e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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þ |
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended: June 30, 2010
or
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o |
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number: 0-9827
PHI, Inc.
(Exact name of registrant as specified in its charter)
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Louisiana
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72-0395707 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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2001 SE Evangeline Thruway
Lafayette, Louisiana
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70508 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (337) 235-2452
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: þ No: o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such
files).
Yes: o No: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer: o
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Accelerated filer: þ
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Non-accelerated filer: o
(Do not check if a smaller reporting company)
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Smaller reporting company: o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes: o No: þ
Indicate the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.
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Class
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Outstanding at July 30, 2010 |
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Voting Common Stock
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2,852,616 shares |
Non-Voting Common Stock
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12,458,992 shares |
PHI, INC.
Index Form 10-Q
2
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
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June 30, |
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December 31, |
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2010 |
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2009 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
|
$ |
2,684 |
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$ |
2,501 |
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Short-term investments |
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76,141 |
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75,138 |
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Accounts receivable net |
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Trade |
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100,069 |
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90,518 |
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Other |
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4,087 |
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3,885 |
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Inventories of spare parts net |
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59,548 |
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61,501 |
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Other current assets |
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12,892 |
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11,018 |
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Income taxes receivable |
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|
610 |
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|
740 |
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|
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Total current assets |
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256,031 |
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|
245,301 |
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Other |
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9,378 |
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11,669 |
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Property and equipment net |
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567,998 |
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548,536 |
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Total assets |
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$ |
833,407 |
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$ |
805,506 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
15,947 |
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$ |
14,935 |
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Accrued liabilities |
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26,574 |
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23,342 |
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Total current liabilities |
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42,521 |
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38,277 |
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Long-term debt |
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224,787 |
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218,305 |
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Deferred income taxes |
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80,508 |
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73,409 |
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Other long-term liabilities |
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9,071 |
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10,067 |
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Total liabilities |
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356,887 |
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340,058 |
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Commitments and contingencies (Note 3) |
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Shareholders Equity: |
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Voting common stock |
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285 |
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|
285 |
|
Non-voting common stock |
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1,246 |
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|
1,246 |
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Additional paid-in capital |
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291,403 |
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|
291,403 |
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Accumulated other comprehensive loss |
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(26 |
) |
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(13 |
) |
Retained earnings |
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183,612 |
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|
172,527 |
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Total shareholders equity |
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|
476,520 |
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|
465,448 |
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|
|
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Total liabilities and shareholders equity |
|
$ |
833,407 |
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|
$ |
805,506 |
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|
|
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|
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars and shares, except per share data)
(Unaudited)
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Quarter Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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Operating revenues, net |
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$ |
139,597 |
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$ |
123,321 |
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$ |
261,206 |
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$ |
240,273 |
|
Gain (loss) on dispositions of
assets, net |
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117 |
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(107 |
) |
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123 |
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165 |
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Other, principally interest income |
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5 |
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65 |
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36 |
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128 |
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139,719 |
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123,279 |
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261,365 |
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240,566 |
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Expenses: |
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Direct expenses |
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116,101 |
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104,912 |
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220,308 |
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207,039 |
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Selling, general and
administrative expenses |
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7,678 |
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8,218 |
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14,403 |
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16,042 |
|
Interest expense |
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4,183 |
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|
4,039 |
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8,179 |
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7,918 |
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127,962 |
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117,169 |
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242,890 |
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230,999 |
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|
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Earnings before income taxes |
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11,757 |
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|
6,110 |
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18,475 |
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|
9,567 |
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Income tax expense |
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|
4,703 |
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|
2,444 |
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|
7,390 |
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|
3,826 |
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|
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|
|
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Net earnings |
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$ |
7,054 |
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|
$ |
3,666 |
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|
$ |
11,085 |
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$ |
5,741 |
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Weighted average shares
outstanding: |
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|
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|
|
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Basic |
|
|
15,312 |
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|
|
15,303 |
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|
15,312 |
|
|
|
15,302 |
|
Diluted |
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|
15,312 |
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|
|
15,307 |
|
|
|
15,312 |
|
|
|
15,305 |
|
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|
|
|
|
|
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|
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|
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Net earnings per share: |
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|
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Basic |
|
$ |
0.46 |
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|
$ |
0.24 |
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$ |
0.72 |
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|
$ |
0.38 |
|
Diluted |
|
$ |
0.46 |
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|
$ |
0.24 |
|
|
$ |
0.72 |
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|
$ |
0.38 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated
financial statements.
4
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Thousands of dollars and shares)
(Unaudited)
|
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|
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|
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|
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|
|
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|
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|
|
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|
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|
|
|
|
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|
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|
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|
|
|
|
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|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Voting |
|
|
Non-Voting |
|
|
Additional |
|
|
Other Com- |
|
|
|
|
|
|
Share- |
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
prehensive |
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Retained |
|
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Holders |
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|
|
Shares |
|
|
Amount |
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|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
Balance at December 31, 2009 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,459 |
|
|
$ |
1,246 |
|
|
$ |
291,403 |
|
|
$ |
(13 |
) |
|
$ |
172,527 |
|
|
$ |
465,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,085 |
|
|
|
11,085 |
|
Changes in pension plan assets and
benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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|
(13 |
) |
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|
(13 |
) |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income,
net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,459 |
|
|
$ |
1,246 |
|
|
$ |
291,403 |
|
|
$ |
(26 |
) |
|
$ |
183,612 |
|
|
$ |
476,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Voting |
|
|
Non-Voting |
|
|
Additional |
|
|
Other Com- |
|
|
|
|
|
|
Share- |
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
prehensive |
|
|
Retained |
|
|
Holders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
Balance at December 31, 2008 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,449 |
|
|
$ |
1,245 |
|
|
$ |
291,262 |
|
|
$ |
45 |
|
|
$ |
159,559 |
|
|
$ |
452,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,741 |
|
|
|
5,741 |
|
Changes in pension plan assets and
benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income,
net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,682 |
|
Stock options exercised |
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
1 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
|
2,853 |
|
|
$ |
285 |
|
|
|
12,459 |
|
|
$ |
1,246 |
|
|
$ |
291,403 |
|
|
$ |
(14 |
) |
|
$ |
165,300 |
|
|
$ |
458,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated
financial statements.
5
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
11,085 |
|
|
$ |
5,741 |
|
Adjustments to reconcile net earnings to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
13,442 |
|
|
|
13,901 |
|
Deferred income taxes |
|
|
7,099 |
|
|
|
3,463 |
|
Gain on asset dispositions, net |
|
|
(123 |
) |
|
|
(165 |
) |
Other |
|
|
577 |
|
|
|
464 |
|
Changes in operating assets and liabilities |
|
|
(4,607 |
) |
|
|
(3,336 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
27,473 |
|
|
|
20,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(33,932 |
) |
|
|
(27,693 |
) |
Proceeds from asset dispositions |
|
|
1,164 |
|
|
|
8,897 |
|
Purchase of short-term investments |
|
|
(1,004 |
) |
|
|
(31,639 |
) |
Proceeds from sale of short-term investments |
|
|
|
|
|
|
14,687 |
|
Deposits on aircraft |
|
|
|
|
|
|
7,600 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(33,772 |
) |
|
|
(28,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from line of credit |
|
|
32,000 |
|
|
|
10,350 |
|
Payment on line of credit |
|
|
(25,518 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
6,482 |
|
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
183 |
|
|
|
2,270 |
|
Cash and cash equivalents, beginning of period |
|
|
2,501 |
|
|
|
1,159 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
2,684 |
|
|
$ |
3,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures Cash Flow Information |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
7,422 |
|
|
$ |
7,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
607 |
|
|
$ |
763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued payables related to purchase of property and
equipment |
|
$ |
21 |
|
|
$ |
237 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying unaudited condensed consolidated financial statements include the accounts of PHI,
Inc. and subsidiaries (PHI or the Company). In the opinion of management, these condensed
consolidated financial statements reflect all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly the financial results for the interim periods presented.
These condensed consolidated financial statements should be read in conjunction with the
consolidated financial statements contained in the Companys Annual Report on Form 10-K for the
year ended December 31, 2009 and the accompanying notes.
The Companys financial results, particularly as they relate to the Companys Oil and Gas
operations, are influenced by seasonal fluctuations as discussed in the Companys Annual Report on
Form 10-K for the year ended December 31, 2009. Therefore, the results of operations for interim
periods are not necessarily indicative of the operating results that may be expected for a full
fiscal year.
2. Segment Information
PHI is primarily a provider of helicopter services, including helicopter maintenance and repair
services. We used a combination of factors to identify reportable segments as required by
Accounting Standards Codification (ASC) 280, Segment Reporting. The overriding determination
of our segments is based on how the chief operating decision-maker of our Company evaluates our
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 we perform.
A segments operating profit is its operating revenues less its direct expenses and selling,
general and administrative expenses. Each segment has a portion of selling, general and
administrative expenses that are charged directly to the segment and a portion that is allocated.
Direct charges represent the vast majority of the segments selling, general and administrative
expenses. Allocated selling, general and administrative expenses are based primarily on total
segment direct expenses as a percentage of total direct expenses. Unallocated overhead consists
primarily of corporate selling, general, and administrative expenses that we do not allocate to the
reportable segments.
Oil and Gas Segment. Our Oil and Gas segment, headquartered in Lafayette, Louisiana, provides
helicopter services primarily for the major oil and gas production companies transporting personnel
and/or equipment to offshore platforms in the Gulf of Mexico and the Democratic Republic of Congo.
We currently operate 164 aircraft in this segment.
Operating revenue from the Oil and Gas segment is derived mainly from contracts that include a
fixed monthly rate for a particular model of aircraft, plus a variable rate for flight time.
Operating costs for the Oil and Gas operations are primarily aircraft operations costs, including
costs for pilots and maintenance personnel. Our Oil and Gas operations generated approximately 68%
and 64% of our total operating revenue for the quarter ended June 30, 2010 and 2009, respectively,
and approximately 69% and 64% of our total operating revenue for the six months ended June 30, 2010
and 2009, respectively.
Air Medical Segment. Air Medical operations are headquartered in Phoenix, Arizona, where we
maintain significant separate facilities and administrative staff dedicated to this segment. Those
costs are charged directly to the Air Medical segment, resulting in a disproportionate share of
selling, general and administrative expenses compared to the Companys other reportable segments.
We provide air medical transportation services for hospitals and emergency service agencies in 18
states using approximately 85 aircraft at 64 separate locations. Our Air Medical segment operates
primarily
7
under the independent provider model and, to a lesser extent, under the hospital-based model.
Under the independent provider model, we have no contracts and no fixed revenue stream, and compete
for transport referrals on a daily basis with other independent operators in the area. Under the
hospital-based model, we contract directly with the hospital to provide their transportation
services, with the contracts typically awarded on a competitive bid basis. Our Air Medical
operations are headquartered in Phoenix, Arizona. For the quarter ended June 30, 2010 and 2009,
approximately 31% and 35% of our total operating revenues were generated by our Air Medical
operations, respectively. For the six months ended June 30, 2010 and 2009, approximately 29% and
34% of our total operating revenues were generated by our Air Medical operations, respectively.
As an independent provider, we bill for our services on the basis of a flat rate plus a variable
charge per loaded mile, regardless of aircraft model. Revenues are recorded net of contractual
allowances under agreements with third party payors and estimated uncompensated care when the
services are provided. Contractual allowances and uncompensated care are estimated based on
historical collection experience by payor category. The main payor categories are Medicaid,
Medicare, Insurance, and Self-Pay. Payor mix and changes in reimbursement rates are the factors
most subject to sensitivity and variability in calculating our allowances. We compute a historical
payment analysis of accounts paid in full, by category. The allowance percentages calculated are
applied to the payor categories, and the necessary adjustments are made to the revenue allowance.
The allowance for contractual discounts was $40.1 million and $36.6 million as of June 30, 2010 and
June 30, 2009, respectively. The allowance for uncompensated care was $29.9 million and $21.9
million as of June 30, 2010 and June 30, 2009, respectively.
Provisions for contractual discounts and estimated uncompensated care for Air Medical operations as
a percentage of gross billings are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months |
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2009 |
|
Gross billings |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Provision for contractual discounts |
|
|
53 |
% |
|
|
53 |
% |
|
|
54 |
% |
|
|
53 |
% |
|
|
52 |
% |
Provision for uncompensated care |
|
|
10 |
% |
|
|
10 |
% |
|
|
9 |
% |
|
|
9 |
% |
|
|
11 |
% |
Net reimbursement per transport from commercial payors generally increase when a rate increase
is implemented. Net reimbursement from certain commercial payors, as well as Medicare and
Medicaid, do not increase proportionately with rate increases.
Net revenue attributable to Medicaid, Medicare, Insurance and Self Pay as a percentage of net Air
Medical revenues are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Medicaid |
|
|
15 |
% |
|
|
13 |
% |
|
|
16 |
% |
|
|
13 |
% |
Medicare |
|
|
21 |
% |
|
|
16 |
% |
|
|
21 |
% |
|
|
18 |
% |
Insurance |
|
|
63 |
% |
|
|
67 |
% |
|
|
62 |
% |
|
|
66 |
% |
Self-Pay |
|
|
1 |
% |
|
|
4 |
% |
|
|
1 |
% |
|
|
3 |
% |
We also have a limited number of contracts with hospitals under which we receive a fixed
monthly rate for aircraft availability and an hourly rate for flight time. Those contracts
generated approximately 16% and 15% of the segments revenues for the quarters ended June 30, 2010
and 2009, respectively, and
8
approximately 17% and 15% of the segments revenues for the six months ended June 30, 2010 and
2009, respectively.
Technical Services Segment. The Technical Services segment provides helicopter repair and overhaul
services for customer owned aircraft. Costs associated with these services are primarily labor,
and customers are generally billed at a percentage above cost. We currently operate six aircraft
for the National Science Foundation in Antarctica under this segment.
Approximately 1% of our total operating revenues for the quarter ended June 30, 2010, and
approximately 2% of our total operating revenues for the quarter ended June, 30, 2009 and six
months ended June 30, 2010 and June 30, 2009 were generated by our Technical Services operations.
9
Summarized financial information concerning our reportable operating segments for the quarters and
six months ended June 30, 2010 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(Thousands of dollars) |
|
|
(Thousands of dollars) |
|
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
94,734 |
|
|
$ |
78,970 |
|
|
$ |
179,674 |
|
|
$ |
153,795 |
|
Air Medical |
|
|
43,101 |
|
|
|
42,628 |
|
|
|
76,670 |
|
|
|
81,721 |
|
Technical Services |
|
|
1,762 |
|
|
|
1,723 |
|
|
|
4,862 |
|
|
|
4,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
139,597 |
|
|
|
123,321 |
|
|
|
261,206 |
|
|
|
240,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment direct expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
75,845 |
|
|
|
64,963 |
|
|
|
146,098 |
|
|
|
126,247 |
|
Air Medical |
|
|
38,385 |
|
|
|
38,620 |
|
|
|
70,011 |
|
|
|
77,498 |
|
Technical Services |
|
|
1,871 |
|
|
|
1,329 |
|
|
|
4,199 |
|
|
|
3,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct expenses |
|
|
116,101 |
|
|
|
104,912 |
|
|
|
220,308 |
|
|
|
207,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
157 |
|
|
|
319 |
|
|
|
424 |
|
|
|
706 |
|
Air Medical |
|
|
1,004 |
|
|
|
1,619 |
|
|
|
2,299 |
|
|
|
3,108 |
|
Technical Services |
|
|
7 |
|
|
|
3 |
|
|
|
14 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses |
|
|
1,168 |
|
|
|
1,941 |
|
|
|
2,737 |
|
|
|
3,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct and selling, general and administrative expenses |
|
|
117,269 |
|
|
|
106,853 |
|
|
|
223,045 |
|
|
|
210,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
18,732 |
|
|
|
13,688 |
|
|
|
33,152 |
|
|
|
26,842 |
|
Air Medical |
|
|
3,712 |
|
|
|
2,389 |
|
|
|
4,360 |
|
|
|
1,115 |
|
Technical Services |
|
|
(116 |
) |
|
|
391 |
|
|
|
649 |
|
|
|
1,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
22,328 |
|
|
|
16,468 |
|
|
|
38,161 |
|
|
|
29,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net (2) |
|
|
122 |
|
|
|
(42 |
) |
|
|
159 |
|
|
|
293 |
|
Unallocated selling, general and administrative costs (1) |
|
|
(6,510 |
) |
|
|
(6,277 |
) |
|
|
(11,666 |
) |
|
|
(12,211 |
) |
Interest expense |
|
|
(4,183 |
) |
|
|
(4,039 |
) |
|
|
(8,179 |
) |
|
|
(7,918 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
11,757 |
|
|
$ |
6,110 |
|
|
$ |
18,475 |
|
|
$ |
9,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in direct expenses and unallocated selling, general, and administrative costs are
the depreciation expense amounts below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Oil and Gas |
|
$ |
4,452 |
|
|
$ |
4,107 |
|
|
$ |
8,692 |
|
|
$ |
8,350 |
|
Air Medical |
|
|
1,962 |
|
|
|
1,969 |
|
|
|
3,951 |
|
|
|
3,954 |
|
Technical Services |
|
|
18 |
|
|
|
11 |
|
|
|
145 |
|
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,432 |
|
|
$ |
6,087 |
|
|
$ |
12,788 |
|
|
$ |
12,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated SG&A |
|
$ |
321 |
|
|
$ |
735 |
|
|
$ |
654 |
|
|
$ |
1,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Consists of gains (losses) on disposition of property and equipment, and other income. |
10
3. Commitments and Contingencies
Environmental Matters We have recorded an aggregate estimated probable liability of $0.2 million
as of June 30, 2010 and December 31, 2009 for environmental monitoring costs. The Company has
conducted environmental surveys of its former Lafayette facility, which it vacated in 2001, and has
determined that limited soil and groundwater contamination exists at the facility. The Company has
installed groundwater monitoring wells at the facility and periodically monitors and reports on the
contamination. The Company previously submitted a Risk Evaluation/Corrective Action Plan (RECAP)
Standard Site Assessment Report to the Louisiana Department of Environmental Quality (LDEQ) fully
delineating the extent and type of contamination and updated the report to include recent
analytical data. LDEQ has reviewed the assessment report and has requested an action plan from the
Company. When the action plan is complete, the Company will be in a position to estimate the
resulting cost of remediation. The Company has not recorded any estimated liability for
remediation and contamination. Based upon the May 2003 Site Assessment Report, the April 2006
update and ongoing monitoring, the Company believes the ultimate remediation costs for the former
Lafayette facility will not be material to its consolidated financial position, results of
operations, or cash flows.
Legal Matters The Company is named as a defendant in various legal actions that have arisen
in the ordinary course of business and have not been finally adjudicated. In the opinion of
management, the amount of the ultimate liability with respect to these actions will not have a
material adverse effect on the Companys consolidated financial position, results of operations, or
cash flows.
As previously reported, the Company has been involved in Federal Court litigation in the Western
District of Louisiana with the Office and Professional Employees International Union (OPEIU), the
union representing domestic pilots, over claims of bad faith bargaining and issues relating to the
return to work of striking pilots. The pilots commenced a strike in September 2006, and a
court-approved return to work process began in January 2007 for those pilots who had not already
returned to work or left the Companys employment, and this was essentially completed in April
2007. Pilots continue to work basically under the same terms and conditions of employment set
forth in the final implementation proposals made by the Company at the end of collective bargaining
negotiations in August 2006 as modified consistent with the Companys ongoing business
needs. By Order dated July 9, 2010, the Court dismissed both PHIs and the Unions claims that the
other had violated the Railway Labor Act by bargaining in bad faith before exercising self-help in
August-September 2006. Then, by Order dated July 30, 2010, the Court dismissed all claims that PHI
violated the Railway Labor Act in the manner in which it returned pilots to work following the
strike. The parties may yet proceed to trial, on the claims of 47 pilots, that PHI improperly
deducted certain sums from their final pre-strike paychecks. Such trial would commence on or about
August 25, 2010. In addition, on December 31, 2009, the OPEIU filed another case against the
Company in the Western District of Louisiana, previously set for trial on July 5, 2011, asserting
that its acceptance in 2009 of PHIs implementation proposals created a binding collective
bargaining agreement, which the Company denies. That case has been stayed by the Court pending
resolution of the strike-related litigation. Management does not expect the outcome of these cases
to have a material adverse effect on our consolidated financial position, results of operations, or
cash flows.
Superior Offshore International Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor Holdings
Inc., ERA Group Inc., ERA Aviation, Inc., and PHI, Inc., Civil Action No. 1:09-cv-00438 on the
docket of the United States District Court for the District of Delaware. This purported class
action was filed on June 12, 2009, on behalf of a class defined to include all direct purchasers of
offshore helicopter services in the Gulf of Mexico from the defendants at any time from January 1,
2001 through December 31, 2005. The suit alleges that the defendants acted jointly to fix,
maintain, or stabilize prices for offshore helicopter services during the above time frame in
violation of the federal antitrust laws. The plaintiff seeks unspecified treble damages,
injunctive relief, costs, and attorneys fees. Defendants motion to dismiss filed on September 4,
2009 is pending. The outcome of this matter cannot be reasonably assessed at this time. The
Company intends to aggressively defend itself in this matter.
11
Operating Leases We lease certain aircraft, facilities, and equipment used in our operations.
The related lease agreements, which include both non-cancelable and month-to-month terms, generally
provide for fixed monthly rentals, and certain real estate leases also include renewal options. We
generally pay all insurance, taxes, and maintenance expenses associated with these aircraft leases,
and some of these leases contain renewal and purchase options at fair market value.
At June 30, 2010, we had approximately $215.0 million in aggregate commitments under operating
leases of which approximately $16.4 million is payable through December 31, 2010, and a total of
$29.8 million is payable over the twelve months ending June 30, 2011. The total lease commitments
include $198.0 million for aircraft and $17.0 million for facility lease commitments, primarily for
our facilities in Lafayette, Louisiana.
We intend to execute a contract to acquire ten medium aircraft related to a new contract with a
customer, which will replace aircraft being used with respect to the current contract. These
deliveries will commence late 2010 and continue over the subsequent three years. The approximate
acquisition cost of all aircraft is $127.0 million. We intend to fund the acquisition of these
aircraft with operating leases.
4. Long-term Debt
As of June 30, 2010, our total long-term indebtedness was $224.8 million, consisting of $200
million of our 7.125% Senior Notes due 2013 and $18.3 million borrowed under our revolving credit
facility due 2011.
On April 12, 2006, we completed the sale of $200 million of 7.125% senior notes. Net proceeds from
the sale of the senior notes were used to repurchase our outstanding $200 million 9.375% senior
notes due 2009 pursuant to a tender offer. The senior notes are due on April 15, 2013, are
unconditionally guaranteed on a senior basis by our domestic subsidiaries and interest is payable
on the senior notes semi-annually on April 15 and October 15. The senior notes and the guarantees
are general, unsecured obligations. We may redeem some or all of these notes at our option at any
time on or after April 15, 2010 at the following redemption prices (expressed as a percentage of
principal amount), plus accrued and unpaid interest to the redemption date: if redeemed during the
12-month period beginning April 15, 2010, 103.563%; if redeemed during the 12-month period
beginning April 15, 2011, 101.781%; and if redeemed during the 12-month period beginning April 15,
2012, 100%. The indenture governing the senior notes contains restrictive covenants, including
limitations on incurring indebtedness, creating liens, selling assets and entering into certain
transaction with affiliates. The covenants also limit our ability to pay cash dividends on common
stock, repurchase or redeem common or preferred equity, prepay subordinated debt and make certain
investments. There are no restrictions on dividends from a subsidiary to the parent company, nor
any restrictions on dividends from the parent company to a subsidiary. Under the indenture, upon
the occurrence of a change in control, each holder of the senior notes has the right to require us
to purchase that holders notes for a cash price equal to 101% of the principal amount of the
senior notes to be purchased. At June 30, 2010, the market value of the notes was approximately
$190.8 million, based on quoted market indicators. We were in compliance with the covenants
applicable to these notes as of June 30, 2010.
Effective August 5, 2009, we executed a new credit agreement with a syndicate of three commercial
banks, which replaced the prior facility, providing a $75 million revolving credit facility
maturing in September 2011. The interest rate is the prime rate plus 100 basis points at June 30,
2010. As of June 30, 2010, we had $24.8 million in borrowings and $5.5 million in letters of
credit outstanding under the facility. The credit agreement includes covenants related to working
capital, funded debt to net worth, and consolidated net worth, and other covenants including
restrictions on additional debt, encumbrances and a change of control. As of June 30, 2010, we
were in compliance with these covenants. The credit agreement is collaterized by accounts
receivable and inventory and guaranteed by our domestic subsidiaries. The agreement contains a
borrowing base of 80% of eligible receivables and 50% of the
12
carrying value of parts. We reviewed interest expense for the quarters and six months ended June
30, 2010 and 2009 that could be capitalized for certain projects and any such amounts were
immaterial.
On April 1, 2010, we purchased two heavy aircraft previously under lease pursuant to purchase
options in the lease contract. This purchase was funded with our revolving line of credit and we
drew $24.7 million for the acquisition. In addition, on April 15, 2010 we funded the payment of
interest on the Senior Notes with $7.0 million from the revolving credit facility. As of June 30,
2010, the principal amount outstanding under the revolving credit facility was $24.8 million.
5. Valuation Accounts
We have established 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 approximately $0.1 million at June 30, 2010 and December 31, 2009.
Revenues related to emergency flights generated by the Companys Air Medical segment are recorded
net of contractual allowances under agreements with third party payors and uncompensated care when
the services are provided. The allowance for contractual discounts was $40.1 million and $32.1
million as of June 30, 2010 and December 31, 2009, respectively. The allowance for uncompensated
care was $29.9 million and $28.1 million as of June 30, 2010 and December 31, 2009, respectively.
The allowance for contractual discounts and estimated uncompensated care as a percentage of gross
accounts receivable are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Gross Accounts Receivable |
|
|
100 |
% |
|
|
100 |
% |
Allowance for Contractual Discounts |
|
|
39 |
% |
|
|
34 |
% |
Allowance for Uncompensated Care |
|
|
29 |
% |
|
|
30 |
% |
We have also established valuation reserves related to obsolete and excess inventory. The
inventory valuation reserves were $11.5 million and $9.2 million at June 30, 2010 and December 31,
2009, respectively.
6. Employees
Employee Incentive Compensation Pursuant to our incentive compensation plans, we accrued $1.1
million and $1.3 million for the quarter and six months ended June 30, 2010. For the quarter and
six months ended June 30, 2009, we accrued $0.3 million and $0.5 million respectively.
We also have a Safety Incentive Plan related to Occupational Safety and Health Administration
recordable incidents, for which we expensed $0.1 million and $0.3 million for the quarter and six
months ended June 30, 2010. For the quarter and six months ended June 30, 2009, we expensed $0.2
million for both periods.
7. Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, applies to all assets and liabilities that are
being measured and reported on a fair value basis. ASC 820 establishes a framework for measuring
fair value in Generally Accepted Accounting Principles, and expands disclosure about fair value
measurements. This statement enables the reader of the financial statements to assess the inputs
used to develop those measurements by establishing a hierarchy for ranking the quality and
reliability of the information used to determine fair values. The statement requires that assets
and liabilities carried at fair value be classified and disclosed in one of the following three
categories:
13
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following table summarizes the valuation of our short-term investments and financial
instruments by the above ASC 820 pricing levels as of the valuation dates listed:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
Quoted prices in |
|
|
Quoted prices in |
|
|
|
active markets for |
|
|
active markets for |
|
|
|
Identical Assets |
|
|
Identical Assets |
|
|
|
(Level 1) |
|
|
(Level 1) |
|
|
|
(Thousands of dollars) |
|
Short-term investments |
|
$ |
76,141 |
|
|
$ |
75,138 |
|
|
|
|
|
|
|
|
|
|
Investments included in other assets |
|
|
3,197 |
|
|
|
4,239 |
|
|
|
|
|
|
|
|
Total |
|
$ |
79,338 |
|
|
$ |
79,377 |
|
|
|
|
|
|
|
|
We hold our short-term investments in a money market fund consisting mainly of government backed
securities, which is classified as a short-term investment. In accordance with ASC 320,
Investments-Debt and Equity Securities, these short-term investments are classified as available
for sale. We have not recorded any unrealized gains or losses associated with short-term
investments as the carrying value approximates fair value at June 30, 2010 and December 31, 2009.
Investments included in other assets consist mainly of investment funds that are highly liquid and
diversified. These investments are amounts related to the liability for the Officers Deferred
Compensation Plan.
8. Recent Accounting Pronouncements
The FASB issued authoritative accounting guidance that became effective in the first quarter 2010
that revises the manner in which entities evaluate whether consolidation is required for variable
interest entities (VIE). Under the revised guidance, the primary beneficiary of a VIE is the
entity that has the power to direct the activities of the VIE that most significantly affect the
VIEs economic performance, and has the obligation to absorb losses or has the right to residual
returns that would potentially be significant to the entity. In conjunction with the adoption of
the new guidance, the Company has reviewed various lease arrangements and other agreements and has
determined that these do not represent a variable interest. The entities through which leases are
executed do not represent VIEs.
9. Shareholders Equity
We had an average of 15.3 million common shares outstanding for the quarters and six months ended
June 30, 2010 and 2009.
10. Condensed Consolidating Financial Information
Our 7.125% Senior Notes are fully and unconditionally guaranteed on a joint and several, senior
basis by all of our wholly-owned Guarantor Subsidiaries.
The following supplemental condensed financial information sets forth, on a consolidated
basis, the balance sheet, statement of operations, and statement of cash flows information for PHI,
Inc. (Parent Company Only) and the Guarantor Subsidiaries. The eliminating entries eliminate
investments in subsidiaries, intercompany balances, and intercompany revenues and expenses.
14
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,718 |
|
|
$ |
966 |
|
|
$ |
|
|
|
$ |
2,684 |
|
Short-term investments |
|
|
76,141 |
|
|
|
|
|
|
|
|
|
|
|
76,141 |
|
Accounts receivable net |
|
|
94,295 |
|
|
|
9,861 |
|
|
|
|
|
|
|
104,156 |
|
Intercompany receivable |
|
|
|
|
|
|
76,990 |
|
|
|
(76,990 |
) |
|
|
|
|
Inventories of spare parts net |
|
|
59,548 |
|
|
|
|
|
|
|
|
|
|
|
59,548 |
|
Other current assets |
|
|
12,875 |
|
|
|
17 |
|
|
|
|
|
|
|
12,892 |
|
Income taxes receivable |
|
|
610 |
|
|
|
|
|
|
|
|
|
|
|
610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
245,187 |
|
|
|
87,834 |
|
|
|
(76,990 |
) |
|
|
256,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
74,186 |
|
|
|
|
|
|
|
(74,186 |
) |
|
|
|
|
Other assets |
|
|
9,352 |
|
|
|
26 |
|
|
|
|
|
|
|
9,378 |
|
Property and equipment net |
|
|
556,286 |
|
|
|
11,712 |
|
|
|
|
|
|
|
567,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
885,011 |
|
|
$ |
99,572 |
|
|
$ |
(151,176 |
) |
|
$ |
833,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
15,195 |
|
|
$ |
752 |
|
|
$ |
|
|
|
$ |
15,947 |
|
Accrued liabilities |
|
|
21,615 |
|
|
|
4,959 |
|
|
|
|
|
|
|
26,574 |
|
Intercompany payable |
|
|
76,990 |
|
|
|
|
|
|
|
(76,990 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
113,800 |
|
|
|
5,711 |
|
|
|
(76,990 |
) |
|
|
42,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
224,787 |
|
|
|
|
|
|
|
|
|
|
|
224,787 |
|
Deferred income taxes and other long-term
liabilities |
|
|
69,904 |
|
|
|
19,675 |
|
|
|
|
|
|
|
89,579 |
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital |
|
|
292,934 |
|
|
|
2,674 |
|
|
|
(2,674 |
) |
|
|
292,934 |
|
Accumulated other comprehensive loss |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
(26 |
) |
Retained earnings |
|
|
183,612 |
|
|
|
71,512 |
|
|
|
(71,512 |
) |
|
|
183,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
476,520 |
|
|
|
74,186 |
|
|
|
(74,186 |
) |
|
|
476,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
885,011 |
|
|
$ |
99,572 |
|
|
$ |
(151,176 |
) |
|
$ |
833,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
15
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,678 |
|
|
$ |
823 |
|
|
$ |
|
|
|
$ |
2,501 |
|
Short-term investments |
|
|
75,138 |
|
|
|
|
|
|
|
|
|
|
|
75,138 |
|
Accounts receivable net |
|
|
83,247 |
|
|
|
11,156 |
|
|
|
|
|
|
|
94,403 |
|
Intercompany receivable |
|
|
|
|
|
|
71,484 |
|
|
|
(71,484 |
) |
|
|
|
|
Inventories of spare parts net |
|
|
61,501 |
|
|
|
|
|
|
|
|
|
|
|
61,501 |
|
Other current assets |
|
|
11,001 |
|
|
|
17 |
|
|
|
|
|
|
|
11,018 |
|
Income taxes receivable |
|
|
740 |
|
|
|
|
|
|
|
|
|
|
|
740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
233,305 |
|
|
|
83,480 |
|
|
|
(71,484 |
) |
|
|
245,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
71,291 |
|
|
|
|
|
|
|
(71,291 |
) |
|
|
|
|
Other assets |
|
|
11,549 |
|
|
|
120 |
|
|
|
|
|
|
|
11,669 |
|
Property and equipment, net |
|
|
535,539 |
|
|
|
12,997 |
|
|
|
|
|
|
|
548,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
851,684 |
|
|
$ |
96,597 |
|
|
$ |
(142,775 |
) |
|
$ |
805,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
13,746 |
|
|
$ |
1,189 |
|
|
$ |
|
|
|
$ |
14,935 |
|
Accrued liabilities |
|
|
19,028 |
|
|
|
4,314 |
|
|
|
|
|
|
|
23,342 |
|
Intercompany payable |
|
|
71,484 |
|
|
|
|
|
|
|
(71,484 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
104,258 |
|
|
|
5,503 |
|
|
|
(71,484 |
) |
|
|
38,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
218,305 |
|
|
|
|
|
|
|
|
|
|
|
218,305 |
|
Deferred
income taxes and other long-term liabilities |
|
|
63,673 |
|
|
|
19,803 |
|
|
|
|
|
|
|
83,476 |
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital |
|
|
292,934 |
|
|
|
2,674 |
|
|
|
(2,674 |
) |
|
|
292,934 |
|
Accumulated other comprehensive
loss |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
Retained earnings |
|
|
172,527 |
|
|
|
68,617 |
|
|
|
(68,617 |
) |
|
|
172,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
465,448 |
|
|
|
71,291 |
|
|
|
(71,291 |
) |
|
|
465,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
851,684 |
|
|
$ |
96,597 |
|
|
$ |
(142,775 |
) |
|
$ |
805,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
16
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended June 30, 2010 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues, net |
|
$ |
123,442 |
|
|
$ |
16,155 |
|
|
$ |
|
|
|
$ |
139,597 |
|
Management fees |
|
|
647 |
|
|
|
|
|
|
|
(647 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
117 |
|
Other, principally interest income |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,211 |
|
|
|
16,155 |
|
|
|
(647 |
) |
|
|
139,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
102,422 |
|
|
|
13,679 |
|
|
|
|
|
|
|
116,101 |
|
Management fees |
|
|
|
|
|
|
647 |
|
|
|
(647 |
) |
|
|
|
|
Selling, general and administrative
expenses |
|
|
7,357 |
|
|
|
321 |
|
|
|
|
|
|
|
7,678 |
|
Equity in net income of consolidated
subsidiaries |
|
|
(905 |
) |
|
|
|
|
|
|
905 |
|
|
|
|
|
Interest expense |
|
|
4,183 |
|
|
|
|
|
|
|
|
|
|
|
4,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,057 |
|
|
|
14,647 |
|
|
|
258 |
|
|
|
127,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
11,154 |
|
|
|
1,508 |
|
|
|
(905 |
) |
|
|
11,757 |
|
Income tax expense |
|
|
4,100 |
|
|
|
603 |
|
|
|
|
|
|
|
4,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
7,054 |
|
|
$ |
905 |
|
|
$ |
(905 |
) |
|
$ |
7,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues, net |
|
$ |
105,519 |
|
|
$ |
17,796 |
|
|
$ |
6 |
|
|
$ |
|
|
|
$ |
123,321 |
|
Management fees |
|
|
712 |
|
|
|
|
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
Loss on dispositions of assets, net |
|
|
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(107 |
) |
Other, principally interest income |
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,189 |
|
|
|
17,796 |
|
|
|
6 |
|
|
|
(712 |
) |
|
|
123,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
92,177 |
|
|
|
12,735 |
|
|
|
|
|
|
|
|
|
|
|
104,912 |
|
Management fees |
|
|
|
|
|
|
712 |
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
Selling,
general and administrative expenses |
|
|
7,786 |
|
|
|
399 |
|
|
|
33 |
|
|
|
|
|
|
|
8,218 |
|
Equity in
net income of consolidated subsidiaries |
|
|
(2,354 |
) |
|
|
|
|
|
|
|
|
|
|
2,354 |
|
|
|
|
|
Interest expense |
|
|
4,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,648 |
|
|
|
13,846 |
|
|
|
33 |
|
|
|
1,642 |
|
|
|
117,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
4,541 |
|
|
|
3,950 |
|
|
|
(27 |
) |
|
|
(2,354 |
) |
|
|
6,110 |
|
Income tax expense |
|
|
875 |
|
|
|
1,580 |
|
|
|
(11 |
) |
|
|
|
|
|
|
2,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
3,666 |
|
|
$ |
2,370 |
|
|
$ |
(16 |
) |
|
$ |
(2,354 |
) |
|
$ |
3,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
17
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2010 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues, net |
|
$ |
227,492 |
|
|
$ |
33,714 |
|
|
$ |
|
|
|
$ |
261,206 |
|
Management fees |
|
|
1,349 |
|
|
|
|
|
|
|
(1,349 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
123 |
|
Other, principally interest income |
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,000 |
|
|
|
33,714 |
|
|
|
(1,349 |
) |
|
|
261,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
193,534 |
|
|
|
26,774 |
|
|
|
|
|
|
|
220,308 |
|
Management fees |
|
|
|
|
|
|
1,349 |
|
|
|
(1,349 |
) |
|
|
|
|
Selling, general and administrative
expenses |
|
|
13,637 |
|
|
|
766 |
|
|
|
|
|
|
|
14,403 |
|
Equity in net income of consolidated
subsidiaries |
|
|
(2,895 |
) |
|
|
|
|
|
|
2,895 |
|
|
|
|
|
Interest expense |
|
|
8,179 |
|
|
|
|
|
|
|
|
|
|
|
8,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,455 |
|
|
|
28,889 |
|
|
|
1,546 |
|
|
|
242,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
16,545 |
|
|
|
4,825 |
|
|
|
(2,895 |
) |
|
|
18,475 |
|
Income tax expense |
|
|
5,460 |
|
|
|
1,930 |
|
|
|
|
|
|
|
7,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
11,085 |
|
|
$ |
2,895 |
|
|
$ |
(2,895 |
) |
|
$ |
11,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries (1) |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues, net |
|
$ |
205,733 |
|
|
$ |
34,514 |
|
|
$ |
26 |
|
|
$ |
|
|
|
$ |
240,273 |
|
Management fees |
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
|
(1,382 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165 |
|
Other, principally interest income |
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,408 |
|
|
|
34,514 |
|
|
|
26 |
|
|
|
(1,382 |
) |
|
|
240,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
179,756 |
|
|
|
27,283 |
|
|
|
|
|
|
|
|
|
|
|
207,039 |
|
Management fees |
|
|
|
|
|
|
1,381 |
|
|
|
1 |
|
|
|
(1,382 |
) |
|
|
|
|
Selling,
general and administrative expenses |
|
|
14,997 |
|
|
|
984 |
|
|
|
61 |
|
|
|
|
|
|
|
16,042 |
|
Equity in
net income of consolidated subsidiaries |
|
|
(2,898 |
) |
|
|
|
|
|
|
|
|
|
|
2,898 |
|
|
|
|
|
Interest expense |
|
|
7,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,773 |
|
|
|
29,648 |
|
|
|
62 |
|
|
|
1,516 |
|
|
|
230,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
7,635 |
|
|
|
4,866 |
|
|
|
(36 |
) |
|
|
(2,898 |
) |
|
|
9,567 |
|
Income tax expense |
|
|
1,894 |
|
|
|
1,946 |
|
|
|
(14 |
) |
|
|
|
|
|
|
3,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
5,741 |
|
|
$ |
2,920 |
|
|
$ |
(22 |
) |
|
$ |
(2,898 |
) |
|
$ |
5,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
18
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2010 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
25,786 |
|
|
$ |
1,687 |
|
|
$ |
|
|
|
$ |
27,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(32,388 |
) |
|
|
(1,544 |
) |
|
|
|
|
|
|
(33,932 |
) |
Proceeds from asset dispositions |
|
|
1,164 |
|
|
|
|
|
|
|
|
|
|
|
1,164 |
|
Purchase of short-term investments, net |
|
|
(1,004 |
) |
|
|
|
|
|
|
|
|
|
|
(1,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(32,228 |
) |
|
|
(1,544 |
) |
|
|
|
|
|
|
(33,772 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from line of credit, net |
|
|
6,482 |
|
|
|
|
|
|
|
|
|
|
|
6,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
6,482 |
|
|
|
|
|
|
|
|
|
|
|
6,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
40 |
|
|
|
143 |
|
|
|
|
|
|
|
183 |
|
Cash and cash equivalents, beginning of
period |
|
|
1,678 |
|
|
|
823 |
|
|
|
|
|
|
|
2,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
1,718 |
|
|
$ |
966 |
|
|
$ |
|
|
|
$ |
2,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2009 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
15,992 |
|
|
$ |
1,673 |
|
|
$ |
2,403 |
|
|
$ |
|
|
|
$ |
20,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(26,047 |
) |
|
|
(1,646 |
) |
|
|
|
|
|
|
|
|
|
|
(27,693 |
) |
Proceeds from asset dispositions |
|
|
8,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,897 |
|
Purchase of short-term investments, net |
|
|
(16,952 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,952 |
) |
Deposits on aircraft |
|
|
7,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(26,502 |
) |
|
|
(1,646 |
) |
|
|
|
|
|
|
|
|
|
|
(28,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from line of credit |
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash
equivalents |
|
|
(160 |
) |
|
|
27 |
|
|
|
2,403 |
|
|
|
|
|
|
|
2,270 |
|
Cash and cash equivalents, beginning of
period |
|
|
559 |
|
|
|
406 |
|
|
|
194 |
|
|
|
|
|
|
|
1,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
399 |
|
|
$ |
433 |
|
|
$ |
2,597 |
|
|
$ |
|
|
|
$ |
3,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the
guarantors subsidiaries amounts. |
19
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and the notes thereto as well as our audited
consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for
the year ended December 31, 2009, managements discussion and analysis, risk factors and other
information contained therein.
Forward-Looking Statements
All statements other than statements of historical fact contained in this Form 10-Q and other
periodic reports filed by PHI, 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, projects and similar words and expressions are intended to identify forward-looking
statements. Forward-looking statements are based on a number of assumptions about future events
and are subject to significant risks, uncertainties, and other factors that may cause the Companys
actual results to differ materially from the expectations, beliefs, and estimates expressed or
implied in such forward-looking statements. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, no assurance can be given that such
assumptions will prove correct or even approximately correct. Factors that could cause the
Companys results to differ materially from the expectations expressed in such forward-looking
statements include but are not limited to the following: unexpected variances in flight hours, the
effect on demand for our services caused by volatility of oil and gas prices and the level of
exploration and production activity in the Gulf of Mexico, the effect on the demand for air
services as a result of the Deepwater Horizon incident, the effect on our operating costs of
volatile fuel prices, the availability of capital required to acquire aircraft, environmental
risks, hurricanes and other adverse weather conditions, the activities of our competitors, changes
in government regulation, unionization, operating hazards, risks related to operating in foreign
countries, the ability to obtain adequate insurance at an acceptable cost and the ability of the
Company to develop and implement successful business strategies. For a more detailed description
of risks, see the Risk Factors section in Item 1.A. of our Form 10-K for the year ended December
31, 2009 and in Part II Item 1.A. of our subsequently filed quarterly reports on Form 10-Q (the
SEC Filings). All forward-looking statements in this document are expressly qualified in their
entirety by the cautionary statements in this paragraph and the Risk Factors section of our SEC
Filings. PHI undertakes no obligation to update publicly any forward-looking statements, whether
as a result of new information, future events, or otherwise.
Overview
In April 2010, the Deepwater Horizon rig, engaged in deepwater drilling operations at BPs Macondo
well in the Gulf of Mexico, sank after a blowout, resulting in the discharge of substantial amounts
of oil until mid-July 2010, when stopped by a temporary cap. Efforts to permanently seal the well
continue to date. On May 28, 2010, the Department of Interior imposed a six-month moratorium on
offshore deepwater drilling operations, the enforcement of which has been preliminarily enjoined,
and on July 12, 2010, the Department of Interior imposed another similar moratorium set to expire
November 30, 2010, which is currently being challenged in court. As a result, deepwater drilling
operations in the Gulf of Mexico have been suspended. In addition, as a result of regulatory
actions by the Department of Interior, there has been a de facto moratorium on drilling in the
shallow waters of the Gulf of Mexico. BP is incurring significant costs related to the clean up of
and damages caused by the oil spill and stopping the flow of oil from the well. BP is one of our
major customers and accounted for approximately 14% of our total revenues in 2009.
As a result of these events, we have experienced increased flight activity, and expect that this
will continue until such time as the flow of oil from the well has been permanently stopped and
other flight activity associated with the clean-up is completed. We estimate that the flight hours
related to this
20
increased activity were approximately 7% of total flight hours for the second quarter. Offsetting
these increased flight hours are decreased flight hours resulting from the suspension of deepwater
drilling activities in the Gulf of Mexico. Many of the deepwater drilling rigs we have been
servicing are still on location (although not drilling), and therefore we are still conducting crew
changes to those rigs. It is not possible to estimate how long these rigs will remain in their
current status, but if these drilling rigs are demobilized or leave the Gulf of Mexico, there will
be a further adverse affect to our flight activity. We estimate that the adverse affect to our
flight hours related to deepwater drilling rigs that have already demobilized are approximately 500
to 600 flight hours per month. See Risk Factors for further discussion of the potential future
impacts of the Macondo incident on our business.
Operating revenues for the three months ended June 30, 2010 were $139.6 million, compared to $123.3
million for the three months ended June 30, 2009, an increase of $16.3 million. Oil and Gas
operating revenues increased $15.8 million for the quarter ended June 30, 2010, related primarily
to increased medium and heavy aircraft revenue due to an increase in deepwater activity in the Gulf
of Mexico. Approximately half of the increase in Oil and Gas revenues for the quarter is a result
of increased activity by BP related to the Deepwater Horizon incident. There was also an increase
of $1.6 million in revenue related to fuel charges due to an increase in fuel prices. Total fuel
cost is included in direct expense and reimbursement of a portion of these costs above a contracted
per-gallon amount is included in revenue. Operating revenues in the Air Medical segment increased
$0.5 million primarily due to increased revenues related to hospital based contracts. Operating
revenues in the independent provider programs decreased $0.2 million due to decreased patient
transports. Contributing to this decrease was the closure of four bases in 2009 and two bases in
2010 that were generating less than acceptable transport volumes. We did not incur any significant
costs as a result of these closures.
Flight hours for the quarter ended June 30, 2010 were 40,258 compared to 39,246 for the quarter
ended June 30, 2009. Oil and Gas segments flight hours increased 901 hours due to an increase in
deepwater activity in the Gulf of Mexico as discussed above. Air Medical segment flight hours
increased 111 hours for the quarter ended June 30, 2010. Transports in the independent provider
programs were 5,002 for the quarter ended June 30, 2010, compared to transports of 5,345 for the
quarter ended June 30, 2009, a decrease of 343 transports. Of this decrease, approximately 240
transports were due to the base closures. We believe the remaining decrease in transports was
primarily attributable to the current economic environment.
Net segment profit for the Oil and Gas segment was $18.7 million for the quarter ended June 30,
2010, compared to $13.7 million for the quarter ended June 30, 2009. The increase of $5.0 million
was primarily due to increased revenue of $15.8 million primarily in medium and heavy aircraft
revenue, partly offset by increases in direct expense of $10.9 million. These items are discussed
in detail in the Segment Discussion below.
Net segment profit for the Air Medical segment was $3.7 million for the quarter ended June 30,
2010, compared to $2.4 million for the quarter ended June 30, 2009. The $1.3 million increase was
due to an increase of $0.5 million in operating revenue, a $0.2 million decrease in direct expense
and a $0.6 million decrease in selling, general and administrative expenses primarily related to
the six base closures and cost reductions. This is discussed further in the Segment Discussion
below.
Net earnings for the quarter ended June 30, 2010 were $7.1 million, or $0.46 per diluted share,
compared to $3.7 million for the quarter ended June 30, 2009, or $0.24 per diluted share. Pre-tax
earnings were $11.8 million for the quarter ended June 30, 2010, compared to $6.1 million the same
period in 2009. The increase was primarily related to the Oil and Gas segment operating profit
increase related to increased deepwater activity in the Gulf of Mexico.
Operating revenues for the six months ended June 30, 2010 were $261.2 million, compared to $240.3
million for the six months ended June 30, 2009, an increase of $20.9 million. Oil and Gas
operating revenues increased $25.9 million for the six months ended June 30, 2010, related
primarily to increased
21
deepwater activity in the Gulf of Mexico. Approximately 30% of the increase in Oil and Gas
revenues for the period is a result of increased activity related to the Deepwater Horizon
incident. There was also an increase in revenue of $3.3 million related to fuel charges due to an
increase in fuel prices. Total fuel cost is included in direct expense and reimbursement of a
portion of these costs above a contracted per-gallon amount is included in revenue. Oil and Gas
revenues for the six months ended June 30, 2009 were adversely affected approximately $3.1 million
due to the grounding of certain aircraft following an accident in January 2009. Operating revenues
in the Air Medical segment decreased $5.0 million primarily due to decreased transports in the
independent provider programs. Contributing to this decrease was the closure of four bases in 2009
and two bases in 2010 that were generating less than acceptable transport volumes and also
unfavorable weather conditions in the first quarter of 2010. We did not incur any significant
costs as a result of the closures.
Flight hours for the six months ended June 30, 2010 were 74,870 compared to 74,310 for the six
months ended June 30, 2009. Oil and Gas segments flight hours increased 1,457 hours due to an
increase in deepwater activity in the Gulf of Mexico. Air Medical segment flight hours decreased
1,004 hours for the six months ended June 30, 2010, primarily due to decreased independent provider
transports. Transports in the independent provider programs were 8,975 for the six months ended
June 30, 2010, compared to 10,303 transports for the six months ended June 30, 2009. Of this
decrease of 1,328 transports, approximately 440 transports were due to the base closures and
approximately 250 were due to unfavorable weather conditions in the first quarter of 2010. We
believe the remaining decrease in transports was primarily attributable to the current economic
environment.
Net segment profit for the Oil and Gas segment was $33.2 million for the six months ended June 30,
2010, compared to $26.8 million for the six months ended June 30, 2009. The increase of $6.4
million was due to the increased medium and heavy aircraft revenue, partially offset by increases
in direct expense of $19.8 million. These items are discussed in detail in the Segment Discussion
below.
Net segment profit for the Air Medical segment was $4.4 million for the six months ended June 30,
2010, compared $1.1 million for the six months ended June 30, 2009. The $3.3 million increase was
primarily due to a $7.5 million decrease in direct expense. The decrease in direct expense was
primarily related to termination of a warranty program for certain aircraft, cost savings related
to the closing of six bases and reductions in selling, general and administrative costs. In
addition, there was increased hospital-based contract revenue, offset in part by a decrease in
revenue in the independent provider programs due to decreased transports as previously mentioned.
Net earnings for the six months ended June 30, 2010 were $11.1 million, or $0.72 per diluted share,
compared to $5.7 million for the six months ended June 30, 2009, or $0.38 per diluted share.
Pre-tax earnings were $18.5 million for the six months ended June 30, 2010, compared to $9.6
million for the same period in 2009. The increase was primarily related to the Oil and Gas segment
operating profit increase related to increased deepwater activity in the Gulf of Mexico, as
discussed above and in the Segment Discussion below. The Air Medical segment operating profit
increase primarily related to the decrease in direct expense due to termination of the warranty
program for certain aircraft, cost savings related to the closing of six bases and reductions in
selling, general and administrative costs.
On April 1, 2010, we purchased two heavy aircraft previously under lease pursuant to purchase
options in the lease contract. This purchase was funded with our revolving line of credit and we
drew $24.7 million for the acquisition. In addition, on April 15, 2010, we funded the payment of
interest on the Senior Notes with $7.0 million from the revolving credit facility. As of June 30,
2010, the principal amount outstanding under the revolving credit facility was $24.8 million, which
was reduced to $17.3 million at July 31, 2010.
We intend to execute a contract to acquire ten medium aircraft related to a new contract with a
customer, which will replace aircraft being used with respect to the current contract. These
deliveries will commence late 2010 and continue over the subsequent three years. The approximate
acquisition cost of
22
all aircraft is $127.0 million. We intend to fund the acquisition of these aircraft with operating
leases.
Operating Statistics
The following tables present certain non-financial operational statistics for the quarters and six
months ended June 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Flight hours: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
31,142 |
|
|
|
30,241 |
|
|
|
58,178 |
|
|
|
56,721 |
|
Air Medical (1) |
|
|
9,116 |
|
|
|
9,005 |
|
|
|
16,207 |
|
|
|
17,211 |
|
Technical Services |
|
|
|
|
|
|
|
|
|
|
485 |
|
|
|
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
40,258 |
|
|
|
39,246 |
|
|
|
74,870 |
|
|
|
74,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air Medical Transports (2) |
|
|
5,002 |
|
|
|
5,345 |
|
|
|
8,975 |
|
|
|
10,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
Aircraft operated at period end: |
|
|
|
|
|
|
|
|
Oil and Gas (3) |
|
|
164 |
|
|
|
158 |
|
Air Medical (4) |
|
|
85 |
|
|
|
89 |
|
Technical Services |
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
Total (3) (4) |
|
|
253 |
|
|
|
251 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Flight hours include 2,273 flight hours associated with hospital-based contracts, compared
to 2,362 flight hours in the prior year quarter, and 4,073 flight hours year-to-date, compared
to 4,233 in the prior year-to-date. |
|
(2) |
|
Represents individual patient transports for the period. |
|
(3) |
|
Includes nine aircraft as of June 30, 2010 and 2009 that are customer owned. |
|
(4) |
|
Includes seven aircraft as of June 30, 2010 and 2009 that are customer owned. |
Results of Operations
Quarter Ended June 30, 2010 compared with Quarter Ended June 30, 2009
Combined Operations
Revenues Operating revenues for the three months ended June 30, 2010 were $139.6
million, compared to $123.3 million for the three months ended June 30, 2009, an increase of $16.3
million. Oil and Gas operating revenues increased $15.8 million for the quarter ended June 30,
2010, related primarily to increased medium and heavy aircraft revenue due to an increase in
deepwater activity in the Gulf of Mexico. These aircraft operate at higher rates as compared to
light aircraft. Approximately half of the increase in Oil and Gas revenues for the quarter is a
result of increased activity by BP related to the Deepwater Horizon incident. The net increase in
revenue related to the deepwater was partially offset by a decrease in deepwater drill rig support
as some drilling rigs demobilized. We are still conducting crew change support for a number of
deepwater drilling rigs (although they are not in a drilling mode). It is not possible to estimate
when or if these drilling rigs might demobilize or leave the Gulf of Mexico. There was also an
increase of $1.6 million in revenue related to fuel charges due to an increase in fuel prices.
Total fuel cost is included in direct expense and reimbursement of a portion of these costs above a
contracted per-gallon amount is included in revenue. Operating revenues in the Air Medical segment
increased $0.5 million primarily due to increased revenues related to hospital based
contracts. Operating revenues in the independent provider programs decreased $0.2 million due to
decreased patient transports. Contributing to this decrease was the closure of four bases in 2009
and two bases in 2010 that were
23
generating less than acceptable transport volumes. We did not incur any significant costs as
a result of these closures.
Flight hours for the quarter ended June 30, 2010 were 40,258 compared to 39,246 for the quarter
ended June 30, 2009. Oil and Gas segments flight hours increased 901 hours due to an increase in
deepwater activity in the Gulf of Mexico. Flight hours increased as a result of support related to
the Deepwater Horizon incident, but were offset to some extent by the demobilization of some
deepwater drilling rigs we previously supported. We are still supporting some deepwater drilling
rigs that remained on site, although they are not conducting drilling operations. Air Medical
segment flight hours increased 111 hours for the quarter ended June 30, 2010. Transports in the
independent provider programs were 5,002 for the quarter ended June 30, 2010, compared to 5,345 for
the quarter ended June 30, 2009, a decrease of 343 transports. Of this decrease, approximately 240
transports were due to the base closures. We believe the remaining decrease in transports was
primarily attributable to the current economic environment.
Other Income and Gains Gain on dispositions of assets was $0.1 million for the three
months ended June 30, 2010, compared to a loss on disposition of assets of $0.1 million for the
three months ended June 30, 2009. These amounts represent gains and losses on sales of assets that
no longer meet our strategic needs.
Other income was less than $0.1 million for the three months ended June 30, 2010, compared to $0.1
million for the three months ended June 30, 2009.
Direct Expenses Direct operating expense was $116.1 million for the three months ended
June 30, 2010, compared to $104.9 million for the three months ended June 30, 2009, an increase of
$11.2 million. This increase was primarily due to increased fuel expense ($2.4 million) due to
increased per-gallon fuel costs and increased fuel usage related to flight activity for medium and
heavy aircraft, and increased employee compensation expense ($3.3 million) due primarily to
compensation rate increases. There were also increases in aircraft insurance expense ($0.4
million), depreciation expense ($0.4 million), and aircraft lease expense ($0.9 million), due to
additional aircraft added to the fleet. Insurance expense increased due to an increase in rates of
approximately 25%. Aircraft parts usage increased ($2.3 million) and component repairs costs
increased ($1.4 million). Other items increased, net ($1.0 million). These increases were offset
by a decrease in aircraft warranty costs ($0.9 million) primarily due to termination of a warranty
program in the first quarter of 2010 for certain aircraft.
Selling, General, and Administrative Expenses Selling, general and administrative
expenses were $7.7 million for the three months ended June 30, 2010, compared to $8.2 million for
the three months ended June 30, 2009. This decrease is primarily due to decreased legal fees ($0.5
million), and a decrease in other items, ($0.1 million).
Interest Expense Interest expense was $4.2 million for the three months ended June 30,
2010, compared to $4.0 million for the three months ended June 30, 2009. The increase is due to
additional borrowings under our revolving credit facility.
Income Taxes Income tax expense for the three months ended June 30, 2010 was $4.7
million compared to $2.4 million for the three months ended June 30, 2009. The effective tax rate
was 40% for the three months ended June 30, 2010 and 2009.
Net Earnings Our net income for the three months ended June 30, 2010 was $7.1 million
compared to $3.7 million for the three months ended June 30, 2009. Earnings before income taxes
for the three months ended June 30, 2010 were $11.8 million compared to $6.1 million for the same
period in 2009. Earnings per diluted share were $0.46 for the current quarter compared to earnings
per diluted share of $0.24 for the prior year quarter. The increase for the quarter ended June 30,
2010 is primarily related to the increase in Oil and Gas segment operating profit related to
increased deepwater activity in the Gulf of
24
Mexico. We had 15.3 million common shares outstanding during the three months ended June 30, 2010
and 2009.
Segment Discussion
Oil and Gas Oil and Gas segment revenues were $94.7 million for the three months ended June 30,
2010, compared to $79.0 million for the three months ended June 30, 2009, an increase of $15.7
million. Flight hours were 31,142 for the current quarter compared to 30,241 for the same quarter
in the prior year. The increase in revenue is due to an increase in medium and heavy aircraft
revenue due to an increase in deepwater activity in the Gulf of Mexico. These aircraft operate at
higher rates as compared to light aircraft. Approximately half of the increase in Oil and Gas
revenues for the quarter is a result of increased activity related to the Deepwater Horizon
incident. The net increase in revenue related to the deepwater was partially offset by a decrease
in deepwater drill rig support as some drilling rigs demobilized. We are still conducting crew
change support for a number of deepwater drilling rigs (although they are not in a drilling mode).
It is not possible to estimate when or if these drilling rigs might demobilize or leave the Gulf of
Mexico. There was also an increase in revenue related to fuel charges due to an increase in fuel
prices and increased fuel usage related to medium and heavy aircraft. Total fuel cost is included
in direct expense and reimbursement of a portion of these costs above a contracted per-gallon
amount is included in revenue.
The number of aircraft in the segment was 164 at June 30, 2010, compared to 158 aircraft at June
30, 2009. We have sold or disposed of three light aircraft in the Oil and Gas segment since June
30, 2009. We added six new aircraft to the Oil and Gas segment since June 30, 2009, consisting of
two medium and four heavy aircraft. Intersegment aircraft transfers account for the remaining
amount.
Direct expense in our Oil and Gas segment was $75.8 million for the three months ended June 30,
2010, compared to $65.0 million for the three months ended June 30, 2009, an increase of $10.8
million. Direct expenses increased as a result of additional flight activity of medium and heavy
aircraft and also due to additional heavy aircraft acquired in 2009 being operational for the full
period in 2010. Employee compensation expense increased ($2.6 million) primarily due to
compensation rate increases and overtime incurred primarily as a result of the additional work in
the Gulf of Mexico due to the Deepwater Horizon incident. There were also increases in pilot
training expenses ($0.3 million), aircraft parts usage ($1.8 million), outside repair costs ($0.4
million) related to component repairs, and aircraft warranty costs ($1.0 million). Aircraft
insurance increased ($0.3 million) and depreciation expense increased ($0.4 million). Fuel expense
increased ($2.2 million) due to an increase in the cost of fuel per gallon and an increase in fuel
usage related to medium and heavy aircraft activity. Total fuel cost is included in direct expense
and reimbursement of a portion of fuel costs above a contracted per-gallon amount is included in
revenue. Aircraft lease expense increased ($0.9 million). Other items increased, net ($0.9
million).
Our Oil and Gas segments operating income was $18.7 million for the three months ended June 30,
2010, compared to $13.7 million for the three months ended June 30, 2009. Operating margins were
20% for the three months ended June 30, 2010, compared to 17% for the three months ended June 30,
2009. The increase in operating income and operating margin is due to increased revenues as
discussed above. The Oil and Gas segment revenues are primarily driven by contracted aircraft and
flight hours. Costs are primarily fixed and are driven by the number of aircraft. The variable
portion is driven by flight hours.
Air Medical Air Medical segment revenues were $43.1 million for the three months ended June 30,
2010, compared to $42.6 million for the three months ended June 30, 2009, an increase of $0.5
million. The increase was primarily due to increased revenue related to hospital-based contracts
offset by a decrease in revenues in the independent provider programs. Contributing to this
decrease was the closure of four bases in 2009 and two bases in 2010 that were generating less than
acceptable transport volumes. Total patient transports were 5,002 for the three months ended June
30, 2010, compared to 5,345 for the three months ended June 30, 2009, a decrease of 343 transports.
There was a decrease of approximately
25
240 transports due to the base closures. We believe the remaining decrease in transports was
primarily attributable to the current economic environment.
Flight hours were 9,116 for the three months ended June 30, 2010, compared to 9,005 for the three
months ended June 30, 2009. The number of aircraft in the segment was 85 at June 30, 2010,
compared to 89 at June 30, 2009. Since June 30, 2009, we transferred three medium aircraft to the
Oil and Gas segment. We also disposed of one fixed wing aircraft since June 30, 2009.
Direct expense in our Air Medical segment was $38.4 million for the three months ended June 30,
2010, compared to $38.6 million for the three months ended June 30, 2009. The $0.2 million
decrease was primarily due to the decrease in aircraft warranty costs ($1.9 million) due to
termination of the warranty program in the first quarter of 2010 for certain aircraft. This
decrease was partially offset by increases in employee compensation expense ($0.6 million) due
primarily to compensation rate increases, component repair costs ($0.9 million), and fuel costs
($0.3 million). Other items increased, net ($0.1 million).
Selling, general and administrative expenses were $1.0 million for the three months ended June 30,
2010, compared to $1.6 million for the three months ended June 30, 2009. The $0.6 million decrease
is due to decreased employee costs ($0.3 million) in the Air Medical segment, decreased contract
services expenses ($0.1 million) and other items, net ($0.2 million). Air Medical operations are
headquartered in Phoenix, Arizona, where we maintain significant separate facilities and
administrative staff dedicated to this segment. Those costs are charged directly to the Air
Medical segment, resulting in higher selling, general and administrative expenses as compared to
our other reportable segments.
Our Air Medical segments operating income was $3.7 million for the three months ended June 30,
2010, compared to $2.4 million for the three months ended June 30, 2009. Operating margins were 9%
for the six months ended June 30, 2010, compared to 6% for the six months ended June 30, 2009. The
improvement in operating income is primarily due to the closure of six locations, the related
reductions in personnel costs, and reductions in selling, general and administrative expenses.
Technical Services Technical Services revenues were $1.8 million for the three months ended June
30, 2010, compared to $1.7 million for the three months ended June 30, 2009. Direct expenses in
our Technical Services segment were $1.9 million for the three months ended June 30, 2010, compared
to $1.3 million for the three months ended June 30, 2009. The $0.6 million increase in direct
expense was due to increased employee compensation costs (0.1 million), aircraft parts usage ($0.1
million), outside services ($0.1 million), and other items, net ($0.3 million). Our Technical
Services segments operating loss was $0.1 million for the three months ended June 30, 2010,
compared to operating income of $0.4 million for the three months ended June 30, 2009.
Six Months Ended June 30, 2010 compared with Six Months Ended June 30, 2009
Combined Operations
Revenues Operating revenues for the six months ended June 30, 2010 were $261.2 million,
compared to $240.3 million for the six months ended June 30, 2009, an increase of $20.9 million.
Oil and Gas operating revenues increased $25.9 million for the six months ended June 30, 2010,
related primarily to increased medium and heavy aircraft revenue due to increased deepwater
activity in the Gulf of Mexico. These aircraft operate at higher rates as compared to light
aircraft. Approximately 30% of the increase in Oil and Gas revenues for the six months ended June
30, 2010, is a result of increased activity related to the Deepwater Horizon incident. Also, see
the discussion in the Overview related to deepwater drilling activity. There was also an increase
in revenue related to fuel charges due to an increase in fuel per-gallon cost. Total fuel cost is
included in direct expense and reimbursement of a portion of these costs above a contracted
per-gallon amount is included in revenue. Oil and Gas revenues for the six months ended June 30,
2009 were adversely affected by approximately $3.1 million due to the grounding of certain aircraft
due to an accident in January 2009. Operating revenues in the Air Medical segment
26
decreased $5.0 million primarily due to decreased transports in the independent provider programs.
Contributing to this decrease was the closure of four bases in 2009 and two bases in 2010 that were
generating less than acceptable transport volumes. We did not incur any significant costs as a
result of these closures.
Flight hours for the six months ended June 30, 2010 were 74,870 compared to 74,310 for the six
months ended June 30, 2009. Oil and Gas segments flight hours increased 1,457 hours due to an
increase in deepwater activity in the Gulf of Mexico. Air Medical segment flight hours decreased
1,004 hours for the six months ended June 30, 2010, primarily due to decreased independent provider
transports. Transports in the independent provider programs were 8,975 for the six months ended
June 30, 2010, compared to 10,303 transports for the six months ended June 30, 2009. Of this
decrease of 1,328 transports, approximately 440 transports were due to the base closures and
approximately 250 were due to unfavorable weather conditions in the first quarter of 2010. We
believe the remaining decrease in transports was primarily attributable to the current economic
environment.
Other Income and Gains Gain on dispositions of assets was $0.1 million for the six
months ended June 30, 2010, compared to a gain of $0.2 million for the six months ended June 30,
2009. These amounts represent gains on sales of aircraft that no longer meet our strategic needs.
Other income was less than $0.1 million for the six months ended June 30, 2010, compared to $0.1
million for the six months ended June 30, 2009.
Direct Expenses Direct operating expense was $220.3 million for the six months ended
June 30, 2010, compared to $207.0 million for the six months ended June 30, 2009, an increase of
$13.3 million. This increase was primarily due to increased fuel expense ($4.3 million) due to
increased per-gallon fuel costs compared to the prior year quarter and also increased fuel usage
related to medium and heavy aircraft activity. There was also increased employee compensation
expense ($4.9 million) due primarily to compensation rate increases. There were increases in
aircraft insurance expense ($1.5 million) and aircraft rent ($3.7 million) due to additional
aircraft added to the fleet during 2009. Insurance expense also increased due to an increase in
rates of approximately 25%. Aircraft parts usage increased ($2.8 million) and component repairs
costs increased ($2.9 million). These increases were offset by a decrease in aircraft warranty
costs ($5.9 million) primarily due to termination of a warranty program in the third quarter of
2009 which reduced ongoing warranty costs and an additional termination in the first quarter of
2010 for certain aircraft, which resulted in a credit of $4.3 million recorded to direct expense in
the first quarter of 2010. All new aircraft come with a manufacturers warranty that covers
defective parts. The warranty we terminated was an additional warranty purchased from the
manufacturer to cover replacement or refurbishment of aircraft parts on certain aircraft in
accordance with manufacturer specifications. A monthly fee was paid to the manufacturer based on
flight hours for the aircraft covered under this warranty. In return, the manufacturer provided
replacement parts required for maintaining the aircraft. Other items decreased, net ($0.9
million).
Selling, General, and Administrative Expenses Selling, general and administrative
expenses were $14.4 million for the six months ended June 30, 2010, compared to $16.0 million for
the six months ended June 30, 2009. The $1.6 million decrease was due to decreased legal fees
($1.2 million) and decreases in other items, net ($0.4 million). The decrease in legal fees, as
compared to the prior year, was related to litigation with the pilots union.
Interest Expense Interest expense was $8.2 million for the six months ended June 30,
2010, compared to $7.9 million for the six months ended June 30, 2009. Increased borrowings under
our revolving line of credit account for the increase.
Income Taxes Income tax expense for the six months ended June 30, 2010 was $7.4 million
compared to $3.8 million for the six months ended June 30, 2009. The effective tax rate was 40%
for the six months ended June 30, 2010 and 2009.
27
Net Earnings Our net income for the six months ended June 30, 2010 was $11.1 million
compared to $5.7 million for the six months ended June 30, 2009. Earnings before income taxes for
the six months ended June 30, 2010 were $18.5 million compared to $9.6 million for the same period
in 2009. Earnings per diluted share were $0.72 for the six months ended June 30, 2010, compared to
earnings per diluted share of $0.38 for the prior year period. The increase for the six months
ended June 30, 2010 is primarily related to the Oil and Gas segment operating profit increase
related to increased deepwater activity in the Gulf of Mexico. In addition, the Air Medical segment
operating profit increased primarily due to decreased direct expense as a result of terminating an
aircraft warranty program for certain aircraft. We had 15.3 million common shares outstanding
during the six months ended June 30, 2010 and 2009.
Segment Discussion
Oil and Gas Oil and Gas segment revenues were $179.7 million for the six months ended June 30,
2010, compared to $153.8 million for the six months ended June 30, 2009, an increase of $25.9
million. Flight hours were 58,178 for the six months ended June 30, 2010, compared to 56,721 for
the same period in 2009. The increase in Oil and Gas revenues was related primarily to increased
medium and heavy aircraft flight hours and revenue due to increased deepwater activity in the Gulf
of Mexico. These aircraft operate at higher rates as compared to light aircraft. Approximately
30% of the increase in Oil and Gas revenues for the period is a result of increased activity
related to the Deepwater Horizon incident. There was also an increase in revenue related to fuel
charges due to an increase in fuel prices. Total fuel cost is included in direct expense and
reimbursement of a portion of these costs above a contracted per-gallon amount is included in
revenue. Oil and Gas revenues for the six months ended June 30, 2009 were adversely affected by
approximately $3.1 million due to the grounding of certain aircraft due to an accident in January
2009.
Direct expense in our Oil and Gas segment was $146.1 million for the six months ended June 30,
2010, compared to $126.2 million for the six months ended June 30, 2009, an increase of $19.9
million. Direct expenses increased as a result of additional flight activity of medium and heavy
aircraft and also due to additional heavy aircraft acquired in 2009 being operational for the full
period in 2010. Employee compensation expense increased ($4.6 million) primarily due to
compensation rate increases and overtime incurred primarily as a result of additional work in the
Gulf of Mexico due to the Deepwater Horizon incident. There were increases in aircraft rent ($3.7
million), aircraft insurance ($1.2 million), and aircraft depreciation ($0.4 million) primarily as
a result of additional aircraft in the fleet. Fuel expense increased ($4.0 million) as a result of
increased per-gallon fuel costs and also due to an increase in fuel usage related to medium and
heavy aircraft activity. Total fuel cost is included in direct expense and reimbursement of a
portion of these costs above a contracted per-gallon amount is included in revenue. We also
experienced increases in aircraft parts usage ($2.5 million), component repair costs ($1.6
million), aircraft warranty costs ($0.6 million), and pilot training costs ($1.2 million).
Aircraft warranty costs include a credit of $1.2 million in the first quarter of 2010 related to
the termination of a warranty program on certain aircraft. Other items increased, net ($0.1
million).
Selling, general and administrative expenses were $0.4 million for the six months ended June 30,
2010, compared to $0.7 million for the six months ended June 30, 2009. The decrease was primarily
related to decreased employee compensation expense.
Our Oil and Gas segments operating income was $33.2 million for the six months ended June 30,
2010, compared to $26.8 million for the six months ended June 30, 2009. The $6.4 million increase
was due to the increase in revenues of $25.9 million and offset by the increase in direct expenses
of $19.8 million. Operating margins were 18% for the six months ended June 30, 2010, compared to
17% for the six months ended June 30, 2009. The increase in operating income and margin is
primarily due to increased medium and heavy aircraft revenue due to increased deepwater activity in
the Gulf of Mexico, and also due to the Deepwater Horizon incident. The Oil and Gas segment
revenues are primarily driven by
28
contracted aircraft and flight hours. Costs are primarily fixed and are driven by the number of
aircraft, and a portion is variable which is driven by flight hours.
Air Medical Air Medical segment revenues were $76.7 million for the six months ended June 30,
2010, compared to $81.7 million for the six months ended June 30, 2009, a decrease of $5.0 million
or 6%. The decrease was related to decreased patient transports in the independent provider
programs and also due to the closure of six locations. Patient transports were 8,975 for the six
months ended June 30, 2010, compared to 10,303 for the six months ended June 30, 2009, a decrease
of 1,328 transports. Patient transports decreased by approximately 440 due to the base closures
and approximately 250 due to unfavorable weather conditions in the current year as compared to the
prior year. We believe the remaining decrease in transports was primarily attributable to the
current economic environment. Flight hours were 16,207 for the six months ended June 30, 2010,
compared to 17,211 for the six months ended June 30, 2009. This decrease was due to the decrease
in independent provider transports.
Direct expense in our Air Medical segment was $70.0 million for the six months ended June 30, 2010,
compared to $77.5 million for the six months ended June 30, 2009. The $7.5 million decrease is
primarily due to decreased aircraft warranty costs ($6.5 million) due primarily to terminations of
warranty programs for certain aircraft in the first quarter of 2010, and in the third quarter of
2009 that reduced ongoing warranty costs. Included in the decrease is a $3.1 million credit
recorded in segment direct expense in the first quarter of 2010. All new aircraft come with a
manufacturers warranty that covers defective parts. The warranty we terminated was an additional
warranty purchased from the manufacturer to cover replacement or refurbishment of aircraft parts on
certain aircraft in accordance with manufacturer specifications. A monthly fee was paid to the
manufacturer based on flight hours for the aircraft covered under this warranty. In return, the
manufacturer provided replacement parts required for maintaining the aircraft. Other items
decreased, net ($1.0 million).
Selling, general and administrative expenses were $2.3 million for the six months ended June 30,
2010, compared to $3.1 million for the six months ended June 30, 2009. The $0.8 million decrease
was primarily due to decreased employee costs ($0.2 million) and decreased expenses for outside
services ($0.6 million).
Our Air Medical segments operating income was $4.4 million for the six months ended June 30, 2010,
compared to $1.1 million for the six months ended June 30, 2009. Operating margins were 6% and 1%
for the six months ended June 30, 2010 and 2009, respectively. Operating income for the six months
ended June 30, 2010 includes a credit of $3.1 million related to the termination of a
manufacturers warranty program. This credit along with decreased aircraft warranty costs
contributed to the improved operating margin in the Air Medical segment.
Technical Services Technical Services revenues were $4.9 million for the six months ended June
30, 2010, compared to $4.8 million for the six months ended June 30, 2009. Direct expenses in our
Technical Services segment were $4.2 for the six months ended June 30, 2010, compared to $3.3
million for the six months ended June 30, 2009. The $0.9 million increase in direct expense was
primarily due to increased employee compensation costs ($0.3 million), aircraft parts usage ($0.1
million), outside services ($0.1 million), and other items, net ($0.4 million). Our Technical
Services segments operating income was $0.6 million for the six months ended June 30, 2010,
compared to $1.4 million for the six months ended June 30, 2009. Operating margins were 12% for
the six months ended June 30, 2010, compared to 30% for the six months ended June 30, 2009. The
decrease in operating income and margin is due to the increase in direct expenses.
Technical Services provides maintenance and repairs performed for our existing customers that own
their aircraft. These services are generally labor intensive with higher operating margins as
compared to other segments. In addition, the Technical Services segment also conducts flight
operations which are unrelated to the other segments. Those flight operations are typically
conducted in the first and fourth quarters each year.
29
Liquidity and Capital Resources
General
Our ongoing liquidity requirements arise primarily from the funding of working capital needs, the
acquisition or leasing of aircraft, the maintenance and refurbishment of aircraft, improvement of
facilities, and acquisition of equipment and inventory. Our principal sources of liquidity
historically have been net cash provided by our operations and borrowings under our revolving
credit facility, as augmented by the issuance of our Senior Notes in 2002, which were refinanced in
2006, and the sale of non-voting common stock in 2005 and 2006. To the extent we do not use cash,
short-term investments or borrowings to finance our aircraft acquisitions, we can typically enter
into operating leases to fund these acquisitions.
We expect cash flow from operations and borrowings under our revolving credit facility will fund
our cash requirements for the next twelve months.
Cash Flow
Our cash position was $2.7 million at June 30, 2010 compared to $2.5 million at December 31, 2009.
Short-term investments were $76.1 million at June 30, 2010, compared to $75.1 million at December
31, 2009. Working capital was $213.5 million at June 30, 2010, compared to $207.0 million at
December 31, 2009, an increase of $6.5 million. The increase in working capital was primarily due
to an increase in accounts receivable trade of $9.6 million, due to increased revenues, and a $1.7
million increase in prepaid expenses, partially offset by a $4.2 million increase in accounts
payable and accrued liabilities.
Net cash provided by operating activities was $27.5 million for the six months ended June 30, 2010,
compared to $20.1 million for the six months ended June 30, 2009, an increase of $7.4 million. The
increase in earnings before tax of $8.9 million compared to the prior year period account for the
improvement in cash from operations.
Net cash used in investing activities was $33.8 million for the six months ended June 30, 2010,
compared to $28.1 million for the same period in 2009. Capital expenditures were $33.9 million for
the six months ended June 30, 2010, compared to $27.7 million for the six months ended June 30,
2009. Capital expenditures for 2010 included $28.4 million for aircraft purchases, upgrades, and
refurbishments. Capital expenditures for 2009 included $25.5 million for aircraft purchases,
upgrades, and refurbishments. Proceeds from aircraft sales and dispositions for the six months
ended June 30, 2010 were $1.2 million compared to $8.9 million for the six months ended June 30,
2009.
Net financing activities were $6.5 million for the six months ended June 30, 2010. The line of
credit was used in April 2010 to purchase aircraft on an operating lease ($24.7 million) and to
fund the interest payment on the Senior Notes ($7.0 million). We paid $25.5 million of the amount
drawn with cash from operations. Financing activities for the same period in 2009 provided $10.4
million from our line of credit also used to purchase three light aircraft off lease.
Long Term Debt
Effective August 5, 2009, we executed a new credit agreement with a syndicate of three commercial
banks, which replaced the prior facility, providing a $75 million revolving credit facility
maturing in September 2011. The interest rate is the prime rate plus 100 basis points. As of June
30, 2010, we had $24.8 million in borrowings. During the six months ended June 30, 2010 and 2009,
the weighted average effective interest rate on amounts borrowed under the facility was 4.25% and
3.58%, respectively. We were in compliance with the covenants of our revolving credit facility at
June 30, 2010 and expect to remain in compliance with these covenants through December 31, 2010.
30
The $200 million 7.125% Senior Notes mature April 15, 2013, and interest is payable semi-annually
on April 15 and October 15. The notes contain restrictive 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 and sales of assets. At June 30, 2010, the
market value of the notes was approximately $190.8 million, based on quoted market indicators. We
were in compliance with the covenants applicable to these notes as of June 30, 2010 and expect to
remain in compliance with these covenants through December 31, 2010.
On April 1, 2010, we purchased two heavy aircraft off lease pursuant to purchase options in the
lease contract. This purchase was funded with our revolving line of credit and we drew $24.7
million for the acquisition. In addition, on April 15, 2010 we funded the payment of interest on
the Senior Notes with $7.0 million from the revolving credit facility. As of June 30, 2010, the
principal amount outstanding under the revolving credit facility was $24.8 million, which was
reduced to $17.3 million at July 31, 2010.
Contractual Obligations
The table below sets out our contractual obligations as of June 30, 2010 related to our revolving
credit facility, operating lease obligations, and the 7.125% Senior Notes due 2013. The operating
leases are not recorded as liabilities on our balance sheet. Each contractual obligation included
in the table contains various terms, conditions, and covenants that, if violated, accelerate the
payment of that obligation. We were in compliance with the covenants applicable to these
contractual obligations as of June 30, 2010, and expect to remain in compliance through the year
ending December 31, 2010. As of June 30, 2010, we leased 23 aircraft included in the lease
obligations below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beyond |
|
|
|
Total |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2014 |
|
|
|
(Thousands of dollars) |
|
Aircraft lease
obligations |
|
$ |
198,004 |
|
|
$ |
14,612 |
|
|
$ |
30,290 |
|
|
$ |
30,957 |
|
|
$ |
31,322 |
|
|
$ |
31,322 |
|
|
$ |
59,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other lease
obligations |
|
|
16,949 |
|
|
|
1,742 |
|
|
|
2,998 |
|
|
|
2,040 |
|
|
|
1,498 |
|
|
|
1,313 |
|
|
|
7,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
224,787 |
|
|
|
|
|
|
|
24,787 |
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
439,740 |
|
|
$ |
16,354 |
|
|
$ |
58,075 |
|
|
$ |
32,997 |
|
|
$ |
232,820 |
|
|
$ |
32,635 |
|
|
$ |
66,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We intend to execute a contract to acquire ten medium aircraft related to a new contract with
a customer, which will replace aircraft being used with respect to the current contract. These
deliveries will commence late 2010 and continue over the subsequent three years. The approximate
acquisition cost of all aircraft is $127.0 million. We intend to fund the acquisition of these
aircraft with operating leases.
New Accounting Pronouncements
For a discussion of applicable new accounting pronouncements, see Note 8 to the Condensed
Consolidated Financial Statements.
31
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings are subject to changes in short-term interest rates due to the variable interest rate
on our revolving credit facility. Based on the $24.8 million in borrowings outstanding at June 30,
2010, a ten percent increase (0.425%) in the interest rate to 4.675% would reduce our annual
pre-tax earnings approximately $0.1 million.
Our Senior Notes bear interest at a fixed rate of 7.125% and therefore changes in market interest
rates do not affect our interest payment obligations on the notes. The fair market value of our
7.125% Senior Notes will vary as changes occur to general market interest rates, the remaining
maturity of the notes, and our credit worthiness. At June 30, 2010, the market value of the notes
was approximately $190.8 million, based on quoted market indications.
Item 4. CONTROLS AND PROCEDURES
The Companys management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by
this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures were effective as of such date to ensure
that information required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange Commission,
including to ensure that such information is accumulated and communicated to management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
There have been no changes in our internal control over financial reporting that occurred during
our most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
32
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
With respect to the previously reported litigation involving the union representing our domestic
pilots, by Order dated July 9, 2010, the Court dismissed both PHIs and the Unions claims that the
other had violated the Railway Labor Act by bargaining in bad faith before exercising self-help in
August-September 2006. Then, by Order dated July 30, 2010, the Court dismissed all claims that PHI
violated the Railway Labor Act in the manner in which it returned pilots to work following the
strike. The parties may yet proceed to trial, on the claims of 47 pilots, that PHI improperly
deducted certain sums from their final pre-strike paychecks. Such trial would commence on or about
August 25, 2010. In addition, on December 31, 2009, the OPEIU filed another case against the
Company in the Western District of Louisiana, previously set for trial on July 5, 2011, asserting
that its acceptance in 2009 of PHIs implementation proposals created a binding collective
bargaining agreement, which the Company denies. That case has been stayed by the Court pending
resolution of the strike-related litigation. Management does not expect the outcome of these cases
to have a material adverse effect on our consolidated financial position, results of operations, or
cash flows. For further discussion of these matters, refer to Item 3. Commitments and
Contingencies, Legal Matters, of this Form 10-Q.
For additional information regarding Legal Proceedings, see Item 3 of our Annual Report on Form
10-K for the year ended December 31, 2009.
Item 1. A. RISK FACTORS
The Macondo incident could have a material adverse effect on our business.
For information about the effects of the Macondo incident on our business during the second quarter
of 2010, and estimated anticipated near-term effects, see our Managements Discussion and Analysis
of Financial Condition and Results of Operations in Part I. Item 2 of this report.
Our business is highly dependent on the offshore oil and gas industry, with approximately 65% of
our total 2009 operating revenue attributable to helicopter support for offshore oil and gas
exploration and production companies, substantially all of which was in the Gulf of Mexico. Of
this revenue, approximately 65% was attributable to deepwater operations. Many of the helicopters
we have purchased recently are larger aircraft intended to service deepwater activities, and the
margins we earn on these aircraft are generally higher than on smaller aircraft. In addition, we
derive a significant amount of our revenue from a small number of major and independent oil and gas
companies, and BP accounted for approximately 14% of our total revenues in 2009.
We believe the Macondo incident is likely to result in increased costs for our exploration and
production company customers operating in the Gulf of Mexico. Increased costs may cause customers
to decrease their activity in the Gulf of Mexico, may decrease demand for our services, and may
increase pricing pressure for our services. We cannot predict whether or to what extent drilling
activities will resume in the Gulf of Mexico. Further, the potential for, or the ultimate
enactment of, laws and regulations that increase the costs of, or impose additional restrictions
on, drilling or operating in the Gulf of Mexico, may cause customers and potential customers to
substantially limit activities in or even exit the Gulf of Mexico. Accordingly, the Macondo
incident could have a material adverse effect on our business.
33
New and proposed health care legislation and regulation could have a material impact on our
business.
On March 23, 2010, the Patient Protection and Affordable Care Act became law, enacting
comprehensive health care reform in the United States. Many provisions of the law that could
impact our business will not become effective until 2014 or later, and require implementation
through regulations that have not yet been promulgated. Accordingly, we are currently evaluating
the new legislation and cannot predict with any certainty what the potential impact of the new law
will be on our business. The legislation aims to expand health insurance coverage to uninsured
Americans, and, among other things, expands Medicaid, requires U.S. citizens and legal residents to
have health insurance coverage or pay a tax penalty, and assesses fees on employers who do not
offer qualifying coverage to employees. The legislation also has provisions aimed at controlling
health care costs. With respect to our Air Medical division, we may see a decrease in
reimbursement amounts from Medicaid, Medicare and commercial insurance payors, but may also see an
increase in payments from individuals who were previously uninsured. Federal and state governments
may propose and adopt other health care initiatives or changes to current laws and regulations, the
impact of which cannot be predicted.
New and proposed health care legislation and regulation could increase the cost of providing
medical benefits to employees, which could have an adverse impact on our results of operations.
Recently passed legislation, described above, and future proposed legislation and regulation, could
increase the cost of providing medical insurance to our employees. The cost and other effects,
which may include the cost of compliance and cost of insurance, cannot be determined with
certainty. If our costs increase and we are unable to pass the costs to our customers, there may
be a material adverse impact on our results of operations.
Item 1.A. Risk Factors of our 2009 Form 10-K includes a discussion of our other risk factors.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. (REMOVED AND RESERVED)
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS
(a) Exhibits
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3.1
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(i)
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Composite Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to PHIs Report on Form 10-Q filed on August 7, 2008). |
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(ii)
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Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.1 to PHIs Report on Form 8-K filed December 18, 2007). |
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4.1 |
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Amended and Restated Loan Agreement dated as of March 31, 2008 by and among
PHI, Inc., Air Evac Services, Inc., PHI Tech Services, Inc. (formerly Evangeline
Airmotive, Inc.), and International Helicopter Transport, Inc. and Whitney National
Bank (incorporated by reference to Exhibit 4.1 to PHIs Report on Form 10-Q filed on
May 8, 2008). |
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4.2 |
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First Amendment dated as of August 5, 2009 to Amended and Restated Loan
Agreement dated as of March 31, 2008 by and among PHI, Inc., Air Evac Services, Inc.,
PHI Tech Services, Inc. (formerly Evangeline Airmotive, Inc.), and International
Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to
Exhibit 4.2 to PHIs Report on Form 10-Q filed on August 10, 2009). |
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4.3 |
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Indenture dated April 12, 2006 among PHI, Inc., the Subsidiary Guarantors named
therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.2
to PHIs Report on Form 8-K filed on April 13, 2006). |
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31.1 |
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chairman and Chief Executive Officer. |
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31.2 |
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer. |
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32.1 |
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chairman and Chief Executive Officer. |
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32.2 |
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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PHI, Inc.
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August 4, 2010 |
By: |
/s/ Al A. Gonsoulin
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Al A. Gonsoulin |
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Chairman and Chief Executive Officer |
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August 4, 2010 |
By: |
/s/ Michael J. McCann
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Michael J. McCann |
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Chief Financial Officer |
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