility ($44.5 million),
and reduce outstanding borrowings under a term debt facility ($16.3 million),
settlement of interest rate Swap agreements ($1.6 million), and the remainder
for general corporate purposes. In May 2002, the Company filed a registration
statement for an offer to exchange these Notes for debt securities with
identical terms.




                                       10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA


The selected financial data presented below for each of the past six fiscal
periods should be read in conjunction with Management's Discussion and Analysis
of Financial Condition and Results of Operations and the Consolidated Financial
Statements and Notes to Consolidated Financial Statements included elsewhere in
this Annual Report. Effective December 31, 1999, the Company changed its fiscal
accounting year-end to December 31 of each year. The table below also presents
comparative information for the twelve months ended December 31, 1999 and the
eight months ended December 31, 1998.

<Table>
<Caption>
                                                 Year Ended                       Eight Months Ended
                                                 December 31,                         December 31,        Year Ended April 30,
                                  -------------------------------------------    ----------------------   --------------------
                                    2002       2001       2000        1999(1)      1999         1998(1)     1999       1998(2)
                                  ---------  ---------  ---------   ---------    ---------    ---------   ---------  ---------
                                                         (Thousands of dollars,  except per share data)
<S>                               <C>        <C>        <C>         <C>          <C>          <C>         <C>        <C>
Income Statement Data
   Operating revenues             $ 283,751  $ 282,437  $ 236,843   $ 227,058    $ 149,077    $ 173,185   $ 251,165  $ 240,135
   Net earnings (loss)(3)             9,231     11,020    (12,294)     (5,019)      (2,699)       5,194       2,988      7,417
   Net earnings (loss) per share
        Basic                          1.73       2.12      (2.38)      (0.97)       (0.52)        1.01        0.58       1.45
        Diluted                        1.70       2.08      (2.38)      (0.97)       (0.52)        0.99        0.57       1.43
   Cash dividends declared
     per share                           --         --         --        0.15         0.05         0.10        0.20       0.20


Balance Sheet Data(4)
   Total assets                   $ 366,707  $ 225,645  $ 222,755   $ 223,056    $ 223,056    $ 238,011   $ 231,575  $ 227,021
   Total debt                       200,000     66,616     74,819      77,640       77,640       81,836      80,296     72,619
   Working capital                   72,751     46,987     41,547      54,699       54,699       52,486      51,030     47,971
   Shareholders' equity             104,854     91,872     81,622      93,623       93,623       99,440      96,581     94,705
</Table>

----------

(1)      Information for the year ended December 31, 1999 and the eight months
         ended December 31, 1998 is derived from unaudited financial information
         and presented for comparison purposes only.

(2)      On December 31, 1997, PHI purchased the net assets of Samaritan
         AirEvac. The results of that acquisition are consolidated with the
         Company's results effective January 1, 1998.

(3)      See Item 8. "Financial Statements and Supplementary Data - Notes to
         Consolidated Financial Statements, Note 1 - Summary of Significant
         Accounting Policies (Fiscal Year Change)" and "Note 2 - Special
         Charges."

(4)      As of the end of the period.




                                       11
<PAGE>
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the Company's
Consolidated Financial Statements for the years ended December 31, 2002,
December 31, 2001, and December 31, 2000 and the related Notes to Consolidated
Financial Statements.

                                    OVERVIEW

Operating revenues for 2002 were $283.8 million compared to $282.4 million for
the prior year, an increase of $1.4 million. The increase in operating revenue
was due to an increase of $1.8 million in Technical Services revenues due to
completion of a project for the upgrade and refurbishment of a customer's
aircraft in the first half of this year, and an increase of $1.2 million in
Aeromedical segment revenues. The strategic focus of the Technical Services
segment is discussed below and will result in a reduction in that segment's
revenues. Aeromedical segment revenues increased $1.2 million due to an
improvement in rates on retained aeromedical contracts, offset by a reduction in
revenue due to the termination of certain other aeromedical contracts. Domestic
Oil and Gas revenues decreased $1.5 million due to a decrease in activity in the
Gulf of Mexico, offset in part by an increase in rates implemented in 2001.

Flight hours were 170,462 for 2002 compared to 192,753 for 2001, a decrease of
22,291 flight hours (11.6% decrease). The Domestic Oil and Gas segment had a
decrease of 12,326 flight hours due to decreased activity in the Gulf of Mexico,
and the Aeromedical segment had a decrease of 6,225 flight hours due to the
termination of certain Aeromedical contracts that were the result of increases
in rates.

Direct operating expense was $235.2 million for 2002 compared to $243.5 million
for 2001, a decrease of $8.3 million. The decrease was due to a reduction in
headcount resulting in decreased compensation costs, decreased helicopter rent
due to the purchase of leased aircraft as a result of the Notes issuance
described below, decreased insurance due in part to a decrease in the number of
aircraft the Company operates, decreased fuel costs due to decreased activity,
and decreased maintenance costs due to a decrease in parts usage. In addition,
there was increased depreciation expense due to the purchase of leased aircraft,
and an increase in Technical Services cost due to a project for the
refurbishment and upgrade of a customer's aircraft completed in 2002.

Selling, general and administrative expense was $18.2 million for 2002 compared
to $18.0 million for 2001, an increase of $0.2 million. Selling, general and
administrative expense for 2002 includes a severance charge ($0.3 million), and
a management bonus ($0.8 million). There were no management bonuses recorded in
2001 and no significant severance charges in 2001. After deducting the
management bonus and the severance charge, selling, general and administrative
expense decreased due to a decrease in employee compensation costs as a result
of a decrease in headcount, and also due to a decrease in legal costs.

Interest expense was $17.3 million for 2002 compared to $6.2 million for 2001.
The increase was due to interest on the Notes issuance described below, and $1.9
million of costs incurred in 2002 related to the retirement of the Company's
bank debt and liquidation of the Company's interest rate Swap agreements, which
were contracts to fix interest rates on the Company's bank debt.

On April 23, 2002, the Company issued $200 million in 9 3/8% Notes due May 1,
2009. The proceeds from the offering were used to retire $62.3 million of
existing bank debt and the Swaps, and to acquire 101 aircraft for $118.1
million, that the Company previously leased. Also on April 23, 2002, the Company
entered into a new $50 million revolving credit facility with a commercial bank
to be available through July 2004. As of December 31, 2002, the Company had no
borrowings and a $0.6 million letter of credit outstanding under the revolving
credit facility.

As a result of the Notes issuance and the purchases of the leased aircraft, the
Company has incurred and will incur increased interest and depreciation expense,
and decreased aircraft rent expense. Although the Company expects that these
changes will reduce earnings before income taxes by approximately $4.8 million
per year, the transaction will improve overall liquidity over the next several
years, which will allow the Company to pursue earnings growth opportunities.
Increased cash from operations was approximately $5.9 million in 2002, including
incremental tax effects. The Company expects increased cash from operations of
$10.8 million in 2003, including incremental tax effects. In later years, this



                                       12
<PAGE>
 amount reduces due to the effects of lower tax depreciation. Additionally,
until 2009 when the Notes become due, the Company will be able to retain cash
that would have otherwise been needed for bank debt principal payments.

                              RESULTS OF OPERATIONS

The following table presents segment operating revenues and segment operating
profit before tax, along with certain non-financial operational statistics, for
the years ended December 31, 2002, 2001 and 2000:

<Table>
<Caption>
                                                            Year Ended
                                                            December 31,
                                                -----------------------------------
                                                  2002         2001         2000
                                                ---------    ---------    ---------
                                                       (Thousands of dollars)
<S>                                             <C>          <C>          <C>
       Segment operating revenues
          Domestic Oil and Gas                  $ 189,480    $ 190,991    $ 153,831
          International                            22,474       22,634       21,703
          Aeromedical                              48,664       47,493       44,282
          Technical Services                       23,133       21,319       17,027
                                                ---------    ---------    ---------
              Total                             $ 283,751    $ 282,437    $ 236,843
                                                =========    =========    =========

       Segment operating profit(1)
          Domestic Oil and Gas                  $  26,974    $  29,059    $   1,502
          International                             1,760          712         (111)
          Aeromedical                              12,463        1,503         (155)
          Technical Services                        4,297        3,490         (550)
                                                ---------    ---------    ---------
              Net segment operating
                  profit (loss)                    45,494       34,764          686
          Other, net(2)                             2,261        2,812        3,247
          Interest expense                        (17,250)      (6,190)      (5,813)
          Unallocated costs                       (15,121)     (13,894)     (15,915)
                                                ---------    ---------    ---------
          Earnings (loss) before income taxes   $  15,384    $  17,492    $ (17,795)
                                                =========    =========    =========

       Flight hours
          Domestic Oil and Gas                    136,237      148,563      158,094
          International                            18,292       21,235       22,338
          Aeromedical                              15,780       22,005       21,490
          Other                                       153          950          545
                                                ---------    ---------    ---------
              Total                               170,462      192,753      202,467
                                                =========    =========    =========

       Aircraft operated at period end
          Domestic Oil and Gas                        190          177          204
          International                                20           21           29
          Aeromedical                                  26           41           46
                                                ---------    ---------    ---------
              Total(3)                                236          239          279
                                                =========    =========    =========
</Table>

(1)      Includes special charges. See Note 2 of the Consolidated Financial
         Statements.

(2)      Including gains on disposition of property and equipment, equity in
         losses of unconsolidated subsidiaries, and other income.

(3)      Includes 13, 19, and 18 aircraft as of December 31, 2002, 2001 and
         2000, respectively that are customer owned or leased by customers.


YEAR ENDED DECEMBER 31, 2002 COMPARED WITH YEAR ENDED DECEMBER 31, 2001

COMBINED OPERATIONS

REVENUES - Operating revenues for 2002 were $283.8 million compared to $282.4
million for the prior year, an increase of $1.4 million. The increase in
operating revenue was due to an increase of $1.8 million in Technical Services
revenues due to completion of a project for the upgrade and refurbishment of a
customer's aircraft during the year and also due to an increase of $1.2 million
in the Aeromedical segment. Although Technical Services revenues increased in
2002, the strategic focus of that segment is limited to maintenance services
primarily for certain military aircraft, flight operations customers, and
original equipment manufacturers. As a result, the Company anticipates that




                                       13
<PAGE>
revenues in this segment will decline in future years. Aeromedical segment
revenues increased due to an improvement in rates on retained aeromedical
contracts, offset by a reduction in revenue due to the termination of certain
other aeromedical contracts. Domestic Oil and Gas revenues decreased $1.5
million due to a decrease in activity in the Gulf of Mexico, offset in part by
an increase in rates implemented in 2001.

Flight hours were 170,462 for 2002 compared to 192,753 for 2001, a decrease of
22,291 flight hours (11.6% decrease). The Domestic Oil and Gas segment had a
decrease of 12,326 flight hours due to decreased activity in the Gulf of Mexico,
and the Aeromedical segment had a decrease of 6,225 flight hours due to the
termination of certain Aeromedical contracts that were the result of increases
in rates to customers unwilling to absorb those increases.

OTHER INCOME AND LOSSES - Gain (loss) on equipment dispositions was $0.6 million
for 2002 compared to $1.4 million for 2001, a decrease of $0.8 million. This
decrease was due to a decrease in the sale of aircraft as compared to the prior
year.

Other income was $1.7 million for 2002 compared to $1.5 million for 2001. The
current year includes a gain related to the favorable settlement of a note
receivable from a previous joint venture sold in the prior year in which the
Company accepted a note receivable for the proceeds ($0.7 million), and the
balance of other income primarily being interest income ($0.9 million). The
prior year included a reimbursement received from the U.S. Department of
Transportation under the Air Safety Stabilization Act ($0.8 million), and
interest income ($0.7 million).

DIRECT EXPENSES - Direct operating expense was $235.2 million for 2002 compared
to $243.5 million for 2001, a decrease of $8.3 million. Employee compensation
costs decreased ($2.0 million) due to decreased headcount in 2002 compared to
2001. Additionally, included in employee compensation costs in direct expenses
for 2002 are severance costs ($1.4 million) and a management bonus ($0.3
million). No significant severance costs or bonuses were recorded in 2001.
Helicopter rent decreased ($10.7 million) due to the purchase of leased aircraft
as previously discussed. Aircraft fuel decreased as a result of decreased
activity ($1.8 million), insurance expense decreased due in part to a decrease
in the number of aircraft the Company operates ($1.4 million), and a decrease in
maintenance costs ($0.5 million). Depreciation expense increased ($5.6 million)
due to the purchase of leased aircraft. Technical Services costs increased ($1.0
million) due to costs related to a project for the refurbishment and upgrade of
a customer's aircraft completed in 2002, and there was an increase, net, of
other items ($1.5 million).

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expense was $18.2 million for 2002 compared to $18.0 for 2001.
Selling, general and administrative expense for 2002 includes a severance charge
($0.3 million), and a management bonus ($0.8 million). After deducting the
severance charges and management bonus, selling, general and administrative
expense decreased due to employee compensation costs as a result of a decrease
in headcount, and also due to a decrease in legal costs.

INTEREST EXPENSE - Interest expense was $17.3 million for 2002 compared to $6.2
million for 2001. The increase was due to interest on the Notes issuance
previously described, and $1.9 million of costs incurred in the second quarter
of 2002 related to the retirement of the Company's bank debt and liquidation of
the Company's interest rate Swap agreements, which is a contract to fix interest
rates on the Company's bank debt, which were charged to interest expense.

INCOME TAXES - Income tax expense for 2002 was $6.2 million, compared to $6.5
million for 2001. The effective tax-rate was 40% for 2002, and 37% for 2001. The
increase in the effective tax rate is primarily due to increased state income
taxes and permanent book and tax differences.

EARNINGS - The Company's net earnings for 2002 were $9.2 million, compared to
$11.0 million for 2001. Earnings before tax for 2002 were $15.4 million compared
to $17.5 million in 2001. Earnings per diluted share were $1.70 as compared to
$2.08 per diluted share for 2001. Although there was a decline in flight hour
activity, the principal reason for the earnings decline was the increase in
interest expense, described above.

SEGMENT DISCUSSION

Effective July 1, 2002, the Company no longer allocates interest expense to its
segments when evaluating operating performance. All results prior to July 1,
2002 have been restated to remove interest expense from the segment operating
results.



                                       14
<PAGE>

Domestic Oil and Gas - Domestic Oil and Gas segment revenues were $189.5 million
for 2002, compared to $191.0 million for 2001, a decrease of $1.5 million. There
was a decrease in flight activity due to reduced oil and gas activity in the
Gulf of Mexico, as indicated by a decrease of 12,326 flight hours for the year.
This was offset in part by an increase in rates implemented in 2001. The number
of aircraft in the segment was 190 at December 31, 2002 as compared to 177 at
December 31, 2001. Certain aircraft were acquired during the year and certain
other aircraft models that can be configured to meet customers' deepwater
service requirements were also transferred from the Aeromedical segment upon
termination of certain aeromedical contracts.

Direct expenses in the Domestic Oil and Gas segment increased $0.6 million due
to an increase in human resource cost due primarily to certain of the pilot and
mechanic employees in the Aeromedical segment being reassigned to the Domestic
Oil and Gas segment ($2.3 million), increased depreciation expense ($5.6
million) due to the purchase of leased aircraft, an increase in maintenance
costs ($0.5 million), and an increase in workers' compensation expense ($0.3
million). These amounts were offset by a decrease in helicopter rent due to the
purchase of the leased aircraft ($7.3 million), a decrease in fuel cost due to
decreased activity ($1.1 million), and a decrease in insurance cost due in part
to a decrease in the number of aircraft the Company operates in total that
benefited the segment ($0.7 million). The Company also reduced its environmental
reserve ($0.3 million), primarily due to costs at one site being less than
anticipated. Additionally, there was an increase due to other items, net ($1.3
million), which consists primarily of supplies and base operating costs and
facility repairs.

The Domestic Oil and Gas segment operating income decreased ($2.1 million) due
in part to a decrease in activity and also due in part to the transfer of
certain pilots and mechanics from the Aeromedical segment. Operating margin was
14.2% for the year compared to 15.2% in the prior year.

International - International segment revenues were $22.5 million for 2002,
compared to $22.6 million for 2001. The number of aircraft in the segment was 20
at December 31, 2002 and 21 at December 31, 2001. Flight hours were 18,292 for
2002 as compared to 21,235 for 2001. The decrease in revenue due to a decrease
in activity was offset by an improvement in rates.

Direct expenses in the International segment decreased for the year ($1.2
million) due to a decrease in human resource cost ($0.5 million), a decrease in
insurance cost ($0.3 million), and a decrease, net, of other items ($0.4
million).

International segment operating income increased for 2002 ($1.0 million).
Operating margin of 7.8% for the year compares to 3.2% for the prior year. The
improvement in operating income and operating margin was due to an increase in
customer rates and a decrease in direct expenses.

In October 2002, the Company exited a contract in Taiwan that included one
aircraft.

Aeromedical - Aeromedical segment revenues were $48.7 million for 2002 compared
to $47.5 million for 2001. The increase in Aeromedical revenues is due to an
increase in rates substantially offset by a decrease in flight hour activity of
6,225 flight hours due to the termination of certain aeromedical contracts as a
result of increases in rates. The number of aircraft in the segment was 26 in
2002 compared to 41 for 2001.

Direct expenses in the Aeromedical segment for 2002 decreased ($9.8 million) due
to a decrease in headcount ($4.1 million), a decrease in helicopter rent ($3.4
million) due to a decrease in the number of aircraft in the segment and to the
purchase of leased aircraft, a decrease in maintenance cost ($1.0 million) and
insurance cost ($0.4 million), both due to fewer aircraft in the segment, a
decrease in fuel costs ($0.7 million), and other items, net, decreased ($0.2
million), which is primarily base operating costs.

The Aeromedical segment operating income increased ($11.0 million) for the year.
Operating margin was 25.6% for 2002 and compares to 3.2% for 2001. The increase
in operating income and operating margin is attributable to an increase in
customer rates on retained Aeromedical contracts, and also due to a reduction in
direct expense as a result of reduced aircraft, reduced personnel, and other
related costs caused by the termination of certain Aeromedical contracts as
mentioned above. Flight hours for the 2002 were 15,780 compared to 22,005 for
2001.

Technical Services - Technical Services segment revenues for 2002 were $23.1
million compared to $21.3 million for 2001. The increase in Technical Services
revenues was related to revenue from a contract for the refurbishment and




                                       15
<PAGE>
upgrade of two aircraft completed in the first half of 2002. The strategic focus
of the Technical Services segment is discussed below and will result in a
reduction in that segment's revenues in future years.

There was an increase in direct expense ($1.0 million) in the Technical Services
segment due to the contract previously mentioned.

The Technical Services segment had operating income of $4.3 million for 2002,
compared to $3.5 million for 2001. The operating margin was 18.6% for 2002,
compared to 16.4% in the prior year. The improvement in operating income and
operating margin was due to increases in rates on continuing activities.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000

COMBINED OPERATIONS

For the year ended December 31, 2001, the Company recorded $1.3 million for
discretionary incentive compensation to be paid to its non-executive employees.
Future incentive compensation expenses are dependant upon the Company achieving
desired profit levels. The Company also reduced its environmental provision by
$1.2 million that primarily relates to one site. Remediation costs at that site
are estimated to be less than originally anticipated.

Additionally, for the year 2001 there was a reimbursement of $0.8 million
received from the United States Department of Transportation under the Air
Safety and System Stabilization Act, which was a result of the events of
September 11, 2001.

For the year ended December 31, 2000, the Company recorded certain significant
adjustments ($4.3 million related to inventory) and special charges ($3.6
million total) that resulted from a reduction in work force, asset write-downs,
and decisions to exit certain operations.

Where appropriate, the above items are allocated to the Company's business
segments and are included in the respective discussion of each segment.

OTHER INCOME AND LOSSES - Gains on property and equipment dispositions were $1.4
million in 2001 as compared to $4.0 million in 2000. During 2001, the Company
reduced its fleet by 40 owned and leased aircraft.

Equity in net losses from unconsolidated subsidiaries for 2000, excluding an
impairment charge against the Company's investment in Clintondale, a joint
venture operating primarily in Kazakhstan, that the Company recorded in special
charges, was $0.7 million. The Company recorded no equity income or losses in
2001. In 2000, the Company recognized an impairment of its remaining equity
investment in the joint venture and, during 2001, sold its 50% interest in
Clintondale. Also, in 2000, the Company closed operations of its Thailand
unconsolidated subsidiary.

Other income for 2001 includes $0.7 million of interest income and $0.8 million
for the reimbursement received from the US Department of Transportation under
the Air Safety and Systems Stabilization Act. During 2001, the Company recorded
interest income for amounts received for interest on prior years tax refunds,
interest credited to the Company on rent prepaid on its new facility, and
interest earned on overnight cash investments.

DIRECT EXPENSES - Direct expenses for 2001 increased $13.2 million to $243.5
million for 2001 compared to $230.3 million for the prior year. The increase was
due to increases in human resource costs, cost of sales related to the Technical
Services segment, insurance costs, aircraft parts costs, helicopter rent, and an
increase in depreciation expense. The most significant of these increases was
the human resource costs. Numerous actions were taken during the year including
closure of certain business operations and a reduction in the Company's work
force, and other actions previously described. These actions reduced the effect
of the cost increases as further described below.

Of the $13.2 million increase in direct expenses, the increase in human resource
costs accounted for 35% of the total increase. This resulted from wage and
benefit increases for the Company's pilot and mechanic work force as well as
certain employees (including a non-executive incentive compensation of $1.3
million) and offset in part by a reduction in the Company's work force
implemented in February 2001. These wage and benefit increases were implemented
to achieve competitive wages in the Company's work force, consistent with the
Company's compensation philosophy to maintain an industry-competitive
compensation package for all of its employees. The Company's total labor work
force at December 31, 2001 was 1,778 compared to 1,939 at December 31, 2000, or
a decrease of 161 personnel.



                                       16
<PAGE>
Cost of sales in the Technical Services segment accounted for 17% of the total
increase in costs. As previously described there was an increase in activity in
the Technical Services segment due to a full year of activity on a certain
contract to perform maintenance, repair and overhaul services for certain
military aircraft and components.

The cost of aircraft parts accounts for 11% of the total increase in costs, due
to price increases implemented by the manufacturers in 2001. The Company's
insurance costs also increased in 2001 generally reflecting increases in the
industry. Helicopter rent increased for the year related to the number of
aircraft on operating leases, obtained during the latter part of 2000.

Depreciation expense included in direct expenses for 2001 was $13.8 million
compared to $12.5 million in the prior year. Total depreciation expense, which
includes expense charged to selling, general and administrative expense, was
$15.1 million and $13.7 million for the same two periods, respectively.

Depreciation expense increased due to acceleration of depreciation of leasehold
improvements on the Company's Lafayette facilities vacated at the time the
Company moved to the new Lafayette facilities, and also due to the depreciation
of aircraft refurbishments and upgrades accomplished during recent years.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES - Selling, general, and
administrative expenses decreased to $18.0 million for 2001 compared to $18.2
million for the prior year. The decrease in selling, general, and administrative
expense was due to lower compensation and bad debt expense. However, these
decreases were offset by increases in consulting costs related to a review of
the Company's inventory and accounting systems, and legal costs associated with
the union contract negotiation.

SPECIAL CHARGES - In the fourth quarter of 2000, in connection with the plan to
restore profitability, the Company recorded special charges of $3.6 million that
included severance costs of $1.1 million, impairment of an investment in and
receivables from Clintondale Aviation, Inc., a joint venture operating primarily
in Kazakhstan, totaling $1.7 million, and impairment of two helicopters of $0.8
million due to pending sales. (See Notes to Financial Statements, Note 7 Other
Assets.)

INTEREST EXPENSE - Interest expense was $6.2 million for the year ended December
31, 2001 and $5.8 million for the year ended December 31, 2000. The increase in
interest expense was due to an increase in the interest rate charged by the
Company's lenders.

INCOME TAXES - Income tax expense for the year ended December 31, 2001 was $6.5
million compared to an income tax benefit in the prior year of $5.5 million. The
effective tax rates were 37% and 30.9% for the years ended December 31, 2001 and
2000, respectively. The lower effective rate for the year ended December 31,
2000 is the result of permanent differences between book income and tax income
and the effect of state income taxes.

SEGMENT DISCUSSION

Domestic Oil and Gas - Domestic Oil and Gas segment revenues increased 24.2% to
$191.0 million for 2001 compared to $153.8 million for the prior year. The
increase in revenue is due to customer rate increases implemented in 2001.
Flight hours in the Domestic Oil and Gas segment decreased 6.0% to 148,563 as
compared to 158,094 for 2000. The decrease in flight hour activity was due to
decreased activity in the Oil and Gas segment and also due to the events of
September 11, 2001.

The segment had a $29.1 million operating profit in 2001 compared to a $1.5
million operating loss for the prior year. Operating margin of 15.2% for 2001
compares to 1.0% for the same period last year. The improvement in earnings in
2001 is a result of customer rate increases implemented in 2001. Also, as
described in Direct Expenses, there were cost reductions, sale or disposal of
unprofitable business units and assets, and personnel reductions, but these were
more than offset by other cost increases, primarily increases in compensation of
pilots and mechanics, aircraft parts cost, and other costs. Additionally, the
operating loss in 2000 included a $2.4 million charge for the write-down of
inventory and $0.8 million for severance costs that were included in special
charges.

International - International segment's revenues increased 4.3% to $22.6 million
for 2001 compared to $21.7 million for the prior year. The increase was due to a
full year of operations related to a contract in Taiwan and also due to rate
increases on a contract in West Africa. Flight hours in the International




                                       17
<PAGE>
segment decreased 4.9% to 21,235 as compared to 22,338 for 2000. The decrease
in flight hours was due to decreased demand for flight services in West Africa,
partially offset by the activities in Taiwan.

The International segment had a $0.7 million operating profit for 2001 compared
to a $0.1 million operating loss for the prior year. Operating margin of 3.1%
for 2001 compares to (1.0)% for the prior year. The improvement in earnings is
related to customer rate increases and also due to a full year of operations
related to a contract in Taiwan. Additionally, the operating loss in 2000
included a $0.3 million charge for the write-down of inventory and $0.1 million
for severance costs that were included in special charges.

Aeromedical - Aeromedical segment's revenue increased 7.3% to $47.5 million for
2001 compared to $44.3 million in the prior year. The increase in revenues is
primarily attributable to a full year operation related to a contract in Grand
Junction, Colorado, rate increases on certain other contracts, and a slight
increase in flight hour activity. Flight hours in the Aeromedical segment
increased 2.4% to 22,005 as compared to 21,490 for 2000.

At December 31, 2001 the Company terminated a contract with an aeromedical
customer. Revenues in 2001 for that contract were $4.1 million. The contract
produced an unacceptable rate of return.

The Aeromedical segment had an operating profit of $1.5 million for 2001
compared to an operating loss of $0.2 million for the prior year. Operating
margin was 3.2% for the year ended December 31, 2001 and compares to (0.3)% for
the prior year. The improvement in earnings is the result of certain customer
rate increases. The improvement in earnings was partially offset by cost
increases described in Direct Expenses, including significant increases in
compensation of pilots and mechanics, aircraft parts cost, and other costs.
Additionally, the operating loss in 2000 included a $0.7 million charge for the
write-down of inventory.

Technical Services - Technical Services segment's revenue increased 25.2% to
$21.3 million for 2001 compared to $17.0 million in the prior year. The increase
in revenues is primarily attributable to an ongoing contract to provide
maintenance to certain military aircraft and components.

During the year the Company changed the strategic focus of Technical Services
from providing maintenance and overhaul services to all customers, to only those
customers that are currently serviced by the Company's helicopter operations.
The Company implemented this change to allow the Technical Services segment to
focus on the Company's aircraft and components. The Company also plans to
fulfill its obligation to provide maintenance to certain military aircraft.

Technical Services operating profit in 2001 was $3.5 million compared to an
operating loss of $0.6 million for the prior year. The operating margin was
16.4% for the year ended December 31, 2001 and (3.2%) in the prior year. The
increased operating profit was due to increased activity. The operating loss in
2000 included a $0.9 million charge for the write-down of inventory and $0.2
million for severance costs that were recorded in Special Charges.

                         LIQUIDITY AND CAPITAL RESOURCES

The Company's cash position at December 31, 2002 was $17.7 million, compared to
$5.4 million at December 31, 2001. Working capital was $72.8 million at December
31, 2002, as compared to $47.0 million at December 31, 2001, an increase of
$25.8 million. An increase in cash of $12.3 million, primarily the remaining
proceeds of the Notes issuance, and a decrease in current maturities of
long-term debt of $7.9 million as bank debt was repaid with the proceeds of
long-term notes accounts for the increase in working capital. Net cash provided
by operating activities funded capital expenditure requirements of $41.4 million
in 2002. Notes issuance costs of $5.8 million were funded with proceeds from the
sale of the Notes.

On April 23, 2002, the Company issued Notes of $200 million that carry an
interest rate of 9 3/8% payable semi-annually on May 1 and November 1 of each
year that commenced on November 1, 2002, and mature in May 2009. On November 1,
2002, the Company paid interest amounts due on the Notes of $9.8 million. The
Notes contain certain covenants, including limitations on indebtedness, liens,
dividends, repurchases of capital stock and other payments affecting restricted
subsidiaries, issuance and sales of restricted subsidiary stock, dispositions of
proceeds of asset sales, and mergers and consolidations or sales of assets. As
of December 31, 2002, the Company was in compliance with these covenants.



                                       18
<PAGE>
Proceeds from the Notes, net of $5.8 million of fees and expenses, were used to
retire the Company's $16.3 million term credit facility and $44.5 million
revolving credit facility, and to terminate the related Swap agreements for $1.6
million. The Company also purchased 101 aircraft, which were previously leased,
for $118.1 million.

Also, on April 23, 2002, the Company executed a new credit agreement with a
commercial bank for a $50 million revolving credit facility to be available
through July 2004. As of December 31, 2002, the Company had no borrowings and a
$0.6 million letter of credit outstanding under the revolving credit facility.
The credit agreement includes covenants related to working capital, funded debt
to net worth, and consolidated net worth. As of December 31, 2002, the Company
was in compliance with these covenants.

Capital expenditures totaled $41.4 million for the twelve months ended December
31, 2002 as compared to $29.5 million for the twelve months ended December 31,
2001. Capital expenditures primarily include amounts for the upgrade of
capability and renewals of certain aircraft, and the purchase of aircraft during
the year. As discussed above, the Company also purchased $118.1 million of
aircraft it previously leased. At December 31, 2002, the Company had commitments
of $7.9 million for the upgrade of aircraft and the purchase of other equipment.

The Company believes that cash flow from operations will be sufficient to fund
required interest payments on the Notes and capital expenditures for the next
twelve months.

The effect of the Notes issuance and purchase of leased aircraft is expected to
improve cash flow by reduced aircraft lease payments partially offset by
increased interest payments. In addition, there is a decrease in current income
taxes due to accelerated tax depreciation related to the purchased aircraft.
Also, until 2009 when the Notes become due, the Company will be able to retain
cash that would have otherwise been required for bank debt principal payments.

The table below sets out the cash contractual obligations of the Company. The
operating leases are not recorded as liabilities on the balance sheet, but
payments are treated as an expense as incurred. Each contractual obligation
included in the table contains various terms, conditions, and covenants which,
if violated, accelerate the payment of that obligation. The Company leases four
aircraft included in the lease obligations below. The operating lease
obligations primarily relate to the Company's facilities in Lafayette,
Louisiana.

<Table>
<Caption>
                                                                  Payment Due by Year
                                              ---------------------------------------------------------------
                                                                                                      Beyond
                                    Total       2003       2004       2005       2006       2007       2007
                                   --------   --------   --------   --------   --------   --------   --------
                                                             (Thousands of dollars)
<S>                                <C>        <C>        <C>        <C>        <C>        <C>        <C>
Operating lease
     obligations                   $ 21,610   $  2,318   $  1,942   $  1,843   $  1,606   $  1,331   $ 12,570

Long term debt                      200,000         --         --         --         --         --    200,000

                                   --------   --------   --------   --------   --------   --------   --------
                                   $221,610   $  2,318   $  1,942   $  1,843   $  1,606   $  1,331   $212,570
                                   ========   ========   ========   ========   ========   ========   ========
</Table>

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these consolidated financial
statements require the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to allowances for
doubtful accounts, inventory valuation, long-lived assets and self-insurance
liabilities. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different




                                       19
<PAGE>

assumptions or conditions. The Company believes the following critical
accounting policies affect its more significant judgments and estimates used in
preparation of its consolidated financial statements.

PHI estimates its allowance for doubtful accounts receivable based on an
evaluation of individual customer financial strength, current market conditions,
and other information. If the Company's evaluation of its significant customers'
and debtors' creditworthiness should change or prove incorrect, then the Company
may have to recognize additional allowances in the period that it identifies the
risk of loss.

PHI maintains inventory to service its own aircraft and the aircraft and
components of customers. Portions of that inventory are used parts that are
often exchanged with parts removed from aircraft or components and reworked to a
useable condition. The Company uses systematic procedures to estimate the
valuation of the used parts, which includes consideration of their condition and
continuing utility. If the Company's valuation of these parts should be
significantly different from amounts ultimately realizable or if it discontinues
using or servicing certain aircraft models, then the Company may have to record
a write-down of its inventory. The Company also records provisions against
inventory for obsolescent and slow-moving parts, relying principally on specific
identification of such inventory. If the Company fails to identify such parts,
additional provisions may be necessary.

The Company's principal long-lived assets are aircraft. The Company reviews its
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company measures recoverability of assets to be held and used by comparing the
carrying amount of an asset to future undiscounted net cash flows that it
expects the asset to generate. When an asset is determined to be impaired, the
Company recognizes the impairment amount, which is measured by the amount that
the carrying value of the asset exceeds fair value. Similarly, the Company
reports assets that it expects to sell at the lower of the carrying amount or
fair value less costs to sell. Future adverse market conditions or poor
operating results could result in the inability to recover the current carrying
value of the long-lived asset, thereby possibly requiring an impairment charge
in the future.

The Company must make estimates for certain of its liabilities and expenses,
losses, and gains related to self-insured programs, insurance deductibles, and
good-experience premium returns. The Company's group medical insurance program
is largely self-insured, and the Company uses estimates to record its periodic
expenses related to that program. The Company also carries deductibles on its
workers' compensation program and aircraft hull and liability insurance and
estimates periodic expenses related to the retained portion of those risks.
Significant changes in estimates due to poor experience or higher accident rates
could result in additional recorded losses.

                          NEW ACCOUNTING PRONOUNCEMENTS

For a discussion of new accounting pronouncements applicable to the Company, see
Note 1 to the Financials Statements

                              ENVIRONMENTAL MATTERS

The Company has an aggregate estimated liability of $1.5 million as of December
31, 2002 for environmental remediation costs that are probable and estimable. In
the fourth quarter of 2002, the Company reduced its recorded estimated liability
by $0.3 million as the result of a re-evaluation of environmental exposure at
all of its operating sites and lowered remediation cost estimates primarily at
its Morgan City, Louisiana facility. The Company has conducted environmental
surveys of the Lafayette facility, which it vacated in 2001, and has determined
that contamination exists at that facility. To date, borings have been installed
to determine the type and extent of contamination. Preliminary results indicate
limited soil and groundwater impacts. Once the extent and type of contamination
are fully defined, a risk evaluation in accordance with the Louisiana Risk
Evaluation/Corrective Action Plan ("RECAP") standard will be submitted and
evaluated by Louisiana Department of Environmental Quality ("LDEQ"). At that
point, LDEQ will establish what cleanup standards must be met at the site. When
the process is complete, the Company will be in a position to develop the
appropriate remediation plan and the resulting cost of remediation. However the
Company has not recorded any estimated liability for remediation of
contamination and, based on preliminary surveys and ongoing monitoring, the
Company believes the ultimate remediation costs for the Lafayette facility will
not be material.



                                       20
<PAGE>


ITEM 7.A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks associated with interest rates and prior
to April 23, 2002, made limited use of derivative financial instruments to
manage that risk. When used, all derivatives for risk management are closely
monitored by the Company's senior management. The Company does not hold
derivatives for trading purposes and it does not use derivatives with leveraged
or complex features. Derivative instruments are transacted either with
creditworthy major financial institutions or over national exchanges.

On April 23, 2002, the Company paid its Terminated Loan Agreement. The
Terminated Loan Agreement had variable interest rates. In conjunction with the
payment of the Terminated Loan Agreement, the Company settled its interest rate
Swap agreements by paying $1.6 million to the counterparties.

Also on April 23, 2002, the Company issued Notes of $200 million that have an
interest rate of 9 3/8% payable semi-annually on May 1 and November 1 of each
year, beginning November 1, 2002, and mature in May 2009. The market value of
the Notes will vary as changes occur to general market interest rates, the
remaining maturity of the Notes, and the Company's credit worthiness. At
December 31, 2002, the market value of the Notes was $209.0 million. A
hypothetical 100 basis-point increase to the Notes' imputed interest rate at
December 31, 2002 would have resulted in a market value decline to approximately
$199.4 million.



                                       21
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          Independent Auditors' Report

To the Board of Directors and Shareholders of
Petroleum Helicopters, Inc.

We have audited the accompanying consolidated balance sheets of Petroleum
Helicopters, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, shareholders' equity,
comprehensive income (loss) and cash flows for each of the three years in the
period ended December 31, 2002. Our audits also included the financial statement
schedule for each of the three years in the period ended December 31, 2002,
listed in the Index at Item 15. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Petroleum Helicopters, Inc. and
subsidiaries as of December 31, 2002 and 2001, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the related financial statement schedule
for each of the three years in the period ended December 31, 2002, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

As discussed in Note 1 to the consolidated financial statements, in 2001 the
Company adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivatives Instruments and Hedging Activities," as amended.

/s/ DELOITTE & TOUCHE LLP

New Orleans, Louisiana
March 20, 2003



                                       22
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                        DECEMBER 31,   DECEMBER 31,
                                                           2002           2001
                                                       ------------   ------------
<S>                                                    <C>            <C>
                           ASSETS
Current Assets:
    Cash and cash equivalents                          $     17,674   $      5,435
    Accounts receivable - net of allowance:
       Trade                                                 40,234         45,361
       Other                                                    579          1,649
    Inventory                                                37,375         34,382
    Other current assets                                      5,753          5,799
    Refundable income taxes                                   2,236             --
                                                       ------------   ------------
                Total current assets                        103,851         92,626

Other                                                        10,279         10,851
Property and equipment, net                                 252,577        122,168
                                                       ------------   ------------
                Total Assets                           $    366,707   $    225,645
                                                       ============   ============

            LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Accounts payable                                   $     14,772   $     16,566
    Accrued liabilities                                      11,893         11,681
    Accrued vacation payable                                  3,931          7,020
    Income taxes payable                                        504          2,428
    Current maturities of long-term debt and capital
       lease obligations                                         --          7,944
                                                       ------------   ------------
                Total current liabilities                    31,100         45,639

Long-term debt and capital lease obligations, net of
    current maturities                                      200,000         58,672
Deferred income taxes                                        24,249         17,612
Other long-term liabilities                                   6,504         11,850
Commitments and contingencies (Note 9)
Shareholders' Equity:
    Voting common stock - par value of $0.10;
         authorized shares of 12,500,000                        285            285
    Non-voting common stock - par value of $0.10;
         authorized shares of 12,500,000                        253            241
    Additional paid-in capital                               15,062         13,327
    Accumulated other comprehensive loss                         --         (2,030)
    Retained earnings                                        89,254         80,049
                                                       ------------   ------------
                Total shareholders' equity                  104,854         91,872
                                                       ------------   ------------
       Total Liabilities and Shareholders' Equity      $    366,707   $    225,645
                                                       ============   ============
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.



                                       23
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            (THOUSANDS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)


<Table>
<Caption>
                                             YEAR ENDED        YEAR ENDED       YEAR ENDED
                                            DECEMBER 31,      DECEMBER 31,     DECEMBER 31,
                                                2002             2001             2000
                                            --------------   --------------   --------------
<S>                                         <C>              <C>              <C>
Operating revenues (Note 1)                 $      283,751   $      282,437   $      236,843
Gain, net on disposition of property
     and equipment                                     586            1,351            3,963
Other                                                1,675            1,461               --
                                            --------------   --------------   --------------
                                                   286,012          285,249          240,806
Expenses:
     Direct expenses (Note 1)                      235,189          243,538          230,336
     Selling, general and administrative            18,189           18,029           18,165
     Equity in net loss of unconsolidated
         subsidiaries                                   --               --              716
     Special charges                                    --               --            3,571
     Interest expense                               17,250            6,190            5,813
                                            --------------   --------------   --------------
                                                   270,628          267,757          258,601
                                            --------------   --------------   --------------

Earnings (loss) before income taxes                 15,384           17,492          (17,795)
Income taxes                                         6,153            6,472           (5,501)
                                            --------------   --------------   --------------

Net earnings (loss)                         $        9,231   $       11,020   $      (12,294)
                                            ==============   ==============   ==============

Earnings (loss) per share:
     Basic                                  $         1.73   $         2.12   $        (2.38)
     Diluted                                $         1.70   $         2.08   $        (2.38)

Weighted average shares
     outstanding                                     5,334            5,199            5,164
Incremental shares                                     104              106               --
                                            --------------   --------------   --------------
Weighted average shares
     and share equivalents                           5,438            5,305            5,164
                                            ==============   ==============   ==============
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       24
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (THOUSANDS OF DOLLARS AND SHARES)


<Table>
<Caption>
                                                                                                      ACCUMULATED
                                          VOTING                     NON-VOTING                        OTHER COM-
                                       COMMON STOCK                 COMMON STOCK          ADDITIONAL   PREHENSIVE
                                 --------------------------  --------------------------     PAID-IN      INCOME         RETAINED
                                   SHARES        AMOUNT         SHARES       AMOUNT         CAPITAL      (LOSS)         EARNINGS
                                 ------------  ------------  ------------  ------------  ------------  ------------   ------------
<S>                              <C>           <C>           <C>           <C>           <C>           <C>            <C>
Balance at Dec. 31, 1999                2,793  $        279         2,367  $        237  $     11,729  $         --   $     81,378
   Stock Issued to Employees               --            --             5            --            --            --             --
   Other                                   --            --             1            --           316            --            (23)
   Net Loss                                --            --             4            --            --            --        (12,294)
                                 ------------  ------------  ------------  ------------  ------------  ------------   ------------
Balance at Dec. 31, 2000                2,793           279         2,373           237        12,045            --         69,061
   Stock Options Exercised                 59             6             1            --           820            --             --
   Stock Issued to Employees               --            --            31             3           111            --             --
   Other                                   --            --             8             1           351            --            (32)
   Cumulative effect of
       adopting SFAS No. 133               --            --            --            --            --            38             --
   Unrecognized loss on
       interest swaps                      --            --            --            --            --        (2,068)            --
   Net Earnings                            --            --            --            --            --            --         11,020
                                 ------------  ------------  ------------  ------------  ------------  ------------   ------------
Balance at Dec. 31, 2001                2,852           285         2,413           241        13,327        (2,030)        80,049
   Stock Options Exercised                 --            --           113            12         1,735            --             --
   Other                                   --            --            --            --            --            --            (26)
   Unrecognized gain on
       interest swaps                      --            --            --            --            --           455             --
   Reclassification
       adjustments for losses
       included in net earnings            --            --            --            --            --         1,575             --

   Net Earnings                            --            --            --            --            --            --          9,231
                                 ------------  ------------  ------------  ------------  ------------  ------------   ------------
Balance at Dec. 31, 2002                2,852  $        285         2,526  $        253  $     15,062  $         --   $     89,254
                                 ============  ============  ============  ============  ============  ============   ============
</Table>

                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                          YEAR ENDED    YEAR ENDED     YEAR ENDED
                                          DECEMBER 31,  DECEMBER 31,   DECEMBER 31,
                                              2002          2001            2000
                                          ------------  ------------   ------------
<S>                                       <C>           <C>            <C>
Net earnings (loss)                       $      9,231  $     11,020   $    (12,294)
Other comprehensive income (loss)
     Cumulative effect of adopting
         SFAS No. 133                               --            38             --
     Unrecognized gain (loss) on
         interest rate swaps                       455        (2,068)            --
Add reclassification adjustments for
         losses included in net earnings         1,575            --             --
                                          ------------  ------------   ------------
Comprehensive income (loss)               $     11,261  $      8,990   $    (12,294)
                                          ============  ============   ============
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.



                                       25
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                    YEAR ENDED       YEAR ENDED      YEAR ENDED
                                                   DECEMBER 31,      DECEMBER 31,    DECEMBER 31,
                                                       2002             2001             2000
                                                  --------------   --------------   --------------
<S>                                               <C>              <C>              <C>
Cash flows from operating activities:
    Net earnings (loss)                           $        9,231   $       11,020   $      (12,294)
    Adjustments to reconcile net earnings
       (loss) to net cash provided by operating
        activities:
       Depreciation                                       21,048           15,082           13,713
       Deferred income taxes                               7,325             (385)          (3,858)
       Gain on asset dispositions                           (586)          (1,351)          (3,963)
       Special charges                                        --               --            2,464
       Equity in net losses of
         unconsolidated subsidiaries                          --               --              716
       Bad debt allowance related to notes
         receivable                                         (731)             575               --
       Other                                               1,100              218              651
    Changes in operating assets and liabilities:
      Accounts receivable                                  6,928           (4,121)          (2,414)
      Inventory                                           (2,993)             793            2,102
      Refundable income taxes                             (2,236)           3,852               70
      Other assets                                         3,228           (6,753)           1,602
      Accounts payable, accrued liabilities and
         vacation payable                                 (4,671)          (1,333)          10,567
      Income taxes payable                                (1,924)           2,428               --
      Other long-term liabilities                          3,810           (1,345)              (5)
                                                  --------------   --------------   --------------
    Net cash provided by operating activities             39,529           18,680            9,351
                                                  --------------   --------------   --------------

Cash flows from investing activities:
    Investments in and advances to subsidiaries               --               --           (1,266)
    Proceeds from notes receivable                         1,629              350              292
    Purchase of property and equipment                   (41,351)         (29,502)         (28,179)
    Purchases of aircraft previously leased             (118,076)              --               --
    Proceeds from asset dispositions                       3,263           24,304           24,142
                                                  --------------   --------------   --------------
    Net cash used in investing activities               (154,535)          (4,848)          (5,011)
                                                  --------------   --------------   --------------

Cash flows from financing activities:
    Proceeds from Notes and long-term debt               200,000            2,851           23,500
    Less related fees & expenses                          (5,835)              --               --
    Payments on long-term debt and capital lease
        obligations                                       (5,845)         (12,850)         (28,640)
    Payments on long-term debt from Notes
      proceeds                                           (60,771)              --               --
    Payment of interest rate swap settlement              (1,575)              --               --
    Proceeds from exercise of stock options and
      other                                                1,271              739               --
                                                  --------------   --------------   --------------
    Net cash provided by (used in) financing
      activities                                         127,245           (9,260)          (5,140)
                                                  --------------   --------------   --------------

Increase (decrease) in cash and cash equivalents          12,239            4,572             (800)
Cash and cash equivalents, beginning of year               5,435              863            1,663
                                                  --------------   --------------   --------------
Cash and cash equivalents, end of year            $       17,674   $        5,435   $          863
                                                  ==============   ==============   ==============
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.



                                       26
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Operations, Basis of Consolidation, and Other General
         Principles

         Since its inception, Petroleum Helicopters, Inc.'s primary business has
         been to transport personnel and, to a lesser extent, parts and
         equipment, to, from and among offshore facilities for customers engaged
         in the oil and gas exploration, development, and production industry.
         The Company also provides aircraft maintenance services to third
         parties and air medical transportation services for hospitals and
         medical programs.

         The consolidated financial statements include the accounts of Petroleum
         Helicopters, Inc. and its subsidiaries ("PHI" or the "Company") after
         the elimination of all significant intercompany accounts and
         transactions. For its investments of 20% to 50% in affiliates, which
         are primarily foreign affiliates, the Company uses the equity method of
         accounting.

         Revenue Recognition

         The Company recognizes revenue related to aviation transportation
         services after the services are performed or the contractual
         obligations are met. Aircraft maintenance service revenues are
         generally recognized at the time the repair or service work is
         completed. Revenues related to emergency flights generated by the
         Company's subsidiary, Air Evac Services, Inc. ("Air Evac") are recorded
         net of contractual allowances under agreements with third party payors
         when the services are provided.

         Use of Estimates

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and the disclosure of contingent
         assets and liabilities at the date of the financial statements, as well
         as reported amounts of revenues and expenses during the reporting
         period. Actual results could differ from those estimates.

         Cash Equivalents

         The Company considers cash equivalents to include demand deposits and
         investments with original maturity dates of three months or less.

         Inventories

         The Company's inventories are stated at the lower of average cost or
         market and consist primarily of spare parts. Portions of the Company's
         inventories are used parts that are often exchanged with parts removed
         from aircraft, reworked to a useable condition according to
         manufacturers' and FAA specifications, and returned to inventory. The
         Company uses systematic procedures to estimate the valuation of the
         used parts, which includes consideration of their condition and
         continuing utility. The Company also records an allowance for
         obsolescent and slow-moving parts, relying principally on specific
         identification of such inventory. Valuation reserves related to
         obsolescence and slow-moving inventory were $4.8 million and $4.3
         million at December 31, 2002 and 2001, respectively.

         Property and Equipment

         The Company records its property and equipment at cost less accumulated
         depreciation. For financial reporting purposes, the Company uses the
         straight-line method to compute depreciation based upon estimated
         useful lives of five to fifteen years for flight equipment and three to
         ten years for other equipment. The Company uses a 30% residual value in
         the calculation of depreciation for its flight equipment. The Company
         uses accelerated depreciation methods for tax purposes. Upon selling or





                                       27
<PAGE>
         otherwise disposing of property and equipment, the Company removes the
         cost and accumulated depreciation from the accounts and reflects any
         resulting gain or loss in earnings at the time of sale or other
         disposition.

         The Company defers any gains resulting from the sale and leaseback of
         assets and amortizes the gain over the lease term. For the years ended
         December 31, 2002 and 2001, there were no gains deferred on sale and
         leaseback transactions. For the year ended December 31, 2000, the gains
         deferred on sale and leaseback transactions were $2.9 million.

         The Company reviews its long-lived assets and certain identifiable
         intangibles for impairment whenever events or changes in circumstances
         indicate that the carrying amount of an asset may not be recoverable.
         The Company measures recoverability of assets to be held and used by
         comparing the carrying amount of an asset to future undiscounted net
         cash flows that it expects the asset to generate. When an asset is
         determined to be impaired, the Company recognizes the impairment
         amount, which is measured by the amount that the carrying value of the
         asset exceeds its fair value. Similarly, the Company reports assets
         that it expects to sell at the lower of the carrying amount or fair
         value less costs to sell.

         Self-Insurance

         The Company maintains a self-insurance program for a portion of its
         health care costs. Self-insurance costs are accrued based upon the
         aggregate of the liability for reported claims and the estimated
         liability for claims incurred but not reported. As of December 31, 2002
         and 2001, the Company had $1.1 million and $0.8 million, respectively,
         of accrued liabilities related to health care claims.

         Concentration of Credit Risk

         Financial instruments that potentially expose the Company to
         concentrations of credit risk consist primarily of cash and cash
         equivalents and trade accounts receivable. The Company places its
         short-term invested cash and cash equivalents on deposit with a major
         financial institution. Cash equivalents include Commercial paper of
         companies with high credit ratings and money market securities. The
         Company does not believe significant credit risk exists with respect to
         these securities at December 31, 2002.

         PHI conducts a majority of its business with major and independent oil
         and gas exploration and production companies with operations in the
         Gulf of Mexico. The Company also provides services to the medical
         centers and US governmental agencies. The Company continually evaluates
         the financial strength of its customers but generally does not require
         collateral to support the customer receivables. The Company establishes
         an allowance for doubtful accounts based upon factors surrounding the
         credit risk of specific customers, current market conditions, and other
         information. The allowance for doubtful accounts was $0.2 million and
         $0.4 million at December 31, 2002 and December 31, 2001, respectively.
         The Company's largest domestic oil and gas customer accounted for $46.9
         million, $40.3 million, and $27.2 million, of consolidated operating
         revenues for years ended December 31, 2002, 2001, and 2000,
         respectively. The Company also carried accounts receivable from this
         same customer totaling 22% and 19%, of net trade accounts receivable on
         December 31, 2002 and 2001, respectively.

         Stock Compensation

         The Company uses the intrinsic value method of accounting for employee
         stock-based compensation prescribed by Accounting Principles Board
         (APB) Opinion No. 25 and, accordingly, follows the disclosure-only
         provisions of Statement of Financial Accounting Standards No. 123,
         "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No.
         123 encourages the use of a fair value based method of accounting for
         compensation expense associated with stock option and similar plans.
         However, SFAS No. 123 permits the continued use of the intrinsic value
         based method prescribed by Opinion No. 25 but requires additional
         disclosures, including pro forma calculations of net earnings and
         earnings per share as if the fair value method of accounting prescribed
         by SFAS No. 123 had been applied.



                                       28
<PAGE>

<Table>
<Caption>
                                                 YEAR ENDED      YEAR ENDED        YEAR ENDED
                                                 DECEMBER 31,    DECEMBER 31,      DECEMBER 31,
                                                    2002             2001              2000
                                                --------------  --------------    --------------
                                                    (Thousands of dollars and shares, except
                                                                   per share data)
<S>                                             <C>             <C>               <C>
Net earnings (loss) - as reported               $        9,231  $       11,020    $      (12,294)
Add stock-based employee compensation
    expense included in reported net
income,
    net of related tax effects                             178             202                42
Deduct total stock-based employee
    compensation expense determined under
    fair value based method for all awards,
    net of related tax effects,                           (161)           (568)              (72)
                                                --------------  --------------    --------------
Net earnings (loss) - pro forma                          9,248          10,654           (12,324)
                                                ==============  ==============    ==============

Earnings per share
    Basic - as reported                                   1.73            2.12             (2.38)
    Basic - pro forma                                     1.73            2.05             (2.39)
    Diluted -- as reported                                1.70            2.08             (2.38)
    Diluted -- pro forma                                  1.70            2.00             (2.39)
Average fair value of grants during the year               N/A            6.18              5.13

Black-Sholes option pricing model assumptions:
     Risk-free interest rate                               N/A            6.00%             6.50%
     Expected life (years)                                 N/A             6.0               6.0
     Volatility                                            N/A           50.64%            58.07%
     Dividend yield                                        N/A              --                --
</Table>

         Income Taxes

         The Company provides for income taxes using the asset and liability
         method under which deferred tax assets and liabilities are recognized
         for the future tax consequences attributable to differences between the
         financial statement carrying amounts of existing assets and liabilities
         and their respective tax bases. The deferred tax assets and liabilities
         measurement uses enacted tax rates that are expected to apply to
         taxable income in the years in which those temporary differences are
         expected to be recovered or settled. The Company recognizes the effect
         of any tax rate changes in income of the period that included the
         enactment date.

         Earnings per Share

         The Company computes basic earnings (loss) per share by dividing income
         available to common stockholders by the weighted average number of
         common shares outstanding during the period. The diluted earnings
         (loss) per share computation uses the weighted average number of shares
         outstanding adjusted for incremental shares attributed to dilutive
         outstanding options to purchase common stock and non-vested restricted
         stock awards. The diluted share base for the year ended December 31,
         2000 excludes incremental shares of 10,488 related to employee stock
         options and restricted stock awards that are antidilutive as a result
         of the Company's net loss for that period.

         Derivative Financial Instruments

         The Company adopted SFAS No. 133, "Accounting for Derivative
         Instruments and Hedging Activities," as amended by SFAS No. 138,
         "Accounting for Certain Derivative Instruments and Certain Hedging
         Activities," on January 1, 2001. The Company recorded a cumulative
         effect to Comprehensive Income (Loss) of $38,000 in the first quarter
         of 2001 in connection with the initial adoption of SFAS No. 133.



                                       29
<PAGE>
         The Company uses interest rate Swap agreements to manage its interest
         rate exposure. The Company specifically designated these agreements as
         hedges of debt instruments and recognized interest differentials as
         adjustments to interest expense in the period the differentials occur.
         Under the interest rate Swap agreements, the Company agreed with other
         parties to exchange, at specific intervals, the difference between
         fixed-rate and variable-rate interest amounts calculated by reference
         to an agreed-upon notional principal amount. At December 31, 2001, the
         Company estimated the fair value of the interest rate Swap agreements
         using quotes from counterparties. The fair value of the agreements
         represented the cash effect if the Company had settled the agreements
         on that date. On April 23, 2002, the Company settled its outstanding
         interest rate Swap agreement for $1.6 million. See Note 4 and Note 8 of
         these consolidated financial statements.

         New Accounting Pronouncements

         On September 29, 2001, Statement of Financial Accounting Standards
         ("SFAS") No. 142, "Goodwill and Other Intangible Assets" was approved
         by the Financial Accounting Standards Board ("FASB"). SFAS No. 142
         changes the accounting for goodwill from an amortization method to an
         impairment-only approach. Amortization of goodwill, including goodwill
         recorded in past business combinations, ceased upon adoption of this
         statement. The Company implemented SFAS No. 142 on January 1, 2002. The
         implementation had no material impact on the Company's consolidated
         financial position or results of operation.

         SFAS No. 143, Accounting for Asset Retirement Obligations, requires the
         recording of liabilities for all legal obligations associated with the
         retirement of long-lived assets that result from the normal operation
         of those assets. These liabilities are required to be recorded at their
         fair values (which are likely to be the present values of the estimated
         future cash flows) in the period in which they are incurred. SFAS No.
         143 requires the associated asset retirement costs to be capitalized as
         part of the carrying amount of the long-lived asset. The asset
         retirement obligation will be accreted each year through a charge to
         expense. The amounts added to the carrying amounts of the assets will
         be depreciated over the useful lives of the assets. The Company
         implemented SFAS No. 143 on January 1, 2003, and determined that this
         statement did not have a material impact on its consolidated financial
         position or results of operations.

         SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived
         Assets, promulgates standards for measuring and recording impairments
         of long-lived assets. Additionally, this standard establishes
         requirements for classifying an asset as held for sale, and changes
         existing accounting and reporting standards for discontinued operations
         and exchanges for long-lived assets. The Company implemented SFAS No.
         144 on January 1, 2002. The implementation of this standard did not
         have a material effect on the Company's financial position or results
         of operations.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
         Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
         Technical Corrections." SFAS No. 145 eliminates SFAS No. 4 and as a
         result, gains and losses from extinguishments of debt should be
         classified as extraordinary items only if they meet the criteria in APB
         Opinion No. 30. SFAS No. 145 amends SFAS No. 13, "Accounting for
         Leases," to eliminate an inconsistency between the required accounting
         for sale-leaseback transactions and the required accounting for certain
         lease modifications that have economic effects that are similar to
         sale-leaseback transactions. SFAS No. 145 also updates and amends
         existing authoritative pronouncements to make various technical
         corrections, clarify meanings, or describe their applicability under
         changed conditions. The Company implemented SFAS No. 145 on January 1,
         2003, and determined that this statement did not have a material impact
         on its consolidated financial statements.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities," which is effective for
         fiscal periods after December 31, 2002. SFAS No. 146 requires companies
         to recognize costs associated with restructurings, discontinued
         operations, plant closings, or other exit or disposal activities, when
         incurred rather than at the date a plan is committed to. The Company
         will implement the provisions of this statement on a prospective basis
         for exit or disposal activities that are initiated after December 31,
         2002.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock
         Based Compensation--Transition and Disclosure, an amendment of SFAS No.
         123." SFAS No. 148 provides alternative methods of transition for a
         voluntary change to the fair value based method of accounting for
         stock-based employee compensation. In addition, SFAS No. 148 amends the
         disclosure requirements to require prominent disclosures in both the





                                       30
<PAGE>
         annual and interim financial statements about the method of accounting
         for stock-based employee compensation and the effect of the method used
         on reported results. The Company has implemented the disclosure
         requirements of this statement as of December 31, 2002. See Note 1 to
         the Consolidated Financial Statements.

         In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
         Accounting and Disclosure Requirements for Guarantees, Including
         Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45
         elaborates on the disclosures to be made by a guarantor about its
         obligations under certain guarantees. It also clarifies that a
         guarantor is required to recognize, at the inception of a guarantee, a
         liability for the fair value of the obligation undertaken in issuing
         the guarantee. As required, the Company adopted the disclosure
         requirements of FIN 45 as of December 31, 2002. See Notes 4 and 9 to
         the consolidated financial statements. The Company will adopt the
         initial recognition and measurement provisions on a prospective basis
         for guarantees issued or modified after December 31, 2002. The Company
         has not determined the impact that the adoption of the
         recognition/measurement provisions will have on its consolidated
         financial position or results of operations.

         In January 2003, FASB issued Interpretation No. 46, "Consolidation of
         Variable Interest Entities" (FIN 46"). FIN 46 requires that companies
         that control another entity through interest other than voting
         interests should consolidate the controlled entity. FIN 46 applies to
         variable interest entities created after January 31, 2003, and to
         variable interest entities in which an enterprise obtains an interest
         in after that date. The Company does not expect that the adoption of
         FIN 46 will have a material impact on its consolidated financial
         position or results of operations.

         Reclassifications

         Certain reclassifications have been made in the prior period financial
         statements in order to conform to the classifications adopted for
         reporting in 2002. Such reclassifications include an adjustment to
         increase operating revenues and direct expenses by $5.4 million and
         $4.8 million for the years ended December 31, 2001 and 2000,
         respectively. This reclassification did not affect income (loss) before
         taxes, net earnings (loss), or earnings (loss) per share for any
         periods.

(2)      SPECIAL CHARGES

         Special Charges recorded in the year ended December 31, 2000 consisted
         of the following:

<Table>
<Caption>
                                                                                 Year Ended
                                                                           -----------------------
         Description                                                          December 31, 2000
                                                                           -----------------------
                                                                           (Thousands of dollars)
<S>                                                                        <C>
         Severance and related costs (Approximately
             120 employees)                                                     $     1,106
         Impairment of property and equipment                                           782
         Impairment of certain foreign based joint ventures                           1,683
                                                                                -----------
                  Total                                                         $     3,571
                                                                                ===========
</Table>

         During the year ended December 31, 2000, in connection with
         management's decision to reduce costs, and to recognize the impairment
         of certain assets, the Company recorded Special Charges of $3.6 million
         ($2.5 million on an after tax basis or $0.48 per diluted share).
         Additionally, the Company recorded a $4.3 million charge for the
         write-down of inventory, included in direct expenses, as a result of an
         analysis of its overhaul and maintenance operations including
         requirements for its fleet. At December 31, 2002 and December 31, 2001,
         the Company carried a liability of $0.3 million and $0.3 million
         respectively, for the remainder of the severance. The Company expects
         to pay the remaining severance liability, covering two employees, over
         the next eight months.



                                       31
<PAGE>
(3)      PROPERTY AND EQUIPMENT

         The following table summarizes the Company's property and equipment at
         December 31, 2002 and December 31, 2001.

<Table>
<Caption>
                                          DECEMBER 31,      DECEMBER 31,
                                              2002              2001
                                         ---------------   ---------------
                                              (Thousands of dollars)
<S>                                      <C>               <C>
         Flight equipment                $       324,476   $       190,425
         Other                                    48,696            38,044
                                         ---------------   ---------------
                                                 373,172           228,469
         Less accumulated depreciation          (120,595)         (106,301)
                                         ---------------   ---------------
            Property and equipment, net  $       252,577   $       122,168
                                         ===============   ===============
</Table>

         Property and equipment at December 31, 2002 and 2001 included aircraft
         with a net book value of $4.3 million and $5.8 million, respectively
         that was held for sale.

         During 2002, the Company used $118.1 million of proceeds from the
         issuance of the Notes to acquire aircraft that it had previously
         leased.

 (4)     LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

         Long-term debt and capital lease obligations at December 31, 2002 and
         December 31, 2001 consisted of the following:


<Table>
<Caption>
                                                           DECEMBER 31,    DECEMBER 31,
                                                               2002            2001
                                                          --------------  --------------
                                                               (Thousands of dollars)

<S>                                                       <C>             <C>
         9 3/8% Senior Unsecured Notes                    $      200,000  $           --
         Secured term loan notes with principal lending
            group                                                     --          19,000
         Secured notes under revolving credit facilities
            with principal lending group                              --          44,500
         Capitalized lease obligations                                --           3,077
         Other                                                        --              39
                                                          --------------  --------------
         Total debt                                              200,000          66,616
         Less current maturities                                      --          (7,944)
                                                          --------------  --------------
         Long-term debt                                   $      200,000  $       58,672
                                                          ==============  ==============
</Table>

         Maturities of long-term debt are as follows:

<Table>
<Caption>
                                              (Thousands
                                             of dollars)
                                             ------------
<S>                                          <C>
2003                                         $        --
2004                                                  --
2005                                                  --
2006                                                  --
2007                                                  --
Thereafter                                        200,000
                                             ------------
    Total                                    $    200,000
                                             ============
</Table>



                                       32
<PAGE>

         On April 23, 2002, the Company issued Senior Unsecured Notes (the
         "Notes") of $200 million that have an interest rate of 9 3/8% payable
         semi-annually on May 1 and November 1 of each year, beginning November
         1, 2002, and mature in May 2009. The Notes contain certain covenants,
         including limitations on indebtedness, liens, dividends, repurchases of
         capital stock and other payments affecting restricted subsidiaries,
         issuance and sales of restricted subsidiary stock, dispositions of
         proceeds of asset sales, and mergers and consolidations or sales of
         assets. As of December 31, 2002, the Company was in compliance with
         these covenants.

         The proceeds of the Notes were used to retire existing bank debt,
         interest rate Swap agreements, and to purchase 101 aircraft previously
         under lease. As of December 31, 2002, the Company had used $186.3
         million of the proceeds as follows (in thousands):

<Table>
<S>                                                                      <C>
         Pay amounts outstanding under the Terminated Loan Agreement:
                  Revolving credit facility                              $    44,500
                  Term debt facility                                          16,271
         Acquisition of 101 aircraft from leasing companies and
            financial institutions:
                  Capital leases                                               2,679
                  Operating leases                                           115,397
         Settlement of interest rate swap agreements                           1,575
         Fees and expenses related to the issue of the Notes                   5,835
                                                                         -----------
                 Total                                                   $   186,257
                                                                         ===========
</Table>

         Also on April 23, 2002, the Company entered into a new credit agreement
         with a commercial bank for a $50 million revolving credit and letter of
         credit facility. The credit agreement permits both prime rate based
         borrowings and "LIBOR" rate borrowings plus a spread. The spread for
         LIBOR borrowings is from 2.0% to 3.0%. Any amounts outstanding under
         the revolving credit facility are due July 31, 2004. The Company will
         pay an annual 0.375% commitment fee on the unused portion of the
         revolving credit facility. The Company may also obtain letters of
         credit issued under the credit facility up to $5.0 million with a
         0.125% fee payable on the amount of letters of credit issued. At
         December 31, 2002, the Company had no borrowings and a $0.6 million
         letter of credit outstanding under the revolving credit facility.

         The Company is subject to certain financial covenants under the credit
         agreement. These covenants include maintaining certain levels of
         working capital and shareholders' equity and contain other provisions
         including a restriction on purchases of the Company's stock and payment
         of dividends. The credit agreement also limits the creation,
         incurrence, or assumption of Funded Debt (as defined, which includes
         long-term debt) and the acquisition of investments in unconsolidated
         subsidiaries. As of December 31, 2002, the Company was in compliance
         with these covenants.

         The following table presents the non-cash investing and financing
         activities for the years ended December 31, 2002 2001, 2000.

<Table>
<Caption>
                                                        YEAR ENDED     YEAR ENDED      YEAR ENDED
                                                       DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                           2002            2001           2000
                                                      --------------  --------------  --------------
                                                                   (Thousands of dollars)
<S>                                                   <C>             <C>             <C>
         Fair value of assets acquired under capital
             leases, net of cash received             $           --  $        2,096  $        2,319
         Cash paid for assets                                     --              --              --
                                                      --------------  --------------  --------------
         Capital leases assumed                       $           --  $        2,096  $        2,319
                                                      ==============  ==============  ==============
</Table>

         As discussed in Note 1, the Company uses derivative instruments on a
         limited basis to manage risks related to interest rates. At December
         31, 2001, the Company had interest rate Swap agreements, which were
         contracts to fix interest rates associated with the Company's bank
         debt, with notional amounts totaling $40.0 million that served to
         convert an equal amount of variable rate long-term debt to fixed rates.
         The Swap agreements were scheduled to mature in 2003 and required the
         Company to pay a weighted-average interest rate of 5.78% over their




                                       33
<PAGE>
         composite lives and to receive a variable rate, which was 4.77% at
         December 31, 2001. Using the accrual/settlement method of accounting,
         the Company recorded the net amount to be received or paid under the
         Swap agreements as part of interest expense in the Consolidated
         Statements of Operations. The interest rate Swap agreements had the
         effect of increasing interest expense by $0.5 million, $0.6 million,
         and $0.3 million, for years ended December 31, 2002, 2001, and 2000,
         respectively. On April 23, 2002, the Company settled its outstanding
         interest rate Swap agreements for $1.6 million.

         Cash paid for interest, net of amounts paid or received in connection
         with the interest rate Swap agreements, was $11.9 million, $6.6
         million, and $5.8 million, for the years ended December 31, 2002, 2001,
         and 2000, respectively.

(5)      INCOME TAXES

         Income tax expense (benefit) is composed of the following:

<Table>
<Caption>
                                          YEAR ENDED       YEAR ENDED       YEAR ENDED
                                          DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                             2002              2001             2000
                                         --------------   --------------   --------------
                                                      (Thousands of dollars)
<S>                                      <C>              <C>              <C>
         Current:
              Federal                    $       (2,009)  $        5,645   $       (2,013)
              State                                 (79)             308             (447)
              Foreign                               916              904              817
         Deferred - principally Federal           7,325             (385)          (3,858)
                                         --------------   --------------   --------------
               Total                     $        6,153   $        6,472   $       (5,501)
                                         ==============   ==============   ==============
</Table>


         Income tax expense (benefit) as a percentage of pre-tax earnings varies
         from the effective Federal statutory rate of 34% as a result of the
         following:

<Table>
<Caption>
                                              YEAR ENDED           YEAR ENDED             YEAR ENDED
                                           DECEMBER 31, 2002    DECEMBER 31, 2001      DECEMBER 31, 2000
                                         --------------------  --------------------  ---------------------
                                                 (Thousands of dollars, except percentage amounts)
                                            Amount        %        Amount       %        Amount        %
                                         --------------  ----  --------------  ----  --------------   ----
<S>                                      <C>             <C>   <C>             <C>   <C>              <C>
         Income taxes at statutory rate  $        5,231    34  $        5,947    34  $       (6,050)   (34)
         Increase (decrease) in taxes
           resulting from:
           Effect of state income taxes             615     4             472     3            (356)    (2)
           Other items - net                        307     2              53    --             905      5
                                         --------------  ----  --------------  ----  --------------   ----
               Total                     $        6,153    40  $        6,472    37  $       (5,501)   (31)
                                         ==============  ====  ==============  ====  ==============   ====
</Table>




                                       34
<PAGE>
         The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and deferred tax liabilities at
         December 31, 2002 and 2001 are presented below:

<Table>
<Caption>
                                                             DECEMBER 31,     DECEMBER 31,
                                                                 2002             2001
                                                             --------------   --------------
                                                                  (Thousands of dollars)
<S>                                                          <C>              <C>
         Deferred tax assets:
            Deferred compensation                            $        1,125   $           --
            Tax credits                                               1,214            1,751
            Vacation accrual                                          1,593            2,541
            Inventory valuation                                       1,784            2,089
            Workman's compensation reserve                              130              100
            Deferred gains                                               --            1,917
            Allowance for uncollectible accounts                         --              792
            Other                                                     1,881            2,084
            Net operating loss                                        3,685               --
                                                             --------------   --------------
              Total deferred tax assets                              11,412           11,274
                                                             --------------   --------------
         Deferred tax liabilities:
            Tax depreciation in excess of book depreciation         (31,683)         (23,764)
            Other                                                      (574)          (1,043)
            Allowance for uncollectible accounts                        (13)              --
                                                             --------------   --------------
              Total deferred tax liabilities                        (32,270)         (24,807)
                                                             --------------   --------------
                  Net deferred tax liabilities               $      (20,858)  $      (13,533)
                                                             ==============   ==============
</Table>

         No valuation allowance was recorded against the deferred tax assets
         because management believes that the deferred tax assets will more than
         likely be realized in full through future operating results and the
         reversal of taxable temporary differences. At December 31, 2002 and
         2001, other current assets include $3.4 million and $4.1 million,
         respectively, of deferred tax assets.

         For Federal income tax purposes, the Company has foreign tax credits of
         approximately $1.2 million, which expire in 2005 through 2007. The
         Company also has net operating loss carryforwards ("NOLs"), of
         approximately $9.8 million that, if not used will expire in 2022.
         Additionally, for state income tax purposes, the Company has NOLs of
         approximately $13.6 million available to reduce future state income
         taxable income. These NOLs expire in varying amounts beginning in 2011
         through 2022.

         Income taxes paid were approximately $4.6 million, $0.6 million and
         $4.9 million, for the years ended December 31, 2002, 2001 and 2000,
         respectively. The Company received net income tax refunds of
         approximately $1.6 million, $0.2 million and $2.2 million during the
         years ended December 31, 2002, 2001 and 2000, respectively.



                                       35
<PAGE>
(6)      EMPLOYEE BENEFIT PLANS

         Savings and Retirement Plans

         The Company maintains an Employee Savings Plan under Section 401(k) of
         the Internal Revenue Code. The Company matches 2% for every 1% of an
         employee's salary deferral contribution, not to exceed 3% of the
         employee's compensation. The Company's contributions were $4.5 million
         for the years ended December 31, 2002 and December 31, 2001, and $4.1
         million for the year ended December 31, 2000.

         The Company maintains a Supplemental Executive Retirement Plan
         ("SERP"). The nonqualified and unfunded plan provides certain senior
         management with supplemental retirement and death benefits at age 65.
         The SERP plan provides supplemental retirement benefits that are based
         each participant's salary at the time of entrance into the plan.
         Occasionally, the Company's board of directors may increase certain
         individuals' benefits. The benefit is one-third of each participant's
         annual salary of $200,000 or less, plus one-half of each participant's
         annual salary that is in excess of $200,000, if applicable. The plan
         does not provide for automatic benefit increases. During 2000, the
         Company's board of directors amended the plan to provide for partial
         vesting. The Company recorded the following plan costs for the years
         ended December 31, 2002, 2001, and 2000.

<Table>
<Caption>
                                                  YEARS ENDED DECEMBER 31,
                                       ------------------------------------------------
                                           2002             2001             2000
                                       --------------   --------------   --------------
                                                    (Thousands of dollars)
<S>                                    <C>              <C>              <C>
         Service cost                  $          268   $          356   $          320
         Interest cost                            110              122              116
         Recognized actuarial gain                (42)             (42)              --
                                       --------------   --------------   --------------
               Net periodic plan cost             336   $          436   $          436
                                       ==============   ==============   ==============
</Table>

         The benefit obligation, funded status, assumptions of the plan on
         December 31, 2002 and 2001 were as follows:

<Table>
<Caption>
                                                                                      DECEMBER 31,
                                                                          --------------------------------
                                                                               2002              2001
                                                                          --------------    --------------
                                                                                (Thousands of dollars)
<S>                                                                   <C>                   <C>
                  Change in benefit obligation:
                     Benefit obligation at the beginning of the year      $        1,659    $        1,650
                     Service cost                                                    268               356
                     Interest cost                                                   110               122
                     Actuarial (gain) loss                                           155              (469)
                     Benefits paid                                                  (112)               --
                                                                          --------------    --------------
                       Benefit obligation at the end of the year                   2,080             1,659
                                                                          --------------    --------------

                  Reconciliation of funded status:
                     Unfunded status                                              (2,080)           (1,659)
                     Unrecognized actuarial gain                                    (345)             (541)
                                                                          --------------    --------------
                       Total liability included in other long-term
                          liabilities on the consolidated balance sheets  $       (2,425)   $       (2,200)
                                                                          ==============    ==============

                  Weighted average assumptions:
                     Discount rate                                                  5.15%             6.15%
                     Employee turnover/early retirement rate                          --                --
</Table>

         The SERP plan is an unfunded arrangement. However, the Company has
         purchased life insurance contracts in anticipation of using the life
         insurance's cash values and death benefits to help fulfill the
         obligations of the plan. The Company may sell or redeem the contracts
         at any time without any obligation to the plan participants. During
         each of the years ended December 31, 2002, 2001, and 2000, the Company
         recorded expenses of less than $0.1 million related to the life
         insurance contracts. Cash values of the life insurance contracts,
         recorded in other assets, are $0.4 million at December 31, 2002 and
         2001.



                                       36
<PAGE>
         The Company maintains an Officer Deferred Compensation Plan that
         permits key officers to defer a portion of their compensation. The plan
         is nonqualified and unfunded. However, the Company has established a
         book reserve account for each participant, which is deemed to be
         invested and reinvested from time to time in investments that the
         participant selects from a list of eligible investment choices.
         Earnings and losses on the book reserve accounts accrue to the plan
         participants. The Company has deposited funds in a brokerage account
         equal to amounts deferred under the plan. The Company may sell or
         redeem the investments at any time without any obligation to the plan
         participants. Liabilities for the plan are included in other long-term
         liabilities, and the corresponding book reserve accounts are included
         in other assets. Aggregate amounts deferred under the plans at December
         31, 2002 and 2001 are $0.6 million and $0.8 million, respectively.

         In 2002, the Company terminated its Director Deferred Compensation
         Plan. The unfunded plan permitted all directors to defer a portion of
         their compensation. At December 31, 2001, other long-term liabilities
         included $0.1 million for amounts payable under the plan, which the
         Company paid in 2002.

         Stock Based Compensation

         Under the PHI 1995 Incentive Plan (the "1995 Plan"), the Company is
         authorized to issue up to 175,000 shares of voting common stock and
         575,000 shares of non-voting common stock. The Compensation Committee
         of the Board of Directors is authorized under the 1995 Plan to grant
         stock options, restricted stock, stock appreciation rights, performance
         shares, stock awards, and cash awards. The exercise prices of the stock
         option grants are equal to the fair market value of the underlying
         stock at the date of grant. The 1995 Plan also allows awards under the
         plan to fully vest upon a change in control of the Company. In
         September of 2001, the Company underwent a change of control as defined
         in the 1995 plan and as a result, all awards issued prior to the change
         of control became fully vested.

         During the year ended December 31, 2001, the Company granted 20,000
         non-voting restricted shares and 150,000 non-voting stock options under
         the 1995 Plan. The non-voting restricted shares had a fair value of
         $11.06 on the date of issue and became unrestricted during 2001. The
         non-voting stock options are 100% vested and expire on September 1,
         2010. During the years ended December 31, 2002 and December 31, 2000,
         the Company did not issue any shares, options or rights under the 1995
         Plan.

         At December 31, 2002, there were 116,520 voting shares and 190,876
         non-voting shares available for issuance under the 1995 Plan. The
         Company recorded $0.3 million of compensation expense related to the
         1995 Plan in each of the years ended December 31, 2002 and 2001 and
         $0.1 million of compensation expense related to the 1995 Plan in the
         year ended December 31, 2000. There was no unearned stock compensation
         expense at December 31, 2002.

         During 2001, the Company's Board of Directors repealed the Directors
         Stock Compensation Plan (the "Director's Plan"). Previously, under the
         Directors Plan, each non-employee director ("Director") received his or
         her annual retainer in the form of PHI's non-voting common stock. Each
         Director could voluntarily defer all or a portion of the stock awards
         or fees otherwise payable. The Directors Plan also provided for the
         automatic annual grant of options to Directors to purchase 2,000 shares
         of non-voting common stock. During 2001, The Company issued no stock or
         deferred stock awards under the plan. The Company issued 547 shares and
         2,388 deferred stock awards during the year ended December 31, 2000.
         The Company issued no stock options under the plan during 2001. During
         the year ended December 31, 2000, the Company issued 4,165 options to
         purchase non-voting common stock.



                                       37
<PAGE>

         The following table summarizes employee and director stock option
         activities for the years ended December 31, 2002, 2001, and 2000. All
         of the options were issued with an exercise price equal to or greater
         than the market price of the stock at the time of issue.

<Table>
<Caption>
                                                         1995 Plan Options
                                    Director      ----------------------------                           Weighted
                                     Plan -                            Non-                               Average
                                  Non-Voting         Voting          Voting           Total           Exercise Price
                                 ------------     ------------     -----------     -----------        --------------
<S>                              <C>              <C>              <C>             <C>                <C>
Balance outstanding at
  December 31, 1999                    16,000           58,480         217,717         292,197             11.95
Options granted                         4,165               --              --           4,165              8.38
Options lapsed/canceled                    --               --          (2,000)         (2,000)            12.75
                                 ------------     ------------     -----------     -----------
Balance outstanding at
  December 31, 2000                    20,165           58,480         215,717         294,362             11.89
Options granted or reinstated              --               --         154,853         154,853             10.98
Options lapsed/canceled                    --               --          (9,250)         (9,250)            12.75
Options exercised                          --          (58,480)         (1,250)        (59,730)            12.35
                                 ------------     ------------     -----------     -----------
Balance outstanding at
  December 31, 2001                    20,165               --         360,070         380,235             11.43
Options settled for cash                   --               --         (17,730)        (17,730)            11.44
Options lapsed/canceled                    --               --          (4,853)         (4,853)             8.50
Options exercised                     (20,165)              --         (92,864)       (113,029)            11.22
                                 ------------     ------------     -----------     -----------
Balance outstanding at
  December 31, 2002                        --               --         244,623         244,623             11.58
                                 ============     ============     ===========     ===========
Shares exercisable at
  December 31, 2002                        --               --         244,623         244,623             11.58
                                 ============     ============     ===========     ===========      ============
  December 31, 2001                    20,165               --         360,070         380,235             11.43
                                 ============     ============     ===========     ===========      ============
  December 31, 2000                     6,000           35,980         101,717         143,697             11.02
                                 ============     ============     ===========     ===========      ============
</Table>

         The following table summarizes information about stock options
         outstanding as of December 31, 2002. All of the outstanding stock
         options are exercisable.

<Table>
<Caption>
        Options Outstanding and Exercisable
                     Remaining
     Number         Contractual         Exercise
  Outstanding       Life (Years)         Price
----------------- ----------------- ----------------
<S>               <C>               <C>
       20,123             2.4          $    8.50
      150,000             7.7              11.06
       59,500             6.5              12.75
       15,000             5.8              16.25
     --------
      244,623             6.8(1)           11.58(1)
     ========
</Table>

     (1)  Weighted Average

         Incentive Compensation

         During 2002, the Company implemented an incentive plan for
         non-executive and non-represented employees. The plan allows the
         Company to pay up to 7% of earnings before tax, net of incentive
         compensation. Pursuant to the incentive plan for non-executives, the
         Company recorded $0.9 million of compensation expense in 2002 and a
         related liability in accrued liabilities at December 31, 2002.

         During 2002, the Company recorded $1.1 million of compensation expense
         for a discretionary incentive bonus paid to certain executive
         employees.



                                       38
<PAGE>
         For the year ended December 31, 2001, the Company recorded $1.3 million
         of compensation expense for a discretionary incentive bonus it paid in
         2002 to non-represented employees.

 (7)     OTHER ASSETS

         The following table summarizes the Company's other assets at December
         31, 2002 and 2001.

<Table>
<Caption>
                                                DECEMBER 31,    DECEMBER 31,
                                                    2002            2001
                                               --------------  --------------
                                                   (Thousands of dollars)
<S>                                            <C>             <C>
         Receivable from Clintondale, net      $           --  $          899
         Security deposits on aircraft leases              --           3,543
         Prepaid rent                                   3,683           3,996
         Deferred financing cost                        5,404             443
         Other                                          1,192           1,970
                                               --------------  --------------
            Total                              $       10,279  $       10,851
                                               ==============  ==============
</Table>

         In December 2000, the Company initiated discussions to exit its 50%
         ownership interest in Clintondale Aviation, Inc. ("Clintondale"), a New
         York corporation that operated helicopters and fixed-wing aircraft
         primarily in Kazakhstan. PHI also leased four aircraft to Clintondale.
         In conjunction with the plan, the Company recorded an impairment charge
         of $1.7 million to its investment in and advances to Clintondale.

         In June 2001, the Company continued its exit plan and executed an
         agreement for the sale of its 50% equity interest and related assets.
         The Company received a promissory note for $3.1 million from
         Clintondale in exchange for the previously leased four aircraft,
         certain amounts receivable from Clintondale, and the Company's 50%
         equity interest. The promissory note was secured by a lien on the four
         aircraft and was recorded at its estimated net realizable value of $1.8
         million based on the fair value of the collateral aircraft. No gain or
         loss was recognized during 2001 related to this exchange as the
         impairment charge recorded during December 2000 was based on the
         estimated fair value of the collateral aircraft.

         As a result of the tragic events that occurred on September 11, 2001,
         the Company reassessed Clintondale's financial ability to repay the
         note receivable based on their reduced operations in Kazakhstan and
         therefore recorded an additional provision of $0.6 million in the third
         quarter of 2001 against the note receivable.

         During 2002, the Company entered into a final agreement and received
         $1.2 million from Clintondale, resulting in a settlement that was $0.7
         million better than previously estimated, which is included in the
         results of operations (in "Other") during 2002.

         The Company maintained security deposits with lessors for aircraft it
         previously leased. The security deposits were refunded to the Company
         with the purchase of those aircraft in 2002.

         During 2001, the Company funded $4.0 million of the construction cost
         of a new principal operating facility leased by the Company. The lease
         provides that the amounts funded by PHI will reduce PHI's monthly lease
         payments ratably for the first 10 years of the lease. The unamortized
         balance is presented in the table above as prepaid rent and will
         amortize ratably through 2011.



                                       39
<PAGE>
 (8)     FINANCIAL INSTRUMENTS

         Fair Value - The following table presents the carrying amounts and
         estimated fair values of financial instruments held by the Company at
         December 31, 2002 and December 2001. The table excludes cash and cash
         equivalents, accounts receivable, accounts payable, and accrued
         liabilities, all of which had fair values approximating carrying
         amounts.

<Table>
<Caption>
                                               DECEMBER 31, 2002             DECEMBER 31, 2001
                                          ----------------------------  ----------------------------
                                            Carrying       Estimated     Carrying       Estimated
                                             Amount       Fair Value      Amount       Fair Value
                                                            (Thousands of dollars)
<S>                                         <C>             <C>          <C>           <C>
           Long-term debt and capital
              lease obligations             $ 200,000       $209,000     $  66,616     $  66,616
           Interest rate swaps
               asset (liability)                  --              --        (2,030)       (2,030)
</Table>


         At December 31, 2002, the fair value of long-term debt is based on
         quoted market indications. At December 2001, the fair value of
         long-term debt and capital lease obligations approximates its carrying
         amount. The fair value of the interest rate Swap agreements is an
         estimate based on quotes from counterparties and approximates the
         amount that the Company would pay to cancel the contracts on the
         reporting date. Effective January 1, 2001, the Company began accounting
         for its interest rate Swap agreements in accordance with SFAS No. 133,
         as amended, and recorded the fair market value of the Swap agreements
         in other long-term liabilities on the balance sheet at December 31,
         2001. See Note 4.

(9)      COMMITMENTS AND CONTINGENCIES

         Operating 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 and some of these
         leases contain renewal and purchase options. Rental expense incurred
         under these leases consisted of the following:

<Table>
<Caption>
                               YEAR ENDED              YEAR ENDED             YEAR ENDED
                              DECEMBER 31,            DECEMBER 31,           DECEMBER 31,
                                 2002                     2001                   2000
                              ------------            ------------           ------------
                                                 (Thousands of dollars)
<S>                           <C>                     <C>                    <C>
         Aircraft             $      5,604            $     16,994           $     15,773
         Other                       2,909                   2,977                  2,548
                              ------------            ------------           ------------
             Total            $      8,513            $     19,971           $     18,321
                              ============            ============           ============
</Table>

         During 2002, the Company acquired 99 aircraft that it had previously
         leased under operating leases. See Notes 3 and 4. The Company began
         leasing a new principal operating facility for twenty years, effective
         September 2001. Under the terms of the new facility lease, PHI funded
         $4.0 million of construction costs, which reduces PHI's monthly lease
         payments and expense ratably through 2011. The unamortized balance at
         December 31, 2002 is $3.7 million. The lease expires in 2021 and has
         three five-year renewal options.



                                       40
<PAGE>
         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 operation
         facility lease.

<Table>
<Caption>
                                          Aircraft        Other
                                         ----------      ---------
                                          (Thousands of dollars)
<S>                                      <C>             <C>
                        2003             $    1,136      $   1,182
                        2004                    884          1,058
                        2005                    884            959
                        2006                    884            722
                        2007                    884            447
                        Thereafter            2,438         10,132
                                         ----------      ---------
                                         $    7,110      $  14,500
                                         ==========      =========
</Table>

         Environmental Matters - The Company has an aggregate estimated
         liability of $1.5 million as of December 31, 2002 for environmental
         remediation costs that are probable and estimable. In the fourth
         quarter of 2002, the Company reduced its recorded estimated liability
         by $0.3 million as the result of a re-evaluation of environmental
         exposure at all of its operating sites and lowered remediation cost
         estimates primarily at its Morgan City, Louisiana facility. The Company
         has conducted environmental surveys of the Lafayette facility, which it
         vacated in 2001, and has determined that contamination exists at that
         facility. To date, borings have been installed to determine the type
         and extent of contamination. Preliminary results indicate limited soil
         and groundwater impacts. Once the extent and type of contamination are
         fully defined, a risk evaluation in accordance with the Louisiana Risk
         Evaluation/Corrective Action Plan ("RECAP") standard will be submitted
         and evaluated by Louisiana Department of Environmental Quality
         ("LDEQ"). At that point, LDEQ will establish what cleanup standards
         must be met at the site. When the process is complete, the Company will
         be in a position to develop the appropriate remediation plan and the
         resulting cost of remediation. However the Company has not recorded any
         estimated liability for remediation of contamination and, based on
         preliminary surveys and ongoing monitoring, the Company believes the
         ultimate remediation costs for the Lafayette facility will not be
         material.

         Legal Matters - The Company is named as a defendant in various legal
         actions that have arisen in the ordinary course of its business and
         have not been finally adjudicated. The amount, if any, of ultimate
         liability with respect to such matters cannot be determined. 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 statements.

         Purchase Commitments - At December 31, 2002, the Company had
         commitments of $7.9 million for the upgrade of certain aircraft,
         building construction, and purchase of other equipment. The Company
         expects to complete the purchase commitments during 2003.

 (10)    BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

         PHI 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 Statement of Financial Accounting Standards No. 131, "Disclosures
         about Segments of an Enterprise and Related Information" ("SFAS 131").
         The overriding determination of the Company's segments is based on how
         the chief operating decision-maker of the Company 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 Company identifies four segments that meet
         the requirements of SFAS 131 for disclosure. The reportable segments
         are Domestic Oil and Gas, International, Aeromedical, and Technical
         Services.

         The Domestic Oil and Gas segment provides helicopter services to oil
         and gas customers operating in the Gulf of Mexico. Prior to 2001, the
         Domestic Oil and Gas segment also provided helicopter services to
         certain domestic governmental agencies involved with forest-fire
         fighting activities. The International segment provides helicopters in
         various foreign countries to oil and gas customers, and certain US
         governmental agencies. The Aeromedical




                                       41
<PAGE>

         segment provides helicopter services to hospitals and medical programs
         in several U.S. states. The Company's Air Evac subsidiary is included
         in the Aeromedical segment. The Technical Services segment provides
         helicopter repair and overhaul services for existing flight operations
         customers and for an existing long-term contract with one customer.

         Effective July 1, 2002, the Company no longer allocates interest
         expense to its segments when evaluating operating performance. All
         results prior to July 1, 2002 have been restated to remove interest
         expense from the segment operating results.

         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, 2002, 2001, and 2000. 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, equity in
         losses of unconsolidated subsidiaries, other income, interest expense,
         and corporate selling, general, and administrative costs to the
         segments. Where applicable, the tables present the unallocated amounts
         to reconcile the totals to the Company's consolidated financial
         statements. Segment assets are determined by where they are situated at
         period-end. Corporate assets are principally cash and cash equivalents,
         short-term investments, other current assets, and certain property,
         plant, and equipment.

<Table>
<Caption>
                                           YEAR ENDED       YEAR ENDED       YEAR ENDED
                                          DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                              2002             2001             2000
                                         --------------   --------------   --------------
                                                       (Thousands of dollars)
<S>                                      <C>              <C>              <C>
         OPERATING REVENUES:
              Domestic Oil and Gas       $      189,480   $      190,991   $      153,831
              International                      22,474           22,634           21,703
              Aeromedical                        48,664           47,493           44,282
              Technical Services                 23,133           21,319           17,027
                                         --------------   --------------   --------------
                  TOTAL                  $      283,751   $      282,437   $      236,843
                                         ==============   ==============   ==============

         OPERATING PROFIT (1):
              Domestic Oil and Gas       $       26,974   $       29,059   $        1,502
              International                       1,760              712             (111)
              Aeromedical                        12,463            1,503             (155)
              Technical Services                  4,297            3,490             (550)
                                         --------------   --------------   --------------
                  NET SEGMENT OPERATING
                      PROFIT (LOSS)              45,494           34,764              686
         OTHER, NET (2)                           2,261            2,812            3,247
         INTEREST EXPENSE                       (17,250)          (6,190)          (5,813)
         UNALLOCATED COSTS                      (15,121)         (13,894)         (15,915)
                                         --------------   --------------   --------------
         EARNINGS (LOSS) BEFORE TAXES    $       15,384   $       17,492   $      (17,795)
                                         ==============   ==============   ==============

         EXPENDITURES FOR LONG-LIVED
           ASSETS (3)
              Domestic Oil and Gas       $      144,973   $       24,201   $       21,879
              International                       1,996            2,067            5,291
              Aeromedical                        10,072            2,373              621
              Technical Services                     16              462              190
              Corporate                           2,370              399              198
                                         --------------   --------------   --------------
                  TOTAL                  $      159,427   $       29,502   $       28,179
                                         ==============   ==============   ==============
 </Table>



                                       42
<PAGE>
<Table>
<Caption>
                                     YEAR ENDED      YEAR ENDED      YEAR ENDED
                                     DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                         2002            2001            2000
                                    --------------  --------------  --------------
                                                (Thousands of dollars)
<S>                                 <C>             <C>             <C>
          DEPRECIATION AND
           AMORTIZATION
              Domestic Oil and Gas  $       15,676  $        9,825  $        8,537
              International                  1,638           1,250           1,262
              Aeromedical                    2,347           2,487           2,483
              Technical Services               102             331             246
              Corporate                      1,285           1,189           1,185
                                    --------------  --------------  --------------
                  TOTAL             $       21,048  $       15,082  $       13,713
                                    ==============  ==============  ==============

         ASSETS
              Domestic Oil and Gas  $      250,215  $      148,616  $      151,820
              International                 14,994          19,912          27,281
              Aeromedical                   30,796          23,328          24,274
              Technical Services            23,076          13,704          12,443
              Corporate                     47,626          20,085           6,937
                                    --------------  --------------  --------------
                  TOTAL             $      366,707  $      225,645  $      222,755
                                    ==============  ==============  ==============
</Table>

         (1)      Includes special charges as discussed in Note 2 - Special
                  Charges of the Consolidated Financial Statements.

         (2)      Includes gains on disposition of property and equipment,
                  equity in losses of unconsolidated subsidiaries, and other
                  income.

         (3)      Includes the acquisition of aircraft from leasing companies
                  and financial institutions as discussed in Note 4.

       The following table presents the Company's revenues from external
       customers attributed to operations in the United States and foreign areas
       and long-lived assets in the United States and foreign areas.

<Table>
<Caption>
                                   YEAR ENDED      YEAR ENDED      YEAR ENDED
                                  DECEMBER 31,    DECEMBER 31,     DECEMBER 31,
                                      2002            2001            2000
                                 --------------  --------------  --------------
                                              (Thousands of dollars)
         OPERATING REVENUES:
<S>                              <C>             <C>             <C>
              United States      $      261,277  $      259,803  $      215,140
              International              22,474          22,634          21,703
                                 --------------  --------------  --------------
                  TOTAL          $      283,751  $      282,437  $      236,843
                                 ==============  ==============  ==============

         LONG-LIVED ASSETS:
              United States      $      242,883  $      105,703  $      110,615
              International               9,694          16,465          21,241
                                 --------------  --------------  --------------
                  TOTAL          $      252,577  $      122,168  $      131,856
                                 ==============  ==============  ==============
</Table>

(11)     RELATED PARTY TRANSACTIONS

         In 2002, the Company leased a fixed wing aircraft from Al A. Gonsoulin,
         Chairman of the Board, for total lease payments of $386,000. In the
         latter part of 2002, the Company purchased the aircraft from Mr.
         Gonsoulin for $695,000. The purchase of the aircraft was reviewed and
         approved by the Audit Committee.



                                       43
<PAGE>


(12)     QUARTERLY FINANCIAL DATA (UNAUDITED)

         The summarized quarterly results of operations for the years ended
         December 31, 2002 and December 31, 2001 (in thousands of dollars,
         except per share data) are as follows:

<Table>
<Caption>
                                                                     QUARTER ENDED
                                    --------------------------------------------------------------------------------
                                        MARCH 31,            JUNE 30,          SEPTEMBER 30,        DECEMBER 31,
                                          2002                 2002                 2002                2002
                                    ------------------  -------------------  -------------------  ------------------
                                                      (Thousands of dollars, except per share data)
<S>                                   <C>                 <C>                  <C>                  <C>
     Operating revenues               $     68,179        $     71,136         $     69,664         $     74,772
     Gross profit                            8,765              12,629               14,419               12,749
     Net earnings                            2,028               1,580                3,310                2,313
     Net earnings per share
      Basic                                   0.38                0.30                 0.62                 0.43
      Diluted                                 0.38                0.29                 0.61                 0.42
</Table>

<Table>
<Caption>
                                                                  QUARTER ENDED
                                      --------------------------------------------------------------------------
                                       MARCH 31,            JUNE 30,           SEPTEMBER 30,        DECEMBER 31,
                                         2001                 2001                 2001                2001
                                      ------------        ------------         -------------        ------------
                                                    (Thousands of dollars, except per share data)
<S>                                   <C>                 <C>                  <C>                  <C>
     Operating revenues               $     64,434        $     69,720         $     75,123         $     73,160
     Gross profit                            4,443               9,744               13,128               11,584
     Net earnings                               46               2,760                4,758                3,456(1)
     Net earnings per share
      Basic                                   0.01                0.53                 0.92                 0.66(1)
      Diluted                                 0.01                0.52                 0.90                 0.65(1)
 </Table>

         (1)      Includes the effect of (a) $1.3 million ($0.8 million after
                  tax or $0.15 per diluted share) of compensation expense
                  recorded for a discretionary bonus accrued for certain
                  non-executive employees; (b) $0.8 million ($0.5 million after
                  tax or $0.09 per diluted share) of other income, recorded for
                  the reimbursement received from the United States Department
                  of Transportation under the Air Safety and System
                  Stabilization Act; and (c) $1.2 million ($0.7 million after
                  tax or $0.14 per diluted share) expense reduction for lowered
                  estimated environmental remediation costs.

(13)     SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION

         On April 23, 2002, the Company issued Notes of $200 million that are
         fully and unconditionally guaranteed on a senior basis, jointly and
         severally, by all of the Company's existing operating subsidiaries
         ("Guarantor Subsidiaries").

         The following supplemental condensed financial information sets forth,
         on a consolidating basis, the balance sheet, statement of operations,
         and statement of cash flows information for Petroleum Helicopters, Inc.
         ("Parent Company Only") and the Guarantor Subsidiaries. The principal
         eliminating entries eliminate investments in subsidiaries, intercompany
         balances, and intercompany revenues and expenses.




                                       44
<PAGE>

                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                                        DECEMBER 31, 2002
                                                       -------------------------------------------------------
                                                        PARENT
                                                        COMPANY       GUARANTOR
                                                          ONLY       SUBSIDIARIES  ELIMINATIONS   CONSOLIDATED
                                                       ------------  ------------  ------------   ------------
<S>                                                    <C>           <C>           <C>            <C>
                             ASSETS
         Current Assets:
             Cash and cash equivalents                 $     17,652  $         22  $         --   $     17,674
             Accounts receivable - net of allowance          36,488         4,325            --         40,813
             Inventory                                       37,232           143            --         37,375
             Other current assets                             5,743            10            --          5,753
             Refundable income taxes                          2,236            --            --          2,236
                                                       ------------  ------------  ------------   ------------
                Total current assets                         99,351         4,500            --        103,851

         Investment in subsidiaries and other                20,958        14,036       (24,715)        10,279
         Property and equipment, net                        248,982         3,595            --        252,577
                                                       ------------  ------------  ------------   ------------
                    Total Assets                       $    369,291  $     22,131  $    (24,715)  $    366,707
                                                       ============  ============  ============   ============

                         LIABILITIES AND
                      SHAREHOLDERS' EQUITY
         Current Liabilities:
             Accounts payable and accrued liabilities  $     33,114  $      3,314  $     (9,763)  $     26,665
             Accrued vacation payable                         3,675           256            --          3,931
             Income taxes payable                                --           504            --            504
                                                       ------------  ------------  ------------   ------------
                Total current liabilities                    36,789         4,074        (9,763)        31,100

         Long-term debt net of current maturities           200,000            --            --        200,000
         Deferred income taxes and other long-term
           liabilities                                       27,648         2,817           288         30,753
         Shareholders' Equity:
             Paid-in capital                                 15,600         4,402        (4,402)        15,600
             Retained earnings                               89,254        10,838       (10,838)        89,254
                                                       ------------  ------------  ------------   ------------
                Total shareholders' equity                  104,854        15,240       (15,240)       104,854
                                                       ------------  ------------  ------------   ------------
                      Total Liabilities and
                        Shareholders' Equity           $    369,291  $     22,131  $    (24,715)  $    366,707
                                                       ============  ============  ============   ============
</Table>



                                       45
<PAGE>

                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                                           DECEMBER 31, 2001
                                                   ----------------------------------------------------------------
                                                      PARENT
                                                      COMPANY         GUARANTOR
                                                       ONLY          SUBSIDIARIES   ELIMINATIONS     CONSOLIDATED
                                                   --------------   --------------  --------------   --------------
<S>                                                <C>              <C>             <C>              <C>
                           ASSETS
         Current Assets:
             Cash and cash equivalents             $        5,422   $           13  $           --   $        5,435
             Accounts receivable - net of
               allowance                                   42,844            4,166              --           47,010
             Inventory                                     34,382               --              --           34,382
             Other current assets                           5,764               35              --            5,799
                                                   --------------   --------------  --------------   --------------
                Total current assets                       88,412            4,214              --           92,626

         Investment in subsidiaries and other              16,138            4,635          (9,922)          10,851
         Property and equipment, net                      118,401            3,767              --          122,168
                                                   --------------   --------------  --------------   --------------
                    Total Assets                   $      222,951   $       12,616  $       (9,922)  $      225,645
                                                   ==============   ==============  ==============   ==============

                       LIABILITIES AND
                    SHAREHOLDERS' EQUITY
         Current Liabilities:
             Accounts payable and accrued
                liabilities                        $       25,986   $        4,193  $       (1,932)  $       28,247
             Accrued vacation payable                       6,777              243              --            7,020
             Income taxes payable                           2,428               --              --            2,428
             Current maturities of long-term debt
               and capital lease obligations                7,944               --              --            7,944
                                                   --------------   --------------  --------------   --------------
                Total current liabilities                  43,135            4,436          (1,932)          45,639

         Long-term debt and capital lease
           obligations, net of current maturities          58,672               --              --           58,672
         Deferred income taxes and
           other long-term liabilities                     29,272               --             190           29,462
         Shareholders' Equity:
             Paid-in capital                               13,853            4,403          (4,403)          13,853
             Accumulated other comprehensive
               income (loss)                               (2,030)              --              --           (2,030)
             Retained earnings                             80,049            3,777          (3,777)          80,049
                                                   --------------   --------------  --------------   --------------
                Total shareholders' equity                 91,872            8,180          (8,180)          91,872
                                                   --------------   --------------  --------------   --------------
                      Total Liabilities and
                        Shareholders' Equity       $      222,951   $       12,616  $       (9,922)  $      225,645
                                                   ==============   ==============  ==============   ==============
</Table>



                                       46
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                       PARENT
                                                       COMPANY         GUARANTOR
                                                        ONLY          SUBSIDIARIES    ELIMINATIONS     CONSOLIDATED
                                                    --------------   --------------   --------------   --------------
                                                                      FOR THE YEAR ENDED DECEMBER 31, 2002
                                                    -----------------------------------------------------------------
<S>                                                 <C>              <C>              <C>              <C>
         Operating revenues                         $      230,031   $       53,720   $           --   $      283,751
         Management fees                                     5,447               --           (5,447)              --
         Gain on dispositions of property and
           equipment                                           586               --               --              586
         Other                                               1,335              340               --            1,675
                                                    --------------   --------------   --------------   --------------
                                                           237,399           54,060           (5,447)         286,012
                                                    --------------   --------------   --------------   --------------
         Expenses:
              Direct expenses                              200,085           35,104               --          235,189
              Management fees                                   --            5,447           (5,447)              --
              Selling, general, and administrative          16,358            1,831               --           18,189
              Equity in net income of consolidated
                 subsidiaries                               (7,061)              --            7,061               --
              Interest expense                              17,192               58               --           17,250
                                                    --------------   --------------   --------------   --------------
                                                           226,574           42,440            1,614          270,628
                                                    --------------   --------------   --------------   --------------

         Earnings before income taxes                       10,825           11,620           (7,061)          15,384
         Income taxes                                        1,594            4,559               --            6,153
                                                    --------------   --------------   --------------   --------------

         Net earnings                               $        9,231   $        7,061   $       (7,061)  $        9,231
                                                    ==============   ==============   ==============   ==============
</Table>

<Table>
<Caption>
                                                                 FOR THE YEAR ENDED DECEMBER 31, 2001
                                                    -----------------------------------------------------------------
<S>                                                 <C>              <C>              <C>              <C>
         Operating revenues                         $      231,934   $       50,503   $           --   $      282,437
         Management fees                                     5,195               --           (5,195)              --
         Gain on dispositions of property and
           equipment                                         1,351               --               --            1,351
         Other                                               1,417               44               --            1,461
                                                    --------------   --------------   --------------   --------------
                                                           239,897           50,547           (5,195)         285,249
                                                    --------------   --------------   --------------   --------------
         Expenses:
              Direct expenses                              202,143           41,395               --          243,538
              Management fees                                   --            5,195           (5,195)              --
              Selling, general, and administrative          16,434            1,595               --           18,029
              Equity in net income of consolidated
                  subsidiaries                              (1,354)              --            1,354               --
              Interest expense                               5,951              239               --            6,190
                                                    --------------   --------------   --------------   --------------
                                                           223,174           48,424           (3,841)         267,757
                                                    --------------   --------------   --------------   --------------

         Earnings before income taxes                       16,723            2,123           (1,354)          17,492
         Income taxes                                        5,703              769               --            6,472
                                                    --------------   --------------   --------------   --------------

         Net earnings                               $       11,020   $        1,354   $       (1,354)  $       11,020
                                                    ==============   ==============   ==============   ==============
</Table>



                                       47
<PAGE>
                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                               PARENT
                                               COMPANY          GUARANTOR
                                                ONLY           SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                            --------------    --------------    --------------    --------------
                                                           FOR THE YEAR ENDED DECEMBER 31, 2000
                                            --------------------------------------------------------------------
<S>                                         <C>               <C>               <C>               <C>
Operating revenues                          $      193,931    $       42,912    $           --    $      236,843
Management fees                                      4,424                --            (4,424)               --
Gain on dispositions of property and
  equipment                                          2,825             1,138                --             3,963
                                            --------------    --------------    --------------    --------------
                                                   201,180            44,050            (4,424)          240,806
                                            --------------    --------------    --------------    --------------
Expenses:
     Direct expenses                               195,382            34,954                --           230,336
     Management fees                                    --             4,424            (4,424)               --
     Selling, general, and administrative           16,627             1,538                --            18,165
     Equity in net loss of unconsolidated
         subsidiaries                                  716                --                --               716
     Equity in net income of consolidated
         subsidiaries                               (1,850)               --             1,850                --
     Special charges                                 3,571                --                --             3,571
     Interest expense                                5,226               587                --             5,813
                                            --------------    --------------    --------------    --------------
                                                   219,672            41,503            (2,574)          258,601
                                            --------------    --------------    --------------    --------------

Earnings (loss) before income taxes                (18,492)            2,547            (1,850)          (17,795)
Income taxes                                        (6,198)              697                --            (5,501)
                                            --------------    --------------    --------------    --------------

Net earnings (loss)                         $      (12,294)   $        1,850    $       (1,850)   $      (12,294)
                                            ==============    ==============    ==============    ==============
</Table>




                                       48
<PAGE>

                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                  PARENT
                                                  COMPANY           GUARANTOR
                                                    ONLY           SUBSIDIARIES     ELIMINATIONS     CONSOLIDATED
                                                --------------    --------------    --------------   --------------
                                                              FOR THE YEAR ENDED DECEMBER 31, 2002
                                                -------------------------------------------------------------------
<S>                                             <C>               <C>               <C>              <C>
Net cash provided by operating activities       $       39,417    $          112    $           --   $       39,529

Cash flows from investing activities:
    Proceeds from notes receivable                       1,629                --                --            1,629
    Purchase of property and equipment                 (41,247)             (104)               --          (41,351)
    Purchase of aircraft previously leased            (118,076)               --                --         (118,076)
    Proceeds from asset dispositions                     3,263                --                --            3,263
                                                --------------    --------------    --------------   --------------
    Net cash used in investing activities             (154,431)             (104)               --         (154,535)
                                                --------------    --------------    --------------   --------------

Cash flows from financing activities:
    Proceeds from long-term debt, net                  194,165                --                --          194,165
    Payments on long-term debt                          (5,845)               --                --           (5,845)
    Payment of long-term debt with bond
        proceeds                                       (60,771)               --                --          (60,771)
    Payment of interest rate swap settlement            (1,575)               --                --           (1,575)
    Proceeds from exercise of stock options              1,271                --                --            1,271
                                                --------------    --------------    --------------   --------------
    Net cash provided by financing activities          127,245                --                --          127,245
                                                --------------    --------------    --------------   --------------

Increase in cash and cash equivalents                   12,231                 8                --           12,239
Cash and cash equivalents, beginning of year             5,422                13                --            5,435
                                                --------------    --------------    --------------   --------------
Cash and cash equivalents, end of year          $       17,653    $           21    $           --   $       17,674
                                                ==============    ==============    ==============   ==============
</Table>

<Table>
<Caption>
                                                                FOR THE YEAR ENDED DECEMBER 31, 2001
                                                -------------------------------------------------------------------
<S>                                             <C>               <C>               <C>              <C>
Net cash provided by operating activities       $       18,178    $          502    $           --   $       18,680
                                                --------------    --------------    --------------   --------------

Cash flows from investing activities:
    Purchase of property and equipment                 (29,494)               (8)               --          (29,502)
    Proceeds from asset dispositions                    24,304                --                --           24,304
    Other                                                  350                --                --              350
                                                --------------    --------------    --------------   --------------
    Net cash used in investing activities               (4,840)               (8)               --           (4,848)
                                                --------------    --------------    --------------   --------------

Cash flows from financing activities:
    Proceeds from long-term debt                         2,851                --                --            2,851
    Payments on long-term debt                         (12,350)             (500)               --          (12,850)
     Other                                                 739                --                --              739
                                                --------------    --------------    --------------   --------------
    Net cash used in financing activities               (8,760)             (500)               --           (9,260)
                                                --------------    --------------    --------------   --------------

Increase (decrease) in cash and cash
  equivalents                                            4,578                (6)               --            4,572
Cash and cash equivalents, beginning of year               844                19                --              863
                                                --------------    --------------    --------------   --------------
Cash and cash equivalents, end of year          $        5,422    $           13    $           --   $        5,435
                                                ==============    ==============    ==============   ==============
</Table>




                                       49
<PAGE>

                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                 PARENT
                                                 COMPANY           GUARANTOR
                                                   ONLY           SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                               --------------    --------------    --------------   --------------
<S>                                            <C>               <C>               <C>              <C>
FOR THE YEAR ENDED DECEMBER 31, 2000

Net cash provided by operating activities      $        8,853    $          498    $           --   $        9,351

Cash flows from investing activities:
    Purchase of property and equipment                (27,903)             (276)               --          (28,179)
    Proceeds from asset dispositions                   19,394             4,748                --           24,142
    Other                                                (974)               --                --             (974)
                                               --------------    --------------    --------------   --------------
    Net cash used in investing activities              (9,483)            4,472                --           (5,011)
                                               --------------    --------------    --------------   --------------

Cash flows from financing activities:
    Proceeds from long-term debt                       23,500                --                --           23,500
    Payments on long-term debt                        (23,676)           (4,964)               --          (28,640)
                                               --------------    --------------    --------------   --------------
    Net cash used in financing activities                (176)           (4,964)               --           (5,140)
                                               --------------    --------------    --------------   --------------

Increase (decrease) in cash and cash
  equivalents                                            (806)                6                --             (800)
Cash and cash equivalents, beginning of year            1,650                13                --            1,663
                                               --------------    --------------    --------------   --------------
Cash and cash equivalents, end of year         $          844    $           19    $           --   $          863
                                               ==============    ==============    ==============   ==============
</Table>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

         None.



                                       50
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information concerning Directors required by this item will be included
         in the Company's definitive information statement in connection with
         its 2003 Annual Meeting of Shareholders and is incorporated herein by
         reference. Information concerning Executive Officers is included as
         Item 4. (a) "Executive officers of the registrant."

ITEM 11. EXECUTIVE COMPENSATION

         Information required by this item will be included in the Company's
         definitive information statement in connection with its 2003 Annual
         Meeting of Shareholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information required by this item will be included in the Company's
         definitive information statement in connection with its 2003 Annual
         Meeting of Shareholders and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information required by this item will be included in the Company's
         definitive information statement in connection with its 2003 Annual
         Meeting of Shareholders and is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

         The Company's Chief Executive Officer and Chief Financial Officer have
         evaluated the effectiveness of the Company's disclosure controls and
         procedures (as is defined in Rules 13a-14(c) and 15d-14(c) under the
         Securities Exchange Act of 1934 (the "Exchange Act")) as of a date
         within 90 days before the filing date of this report (the "Evaluation
         Date"). Based on such evaluation, such officers have concluded that, as
         of the Evaluation Date, the Company's disclosure controls and
         procedures are effective in alerting them on a timely basis to material
         information relating to the Company (including its consolidated
         subsidiaries) required to be included in the Company's periodic filings
         under the Exchange Act.

         Since the Evaluation Date, there have not been any significant changes
         in the Company's internal controls or in other factors that could
         significantly affect such controls.

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K

(a)   1.  Financial Statements
              Included in Part II of this report:
                 Independent Auditors' Reports.
                 Consolidated Balance Sheets - December 31, 2002 and
                 December 31, 2001. Consolidated Statements of Operations
                 for the years ended December 31, 2002, December 31,
                      2001, and December 31, 2000.
                 Consolidated Statements of Shareholders' Equity for the
                      years ended December 31, 2002, December 31, 2001, and
                      December 31, 2000.
                 Consolidated Statements of Comprehensive Income (Loss) for the
                      years ended December 31, 2002, December 31, 2001, and
                      December 31, 2000.
                 Consolidated Statements of Cash Flows for the years ended
                      December 31, 2002, December 31, 2001, and December
                      31, 2000.
                 Notes to Consolidated Financial Statements.



                                   51
<PAGE>

         2.     Financial Statement Schedules
                      Schedule II - Valuation and Qualifying accounts for the
                           years ended December 31, 2002, December 31, 2001, and
                           December 31, 2000.

         3.     Exhibits

         3      Articles of Incorporation and By-laws

         3.1        (i)    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 October 31, 1994).

                    (ii)   By-laws of the Company as amended (incorporated by
                           reference to Exhibit No. 3.1 (ii) to PHI's Report on
                           Form 10-Q for the quarterly period ended March 31,
                           2002).

         4        Instruments defining the rights of security holders, including
                  indentures

         4.1      Indenture dated April 23, 2002 among Petroleum Helicopters,
                  Inc., the Subsidiary Guarantors named therein and The Bank of
                  New York, as Trustee (incorporated by reference to Exhibit 4.1
                  to PHI's Registration Statement on Form S-4, filed on April
                  30, 2002, File Nos. 333-87288 through 333-87288-08).

         4.2      Form of 9 3/8% Senior Note (incorporated by reference to
                  Exhibit 4.1 to PHI's Registration Statement on Form S-4, filed
                  on April 30, 2002, File Nos. 333-87288 through 333-87288-08).

         4.3      Loan Agreement dated as of April 23, 2002 by and among
                  Petroleum Helicopters, Inc., Air Evac Services, Inc.,
                  Evangeline Airmotive, Inc., and International Helicopter
                  Transport, Inc. and Whitney National Bank (incorporated by
                  reference to Exhibit 10.3 to PHI's Report on Form 10-Q for the
                  quarterly period ended June 30, 2002).

         10       Material Contracts

         10.2     The Petroleum Helicopters, Inc. 401(k) Retirement Plan
                  effective July 1, 1989 (incorporated by reference to Exhibit
                  No. 10.4 to PHI's Report on Form 10-K dated April 30, 1990).

         10.3     Amended and Restated Petroleum Helicopters, 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 No
                  10.12 to PHI's Report on Form 10-K dated April 30, 1996).

         10.4     Form of Non-Qualified Stock Option Agreement under the
                  Petroleum Helicopters, Inc. 1995 Incentive Compensation Plan
                  between PHI and certain of its key employees (incorporated by
                  reference to Exhibit No. 10.13 to PHI's Report on Form 10-K
                  dated April 30, 1996).

         10.5     Supplemental Executive Retirement Plan adopted by PHI's Board
                  effective September 14, 2000 (incorporated by reference to
                  Exhibit 10.23 to PHI's Report on Form 10-Q dated September 30,
                  2000).

         10.6     Amendment to the Supplemental Executive Retirement Plan dated
                  May 24, 2001 (incorporated by reference to Exhibit 10.25 to
                  PHI's Report on Form 10-Q dated June 30, 2001).

         10.7     Officer Deferred Compensation Plan adopted by PHI's Board
                  effective January 1, 2001 (incorporated by reference to
                  Exhibit 10.21 to PHI's Report on Form 10-K dated December 31,
                  2001).

         10.8     Articles of Agreement Between Petroleum Helicopters, Inc. &
                  Office & Professional Employees International Union and its
                  Local 108 dated June 13, 2001 (incorporated by reference to
                  Exhibit 10.24 to PHI's Report on Form 10-Q dated June 30,
                  2001).

         10.9     Employment letter agreement between PHI and Lance F. Bospflug
                  dated August 24, 2000 (incorporated by reference to Exhibit
                  10.22 to PHI's Report on Form 10-KA dated December 31, 2001).

         21       Subsidiaries of the Registrant

         23.1     Consent of Deloitte & Touche LLP

         99.1     Certification pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 by Lance F. Bospflug, Chief Executive Officer.



                                       52
<PAGE>

         99.2     Certification pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 by Michael J. McCann, Chief Financial Officer.

(b)      Reports on Form 8-K

         None.

                  PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                             (THOUSANDS OF DOLLARS)

<Table>
<Caption>
                                                                 Additions
                                                                 ----------
                                                 Balance at      Charged to                      Balance at
                                                 Beginning       Costs and                           End
     Description                                   of Year        Expenses       Deductions       of Year
                                                 ---------       ----------      ---------       ----------
<S>                                              <C>              <C>             <C>            <C>
Year ended December 31, 2002:
     Allowance for doubtful accounts             $     444        $    249        $    535       $     158
     Allowance for obsolescent inventory             4,340             994             512           4,822

Year ended December 31, 2001:
     Allowance for doubtful accounts             $   2,156        $    107        $  1,819       $     444
     Allowance for obsolescent inventory             3,721             978             359           4,340

Year ended December 31, 2000:
     Allowance for doubtful accounts             $     794        $  1,681        $    319       $   2,156
     Allowance for obsolescent inventory             2,208           3,005           1,492           3,721
</Table>




                                       53
<PAGE>
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


                                      PETROLEUM HELICOPTERS, INC.


                                      By: /s/  Michael J. McCann
                                         --------------------------------------
                                              Michael J. McCann
                                              Chief Financial Officer
                                              (Principal Financial and
                                                Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


<Table>
<Caption>
                     Signature                 Title                         Date
                     ---------                 -----                         ----
<S>                                      <C>                              <C>
 /s/  Al A. Gonsoulin                    Chairman of the Board            March 31, 2003
-----------------------------                and Director
      Al A. Gonsoulin


/s/   Lance F. Bospflug               President, Chief Executive          March 31, 2003
-----------------------------      Officer and Director, (Principal
      Lance F. Bospflug                   Executive Officer)


/s/   Arthur J. Breault, Jr.                   Director                   March 31, 2003
-----------------------------
      Arthur J. Breault, Jr.


/s/   Thomas H. Murphy                         Director                   March 31, 2003
-----------------------------
      Thomas H. Murphy


/s/   Richard H. Matzke                        Director                   March 31, 2003
-----------------------------
      Richard H. Matzke


/s/   C. Russell Luigs                         Director                   March 31, 2003
-----------------------------
      C. Russell Luigs


/s/   Michael J. McCann                 Chief Financial Officer           March 31, 2003
-----------------------------          (Principal Financial and
      Michael J. McCann                Accounting Officer)
</Table>



                                       54
<PAGE>
                                 CERTIFICATIONS

I, Lance F. Bospflug, certify that:

     1.  I have reviewed this annual report on Form 10-K of Petroleum
         Helicopters, Inc.

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

     4.  The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

     6.  The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date: March 31, 2003

By: /s/ Lance F. Bospflug
    ----------------------------------------
Lance F. Bospflug
President & Chief Executive Officer





                                       55
<PAGE>
I, Michael J. McCann, certify that:

     1.  I have reviewed this annual report on Form 10-K of Petroleum
         Helicopters, Inc.

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

     4.  The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

     6.  The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date: March 31, 2003

By: /s/ Michael J. McCann
    ----------------------------------------
Michael J. McCann
Chief Financial Officer and Treasurer



                                       56
<PAGE>
                                 EXHIBIT INDEX


(a)   1.  Financial Statements
              Included in Part II of this report:
                 Independent Auditors' Reports.
                 Consolidated Balance Sheets - December 31, 2002 and
                 December 31, 2001. Consolidated Statements of Operations
                 for the years ended December 31, 2002, December 31,
                      2001, and December 31, 2000.
                 Consolidated Statements of Shareholders' Equity for the
                      years ended December 31, 2002, December 31, 2001, and
                      December 31, 2000.
                 Consolidated Statements of Comprehensive Income (Loss) for the
                      years ended December 31, 2002, December 31, 2001, and
                      December 31, 2000.
                 Consolidated Statements of Cash Flows for the years ended
                      December 31, 2002, December 31, 2001, and December
                      31, 2000.
                 Notes to Consolidated Financial Statements.

         2.     Financial Statement Schedules
                      Schedule II - Valuation and Qualifying accounts for the
                           years ended December 31, 2002, December 31, 2001, and
                           December 31, 2000.

         3.     Exhibits

         3      Articles of Incorporation and By-laws

         3.1        (i)    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 October 31, 1994).

                    (ii)   By-laws of the Company as amended (incorporated by
                           reference to Exhibit No. 3.1 (ii) to PHI's Report on
                           Form 10-Q for the quarterly period ended March 31,
                           2002).

         4        Instruments defining the rights of security holders, including
                  indentures

         4.1      Indenture dated April 23, 2002 among Petroleum Helicopters,
                  Inc., the Subsidiary Guarantors named therein and The Bank of
                  New York, as Trustee (incorporated by reference to Exhibit 4.1
                  to PHI's Registration Statement on Form S-4, filed on April
                  30, 2002, File Nos. 333-87288 through 333-87288-08).

         4.2      Form of 9 3/8% Senior Note (incorporated by reference to
                  Exhibit 4.1 to PHI's Registration Statement on Form S-4, filed
                  on April 30, 2002, File Nos. 333-87288 through 333-87288-08).

         4.3      Loan Agreement dated as of April 23, 2002 by and among
                  Petroleum Helicopters, Inc., Air Evac Services, Inc.,
                  Evangeline Airmotive, Inc., and International Helicopter
                  Transport, Inc. and Whitney National Bank (incorporated by
                  reference to Exhibit 10.3 to PHI's Report on Form 10-Q for the
                  quarterly period ended June 30, 2002).

         10       Material Contracts

         10.2     The Petroleum Helicopters, Inc. 401(k) Retirement Plan
                  effective July 1, 1989 (incorporated by reference to Exhibit
                  No. 10.4 to PHI's Report on Form 10-K dated April 30, 1990).

         10.3     Amended and Restated Petroleum Helicopters, 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 No
                  10.12 to PHI's Report on Form 10-K dated April 30, 1996).

         10.4     Form of Non-Qualified Stock Option Agreement under the
                  Petroleum Helicopters, Inc. 1995 Incentive Compensation Plan
                  between PHI and certain of its key employees (incorporated by
                  reference to Exhibit No. 10.13 to PHI's Report on Form 10-K
                  dated April 30, 1996).

         10.5     Supplemental Executive Retirement Plan adopted by PHI's Board
                  effective September 14, 2000 (incorporated by reference to
                  Exhibit 10.23 to PHI's Report on Form 10-Q dated September 30,
                  2000).

         10.6     Amendment to the Supplemental Executive Retirement Plan dated
                  May 24, 2001 (incorporated by reference to Exhibit 10.25 to
                  PHI's Report on Form 10-Q dated June 30, 2001).

         10.7     Officer Deferred Compensation Plan adopted by PHI's Board
                  effective January 1, 2001 (incorporated by reference to
                  Exhibit 10.21 to PHI's Report on Form 10-K dated December 31,
                  2001).

         10.8     Articles of Agreement Between Petroleum Helicopters, Inc. &
                  Office & Professional Employees International Union and its
                  Local 108 dated June 13, 2001 (incorporated by reference to
                  Exhibit 10.24 to PHI's Report on Form 10-Q dated June 30,
                  2001).

         10.9     Employment letter agreement between PHI and Lance F. Bospflug
                  dated August 24, 2000 (incorporated by reference to Exhibit
                  10.22 to PHI's Report on Form 10-KA dated December 31, 2001).

         21       Subsidiaries of the Registrant

         23.1     Consent of Deloitte & Touche LLP

         99.1     Certification pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 by Lance F. Bospflug, Chief Executive Officer.

         99.2     Certification pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002 by Michael J. McCann, Chief Financial Officer.