e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007
or
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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)
2001 SE Evangeline Thruway
Lafayette, Louisiana 70508
(337) 235-2452
(Address, including zip
code and telephone number of principal executive office)
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Louisiana
(State or other jurisdiction of incorporation or organization)
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72-0395707
(I.R.S. Employer Identification No.) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Name of Each Exchange on Which Registered |
Voting Common Stock
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The NASDAQ Global Market |
Non-Voting Common Stock
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The NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes: o No: þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes: o No: þ
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this form 10-K. þ
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. (Check One):
Large accelerated filer:
o
Accelerated filer:
þ
Non-accelerated filer:
o
Smaller
reporting company:
o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes: o No: þ
The aggregate market value of the voting and non-voting common stock held by non-affiliates of
the registrant as of June 30, 2007 was $458,988,668 based upon the last sales prices of the voting
and non-voting common stock on June 30, 2007, as reported on the NASDAQ Global Market.
The number of shares outstanding of each of the registrants classes of common stock, as of
February 29, 2008 was:
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Voting Common Stock |
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2,852,616 |
shares. |
Non-Voting Common Stock |
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12,438,992 |
shares. |
Documents Incorporated by Reference
Portions of the registrants definitive Information Statement for the 2008 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Form 10-K.
PHI, INC.
INDEX FORM 10-K
i
PART I
Forward-Looking Statements
All statements other than statements of historical fact contained in this Form 10-K and other
periodic reports filed by 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 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 1A below. 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 below. PHI undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future events, or otherwise.
ITEM 1. BUSINESS
General
Since our incorporation in 1949, our primary business has been the safe and reliable transportation
of personnel and, to a lesser extent, parts and equipment, to, from, and among offshore platforms
for customers engaged in the oil and gas exploration, development, and production industry,
principally in the Gulf of Mexico. We are a leading provider of helicopter transportation services
in the Gulf of Mexico. We also provide helicopter services to the oil and gas industry
internationally, and to non-oil and gas customers such as health care providers and U.S.
governmental agencies such as the National Science Foundation. We also provide helicopter
maintenance and repair services to certain customers. At December 31, 2007, we owned or operated
approximately 237 aircraft domestically and internationally.
Description of Operations
We operate in three business segments: Oil and Gas, Air Medical, and Technical Services. For
financial information regarding our operating segments and the geographic areas in which they
operate, see Note 10 of the Notes to Consolidated Financial Statements included elsewhere in this
Form 10-K.
During the quarter ended March 31, 2007, we combined our oil and gas customers that were previously
included in our International segment into our Domestic Oil and Gas segment, and eliminated the
term Domestic from that segment. Additionally, the contract work previously included in the
International segment for the National Science Foundation is now included in our Technical Services
segment. We therefore now have three reportable segments: Oil and Gas, Air Medical, and Technical
Services. All prior periods have been recast to conform to the 2007 presentation.
A segments operating income 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 is charged directly to the segment and a portion that is allocated.
Direct charges represent the vast majority of segment selling, general and administrative expenses.
Allocated selling, general and administrative expenses is based primarily on total segment costs
as a percentage of total operating costs.
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Air Medical operations are headquartered in Phoenix, AZ, 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. Unallocated overhead
consists primarily of corporate selling, general, and administrative expenses that we do not
allocate to the reportable segments.
Oil and Gas. Our Oil and Gas segment 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, Angola and the Democratic Republic of Congo. We currently operate 163 aircraft in this
segment.
Oil and gas exploration and production companies and other offshore oil service companies use our
services primarily for routine transportation of personnel and equipment, to transport personnel
during medical and safety emergencies, and to evacuate personnel during the threat of hurricanes
and other adverse weather conditions. Most of our customers have entered into contracts for
transportation services for a term of one year or longer, although some hire us on an ad hoc or
spot basis.
Most of our Oil and Gas aircraft are available for hire by any customer, but some are dedicated to
individual customers. Our helicopters have flight ranges up to 495 miles with a 30-minute fuel
reserve and thus are capable of servicing many of the deepwater oil and gas operations from 50 to
200 miles offshore. (See Item 2 Properties, for specific information by aircraft model.)
Operating revenue from the Oil and Gas segment is derived mainly from long-term 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 operation costs,
including costs for pilots and maintenance personnel.
Operating revenues from the Oil and Gas segment accounted for 64%, 66%, and 67% of consolidated
operating revenues during the years ended December 31, 2007, 2006, and 2005, respectively.
Air Medical. We provide air medical transportation services for hospitals and emergency service
agencies where we operate as an independent provider of medical services in 15 states using
approximately 70 aircraft at 62 separate locations. The Air Medical segments operating revenues
accounted for 34%, 32%, and 31% of consolidated operating revenues for the years ended December 31,
2007, 2006, and 2005, 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 the 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 an 18 month
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 $31.9 million, $29.9 million, and
$24.2 million as of December 31, 2007, 2006 and 2005, respectively. The allowance for
uncompensated care was $19.1 million, $20.1 million, and $11.5 million as of December 31, 2007,
2006, and 2005, respectively.
Provisions for contractual discounts and estimated uncompensated care are as follows:
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Revenue |
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Accounts Receivable |
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Year Ended December 31, |
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Year Ended December 31, |
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2007 |
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2006 |
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2005 |
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2007 |
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2006 |
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2005 |
Gross billings |
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100 |
% |
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100 |
% |
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100 |
% |
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100 |
% |
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100 |
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100 |
% |
Provision for contractual discounts |
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46 |
% |
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43 |
% |
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42 |
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33 |
% |
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32 |
% |
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34 |
% |
Provision for uncompensated care |
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10 |
% |
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10 |
% |
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9 |
% |
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20 |
% |
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22 |
% |
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16 |
% |
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Amounts attributable to Medicaid, Medicare, Insurance and Self Pay as a percentage of net Air
Medical revenues are as follows:
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Year Ended December 31, |
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2007 |
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2006 |
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2005 |
Medicaid |
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10 |
% |
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12 |
% |
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14 |
% |
Medicare |
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16 |
% |
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14 |
% |
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10 |
% |
Insurance |
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66 |
% |
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62 |
% |
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60 |
% |
Self Pay |
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8 |
% |
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12 |
% |
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16 |
% |
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 generate
approximately 8% of the segments revenues.
Technical Services. The Technical Services segment provides helicopter repair and overhaul
services for flight operations customers that own their aircraft. Costs associated with these
services are primarily labor, and customers are generally billed at a percentage above cost. We
also operate four aircraft for the National Science Foundation in Antarctica under this segment.
Operating revenues from the Technical Services segment accounted for 2% of consolidated operating
revenues for the years ended December 31, 2007, 2006, and 2005.
Seasonal Aspects
Seasonality affects our operations in three principal ways: weather conditions are generally poorer
in December, January, and February; tropical storms and hurricanes are prevalent in the Gulf of
Mexico in late summer and early fall; and reduced daylight hours restrict our operations in winter,
which result in reduced flight hours. When a tropical storm or hurricane is about to enter or
begins developing in the Gulf of Mexico, flight activity may temporarily increase because of
evacuations of offshore workers, but during the storms, we are unable to operate in the area of the
storm and can incur significant expense in moving our aircraft to safer locations. For a more
detailed discussion of these events, see the Adverse Weather Conditions paragraph in the Risk
Factors section of Item 1A. Our operating results vary from quarter to quarter, depending on
seasonal factors and other factors outside of our control. As a result, full year results are not
likely to be a direct multiple of any particular quarter or combination of quarters.
Inventories
We carry a significant inventory of aircraft parts to support the maintenance and repair of our
helicopters. Many of these inventory items are parts that have been removed from aircraft,
refurbished according to manufacturers and FAA specifications, and returned to inventory. The cost
to refurbish these parts is expensed as incurred. We use systematic procedures to estimate the
value of these used parts, which include consideration of their condition and continuing utility.
The carrying values of inventory reported in our financial statements are affected by these
estimates and may change from time to time if our estimated values change.
Customers
Our principal customers are major integrated energy companies and independent exploration and
production companies. We also serve oil and gas service companies, hospitals and medical programs
under the independent provider model, government agencies, and other aircraft owners and operators.
Our largest customer is in our Oil and Gas segment and accounted for 15%, 17%, and 14% of
operating revenues for the years ended December 31, 2007, 2006, and 2005, respectively. We have
entered into contracts with most of our customers for terms of at least one year, although most
contracts include provisions permitting earlier termination.
Competition
Our business is highly competitive in each of our markets, and many of our contracts are awarded
after competitive bidding. Factors that impact competition include safety, reliability, price,
availability of appropriate aircraft and quality of service. Some of our competitors recently have
undertaken expansion and/or upgrades of their fleets.
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We are a leading operator of helicopters in the Gulf of Mexico. There are two major and several
small competitors operating in the Gulf of Mexico market. Although most oil companies
traditionally contract for most specialty services associated with offshore operations, including
helicopter services, certain of our customers and potential customers in the oil industry operate
their own helicopter fleets, or have the capability to do so if they so elect.
In the air medical market, we compete against national and regional firms, and there is usually
more than one competitor in each local market. In addition, we compete against hospitals that
operate their own helicopters and, in some cases, against ground ambulances as well.
Employees
As of December 31, 2007, we employed approximately 2,254 full-time employees and 45 part-time
employees, including approximately 643 pilots and 1,656 aircraft maintenance and support personnel.
As previously reported, the Company is involved in Federal Court litigation in the Western District
of Louisiana with the OPEIU (the Office and Professional Employees International Union), the union
representing domestic pilots, over claims of bad faith bargaining and issues relating to the return
to work of striking pilots. Pilots continue to work under the 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.
A trial on strike-related matters is currently set to start on November 3, 2008. It is not
possible to assess the outcome of that litigation, as these matters are still in the discovery
stage. However, management is of the opinion that the Companys claims and defenses have
substantial merit.
The Company has continued to hire and train pilots to meet staffing needs for new and existing
aircraft. As of February 14, 2008, the pilot work force was 646.
Environmental Matters
We are subject to federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the environment and establish standards for the
treatment, storage, recycling, and disposal of toxic and hazardous wastes. Operating and
maintaining helicopters requires that we use, store, and dispose of materials that are subject to
federal and state environmental regulation. We periodically conduct environmental site surveys at
our facilities, and determine whether there is a need for environmental remediation based on these
surveys.
Availability of SEC filings and other information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to any of these reports are available free of charge through our web site:
www.phihelico.com. These reports are available as soon as reasonably practicable after we file
them with the Securities and Exchange Commission (SEC). You may also read and copy any of the
materials that we file with the SEC at the SECs Public Reference Room at 100 F. Street, N.E.,
Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy
and information statements, and other information regarding issuers that file electronically with
the SEC. The SECs website address is www.sec.gov.
ITEM 1A. Risk Factors
All phases of our operations are subject to significant uncertainties, risks, and other influences.
Important factors that could cause our actual results to differ materially from anticipated
results or other expectations include the following:
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RISKS INHERENT IN OUR BUSINESS
Our operations are affected by adverse weather conditions and seasonal factors.
We are subject to three types of weather-related or seasonal factors:
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the tropical storm and hurricane season in the Gulf of Mexico; |
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poor weather conditions that often prevail during winter and can develop in any season; and |
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reduced daylight hours during the winter months. |
Poor visibility, high winds and heavy precipitation can affect the operation of helicopters and
significantly reduce our flight hours. A significant portion of our operating revenue is dependent
on actual flight hours and a substantial portion of our direct costs is fixed. Thus, prolonged
periods of adverse weather can materially and adversely affect our operating revenues and net
earnings.
In the Gulf of Mexico, the months of December, January and February have more days of adverse
weather conditions than the other months of the year. Also, June through November is tropical
storm and hurricane season in the Gulf of Mexico, with August and September typically being the
most active months. During tropical storms, we are unable to operate in the area of the storm and
can incur significant expense in moving our aircraft to safer locations. In addition, as most of
our facilities are located along the Gulf of Mexico coast, tropical storms and hurricanes may cause
substantial damage to our property, including helicopters that we are unable to relocate.
Because the fall and winter months have fewer hours of daylight, our flight hours are generally
lower at those times, which typically results in a reduction in operating revenues during those
months. Currently, only 50 of the 163 helicopters used in our oil and gas operations are equipped
to fly under instrument flight rules, or IFR, which enables these aircraft, when manned by
IFR-rated pilots and co-pilots, to operate when poor visibility or darkness prevents flight by
aircraft that can fly only under visual flight rules, or VFR. Not all of our pilots are IFR rated.
We may not be able to obtain acceptable customer contracts covering some of our new helicopters,
and there will be a delay between the time that a helicopter is delivered to us and the time that
it can begin generating revenues.
We are substantially expanding and upgrading our medium and heavy helicopter fleet. Many of our
new oil and gas helicopters may not be covered by customer contracts when they are placed into
service, and we cannot assure you as to when we will be able to utilize these new helicopters or on
what terms. In addition, with respect to those helicopters that will be covered by customer
contracts when they are placed into service, our contract terms generally are too short to recover
our cost of purchasing the helicopter at current rates. Thus, we are subject to the risk that we
will be unable to recoup our investment in the helicopters.
Once a new helicopter is delivered to us, we generally spend between two and five months installing
mission-specific and/or customer-specific equipment before we place it into service. As a result,
there can be a significant delay between the delivery date for a new helicopter and the time that
it is able to generate revenues for us.
There is also a possibility that our customers may request new helicopters in lieu of our existing
helicopters, which could adversely affect the utilization of our existing fleet.
Our contracts generally can be terminated or downsized by our customers without penalty.
Most of our fixed-term contracts contain provisions permitting early termination by the customer,
sometimes with as little as 30 days notice for any reason and generally without penalty. In
addition, many of our contracts permit our customers to decrease the number of aircraft under
contract with a corresponding decrease in the fixed monthly payments without penalty. As a result,
you should not place undue reliance on our customer contracts or the terms of those contracts.
Increased governmental regulations could increase our costs or reduce our ability to operate
successfully.
Our operations are regulated by a number of federal and state agencies. All of our flight
operations are regulated by the Federal Aviation Administration, or FAA. Aircraft accidents are
subject to the jurisdiction of the National Transportation Safety Board. Standards relating to the
workplace health and safety are monitored by the federal
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Occupational Safety and Health Administration, or OSHA. We are also subject to various federal and
state environmental statutes.
The FAA has jurisdiction over many aspects of our business, including personnel, aircraft and
ground facilities. We are required to have an Air Taxi Certificate, granted by the FAA, to
transport personnel and property in our helicopters. This certificate contains operating
specifications that allow us to conduct our present operations, but it is potentially subject to
amendment, suspension or revocation in accordance with procedures set forth in the Federal Aviation
Act. The FAA conducts regular inspections regarding the safety, training and general regulatory
compliance of our U.S. aviation operations. Additionally, the FAA requires us to file reports
confirming our continued compliance.
FAA regulations require that at least 75% of our voting securities be owned or controlled by
citizens of the U.S. or one of its possessions, and that our president and at least two-thirds of
our directors be U.S. citizens. Our Chief Executive Officer and all of our directors are U.S.
citizens, and our organizational documents provide for the automatic reduction in voting power of
each share of voting common stock owned or controlled by a non-U.S. citizen if necessary to comply
with these regulations.
We are subject to significant regulatory oversight by OSHA and similar state agencies. We are also
subject to the Communications Act of 1934 because of our ownership and operation of a radio
communications flight-following network throughout the Gulf of Mexico.
Numerous other federal statutes and rules regulate our offshore operations and those of our
customers, pursuant to which the federal government has the ability to suspend, curtail or modify
certain or all offshore operations. A suspension or substantial curtailment of offshore oil and
gas operations for any prolonged period would have an immediate and materially adverse effect on
us. A substantial modification of current offshore operations could adversely affect the economics
of such operations and result in reduced demand for our services.
The helicopter services business is highly competitive.
All segments of our business are highly competitive. Many of our contracts are awarded after
competitive bidding, and the competition for those contracts generally is intense. The principal
aspects of competition are safety, price, reliability, availability and service.
We have two major competitors and several small competitors operating in the Gulf of Mexico, and
most of our customers and potential customers could operate their own helicopter fleets if they
chose to do so. At least one of our primary competitors is in the process of significantly
expanding its fleet.
Our Air Medical segment competes for business primarily 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, but must 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. Under both models, we compete against national and regional companies,
and there is usually more than one competitor in each local market. In addition, we compete
against hospitals that operate their own helicopters and, in some cases, against ground ambulances
as well.
The failure to maintain our safety record would seriously harm our ability to attract new customers
and maintain our existing customers.
A favorable safety record is one of the primary factors a customer reviews in selecting an aviation
provider. If we fail to maintain our safety and reliability record, our ability to attract new
customers and maintain our current customers will be materially adversely affected.
Helicopter operations involve risks that may not be covered by our insurance or may increase the
cost of our insurance.
The operation of helicopters inherently involves a high degree of risk. Hazards such as aircraft
accidents, collisions, fire and adverse weather are hazards that must be managed by providers of
helicopter services and may result in loss of life, serious injury to employees and third parties,
and losses of equipment and revenues.
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We maintain hull and liability insurance on our aircraft, which insures us against physical loss
of, or damage to, our aircraft and against certain legal liabilities to others. In addition, we
carry war risk, expropriation, confiscation and nationalization insurance for our aircraft involved
in international operations. In some instances, we are covered by indemnity agreements from our
customers in lieu of, or in addition to, our insurance. Our aircraft are not insured for loss of
use.
While we believe that our insurance and indemnification arrangements provide reasonable protection
for most foreseeable losses, they do not cover all potential losses and are subject to deductibles,
retentions, coverage limits and coverage exceptions such that severe casualty losses, or the
expropriation or confiscation of significant assets could materially and adversely affect our
financial condition or results of operations. The occurrence of an event that is not fully covered
by insurance could have a material adverse impact on our financial condition, results of
operations, and cash flows.
Our air medical operations expose us to numerous special risks, including collection risks, high
start-up costs and potential medical malpractice claims.
We expanded our Air Medical operations significantly from 2004 to 2006. These operations are
highly competitive and expose us to a number of risks that we do not encounter in our oil and gas
operations. For instance, the fees for our air medical services generally are paid by individual
patients, insurance companies, or government agencies such as Medicare and Medicaid. As a result,
our profitability in this business depends not only on our ability to generate an acceptable volume
of patient transports, but also on our ability to collect our transport fees. We are not permitted
to refuse service to patients based on their inability to pay.
As a result of our recent expansion, even if we are able to generate an acceptable volume of
patient transports, we cannot assure you that our new markets will be profitable for us. We
generally incurred significant startup costs and lower utilization rates when we entered new air
medical markets, which impacted our profitability. Finally, we employ paramedics, nurses, and
other medical professionals for these operations, which can give rise to medical malpractice claims
against us, which, if not fully covered by our medical malpractice insurance, could materially
adversely affect our financial condition and results of operations.
Our international operations are subject to political, economic and regulatory uncertainty.
Our international operations, which represented approximately 5% of our total operating revenues
for the year ended December 31, 2007, are subject to a number of risks inherent in operating in
lesser developed countries, including:
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political, social and economic instability; |
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terrorism, kidnapping and extortion; |
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potential seizure or nationalization of assets; |
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import-export quotas; and |
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currency fluctuations or devaluation. |
Additionally, our competitiveness in international markets may be adversely affected by government
regulation, including regulations requiring:
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the awarding of contracts to local contractors; |
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the employment of local citizens; and |
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the establishment of foreign subsidiaries with significant
ownership positions reserved by the foreign government for local
ownership. |
Our failure to attract and retain qualified personnel could adversely affect us.
Our ability to attract and retain qualified pilots, mechanics, nurses, paramedics and other highly
trained personnel will be an important factor in determining our future success. Many of our
customers require pilots of aircraft that service them to have inordinately high levels of flight
experience. The market for these experienced and highly trained personnel is extremely
competitive. Accordingly, we cannot assure you that we will be successful in our
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efforts to attract and retain such persons. Some of our pilots and mechanics, and those of our
competitors, are members of the U.S. military reserves and could be called to active duty. If
significant numbers of such persons are called to active duty, it would reduce the supply of such
workers, possibly curtailing our operations and likely increasing our labor costs.
RISKS SPECIFIC TO OUR COMPANY
We are highly dependent on the offshore oil and gas industry.
Approximately 60% of our 2007 operating revenue was attributable to helicopter support for domestic
offshore oil and gas exploration and production companies. Our business is highly dependent on the
level of activity by oil and gas companies, particularly in the Gulf of Mexico. The level of
activity by our customers operating in the Gulf of Mexico depends on factors that we cannot
control, such as:
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the supply of, and demand for, oil and natural gas and market expectations regarding supply and demand; |
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weather-related or other natural causes; |
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actions of OPEC, and Middle Eastern and other oil producing countries, to control prices or change production levels; |
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general economic conditions in the United States and worldwide; |
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war, civil unrest or terrorist activities; |
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governmental regulation; and |
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the price and availability of alternative fuels. |
Any substantial or extended decline in the prices of oil and natural gas could depress the level of
helicopter activity in support of exploration and production activity, and thus have a material
adverse effect on our business, results of operations and financial condition.
Additionally, the Gulf of Mexico is generally considered to be a mature area for oil and gas
exploration, which may result in a continuing decrease in activity over time. This could
materially adversely affect our business, results of operations and financial condition. In
addition, the concentrated nature of our operations subjects us to the risk that a regional event
could cause a significant interruption in our operations or otherwise have a material affect on our
profitability.
Moreover, companies in the oil and gas exploration and production industry continually seek to
implement cost-savings measures. As part of these measures, oil and gas companies have attempted
to improve operating efficiencies with respect to helicopter support services. For example,
certain oil and gas companies have pooled helicopter services among operators, reduced staffing
levels by using technology to permit unmanned production installations and decreased the frequency
of transportation of employees offshore by increasing the lengths of shifts offshore. The
continued implementation of such measures could reduce demand for helicopter services and have a
material adverse effect on our business, results of operations and our financial condition.
Our pilot workforce is represented by the Office and Professional Employees International Union,
with which the Company is engaged in strike-related litigation.
As previously reported, the Company is involved in Federal Court litigation in the Western District
of Louisiana with the OPEIU (the Office and Professional Employees International Union), the union
representing domestic pilots, over claims of bad faith bargaining and issues relating to the return
to work of striking pilots. Pilots continue to work under the 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.
A trial on strike-related matters is currently set to start on November 6, 2008. It is not
possible to assess the outcome of that litigation.
8
We depend on a small number of large oil and gas industry customers for a significant portion of
our revenues, and our credit exposure within this industry is significant.
We derive a significant amount of our revenue from a small number of major and independent oil and
gas companies. For the year ended December 31, 2007, 15% of our revenues were attributable to our
largest customer. The loss of one of our significant customers, if not offset by revenues from new
or other existing customers, would have a material adverse effect on our business and operations.
In addition, this concentration of customers may impact our overall credit risk in that these
entities may be similarly affected by changes in economic and other conditions.
Our Chairman of the Board and Chief Executive Officer is also our principal stockholder and has
voting control of the Company.
Al A. Gonsoulin, our Chairman of the Board and Chief Executive Officer, beneficially owns stock
representing approximately 52% of our total voting power. As a result, he exercises control over
the election of all of our directors and the outcome of most matters requiring a stockholder vote.
This ownership also may delay or prevent a change in our management or a change in control of us,
even if such changes would benefit our other stockholders and were supported by a majority of our
stockholders.
Our substantial indebtedness could adversely affect our financial condition and impair our ability
to operate our business.
We are a highly leveraged company and, as a result, have significant debt service obligations. As
of December 31, 2007, our total long-term indebtedness was $200.0 million, consisting of $200
million of our 7.125% Senior Notes due 2013. On April 12, 2006, we completed the sale of 4,287,920
non-voting common shares, and then on May 1, 2006 we completed the sale of the over-allotment of
shares of 578,680 non-voting common shares. These transactions resulted in an increase in
shareholder equity of $160.7 million, net of expenses. We also issued $200 million of 7.125%
Senior Notes due April 15, 2013. Proceeds of the Notes were used to retire our existing $200
million 9 3/8% Senior Notes due May 1, 2009. These transactions are discussed in more detail under
Managements Discussion And Analysis of Financial Condition and Results of Operations Overview
below. As a result of these transactions, our debt to equity ratio at December 31, 2007 was 0.47
to 1.00, as compared to 0.51 to 1.00 at December 31, 2006.
At December 31, 2007, we had no borrowings and $4.6 million in letters of credit outstanding under
our revolving line of credit. As of December 31, 2007, availability for borrowings under our
revolving credit facility was $30.4 million.
Our substantial indebtedness could have significant negative consequences to us that you should
consider. For example, it could:
Ø |
|
require us to dedicate a substantial portion of our cash flow from operations to pay principal of, and interest on, our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures or other
general corporate purposes, or to carry out other aspects of our business plan; |
Ø |
|
increase our vulnerability to general adverse economic and industry conditions and limit our ability to withstand
competitive pressures; |
Ø |
|
limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities; |
Ø |
|
place us at a competitive disadvantage compared to our competitors that have less debt; and |
Ø |
|
limit our ability to obtain additional financing for working capital, capital expenditures and other aspects of our
business plan. |
Our ability to meet our debt obligations and other expenses will depend on our future performance,
which will be affected by financial, business, economic, regulatory and other factors, many of
which we are unable to control. When our 7.125% Senior Notes come due in 2013, we will likely need
to enter into new financing arrangements at that time to repay those notes. We may be unable to
obtain that financing on favorable terms, which could adversely
9
affect our business, financial condition and results of operations. For more information on our
indebtedness, please see the financial statements included elsewhere herein.
The United States Department of Justice (DOJ) investigation could result in criminal proceedings
and the imposition of fines and penalties.
On June 15, 2005, we received a subpoena from the DOJ relating to a grand jury investigation of
potential antitrust violations among providers of helicopter transportation services in the Gulf of
Mexico. We are cooperating fully with the investigation and believe we have provided all documents
and other information required by the subpoena. We will respond to any DOJ request for further
information, and will continue to cooperate with the investigation.
We cannot predict the ultimate outcome of the DOJ investigation. The outcome of the DOJ
investigation and any related legal proceedings could include civil injunctive or criminal
proceedings, the imposition of fines and other penalties, remedies and/or sanctions, referral to
other governmental agencies and/or the payment of damages in civil litigation, any of which could
have a material adverse effect on our business, financial condition and results of operations.
Additionally, the cost of defending such an action or actions against us could be significant.
Our stock has a low trading volume.
Our common stock is listed for trading on The NASDAQ Global Market under the symbol PHIIK for
our non-voting common stock and PHII for our voting common stock. Both classes of common stock
have low trading volume. As a result, a stockholder may not be able to sell shares of our common
stock at the time, in the amounts, or at the price desired.
We do not pay dividends.
We have not paid any dividends on our common stock since 1999 and do not anticipate that we will
pay dividends on our common stock in the foreseeable future. In addition, our ability to pay
dividends is restricted by the indenture governing our 7.125% Senior Notes due 2013 and our bank
credit facility. There are limitations and restrictions on the
payment of dividends, more fully described in Form 10-K,
Item 15 Exhibits and Financial Statement Schedules, Exhibit 4.7.
Provisions in our articles of incorporation and by-laws and Louisiana law make it more difficult to
effect a change in control of us, which could discourage a takeover of our company and adversely
affect the price of our common stock.
Although an attempted takeover of our company is unlikely by virtue of the ownership by our Chief
Executive Officer of more than 50% of the total voting power of our capital stock, there are also
provisions in our articles of incorporation and by-laws that may make it more difficult for a third
party to acquire control of us, even if a change in control would result in the purchase of your
shares at a premium to the market price or would otherwise be beneficial to you. For example, our
articles of incorporation authorize our board of directors to issue preferred stock without
stockholder approval. If our board of directors elects to issue preferred stock, it could be more
difficult for, or discourage, a third party to acquire us.
In addition, provisions of our by-laws, such as giving the board the exclusive right to fill all
board vacancies, could make it more difficult for a third party to acquire control of us. In
addition to the provisions contained in our articles of incorporation and by-laws, the Louisiana
Business Corporation Law (LBCL), includes certain provisions applicable to Louisiana
corporations, such as us, which may be deemed to have an anti-takeover effect. Such provisions
give stockholders the right to receive the fair value of their shares of stock following a control
transaction from a controlling person or group and set forth requirements relating to certain
business combinations. Our descriptions of these provisions are only abbreviated summaries of
detailed and complex statutes. For a complete understanding of the statutes, you should read them
in their entirety.
The LBCLs control share acquisition statute provides that any person who acquires control
shares will be able to vote such shares only if the right to vote is approved by the affirmative
vote of at least a majority of both (i) all the votes entitled to be cast by stockholders and (ii)
all the votes entitled to be cast by stockholders excluding interested shares. The control
share acquisition statute permits the articles of incorporation or by-laws of a company to exclude
from the statutes application acquisitions occurring after the adoption of the exclusion. Our
by-laws do contain such an exclusion; however, our board of directors or stockholders, by an
amendment to our by-laws, could reverse this exclusion.
10
Future sales of our shares could depress the market price of our non-voting common stock.
The market price of our non-voting common stock could decline as a result of issuances and sales by
us of additional shares of non-voting or voting common stock pursuant to our existing shelf
registration statement or otherwise. The market price of our non-voting common stock could also
decline as the result of the perception that these sales could occur. These sales, or the
possibility that these sales may occur, also might make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem appropriate.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Aircraft
Information regarding our owned and leased aircraft fleet and twelve customer-owned aircraft as of
December 31, 2007 is set forth in the following table:
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|
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|
Cruise |
|
Appr. |
|
|
|
|
Number |
|
|
|
|
|
|
|
Speed |
|
Range |
Manufacturer |
|
Type |
|
in Fleet |
|
Engine |
|
Passengers |
|
(mph) |
|
(miles)(2) |
Light Aircraft |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell |
|
206 / 407 |
|
|
95 |
|
|
Turbine |
|
|
4 6 |
|
|
|
130 150 |
|
|
|
300 420 |
|
Eurocopter |
|
BK-117 / BO-105 |
|
|
11 |
|
|
Twin Turbine |
|
|
4 6 |
|
|
|
135 |
|
|
|
255 270 |
|
Eurocopter |
|
EC-135 (1) |
|
|
30 |
|
|
Twin Turbine |
|
|
7 |
|
|
|
143 |
|
|
|
382 |
|
Aerospatiale |
|
AS350 B2 / B3 |
|
|
24 |
|
|
Turbine |
|
|
5 |
|
|
|
140 |
|
|
|
337 385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium Aircraft |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell |
|
212 (1) / 222 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230
(1) / 412 (1) / 430 (1) |
|
|
17 |
|
|
Twin Turbine |
|
|
8 13 |
|
|
|
115 160 |
|
|
|
300 370 |
|
Sikorsky |
|
S-76 (1) A++, C+, C++ |
|
|
41 |
|
|
Twin Turbine |
|
|
12 |
|
|
|
150 |
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transport Aircraft |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sikorsky |
|
S-92A(1) |
|
|
10 |
|
|
Twin Turbine |
|
|
19 |
|
|
|
160 |
|
|
|
495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Helicopters |
|
|
228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Wing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rockwell(3) |
|
Aero Commander |
|
|
2 |
|
|
Turboprop |
|
|
6 |
|
|
|
300-340 |
|
|
|
1,200-1,600 |
|
Lear Jet(4) |
|
31A(1) |
|
|
1 |
|
|
Turbojet |
|
|
8 |
|
|
|
527 |
|
|
|
1,437 |
|
Cessna(4) |
|
Conquest 441 (1) |
|
|
3 |
|
|
Turboprop |
|
|
6 |
|
|
|
330 |
|
|
|
1,200 |
|
Beech(4) |
|
King Air(1) |
|
|
3 |
|
|
Turboprop |
|
|
8 |
|
|
|
300 |
|
|
|
1,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fixed Wing |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aircraft |
|
|
237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Equipped to fly under instrument flight rules (IFR). All other types listed
can only fly under visual flight rules (VFR). See Item 1A. Business Risk Factors,
Risks Inherent In Our Business Our operations are affected by adverse weather
conditions and seasonal factors. |
|
(2) |
|
Based on maintaining a 30-minute fuel reserve. |
|
(3) |
|
Aircraft used for corporate purposes. |
|
(4) |
|
Aircraft used in the Air Medical segment. |
11
Of the 237 aircraft listed, we own 205 and lease 20. Additionally, we operate 12 aircraft owned by
customers also included in the table above.
We sell aircraft whenever they (i) become obsolete or (ii) do not fit into future fleet plans.
Facilities
Our principal facilities are located on property leased from the Lafayette Airport Commission at
Lafayette Regional Airport in Lafayette, Louisiana. The lease covers approximately 28 acres and
two buildings, with an aggregate of approximately 256,000 square feet, housing our main
operational, executive, and administrative offices and the main repair and maintenance facility.
The lease for this facility commenced in 2001, expires in 2021 and contains three five-year renewal
options following the expiration date.
We own our Boothville, Louisiana operating facility. The property has a 23,000 square foot
building, a 7,000 square foot hangar, and landing pads for 35 helicopters. This facility was
extensively damaged by Hurricane Katrina, but was repaired and returned to service in 2006.
We also lease property for an Executive and Marketing office in Houston, Texas and 12 additional
bases to service the oil and gas industry throughout the Gulf of Mexico. Those bases that
represent a significant investment in leasehold improvements and are particularly important to our
operations are:
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|
Facility |
|
Lease Expiration |
|
Area |
|
Facilities |
|
Comments |
Morgan City
(Louisiana)
|
|
June 30, 2008
|
|
53 acres
|
|
Operational and
maintenance
facilities, landing
pads for 46
helicopters
|
|
Options to extend
to June 30, 2018 |
Intracoastal City
(Louisiana)
|
|
December 31, 2008
|
|
18 acres
|
|
Operational and
maintenance
facilities, landing
pads for 45
helicopters
|
|
Options to extend
to December 31,
2010 |
Houma-Terrebonne
Airport (Louisiana)
|
|
July 31, 2017
|
|
91 acres
|
|
Operational and
maintenance
facilities, landing
pads for 30
helicopters
|
|
Facility under four
separate leases, of
which two contain
options to extend
thru 2027 |
Galveston (Texas)
|
|
May 31, 2021
|
|
4 acres
|
|
Operational and
maintenance
facilities, landing
pads for 30
helicopters
|
|
Lease period to May
31, 2021 with
certain
cancellation
provisions |
Fourchon
(Louisiana)
|
|
February 28, 2013
|
|
8 acres
|
|
Operational and
maintenance
facilities, landing
pads for 10
helicopters
|
|
Facility under
three separate
leases, of which
two contain options
to extend thru 2026
and 2028. |
Our other operations-related facilities in the United States are located at New Orleans and Lake
Charles, Louisiana; at Port OConnor and Sabine Pass, Texas; and at Theodore, Alabama.
We also operate from offshore platforms that are provided without charge by the owners of the
platforms, although in certain instances we are required to indemnify the owners against loss in
connection with our use of their facilities.
12
We also lease office and hangar space for our Air Medical operations in Phoenix, Arizona. The two
buildings are held under separate leases and collectively provide 5,000 square feet of hangar space
and 26,000 square feet of office space. The leases expire in 2009, subject to options to extend
for up to ten additional years. Other Air Medical bases are located in California, Indiana,
Kentucky, Maryland, New Jersey, New Mexico, Texas and Virginia. Other bases for our International
and other Air Medical operations are generally furnished by customers.
ITEM 3. LEGAL PROCEEDINGS
We have been named as a defendant in various legal actions that have arisen in the ordinary course
of our 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 our
consolidated financial condition, results of operations or cash flows.
As previously reported, the Company is involved in Federal Court litigation in the Western District
of Louisiana with the OPEIU (the Office and Professional Employees International Union), the union
representing domestic pilots, over claims of bad faith bargaining and issues relating to the return
to work of striking pilots. Pilots continue to work under the 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. A trial on strike-related matters is currently set to
start on November 3, 2008. It is not possible to assess the outcome of that litigation, as these
matters are still in the discovery stage. However, management is of the opinion that the Companys
claims and defenses have substantial merit.
As previously reported, on June 15, 2005, we received a subpoena from the United States Department
of Justice relating to a grand jury investigation of potential antitrust violations among providers
of helicopter transportation services in the Gulf of Mexico. We are cooperating fully with the
investigation and believe we have provided all documents and other information required by the
subpoena. We have not received any further communications from the Department of Justice since
shortly after providing the requested information. At this stage, it is not possible to predict
the outcome of this investigation, although based on the information available to us to date,
management does not expect the outcome of the investigation to have a material adverse effect on
our financial condition, results of operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our voting and non-voting common stock trades on The NASDAQ Global Market, under the symbols PHII
and PHIIK, respectively. The following table sets forth the range of high and low sales prices per
share, as reported by NASDAQ, for our voting and non-voting common stock for the fiscal quarters
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting |
|
Non-Voting |
Period |
|
High |
|
Low |
|
High |
|
Low |
January 1, 2007 to March 31, 2007
|
|
$ |
34.10 |
|
|
$ |
23.45 |
|
|
$ |
33.30 |
|
|
$ |
25.03 |
|
April 1, 2007 to June 30, 2007
|
|
|
32.16 |
|
|
|
26.04 |
|
|
|
30.72 |
|
|
|
25.02 |
|
July 1, 2007 to September 30, 2007
|
|
|
34.00 |
|
|
|
19.94 |
|
|
|
34.69 |
|
|
|
27.02 |
|
October 1, 2007 to December 31, 2007
|
|
|
34.49 |
|
|
|
28.85 |
|
|
|
35.38 |
|
|
|
28.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006 to March 31, 2006
|
|
$ |
41.00 |
|
|
$ |
29.00 |
|
|
$ |
39.48 |
|
|
$ |
30.00 |
|
April 1, 2006 to June 30, 2006
|
|
|
38.00 |
|
|
|
29.99 |
|
|
|
38.54 |
|
|
|
29.00 |
|
July 1, 2006 to September 30, 2006
|
|
|
34.24 |
|
|
|
29.01 |
|
|
|
34.39 |
|
|
|
26.69 |
|
October 1, 2006 to December 31, 2006
|
|
|
34.10 |
|
|
|
27.29 |
|
|
|
33.06 |
|
|
|
27.56 |
|
13
We have not paid dividends on either class of our common stock since 1999 and do not expect to pay
dividends in the foreseeable future.
In addition, the indenture governing our 7.125% Series B Senior Notes due 2013 and our revolving
credit facility with a commercial bank restrict the payment of dividends. See Note 4 to the
Consolidated Financial Statements.
Stock Performance Graph
The information included under the caption Stock Performance Graph in this Item 5 of this Annual
Report on Form 10-K is not deemed to be soliciting material or to be filed with the SEC or
subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of
Section 18 of the Securities Act of 1934, and will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to
the extent we specially incorporate it by reference into such a filing.
The following performance graph compares PHIs cumulative total stockholder return on its voting
common stock for the last five years with the cumulative total return on the Russell 2000 Index,
the Oil Service Index, and a peer group, assuming the investment of $100 on January 1, 2003, at
closing prices on December 31, 2002, and reinvestment of dividends. The Russell 2000 Index
consists of a broad range of publicly-traded companies with small market capitalizations of $0.5
billion to $1.07 billion, and is published daily in the Wall Street Journal. The Oil Service
Sector Index is a price-weighted index composed of the common stocks of 15 companies that provide
oil drilling and production services, oil field equipment, support services, and
geophysical/reservoir services. The peer group companies are Bristow Group, Inc.; Tidewater, Inc.;
Gulfmark Offshore, Inc.; CHC Helicopter Corp.; Seacor Holdings, Inc.; and Air Methods Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Index |
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
PHI |
|
|
|
122.50 |
|
|
|
|
128.90 |
|
|
|
|
155.00 |
|
|
|
|
165.00 |
|
|
|
|
155.10 |
|
|
|
Peer Group |
|
|
|
106.41 |
|
|
|
|
143.28 |
|
|
|
|
155.95 |
|
|
|
|
198.35 |
|
|
|
|
239.61 |
|
|
|
OSX |
|
|
|
108.36 |
|
|
|
|
142.95 |
|
|
|
|
210.08 |
|
|
|
|
230.57 |
|
|
|
|
347.88 |
|
|
|
Russell 2000 |
|
|
|
115.60 |
|
|
|
|
135.25 |
|
|
|
|
139.75 |
|
|
|
|
163.50 |
|
|
|
|
159.01 |
|
|
|
As of February 29, 2008, there were approximately 936 holders of record of our voting common stock
and 66 holders of record of our non-voting common stock.
Information regarding our stock based compensation plan is included in Note 6 to the Consolidated
Financial Statements.
14
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for each of the past five fiscal periods should be read
in conjunction with Managements Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and Notes to Consolidated Financial Statements
included elsewhere in this Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
December 31, |
|
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
|
(Thousands) |
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
446,406 |
|
|
$ |
413,118 |
|
|
$ |
363,610 |
|
|
$ |
291,308 |
|
|
$ |
269,392 |
|
Net earnings (loss) |
|
|
28,218 |
|
|
|
(667 |
) |
|
|
14,154 |
|
|
|
3,972 |
|
|
|
1,139 |
|
Net earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
1.85 |
|
|
|
(0.05 |
) |
|
|
1.76 |
|
|
|
0.74 |
|
|
|
0.21 |
|
Diluted |
|
|
1.85 |
|
|
|
(0.05 |
) |
|
|
1.76 |
|
|
|
0.72 |
|
|
|
0.21 |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,277 |
|
|
|
13,911 |
|
|
|
8,040 |
|
|
|
5,383 |
|
|
|
5,383 |
|
Diluted |
|
|
15,286 |
|
|
|
13,911 |
|
|
|
8,063 |
|
|
|
5,486 |
|
|
|
5,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities |
|
$ |
25,226 |
|
|
$ |
30,324 |
|
|
$ |
28,020 |
|
|
$ |
10,905 |
|
|
$ |
29,415 |
|
Net cash used in investing activities |
|
|
(19,464 |
) |
|
|
(178,928 |
) |
|
|
(137,464 |
) |
|
|
(18,594 |
) |
|
|
(30,943 |
) |
Net cash (used in) provided by
financing
activities |
|
|
(5,157 |
) |
|
|
146,388 |
|
|
|
108,947 |
|
|
|
8,275 |
|
|
|
2,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
230,029 |
|
|
$ |
307,689 |
|
|
$ |
224,265 |
|
|
$ |
128,405 |
|
|
$ |
110,135 |
|
Working capital |
|
|
176,633 |
|
|
|
254,099 |
|
|
|
162,527 |
|
|
|
88,716 |
|
|
|
70,300 |
|
Property and equipment, net |
|
|
484,119 |
|
|
|
369,465 |
|
|
|
311,678 |
|
|
|
253,241 |
|
|
|
258,526 |
|
Total assets |
|
|
741,296 |
|
|
|
700,970 |
|
|
|
549,209 |
|
|
|
394,173 |
|
|
|
377,454 |
|
Total debt |
|
|
200,000 |
|
|
|
205,500 |
|
|
|
204,300 |
|
|
|
210,275 |
|
|
|
202,000 |
|
Shareholders equity |
|
|
428,669 |
|
|
|
400,125 |
|
|
|
239,051 |
|
|
|
109,975 |
|
|
|
105,993 |
|
|
|
|
(1) |
|
As of the end of the period. |
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
should be read in conjunction with our Consolidated Financial Statements and the related Notes
included elsewhere in this report.
Overview
Operating revenues for 2007 were $446.4 million compared to $413.1 million for 2006, an increase of
$33.3 million. Oil and Gas operating revenues increased $15.4 million for 2007 due to an increase
in medium and heavy aircraft flight hours and contractual rate increases. Operating revenues in
the Air Medical segment increased $16.2 million due to rate increases and increased patient
transports. Technical Services operating revenues increased $1.7 million due to increased activity
in the segment.
Flight hours for 2007 were 140,369 compared to 150,980 for 2006. The decrease was due to a
reduction in flight hours in our foreign operations, and continuing effects of the strike on our
domestic operations related to pilot staffing levels. Although we have increased our pilot
workforce since the termination of the pilots strike, we still have requirements for additional
pilots, particularly in the Oil and Gas segment.
Oil and Gas segments operating income was $34.5 million for the year ended December 31, 2007,
compared to $40.8 million for the year ended December 31, 2006. The decrease of $6.3 million was
primarily due to an increase
15
in operating expenses of $21.3 million related to increased employee, aircraft leasing and aircraft
warranty costs. Our Air Medical segments operating income was $4.0 million for the year ended
December 31, 2007, compared to an operating loss of $4.4 million for the year ended December 31,
2006 primarily as a result of recovery from the effects of the pilots strike, along with rate
increases initiated in 2007 and increased patient transports related to the expansion of new
locations in the segment during the past three years. Technical Services operating income
increased $2.1 million.
Net earnings for 2007 were $28.2 million, or $1.85 per diluted share, compared to a loss of $0.7
million for 2006, or $0.05 per diluted share. Pre-tax earnings were $45.7 million for 2007
compared to a loss of $1.1 million in 2006. Pre-tax gain on disposition of assets, net was $35.0
million in 2007 compared to $1.9 million in 2006. Earnings in 2006 were impacted by a pre-tax loss
on debt restructuring of $12.8 million.
Effective July 1, 2007, we changed the estimated residual value of certain aircraft from 40% to
54%. We believe the revised amounts reflect our historical experience and more appropriately match
costs over the estimated useful lives and salvage values of these assets. The change in residual
values of certain aircraft was based on our experience in sales of such aircraft and industry data
which indicated that these aircraft were retaining on average a salvage value of at least 54% by
model type. The effect of this change for 2007 was a reduction in depreciation expense of $1.6
million ($1.0 million after tax or $0.07 per diluted share).
In 2007, we sold or disposed of 28 aircraft, primarily consisting of older aircraft that were not
in our long term growth plan. We have also taken delivery of 29 aircraft, consisting of two heavy,
10 medium, 16 light, and one fixed wing aircraft.
At December 31, 2007, we had an order for six additional transport category aircraft at an
approximate cost of $127.4 million with delivery dates throughout 2008 and 2009. We also had
orders for 30 medium and light aircraft for service primarily in the Oil and Gas segment, although
certain of these may be assigned to the Air Medical segment as growth opportunities are identified.
The total cost of these aircraft is $154.0 million and delivery dates are scheduled throughout
2008 and 2009. We intend to fund these aircraft from existing cash, short-term investments, and
operating leases, as required.
As previously reported, the Company is involved in Federal Court litigation in the Western District
of Louisiana with the OPEIU (the Office and Professional Employees International Union), the union
representing domestic pilots, over claims of bad faith bargaining and issues relating to the return
to work of striking pilots. Pilots continue to work under the 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. A trial on strike-related matters is currently set to
start on November 3, 2008. It is not possible to assess the outcome of that litigation, as these
matters are still in the discovery stage. However, management is of the opinion that the Companys
claims and defenses have substantial merit.
As previously reported, on June 15, 2005, we received a subpoena from the United States Department
of Justice relating to a grand jury investigation of potential antitrust violations among providers
of helicopter transportation services in the Gulf of Mexico. We are cooperating fully with the
investigation and believe we have provided all documents and other information required by the
subpoena. We have not received any further communications from the Department of Justice since
shortly after providing the requested information. At this stage, it is not possible to predict
the outcome of this investigation, although based on the information available to us to date,
management does not expect the outcome of the investigation to have a material adverse effect on
our financial condition, results of operations, or cash flows.
16
Results of Operations
The following table presents segment operating revenues, expense and operating profit before tax,
along with certain non-financial operational statistics, for the years ended December 31, 2007,
2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
286,118 |
|
|
$ |
270,707 |
|
|
$ |
242,464 |
|
Air Medical |
|
|
149,590 |
|
|
|
133,397 |
|
|
|
112,123 |
|
Technical Services |
|
|
10,698 |
|
|
|
9,014 |
|
|
|
9,023 |
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
446,406 |
|
|
|
413,118 |
|
|
|
363,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment direct expense |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
250,110 |
|
|
|
228,797 |
|
|
|
188,872 |
|
Air Medical |
|
|
137,703 |
|
|
|
130,412 |
|
|
|
104,465 |
|
Technical Services |
|
|
6,608 |
|
|
|
7,063 |
|
|
|
5,926 |
|
|
|
|
|
|
|
|
|
|
|
Total direct expense |
|
|
394,421 |
|
|
|
366,272 |
|
|
|
299,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
1,531 |
|
|
|
1,150 |
|
|
|
1,181 |
|
Air Medical |
|
|
7,883 |
|
|
|
7,384 |
|
|
|
6,503 |
|
Technical Services |
|
|
59 |
|
|
|
38 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses |
|
|
9,473 |
|
|
|
8,572 |
|
|
|
7,727 |
|
|
|
|
|
|
|
|
|
|
|
Total direct and selling, general and administrative expenses |
|
|
403,894 |
|
|
|
374,844 |
|
|
|
306,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net segment profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
34,477 |
|
|
|
40,760 |
|
|
|
52,411 |
|
Air Medical |
|
|
4,004 |
|
|
|
(4,399 |
) |
|
|
1,155 |
|
Technical Services |
|
|
4,031 |
|
|
|
1,913 |
|
|
|
3,054 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
42,512 |
|
|
|
38,274 |
|
|
|
56,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net (1) |
|
|
40,051 |
|
|
|
9,946 |
|
|
|
3,230 |
|
Unallocated selling, general and administrative expenses |
|
|
(20,753 |
) |
|
|
(19,267 |
) |
|
|
(17,169 |
) |
Interest expense |
|
|
(16,121 |
) |
|
|
(17,243 |
) |
|
|
(20,448 |
) |
Loss on debt restructuring |
|
|
|
|
|
|
(12,790 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
$ |
45,689 |
|
|
$ |
(1,080 |
) |
|
$ |
22,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flight hours |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
107,812 |
|
|
|
119,503 |
|
|
|
126,591 |
|
Air Medical |
|
|
31,341 |
|
|
|
29,980 |
|
|
|
26,619 |
|
Technical Services |
|
|
1,216 |
|
|
|
1,497 |
|
|
|
1,433 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
140,369 |
|
|
|
150,980 |
|
|
|
154,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air Medical Transports |
|
|
21,710 |
|
|
|
20,808 |
|
|
|
17,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft operated at period end |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
163 |
|
|
|
164 |
|
|
|
167 |
|
Air Medical |
|
|
70 |
|
|
|
68 |
|
|
|
64 |
|
Technical Services |
|
|
4 |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Total (2) |
|
|
237 |
|
|
|
236 |
|
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Including gains on disposition of property and equipment, and other income. |
|
(2) |
|
Includes 12 aircraft as of December 31, 2007, 2006 and 2005 that are customer owned or
leased by customers but operated by us. |
17
Year Ended December 31, 2007 compared with Year Ended December 31, 2006
Combined Operations
Operating Revenues Operating revenues for 2007 were $446.4 million compared to $413.1
million for 2006, an increase of $33.3 million, or 8%. Operating revenues increased in the Oil and
Gas segment $15.4 million primarily due to an increase in medium and heavy aircraft flight hours
and contractual rate increases in our domestic operations. Operating revenues in the Air Medical
segment also increased $16.2 million in 2007 due to rate increases and increased patient
transports. Revenues in the Technical Services segment increased $1.7 million due to an increase
in activity. These items are discussed in more detail in the Segment Discussion below.
Other Income and Losses Gain on equipment dispositions were $35.0 million for 2007
compared to $1.9 million for 2006. These amounts represent gains and losses on sales of aircraft
and related parts inventory that no longer meet our strategic needs. We expect a substantial
reduction in this amount prospectively. Other income, which primarily represents interest income
on unspent proceeds from our April 2006 stock offering, was $5.1 million for 2007, compared to $8.0
million for 2006. This decrease resulted from a decrease in short-term investments as a
substantial portion of these proceeds have now been spent acquiring new aircraft.
Direct Expenses Direct expense was $394.4 million for 2007 compared to $366.3 million for
2006, an increase of $28.1 million, or 8%.
Direct expense in the Oil and Gas segment increased $21.3 million, primarily due to increased
employee costs ($7.9 million), aircraft lease expense ($6.2 million), and aircraft warranty costs
($7.2 million). Air Medical direct expense increased $7.3 million due to increased employee costs
($4.4 million), aircraft warranty costs ($1.4 million), and outside services expenses ($2.2
million). Technical Services direct expense decreased $0.5 million. These items are discussed in
more detail in the Segment Discussion below.
Selling, General and Administrative Expenses Selling, general and administrative expenses
were $30.2 million for 2007 compared to $27.8 million for 2006, an increase of $2.4 million, or 9%.
This increase resulted from increased employee costs ($1.0 million), franchise taxes ($0.4
million), outside services ($0.2 million) primarily related to the Air Medical segment, legal fees
($0.3 million), and other items, net ($0.5 million).
Interest Expense Interest expense was $16.1 million for 2007, compared to $17.2 million
for 2006 due to a decrease in borrowings under our line of credit.
Income Taxes Income tax expense for 2007 was $17.5 million, compared to income tax
benefit of $0.4 million for 2006. The effective tax rate was 38% for 2007 and 2006.
Earnings Our net earnings for 2007 was $28.2 million, compared to a net loss of $0.7
million for 2006. Earnings before tax for 2007 were $45.7 million compared to losses before tax of
$1.1 million in 2006. Earnings per diluted share were $1.85 for 2007 as compared to losses per
diluted share of $0.05 for 2006. Included in earnings before tax for 2007 are gains on disposition
of assets of $35.0 million, compared to $1.9 million for 2006. The loss for 2006 included a loss
on debt restructuring charge of $12.8 million related to the early call premium and associated
costs for redemption of our 9 3/8% Senior Notes.
Segment Discussion
Oil and Gas Oil and Gas segment revenues for 2007 were $286.1 million compared to $270.7 million
for 2006, an increase of $15.4 million or 6%. The increase was due to an increase in medium and
heavy aircraft flight hours and contractual rate increases. These increases were partially offset
by a decrease in light aircraft flight hours due to competitive pricing pressures. Segment
revenues were also adversely affected by less than optimal pilot staffing levels due to the
residual effects of the strike and competition for pilots from the military and other companies.
Segment flight hours were 107,812 for 2007 compared to 119,503 for 2006, a decrease of 11,691
hours. The number of aircraft in the segment at December 31, 2007 was 163 compared to 164 aircraft
at December 31, 2006. In 2007, we sold or disposed of 22 aircraft in the Oil and Gas segment,
consisting of nine light, nine medium and four heavy aircraft. We also transferred three light
aircraft to the Air Medical segment. We have added 24 new aircraft to the Oil and Gas segment
during 2007, consisting of 12 light, 10 medium, and two heavy aircraft. We have a total of 32
aircraft on order for delivery in 2008 and 2009 for the Oil and Gas segment, although certain of
the light
18
aircraft on order may be assigned to the Air Medical segment as growth opportunities materialize.
For further information on our aircraft, see Item 2 Properties contained in this Form 10-K
Direct expense in the Oil and Gas segment increased by $21.3 million due to increased employee
costs ($7.9 million) due primarily to compensation increases including pilot overtime costs and
other contract labor costs related to the strike, and incentive and safety compensation accruals.
We also experienced increased aircraft lease expense ($6.2 million) and aircraft warranty costs
($7.2 million) due to additional aircraft added to the fleet. All new aircraft come with a
manufacturers warranty that covers defective parts. The increase in our warranty cost is related
to an additional warranty that we purchase from the manufacturer on certain aircraft to cover
replacement or refurbishment of aircraft parts in accordance with manufacturer specifications. We
pay a monthly fee to the manufacturer based on flight hours for the aircraft that are covered under
this warranty. In return, the manufacturer provides replacement parts required for maintaining the
aircraft. Depreciation expense decreased $0.2 million due to the change in residual value of
certain aircraft effective July 1, 2007, as discussed in the Overview.
Selling, general and administrative expenses were $1.5 million for the year ended December 31,
2007, compared to $1.2 million for the prior year.
Our Oil and Gas segments operating income was $34.5 million for the year ended December 31, 2007,
compared to $40.8 million for the year ended December 31, 2006. The decrease of $6.3 million was
due to the increase in operating expenses of $21.3 million, offset by the increase in operating
revenues of $15.4 million, for the reasons described above. Operating margins were 12% for the
year ended December 31, 2007, compared to 15% for the year ended December 31, 2006, primarily due
to pilot staffing levels resulting in reduced flight hours and lower revenues and increases in
certain direct expenses, such as pilot overtime costs and other contract labor costs.
Air Medical Air Medical segment revenues were $149.6 million for 2007 compared to $133.4 million
for 2006, an increase of $16.2 million. The increase was primarily related to rate increases and
an increase in patient transports, which totaled 21,710 for 2007 compared to 20,808 transports for
2006. Flight hours were 31,341 for the year ended December 31, 2007, compared to 29,980 for the
year ended December 31, 2006. The number of aircraft in the segment was 70 at December 31, 2007,
compared to 68 at December 31, 2006. In 2007, we transferred three light aircraft to the Air
Medical segment from the Oil and Gas segment, and added five new aircraft, consisting of four light
and one fixed wing aircraft. We sold four medium and two light aircraft. At December 31, 2007, we
had a total of four aircraft on order for delivery in 2008 for the Air Medical segment.
Air Medical direct expense increased $7.3 million due to increased employee costs ($4.4 million)
due primarily to compensation increases including incentive and safety compensation accruals,
aircraft warranty costs increases ($1.4 million) due to additional aircraft added to manufacturers
warranty programs, and increased outside services expenses ($2.2 million) related to medical
director fees and collection expenses. In addition to expected flight operation costs, the Air
Medical segment incurs additional costs for necessary medical personnel. Other items decreased,
net ($0.7 million).
Selling, general and administrative expenses was $7.9 million for the year ended December 31, 2007,
compared to $7.4 million for the year ended December 31, 2006. 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 $4.0 million for the year ended December 31, 2007,
compared to an operating loss of $4.4 million for the year ended December 31, 2006. Operating
margins increased to 3% in the year ended December 31, 2007, compared to a loss in the same period
in 2006. Segment revenues and expenses were affected in 2006 by the pilots strike. The increases
in the current year in operating income and margin are a result of recovery from the effects of the
strike, along with rate increases initiated in 2007 and increased patient transports related to the
expansion of new locations in the segment during the past three years. Operating margins were
lower in this segment compared to our other segments as it takes some time for these new locations
to grow revenues to a level that will cover their costs and produce operating income. Operating
margins may also be affected by the mix of payors in any period.
Technical Services Technical Services revenues were $10.7 million for the year ended December 31,
2007, compared to $9.0 million for the year ended December 31, 2006. The $1.7 million increase was
due to increased activity in the segment.
19
Direct expense was $6.6 million for the year ended December 31, 2007, compared to $7.1 million for
the year ended December 31, 2006.
The Technical Services segment had operating income of $4.0 million for the year ended December 31,
2007, compared to $1.9 million for the year ended December 31, 2006. Operating margins in the
Technical Services segment were 38% for the year ended December 31, 2007, compared to 21% for the
same period in 2006. Technical Services includes maintenance and repairs performed primarily for
our existing customers that own their aircraft. These services are generally labor intensive with
higher operating margins as compared to other segments.
Year Ended December 31, 2006 compared with Year Ended December 31, 2005
Combined Operations
Revenues Operating revenues for 2006 were $413.1 million compared to $363.6 million for
2005, an increase of $49.5 million, or 14%. Operating revenues increased in the Oil and Gas
segment $28.2 million due to an increase in contracted aircraft and an increase due to contractual
rate increases. Although revenues increased in the Oil and Gas segment, flight hours were
negatively impacted in the fourth quarter by the pilots strike, resulting in an estimated revenue
decrease of $4.7 million. Operating revenues in the Air Medical segment also increased $21.3
million in 2006, due to the additional operating locations established in 2005 that were in service
for all of 2006, although patient transport volume and operating revenues were also negatively
impacted in the fourth quarter by the pilots strike. We estimate a decrease in operating
revenues in the Air Medical segment of $4.2 million as a result of the strike. Revenues in the
Technical Services segment were $9.0 million for the year ended December 31, 2006 and December 31,
2005. These items are discussed in the Segment Discussion below.
Other Income and Losses Gain on equipment dispositions was $1.9 million for 2006 compared
to $1.2 million for 2005. Gain or loss on equipment dispositions is related to dispositions of
aircraft. Other income increased approximately $6.0 million in 2006 due to interest income on
unspent proceeds from securities offerings.
Direct Expenses Direct expense was $366.3 million for 2006 compared to $299.3 million for
2005, an increase of $67.0 million, or 22%. Included in direct expense are costs incurred as a
result of the strike which includes overtime pay and a work completion bonus for working pilots
($5.7 million), other pilot associated costs ($1.9 million), and security costs ($0.6 million).
Direct expense in the Oil and Gas segment increased by $39.9 million due to increased employee
costs ($7.2 million) including the strike related amount mentioned above, aircraft parts and repair
costs ($3.9 million), aircraft warranty costs ($5.4 million), aircraft rent ($6.7 million),
insurance expense ($3.0 million), aircraft fuel ($1.7 million), outside services ($5.1 million),
also including ($1.9 million) pilot associated costs mentioned above, and training costs ($3.3
million). The remaining increase ($3.6 million) was due to travel expenses, security services,
temporary labor and property taxes. The effect of the strike on this segment, as well as a further
discussion of the above items, is described in the Segment Discussion.
Air Medical segment direct expense increased ($25.9 million) due to new locations opened in 2005
being in service for a full twelve months in 2006 as well as an increase related to the pilots
strike, which is discussed in the Segment Discussion below.
There was also an increase in the Technical Services segment ($1.1 million).
Selling, General and Administrative Expenses Selling, general and administrative expenses
was $27.8 million for 2006 compared to $24.9 million for 2005, an increase of $2.9 million, or 12%.
This increase resulted from legal costs and other expenses ($1.5 million) related to the pilots
strike and other union issues, increased employee costs ($0.5 million), and increased insurance
expense ($0.9 million).
Income Taxes Income tax benefit for 2006 was $0.4 million, compared to income tax expense
of $8.1 million for 2005. The effective tax rate was 38% for 2006 compared to 36% for 2005. The
2005 rate benefited from a Hurricane Katrina tax credit of $0.8 million in 2005.
Earnings Our net loss for 2006 was $0.7 million, compared to net earnings of $14.2
million for 2005. Losses before tax for 2006 were $1.1 million compared to earnings before tax of
$22.2 million in 2005. Losses per diluted
20
share were $0.05 for 2006 as compared to earnings per diluted share of $1.76 for 2005. The loss
for 2006 included $12.8 million related to the early call premium and associated costs for
redemption of our 9 3/8% Senior Notes, and also the impact of the pilots strike.
Segment Discussion
Oil and Gas Oil and Gas segment revenues for 2006 were $270.7 million compared to $242.5 million
for 2005, an increase of $28.2 million or 12%. The increase was due to increased use of medium and
transport aircraft and an increase in contracted aircraft prior to the pilots strike and
contractual rate increases. Flight hours were 119,503 for 2006 compared to 126,591 for 2005, a
decrease of 7,088 hours, which was also attributable to the strike, resulting in an estimated
revenue decrease of $4.7 million, and due to the scheduled release of one aircraft from contract by
the customer in our foreign operations. The number of aircraft in the segment at December 31, 2006
was 164 compared to 167 aircraft at December 31, 2005. In 2006, we sold 18 light aircraft, which
had little flight time in 2006, and had 20 new aircraft delivered. We also converted five aircraft
from the Oil and Gas segment for Air Medical use.
Direct expenses in the Oil and Gas segment were $228.8 million for the year ended December 31,
2006, compared to $188.9 million for the prior year, an increase of $39.9 million, or 21%.
Included in this increase were increases in employee costs ($7.2 million). Of this amount, $2.5
million was related to increased pilot compensation expense, related to overtime and a work
completion bonus, due to the pilots strike. There was also an increase in outside services ($5.1
million). Of this amount, $1.9 million was other pilot associated costs related to the strike.
Other increases include aircraft parts usage ($2.1 million), aircraft rent ($6.7 million) due to
additional aircraft on lease, aircraft warranty costs ($5.4 million) due to additional aircraft
covered under the manufacturers warranty programs, fuel ($1.7 million) due to increased prices and
increased use of medium and transport aircraft, component repair costs ($1.9 million), and
insurance expense ($3.0 million) due to a contractual premium refund in 2005 due to favorable loss
experience. There were also increases in training costs ($3.3 million), travel expenses ($1.7
million), security services ($0.6 million), which were also partially strike related costs, and
other items ($1.2 million).
The Oil and Gas segments operating income was $40.8 million for 2006 compared to $52.4 million for
2005. The decrease was due to decreased flight hours and revenues, and increased employee and
other strike related costs in the fourth quarter due to the pilots strike, and a decrease in
flight hour activity and the scheduled release of one aircraft from contract by the customer in our
foreign operations.
Air Medical Air Medical segment revenues were $133.4 million for 2006 compared to $112.1 million
for 2005. The increase was due to the additional operations established in 2005 that were in
service for all of 2006. Operating revenues in 2006 from the locations opened in 2005 were $37.2
million. Flight hours were 29,980 for 2006 compared to 26,619 for 2005. Patient transports were
20,808 for 2006, compared to 17,200 for 2005. Patient transport volume was negatively impacted by
the pilots strike in the fourth quarter 2006. We estimated a decrease of approximately 700
transports related to the strike in the fourth quarter resulting in an estimated revenue decrease
of $4.2 million. The number of aircraft in the segment was 68 at December 31, 2006, compared to 64
at December 31, 2005.
Direct expenses in the Air Medical segment increased to $130.4 million for 2006 compared to $104.5
million for 2005. During fiscal year 2005, we opened 15 locations, and the increase in direct
expense in 2006 reflects a full year of operations at those locations. The $25.9 million increase
includes increases in employee costs ($13.8 million) primarily due to new locations opened in the
prior year being in service for a full twelve months, but also pilot compensation expenses related
to the strike ($3.2 million). There were also increases in fuel costs ($2.3 million), aircraft
rent ($0.3 million) and aircraft warranty costs ($1.7 million) as additional aircraft were added to
the manufacturers warranty programs, insurance expense ($1.2 million), depreciation expense ($2.5
million), and other operating costs ($0.9 million).
Selling, general and administrative expenses was $7.4 million for the year ended December 31, 2006,
compared to $6.5 million for the year ended December 31, 2005.
The Air Medical segment operating loss was $4.4 million for 2006 compared to operating income of
$1.2 million for 2005. Although the Air Medical segment revenues increased in 2006, the decrease
in transports in the fourth quarter related to the strike resulted in an estimated revenue decrease
of $4.2 million. Expenses related to the strike also increased an estimated $3.2 million.
Technical Services Technical Services segment revenues were $9.0 million in 2006 and 2005.
21
Direct expenses were $7.1 million for 2006 compared to $5.9 million for 2005, which was due to the
recategorization of contract revenue and expense of certain contractual work for third parties that
was previously recorded in the Oil and Gas segment.
The Technical Services segment had operating income of $1.9 million for December 31, 2006, compared
to $3.1 million for December 31, 2005.
Liquidity and Capital Resources
General
Our ongoing liquidity requirements arise primarily from the funding of working capital needs, such
as 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 in recent years 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.
As we grow our operations, we continually monitor the capital resources available to meet our
future financial obligations, planned capital expenditures and liquidity. We also review
acquisition opportunities on an ongoing basis. If we were to make a significant acquisition for
cash, we would need to obtain additional equity or debt financing.
Cash Flow
Our cash position at December 31, 2007 was $1.4 million, compared to $0.8 million at December 31,
2006. Short-term investments were $63.0 million at December 31, 2007, compared to $153.4 million
at December 31, 2006. Working capital was $176.6 million at December 31, 2007, as compared to
$254.1 million at December 31, 2006, a decrease of $77.5 million. The decrease in working capital
was primarily a result of a decrease in short-term investments of $90.4 million and an increase in
accounts receivable of $8.8 million. The decrease in short-term investments was primarily a result
of spending a substantial portion of the proceeds from our April 2006 stock offering to acquire new
aircraft.
Net cash provided by operating activities was $25.2 million for 2007 compared to $30.3 million for
2006, a decrease of $5.1 million. The decrease was due primarily to changes in operating assets
and liabilities of $6.1 million, an increase in net earnings of $28.9 million, in part due to the
loss of $12.8 million recorded in the second quarter of 2006 as a result of refinancing our 9 3/8%
Senior Notes, a decrease in depreciation and amortization expense of $0.3 million, an increase in
the deferred tax provision of $18.1 million, and an increase in gain on sales of assets of $33.0
million. The increase in deferred tax is due to the tax expense associated with the earnings
before tax of $45.7 million in the current year compared to a tax benefit associated with the loss
before tax of $1.1 million in the prior year. Capital expenditures were $159.7 million for 2007
compared to $123.3 million for 2006. Capital expenditures for 2007 were $126.5 million for
aircraft purchases, $22.8 million for refurbishments and equipment installations for new aircraft,
$10.4 million for facility improvements, operating equipment, engine spares, and medical equipment.
Capital expenditures for 2006 were $94.7 million for aircraft purchases, $18.3 million for
refurbishments and equipment installations for new aircraft, $10.3 million for facility
improvements, operating equipment, engine spares, and medical equipment. Gross proceeds from
aircraft sales were $58.1 million for 2007 compared to $36.8 million for 2006.
Financing Activities
On April 12, 2006, we completed the sale of 4,287,920 non-voting common shares at $35.00 per share
and on May 1, 2006, we completed the sale of another 578,680 shares pursuant to the underwriters
over-allotment option, also at $35.00 per share. Proceeds from the offering were $160.7 million,
net of expenses, and were used to fund the acquisition of aircraft delivered in 2006 and 2007.
Also on April 12, 2006, we issued $200 million of 7.125% Senior Notes due 2013. Net proceeds of
$196.0 million were used to repurchase $184.8 million of our existing 9 3/8% Senior Notes, which
were tendered by April 12, 2006, at a total cost of $201.6 million including an early call premium
and accrued interest. We redeemed the remaining $15.2 million of 9 3/8% Senior Notes on May 1,
2006,
22
at a redemption price of 104.688% of the face amount plus accrued interest. As a result of the
refinancing of the 9 3/8% Senior Notes, we recorded a pretax charge of $12.8 million ($7.7 million,
net of tax) in the quarter ended June 30, 2006, which consisted of a $9.8 million early call
premium, $2.6 million of unamortized issuance costs, and $0.4 million in related expenses of the
tender for the outstanding notes.
Credit Facility
We have a $35 million revolving credit facility with a commercial bank that expires on September 1,
2009. At December 31, 2007, there were no borrowings and $4.6 million in letters of credit
outstanding under the facility. The facility includes covenants related to working capital, funded
debt to net worth, and consolidated net worth. As of December 31, 2007, we were in compliance with
these covenants.
Contractual Obligations
The table below sets out our contractual obligations as of December 31, 2007 related to operating
lease obligations, purchase commitments, credit facility, and the 7.125% Senior Notes due 2013.
The operating leases are not recorded as liabilities on the balance sheet, but payments are treated
as an expense as incurred. Each contractual obligation included in the table contains various
terms, conditions, or covenants which, if violated, accelerate the payment of that obligation. We
currently lease eighteen aircraft included in the lease obligations below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beyond |
|
|
|
Total |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2012 |
|
|
|
(Thousands of dollars) |
|
Aircraft Purchase
commitments (1) |
|
$ |
153,967 |
|
|
$ |
72,468 |
|
|
$ |
81,499 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Aircraft Purchase
commitments (2) |
|
|
127,407 |
|
|
|
20,255 |
|
|
|
107,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft lease
obligations |
|
|
169,150 |
|
|
|
18,274 |
|
|
|
18,274 |
|
|
|
18,876 |
|
|
|
20,144 |
|
|
|
20,811 |
|
|
|
72,771 |
|
Other lease
obligations |
|
|
21,211 |
|
|
|
3,463 |
|
|
|
2,726 |
|
|
|
2,325 |
|
|
|
1,897 |
|
|
|
1,442 |
|
|
|
9,358 |
|
Long term debt |
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
671,735 |
|
|
$ |
114,460 |
|
|
$ |
209,651 |
|
|
$ |
21,201 |
|
|
$ |
22,041 |
|
|
$ |
22,253 |
|
|
$ |
282,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These commitments are for aircraft that we intend to fund from existing cash,
short-term investments, and operating leases, as required. |
|
(2) |
|
These commitments are for aircraft that we intend to finance with an operating lease.
Once the leases are entered into, the lease payments will be made over the term of the
leases. |
Estimated interest costs on the debt obligations set forth above, without considering any
additional debt that may be obtained relative to purchase commitments for aircraft, are $14.5
million for 2008 and each successive year through 2012, including amortization of debt issuance
costs.
At December 31, 2007, we had an order for six additional transport category aircraft, with
scheduled delivery dates throughout 2008 and 2009. The approximate cost for these aircraft is
$127.4 million.
At December 31, 2007, we also had orders for 30 additional aircraft with a total cost of $154.0
million and scheduled delivery dates throughout 2008 and 2009.
We believe that cash flow from operations will be sufficient to fund operating requirements and
required interest payments on the 7.125% Senior Notes for the next twelve months. We have capital
requirements for aircraft on order totaling $154.0 million over 2008 and 2009, which we intend to
fund from existing cash, short-term investments, and operating leases, as required. The balance of
the aircraft purchase commitment of $127.4 million will be financed with operating leases.
23
Critical Accounting Policies and Estimates
Managements discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these
consolidated financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including
those related to allowances for doubtful accounts, inventories of spare parts, long-lived assets,
income taxes, and self-insurance liabilities. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates, and the differences may be material. We believe the following critical accounting
policies affect our more significant judgments and estimates used in preparation of our
consolidated financial statements.
Revenues related to Air Medical Services are recorded net of contractual allowances under
agreements with third party payors and estimated uncompensated care when services are provided. We
estimate contractual allowances and uncompensated care 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 an 18 month 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. There have not been any material
adjustments to the estimated amounts recorded for the years ended December 31, 2007, 2006, and
2005.
We maintain a significant parts inventory to service our own aircraft and the aircraft and
components of customers. Portions of that inventory are used parts that are often exchanged with
parts removed from aircraft or components and reworked to a useable condition. We use systematic
procedures to estimate the valuation of the used parts, which includes consideration of their
condition and continuing utility. If our valuation of these parts should be significantly
different from amounts ultimately realizable or if we discontinue using or servicing certain
aircraft models, then we may have to record a write-down of our inventory. We also record
provisions against inventory for obsolescent and slow-moving parts, relying principally on specific
identification of such inventory. If we fail to identify such parts, additional provisions may be
necessary.
Our principal long-lived assets are aircraft. We review our long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. We measure recoverability of assets to be held and used by comparing the carrying
amount of an asset to the future undiscounted net cash flows that we expect the asset to generate.
When an asset is determined to be impaired, we recognize the impairment amount, which is the amount
by which the carrying value of the asset exceeds its estimated fair value. Similarly, we report
assets that we expect to sell at the lower of the carrying amount or fair value less costs to sell.
Future adverse market conditions or poor operating results could result in an inability to recover
the current carrying value of certain long-lived assets, thereby possibly requiring an impairment
charge in the future.
Effective July 1, 2007, we changed the estimated residual value of certain aircraft from 40% to
54%. We believe the revised amounts reflect our historical experience and more appropriately match
costs over the estimated useful lives and salvage values of these assets. The change in residual
values of certain aircraft was based on our experience in sales of such aircraft and industry data
which indicated that these aircraft were retaining on average a salvage value of at least 54% by
model type. The effect of this change for 2007 was a reduction in depreciation expense of $1.6
million ($1.0 million after tax or $0.07 per diluted share).
We must make estimates for certain of our liabilities and expenses, losses, and gains related to
self-insured programs, insurance deductibles, and good-experience premium returns. Our group
medical insurance program is largely self-insured, and we use estimates to record our periodic
expenses related to that program. We also carry deductibles on our workers compensation program
and aircraft hull and liability insurance, and poor experience or higher accidents rates could
result in additional recorded losses.
We estimate what our effective tax rate will be for the full year and record a quarterly income tax
expense in accordance with the anticipated effective annual tax rate. As the year progresses, we
continually refine our estimate
24
based upon actual events and income before income taxes by jurisdiction during the year. This
process may result in a change to our expected effective tax rate for the year. When this occurs,
we adjust the income tax expense during the quarter in which the change in estimate occurs so that
the year-to-date expense equals the annual rate.
New Accounting Pronouncements
For a discussion of new accounting pronouncements applicable to the Company, see Note 1 to the
Consolidated Financial Statements.
Environmental Matters
We have an aggregate estimated liability of $0.2 million as of December 31, 2007 and 2006 for
environmental remediation costs that are probable and estimable. We have conducted environmental
surveys of our former Lafayette Facility, which we vacated in 2001, and have determined that
limited soil and groundwater contamination exists at the facility. We have installed groundwater
monitoring wells at the facility and periodically monitor and report on the contamination. In May
2003, we submitted a Louisiana 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. In April, 2006 the Site Assessment was updated to include
recent analytical data. LDEQ is reviewing the assessment report. Once LDEQ completes its review
and reports on whether all contamination has been fully defined, a risk evaluation in accordance
with RECAP will be submitted and evaluated by LDEQ. At that point, LDEQ will establish what
cleanup standards must be met at the site. When the process is complete, we will be in a position
to develop an appropriate remediation plan and determine the resulting cost of remediation. We
have not recorded any estimated liability for remediation and contamination and, based upon the May
2003 Site Assessment Report, the April 2006 update and ongoing monitoring, we believe the ultimate
remediation costs for the former Lafayette facility will not be material to our consolidated
financial position, results of operations, or cash flows.
During 2004, LDEQ advised us that groundwater contaminants impacting monitor wells at the PHI
Lafayette Heliport were originating from an off-site location and that we would no longer be
required to perform further monitoring at the site. Subsequently, based upon site investigation
work performed by the Lafayette Airport Commission, the source of the contamination was identified
as residing at another location, for which PHI is not responsible. The Lafayette Airport
Commission has begun remediation of the PHI Lafayette Heliport.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
In the past we made limited use of derivative financial instruments to manage interest rate risk.
When used, all derivatives for interest rate risk management were closely monitored by our senior
management. We do not hold derivatives for trading purposes and we do not use derivatives with
leveraged or complex features. Derivative instruments were transacted either with creditworthy
major financial institutions or over national exchanges. The Company has not engaged in activities
involving financial derivatives during the years 2007, 2006, and 2005.
The market value of the Senior Notes will vary as changes occur in market interest rates, the
remaining maturity of the Senior Notes, and our credit-worthiness. At December 31, 2007, the
market value of the Notes was $191.0 million. A hypothetical 100 basis-point increase in the
Senior Notes imputed rate at December 31, 2007 would have resulted in a market value decline of
approximately $8.0 million.
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
PHI, Inc.
Lafayette, Louisiana
We have audited the accompanying consolidated balance sheets of PHI, Inc. and subsidiaries (the
Company) as of December 31, 2007 and 2006, and the related consolidated statements of operations,
shareholders equity, and cash flows for each of the three years in the period ended December 31,
2007. Our audits also included the financial statement schedule listed in the Index at Item 15.
These financial statements and financial statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on the financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of PHI, Inc. and subsidiaries as of December 31, 2007 and 2006, and the
results of their operations and their cash flows for each of the three years in the period ended
December 31, 2007, in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Companys internal control over financial reporting as of December 31,
2007, based on the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and
our report dated March 11, 2008
expressed an unqualified opinion on the Companys internal control over financial reporting.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 11, 2008
26
PHI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,425 |
|
|
$ |
820 |
|
Short-term investments |
|
|
62,970 |
|
|
|
153,414 |
|
Accounts receivable net: |
|
|
|
|
|
|
|
|
Trade |
|
|
95,111 |
|
|
|
87,366 |
|
Other |
|
|
2,973 |
|
|
|
1,928 |
|
Inventories of spare parts and supplies |
|
|
55,831 |
|
|
|
55,596 |
|
Other current assets |
|
|
11,194 |
|
|
|
7,930 |
|
Refundable income taxes |
|
|
525 |
|
|
|
635 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
230,029 |
|
|
|
307,689 |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
27,148 |
|
|
|
23,816 |
|
Property and equipment, net |
|
|
484,119 |
|
|
|
369,465 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
741,296 |
|
|
$ |
700,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
28,454 |
|
|
$ |
35,815 |
|
Accrued liabilities |
|
|
24,942 |
|
|
|
17,775 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
53,396 |
|
|
|
53,590 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
200,000 |
|
|
|
205,500 |
|
Deferred income taxes |
|
|
51,644 |
|
|
|
32,828 |
|
Other long-term liabilities |
|
|
7,587 |
|
|
|
8,927 |
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
Voting common stock par value of $0.10;
authorized shares of 12,500,000 |
|
|
285 |
|
|
|
285 |
|
Non-voting common stock par value of $0.10;
authorized shares of 12,500,000 |
|
|
1,242 |
|
|
|
1,242 |
|
Additional paid-in capital |
|
|
291,037 |
|
|
|
290,695 |
|
Accumulated other comprehensive income |
|
|
61 |
|
|
|
77 |
|
Retained earnings |
|
|
136,044 |
|
|
|
107,826 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
428,669 |
|
|
|
400,125 |
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
741,296 |
|
|
$ |
700,970 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
27
PHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars and shares, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Operating revenues |
|
$ |
446,406 |
|
|
$ |
413,118 |
|
|
$ |
363,610 |
|
Gain on disposition of assets, net |
|
|
34,953 |
|
|
|
1,910 |
|
|
|
1,173 |
|
Other |
|
|
5,098 |
|
|
|
8,036 |
|
|
|
2,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
486,457 |
|
|
|
423,064 |
|
|
|
366,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
394,421 |
|
|
|
366,272 |
|
|
|
299,263 |
|
Selling, general and
administrative expenses |
|
|
30,226 |
|
|
|
27,839 |
|
|
|
24,896 |
|
Interest expense |
|
|
16,121 |
|
|
|
17,243 |
|
|
|
20,448 |
|
Loss on debt restructuring |
|
|
|
|
|
|
12,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440,768 |
|
|
|
424,144 |
|
|
|
344,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
|
45,689 |
|
|
|
(1,080 |
) |
|
|
22,233 |
|
Income tax expense (benefit) |
|
|
17,471 |
|
|
|
(413 |
) |
|
|
8,079 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
28,218 |
|
|
$ |
(667 |
) |
|
$ |
14,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.85 |
|
|
$ |
(0.05 |
) |
|
$ |
1.76 |
|
Diluted |
|
$ |
1.85 |
|
|
$ |
(0.05 |
) |
|
$ |
1.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,277 |
|
|
|
13,911 |
|
|
|
8,040 |
|
Diluted |
|
|
15,286 |
|
|
|
13,911 |
|
|
|
8,063 |
|
The accompanying notes are an integral part of these consolidated financial statements.
28
PHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Thousands of dollars and shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Voting |
|
|
Non-Voting |
|
|
Additional |
|
|
Other Com- |
|
|
|
|
|
|
Share- |
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
prehensive |
|
|
Retained |
|
|
Holders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
Balance at Dec. 31, 2004 |
|
|
2,852 |
|
|
$ |
285 |
|
|
|
2,531 |
|
|
$ |
253 |
|
|
$ |
15,098 |
|
|
$ |
|
|
|
$ |
94,339 |
|
|
$ |
109,975 |
|
Stock issuance, net |
|
|
|
|
|
|
|
|
|
|
4,887 |
|
|
|
489 |
|
|
|
113,352 |
|
|
|
|
|
|
|
|
|
|
|
113,841 |
|
Stock options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,081 |
|
|
|
|
|
|
|
|
|
|
|
1,081 |
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,154 |
|
|
|
14,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2005 |
|
|
2,852 |
|
|
|
285 |
|
|
|
7,418 |
|
|
|
742 |
|
|
|
129,531 |
|
|
|
|
|
|
|
108,493 |
|
|
|
239,051 |
|
Stock issuance, net |
|
|
|
|
|
|
|
|
|
|
4,867 |
|
|
|
487 |
|
|
|
160,235 |
|
|
|
|
|
|
|
|
|
|
|
160,722 |
|
Other |
|
|
|
|
|
|
|
|
|
|
139 |
|
|
|
13 |
|
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
942 |
|
SFAS No. 158 incremental effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77 |
|
|
|
|
|
|
|
77 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(667 |
) |
|
|
(667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2006 |
|
|
2,852 |
|
|
|
285 |
|
|
|
12,424 |
|
|
|
1,242 |
|
|
|
290,695 |
|
|
|
77 |
|
|
|
107,826 |
|
|
|
400,125 |
|
Stock options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
342 |
|
|
|
|
|
|
|
|
|
|
|
342 |
|
SFAS No. 158 incremental effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
(16 |
) |
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,218 |
|
|
|
28,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2007 |
|
|
2,852 |
|
|
$ |
285 |
|
|
|
12,424 |
|
|
$ |
1,242 |
|
|
$ |
291,037 |
|
|
$ |
61 |
|
|
$ |
136,044 |
|
|
$ |
428,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
29
PHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
28,218 |
|
|
$ |
(667 |
) |
|
$ |
14,154 |
|
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
30,047 |
|
|
|
30,297 |
|
|
|
27,133 |
|
Deferred income taxes |
|
|
16,498 |
|
|
|
(1,631 |
) |
|
|
6,415 |
|
Gain on asset dispositions |
|
|
(34,953 |
) |
|
|
(1,910 |
) |
|
|
(1,173 |
) |
Loss on debt restructuring |
|
|
|
|
|
|
12,790 |
|
|
|
|
|
Other |
|
|
868 |
|
|
|
806 |
|
|
|
1,411 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(8,790 |
) |
|
|
1,985 |
|
|
|
(31,109 |
) |
Inventories |
|
|
(1,492 |
) |
|
|
(7,473 |
) |
|
|
(8,898 |
) |
Refundable income taxes |
|
|
110 |
|
|
|
(213 |
) |
|
|
|
|
Other assets |
|
|
(1,824 |
) |
|
|
177 |
|
|
|
(2,313 |
) |
Accounts payable and accrued liabilities |
|
|
(2,100 |
) |
|
|
(6,679 |
) |
|
|
23,049 |
|
Other long-term liabilities |
|
|
(1,356 |
) |
|
|
2,842 |
|
|
|
(649 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
25,226 |
|
|
|
30,324 |
|
|
|
28,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(159,715 |
) |
|
|
(123,253 |
) |
|
|
(96,165 |
) |
Proceeds from asset dispositions |
|
|
58,105 |
|
|
|
36,809 |
|
|
|
10,751 |
|
Purchase of short-term investments |
|
|
(134,241 |
) |
|
|
(186,339 |
) |
|
|
(97,950 |
) |
Proceeds from sale of short-term investments |
|
|
224,685 |
|
|
|
99,450 |
|
|
|
45,900 |
|
Other |
|
|
(8,298 |
) |
|
|
(5,595 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(19,464 |
) |
|
|
(178,928 |
) |
|
|
(137,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds of debt issuance Senior Notes |
|
|
|
|
|
|
200,000 |
|
|
|
|
|
Premium and costs to retire debt early |
|
|
|
|
|
|
(10,208 |
) |
|
|
|
|
Repayment of Senior Notes |
|
|
|
|
|
|
(200,000 |
) |
|
|
|
|
Debt issuance costs |
|
|
|
|
|
|
(4,857 |
) |
|
|
|
|
Payments on long-term debt |
|
|
|
|
|
|
(1,000 |
) |
|
|
(1,000 |
) |
Proceeds from line of credit |
|
|
37,200 |
|
|
|
181,900 |
|
|
|
114,875 |
|
Payments on line of credit |
|
|
(42,700 |
) |
|
|
(179,700 |
) |
|
|
(119,850 |
) |
Proceeds from stock issuance |
|
|
|
|
|
|
161,155 |
|
|
|
115,162 |
|
Less related fees and expenses |
|
|
|
|
|
|
(433 |
) |
|
|
(1,265 |
) |
Proceeds from exercise of stock options |
|
|
343 |
|
|
|
|
|
|
|
1,025 |
|
Other |
|
|
|
|
|
|
(469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(5,157 |
) |
|
|
146,388 |
|
|
|
108,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
605 |
|
|
|
(2,216 |
) |
|
|
(497 |
) |
Cash and cash equivalents, beginning of year |
|
|
820 |
|
|
|
3,036 |
|
|
|
3,533 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
$ |
1,425 |
|
|
$ |
820 |
|
|
$ |
3,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued payables related to purchases of property and equipment |
|
$ |
1,906 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
30
PHI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
Nature of Operations, Basis of Consolidation, and Other General Principles |
|
|
|
Since its inception, PHI, Inc.s primary business has been to transport personnel and, to a
lesser extent, parts and equipment, to, from and among offshore facilities for customers
engaged in the oil and gas exploration, development, and production industry. The Company
also provides air medical transportation services for hospitals, medical programs, and
aircraft maintenance services to third parties. |
|
|
|
The consolidated financial statements include the accounts of PHI, Inc. and its subsidiaries
(PHI or the Company) after the elimination of all intercompany accounts and
transactions. |
|
|
|
A principal stockholder has substantial control. Al A. Gonsoulin, Chairman of the Board and
Chief Executive Officer, beneficially owns stock representing approximately 52% of the total
voting power. As a result, he exercises control over the election of PHIs directors and
the outcome of matters requiring a stockholder vote. |
|
|
|
Revenue Recognition |
|
|
|
The Company recognizes revenue related to aviation transportation services after the
services are performed or the contractual obligations are met. Aircraft maintenance
services revenues are recognized at the time the repair or services work is completed.
Revenues related to emergency flights generated by the Companys Air Medical segment are
recorded net of contractual allowances under agreements with third party payors when the
services are provided. |
|
|
|
Use of Estimates |
|
|
|
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as well as
reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. |
|
|
|
Estimates Include: |
Allowance for doubtful accounts receivable,
Estimates of contractual allowances applicable to billings in the Air Medical segment,
Valuation reserve related to obsolete and excess inventory,
Depreciable lives and salvage values of property and equipment,
Valuation allowance for deferred tax assets,
Insurance reserves for hull liability and health insurance care claims, and
Impairment of long lived assets.
|
|
Cash Equivalents |
|
|
|
The Company considers cash equivalents to include demand deposits and investments with
original maturity dates of three months or less. The Companys cash and cash equivalents
are maintained in one financial institution in amounts that typically exceed federally
insured limits. The Company has not experienced any losses in such accounts and believes it
is not exposed to significant credit risk. |
|
|
|
Short-term Investments |
|
|
|
Short-term investments consist primarily of money market funds, which represent funds
available for current operations. In accordance with SFAS
No. 115, Accounting for Certain
Investments in Debt and Equity Securities, these short-term investments are classified as
available for sale. The Company has not recorded any unrealized gains or losses associated
with short-term investments as the carrying value approximates fair value at December 31,
2007 and 2006. |
31
|
|
Investments included in Other Assets as detailed in Note 7 are comprised of mutual funds.
These investments are amounts related to the liability for the Officers Deferred
Compensation Plan. |
|
|
|
Inventories of Spare Parts and Supplies |
|
|
|
The Companys inventories are stated at the lower of average cost or market and consist
primarily of spare parts. Portions of the Companys inventories are used parts that are
often exchanged with parts removed from aircraft, reworked to a useable condition according
to manufacturers and FAA specifications, and returned to inventory. The Company uses
systematic procedures to estimate the valuation of the used parts, which includes
consideration of their condition and continuing utility. Reusable aircraft parts are
included in inventory at the average cost of comparable parts. The rework costs are
expensed as incurred. The Company also records an allowance for obsolete and slow-moving
parts, relying principally on specific identification of such inventory. Valuation reserves
related to obsolescence and slow-moving inventory were $7.5 million and $7.3 million at
December 31, 2007 and 2006, respectively. |
|
|
|
Property and Equipment |
|
|
|
The Company records its property and equipment at cost less accumulated depreciation. For
financial reporting purposes, the Company uses the straight-line method to compute
depreciation based upon estimated useful lives of five to fifteen years for flight equipment
and three to ten years for other equipment. Leasehold improvements are amortized over the
shorter of the life of the respective lease, or the asset, and range
from six to ten years.
The salvage value used in calculating depreciation of aircraft ranges from 30% to 54%. The
Company uses accelerated depreciation methods for tax purposes. The cost of scheduled
inspections and modifications for flight equipment are charged to maintenance expense as
incurred. Modifications that enhance the operating performance or extend the useful lives
of the aircraft are capitalized and depreciated over the remaining life of the asset. Upon
selling or otherwise disposing of property and equipment, the Company removes the cost and
accumulated depreciation from the accounts and reflects any resulting gain or loss in
earnings at the time of sale or other disposition. |
|
|
|
Effective July 1, 2007, the Company changed the estimated residual value of certain aircraft from 40%
to 54%. The Company believes the revised amounts reflect their historical experience and more
appropriately match costs over the estimated useful lives and salvage values of these
assets. The change in residual values of certain aircraft was based
on the Companys experience in
sales of such aircraft and industry data which indicated that these aircraft were retaining
on average a salvage value of at least 54% by model type. The effect of this change for the
year ended December 31, 2007 was a reduction in depreciation expense of $1.6 million ($1.0
million after tax or $0.07 per diluted share). |
|
|
|
The Company had previously reassessed the salvage values applicable to major modifications
to aircraft at January 1, 2005 based on updated estimates derived from recent aircraft
sales. The adjustment for the year 2005 resulted in a decrease in depreciation expense
($1.6 million). |
|
|
|
The Company reviews its long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company measures recoverability of assets to be held
and used by comparing the carrying amount of an asset to future undiscounted net cash flows
that it expects the asset to generate. When an asset is determined to be impaired, the
Company recognizes that impairment amount, which is measured by the amount that the carrying
value of the asset exceeds its fair value. Similarly, the Company reports assets that it
expects to sell at the lower of the carrying amount or fair value less costs to sell. |
|
|
|
Self-Insurance |
|
|
|
The Company maintains a self-insurance program for a portion of its health care costs.
Self-insurance costs are accrued based upon the aggregate of the liability for reported
claims and the estimated liability for claims incurred but not reported. The Companys
insurance retention is $200,000 per claim through December 31, 2007. As of December 31,
2007 and 2006, the Company had $1.5 million and $1.3 million, respectively, of accrued
liabilities related to health care claims. |
32
|
|
During 2005, the Company established an offshore insurance captive to realize savings in
reinsurance costs on its insurance premiums. Amounts paid to the captive in 2007 and 2006
totaled $1.5 million and $3.2 million, respectively. The financial position and operations
of the insurance captive were not significant in 2007 nor 2006. The captive is fully
consolidated in the accompanying financial statements. |
|
|
|
Concentration of Credit Risk |
|
|
|
Financial instruments that potentially expose the Company to concentrations of credit risk
consist primarily of short-term investments and trade accounts receivable. Short-term
investments at December 31, 2007 include money market securities. The Company does not
believe significant credit risk exists with respect to these securities at December 31,
2007. |
|
|
|
PHI conducts a majority of its business with major and independent oil and gas exploration
and production companies with operations in the Gulf of Mexico. The Company also provides
services to major medical centers and US governmental agencies. The Company continually
evaluates the financial strength of its customers but generally does not require collateral
to support the customer receivables. The Company establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers, current
market conditions, and other information. Amounts are charged off as uncollectible when
collection efforts have been exhausted. The allowance for doubtful accounts was $0.1
million at December 31, 2007 and 2006. The Companys largest oil and gas customer accounted
for 15%, 17%, and 14% of consolidated operating revenues for years ended December 31, 2007,
2006, and 2005, respectively. The Company also carried accounts receivable from this same
customer totaling 12% and 14% of net trade receivable on December 31, 2007 and 2006,
respectively. |
|
|
|
Trade receivables representing amounts due pursuant to air medical services are carried net
of an allowance for estimated contractual adjustments on unsettled invoices. The Company
monitors its collection experience by payor category within the Air Medical segment and
updates its estimated collections to be realized as deemed necessary. |
|
|
|
Stock Compensation |
|
|
|
Effective January 1, 2006, the Company adopted the accounting policies described in Statement of
Financial Accounting Standards (SFAS) No. 123
(R),Share Based Payment. The Company chose to use
the modified prospective method of transition, and accordingly, no adjustments to prior
period financial statements were made. SFAS No. 123 (R) superseded Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and amended SFAS
No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123 (R) is similar to
the approach described in SFAS No. 123. However, SFAS No. 123 (R) requires all share-based
payments to employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer an
alternative. Prior to January 1, 2006, the Company accounted for share-based payments to employees
using the intrinsic value method of and, as such, generally recognized no compensation
expense for employee stock options. In September 2001, the Company underwent a change of
control and as a result, all awards issued prior to the change of control became fully
vested. The Company has not issued any shares, options or rights under its stock plan since
2001. As a result, no pro forma information for 2005 is necessary under SFAS No. 123. As
no employee stock options were granted in 2007 and 2006, the adoption of SFAS No. 123 (R)
had no impact on the Companys results of operations for the years ended December 31, 2007 and 2006.
The impact on future periods will be dependent on levels of share based payments granted in
the future. |
|
|
|
Stock-based employee compensation expense relates to restricted stock grants and stock
options that were settled for cash. The employee compensation expense for stock grants and
options settled for cash was $0 for 2007, $0 for 2006, and $122,498 for 2005. There have
been no stock awards granted since 2001. |
|
|
|
Income Taxes |
|
|
|
The Company provides for income taxes using the asset and liability method under which
deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. The deferred tax assets and
liabilities measurement uses enacted tax rates that are expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled.
The |
33
|
|
Company recognizes the effect of any tax rate changes in income of the period that included
the enactment date. |
|
|
In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the
accounting and disclosure for uncertain tax positions, as defined. FIN 48 seeks to reduce
the diversity in practice associated with certain aspects of the recognition and measurement
related to accounting for income taxes. On January 1, 2007, the Company adopted the provisions of
FIN 48. Based on the Companys evaluation, the Company concluded that there are no significant uncertain
tax positions requiring recognition in their financial statements. The Companys evaluation was
performed for the tax years ended December 31, 2001 to 2006, the tax years which remained
subject to examination by major tax jurisdictions. |
|
|
|
Based on a review and evaluation at December 31, 2007, it was determined that there are no
material tax positions requiring recognition for the current tax year. The Companys evaluation was
performed for the tax years ended December 31, 2004 to 2007, the tax years which remain
subject to examination by major tax jurisdictions as of December 31, 2007. |
|
|
|
Earnings per Share |
|
|
|
The Company computes basic earnings per share by dividing income available to common
stockholders by the weighted average number of common shares outstanding during the period.
The diluted earnings per share computation uses the weighted average number of shares
outstanding adjusted for incremental shares attributed to dilutive outstanding options to
purchase common stock. |
|
|
|
Deferred Financing Costs |
|
|
|
Costs of obtaining long term debt financing are deferred and amortized ratably over the term
of the related debt agreement. |
|
|
|
Derivative Financial Instruments |
|
|
|
The Company has not engaged in activities involving financial derivatives during the years
2007, 2006, and 2005. |
|
|
|
New Accounting Pronouncements |
|
|
|
In September 2006, FASB issued SFAS No. 157, Fair Value Measurements which defines fair
value, establishes a framework for measuring fair value in generally accepted accounting
principles and expands disclosures about fair value measurements. This Statement is
effective for financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. Earlier application is encouraged provided
that the reporting entity has not yet issued financial statements for that fiscal year
including financial statements for an interim period within that fiscal year. The Company
is assessing SFAS No. 157 and has not determined yet the impact that the adoption of SFAS
No. 157 will have on its results of operations, financial position, or cash flows. |
|
|
|
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements. SAB No. 108 provides interpretive
guidance on the consideration of the effects of prior year misstatements in quantifying
current year misstatements when evaluating materiality. The application of the guidance in
SAB No. 108 did not have a significant impact on the Companys consolidated financial
statements. |
|
|
|
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities, including an amendment of FASB Statements No. 115 (SFAS No.
159). SFAS No. 159 permits the Company to choose, at specified election dates, to measure
eligible items at fair value (the fair value option). The Company would report unrealized
gains and losses on items for which the fair value option has been elected in earnings at
each subsequent reporting period. This accounting standard is effective as of the beginning
of the first fiscal year that begins after November 15, 2007. The Company is assessing SFAS
No. 159 and has not determined yet the impact that the adoption of SFAS No. 159 will |
34
|
|
have on its results of operations, financial position, or cash flows. |
|
|
Comprehensive Income |
|
|
|
Comprehensive Income includes net earnings and other comprehensive income items such as
revenues, expenses, gains or losses that under generally accepted accounting principles are
included in comprehensive income, but excluded from net income. |
|
|
|
The following table summarizes the components of total comprehensive income (net of taxes): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Net earnings (loss) |
|
$ |
28,218 |
|
|
$ |
(667 |
) |
|
$ |
14,154 |
|
SFAS No. 158 adjustment |
|
|
(16 |
) |
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
28,202 |
|
|
$ |
(590 |
) |
|
$ |
14,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
Goodwill represents costs in excess of the fair value acquired in connection with purchase
business combinations. Goodwill arose in connection with the acquisition of a company
related to the planned expansion of the Air Medical segment. In accordance with the
provisions of SFAS No. 142, Goodwill and Other Intangibles, the Company tests its goodwill
for impairment annually on December 31 or if impairment indicators are present. The
impairment evaluation for goodwill is performed by using a two-step process. In the first
step, the fair value of each reporting unit is compared with the carrying amount of the
reporting unit, including goodwill. The estimated fair value of the reporting unit is
generally determined on the basis of discounted future cash flows. If the estimated fair
value of the reporting unit is less than the carrying amount of the reporting unit, then a
second step must be completed in order to determine the amount of the goodwill impairment
that should be recorded. In the second step, the implied fair value of the reporting units
goodwill is determined by allocating the reporting units fair value to all of its assets
and liabilities other than goodwill (including any unrecognized intangible assets) in a
manner similar to a purchase price allocation. The resulting implied fair value of the
goodwill that results from the application of this second step is then compared to the
carrying amount of the goodwill and an impairment charge is recorded for the difference.
The Company performed the test at December 31, 2007 and determined that no impairment charge
for goodwill was required. |
|
(2) |
|
PROPERTY AND EQUIPMENT |
|
|
|
The following table summarizes the Companys property and equipment at
December 31, 2007 and 2006. |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Thousands of dollars) |
|
Flight equipment |
|
$ |
583,076 |
|
|
$ |
480,934 |
|
Other |
|
|
81,829 |
|
|
|
74,638 |
|
|
|
|
|
|
|
|
|
|
|
664,905 |
|
|
|
555,572 |
|
Less
accumulated depreciation and amortization |
|
|
(180,786 |
) |
|
|
(186,107 |
) |
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
484,119 |
|
|
$ |
369,465 |
|
|
|
|
|
|
|
|
Gain on equipment dispositions was $35.0 million for 2007 compared to $1.9 million for 2006. These
amounts represent gains and losses on sales of aircraft and related parts inventory that no longer
meet the Companys strategic needs.
35
(3) |
|
ACCRUED LIABILITIES |
|
|
|
Accrued liabilities consisted of the following: |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Thousands of dollars) |
|
Salaries & Wages |
|
$ |
9,654 |
|
|
$ |
4,141 |
|
Vacation Payable |
|
|
3,103 |
|
|
|
2,583 |
|
Interest |
|
|
2,974 |
|
|
|
3,045 |
|
Helicopter Lease |
|
|
2,821 |
|
|
|
|
|
Group Medical |
|
|
1,480 |
|
|
|
1,260 |
|
Transportations Tax |
|
|
1,195 |
|
|
|
738 |
|
Workers Compensation |
|
|
1,332 |
|
|
|
1,158 |
|
Other |
|
|
2,383 |
|
|
|
4,850 |
|
|
|
|
|
|
|
|
Total Accrued Liabilities |
|
$ |
24,942 |
|
|
$ |
17,775 |
|
|
|
|
|
|
|
|
(4) |
|
LONG-TERM DEBT |
|
|
|
On April 12, 2006, the Company issued $200.0 million of 7.125% Senior
Notes that mature in 2013. These Notes were offered and sold in a
private placement under Rule 144A and Regulation S under the
Securities Act of 1933. Net proceeds of $196.0 million were used to
repurchase $184.8 million of the Companys outstanding
9 3/8% Senior Notes due 2009 pursuant to a tender offer that also closed on April 12, 2006.
The total cost to repurchase those notes was $201.6 million, including the tender offer
premium and accrued interest. The Company called for redemption on May 1, 2006, the
remaining $15.2 million of 9 3/8% notes outstanding, at a redemption price of 104.688% of
their face amount plus accrued and unpaid interest. Interest on the 7.125% notes is payable
semi-annually on April 15 and October 15, and those notes mature April 15, 2013. The
estimated annual interest cost of the new notes is $14.3 million, excluding amortization of
issuance costs, which represents a reduction in annual interest cost on the notes of $4.5
million. As a result of the early redemption of the 9 3/8% notes, a pretax charge of $12.8
million ($7.7 million, net of tax) was recorded as a charge for debt restructuring in the
quarter ended June 30, 2006, which consisted of $9.8 million for the early call premium,
$2.6 million of unamortized issuance costs, and $0.4 million in related expenses for the
tender of outstanding notes. |
|
|
|
The new 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 or sales of assets. The Senior Notes are fully
and unconditionally guaranteed on a joint and several senior basis by all of the Companys
Guarantor Subsidiaries, which are all of the domestic subsidiaries.
See Note 14 of the Notes to Consolidated Financial Statements. The
Company was in compliance with the covenants applicable to these notes as of December 31, 2007 and
2006. |
|
|
|
The Company has a $35 million revolving credit facility with a commercial bank, which is
scheduled to expire on September 1, 2009. At December 31, 2007, the Company had no
borrowings under the revolving credit facility, and the Company had $5.5 million under the
credit facility at December 31, 2006. The Company had four letters of credit for $4.6
million outstanding at December 31, 2007, and five letters of credit for $5.1 million
outstanding at December 31, 2006. The credit agreement permits both prime rate based
borrowings and LIBOR rate borrowings plus a spread. The spread for LIBOR borrowings is
from 1.25% to 3.0%. The Company will pay an annual 0.25% commitment fee on the unused
portion of the revolving credit facility. The credit agreement includes covenants related
to working capital, funded debt to net worth, and consolidated net worth. As of December
31, 2007 and 2006, the Company was in compliance with these covenants. The credit agreement
is collateralized by accounts receivable and inventory. |
|
|
|
Cash paid for interest was $15.4 million, $16.5 million, and $19.5 million, for the years
ended December 31, 2007, 2006, and 2005, respectively. |
36
(5) |
|
INCOME TAXES |
|
|
|
Income tax expense (benefit) is composed of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
|
|
|
$ |
|
|
|
$ |
343 |
|
State |
|
|
|
|
|
|
|
|
|
|
(50 |
) |
Foreign |
|
|
973 |
|
|
|
1,175 |
|
|
|
1,371 |
|
Deferred principally Federal |
|
|
16,498 |
|
|
|
(1,588 |
) |
|
|
6,415 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
17,471 |
|
|
$ |
(413 |
) |
|
$ |
8,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) as a percentage of pre-tax earnings varies from the effective
Federal statutory rate of 35% as a result of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, 2007 |
|
|
December 31, 2006 |
|
|
December 31, 2005 |
|
|
|
(Thousands of dollars, except percentage amounts) |
|
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
Income taxes at statutory rate |
|
$ |
15,991 |
|
|
|
35 |
|
|
$ |
(367 |
) |
|
|
(34 |
) |
|
$ |
7,559 |
|
|
|
34 |
|
Increase (decrease) in taxes
resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hurricane relief credit |
|
|
(134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(537 |
) |
|
|
(2 |
) |
Effect of state income taxes |
|
|
1,479 |
|
|
|
3 |
|
|
|
(35 |
) |
|
|
(3 |
) |
|
|
762 |
|
|
|
3 |
|
Other items net |
|
|
135 |
|
|
|
|
|
|
|
(11 |
) |
|
|
(1 |
) |
|
|
295 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
17,471 |
|
|
|
38 |
|
|
$ |
(413 |
) |
|
|
(38 |
) |
|
$ |
8,079 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 2007 and 2006 are presented
below: |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Thousands of dollars) |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Deferred compensation |
|
$ |
1,889 |
|
|
$ |
1,644 |
|
Foreign tax credits |
|
|
6,466 |
|
|
|
5,792 |
|
Vacation accrual |
|
|
2,563 |
|
|
|
962 |
|
Inventory valuation |
|
|
4,065 |
|
|
|
3,355 |
|
Workmans compensation reserve |
|
|
|
|
|
|
323 |
|
Allowance for uncollectible accounts |
|
|
19 |
|
|
|
19 |
|
Alternative minimum tax credit |
|
|
|
|
|
|
343 |
|
Hurricane relief credit |
|
|
1,083 |
|
|
|
814 |
|
Other |
|
|
770 |
|
|
|
720 |
|
Net operating loss |
|
|
28,464 |
|
|
|
34,192 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
45,319 |
|
|
|
48,164 |
|
Valuation allowance tax credit carryforwards |
|
|
(1,945 |
) |
|
|
(2,142 |
) |
|
|
|
|
|
|
|
Total deferred tax assets, net |
|
|
43,374 |
|
|
|
46,022 |
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Tax depreciation in excess of book
depreciation |
|
|
(88,331 |
) |
|
|
(74,326 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
(88,331 |
) |
|
|
(74,326 |
) |
|
|
|
|
|
|
|
Net deferred tax liabilities |
|
$ |
(44,957 |
) |
|
$ |
(28,304 |
) |
|
|
|
|
|
|
|
37
|
|
A valuation allowance was recorded against certain foreign tax credits paid in 2004 and
prior as management believes it is more likely than not that the deferred tax asset related
to certain foreign tax credit carryforwards will not be realized during their carryforward
period. The estimated future U.S. taxable income, after utilization of the available net
operating loss carryforwards, will limit the ability of the Company to utilize the foreign
tax credit carryforwards during their carryforward period. Due to recent changes in the tax
laws extending the credit carryforward period, management believes that a valuation
allowance is not necessary for foreign tax credits generated after 2005. A tax credit of
$0.1 million was realized in 2006 and 2007 as a result of Hurricanes Katrina and Rita
Legislation. At December 31, 2007 and 2006, other current assets include $6.6 million and
$4.5 million, respectively, of deferred tax assets. |
|
|
|
The Company has net operating loss carryforwards (NOLs), of approximately $72.0 million
that, if not used will expire beginning in 2022 through 2027. Additionally, for state income
tax purposes, the Company has NOLs of approximately $84.0 million available to reduce future
state taxable income. These NOLs expire in varying amounts beginning in 2012 through 2027,
the majority of which expires in 2017 and through 2020. Most of these NOLs arose from
accelerated tax depreciation deductions related to substantial aircraft additions since
2002. |
|
|
|
Income taxes paid were approximately $0.02 million, $0.1 million, and $0.1 million, for the
years ended December 31, 2007, 2006, and 2005, respectively. The Company received net
income tax refunds of approximately $0.9 million, $0.3 million and $0.8 million during the
years ended December 31, 2007, 2006 and 2005, respectively. |
|
(6) |
|
EMPLOYEE BENEFIT PLANS |
|
|
|
Savings and Retirement Plans |
|
|
|
The Company maintains an Employee Savings Plan under Section 401(k) of
the Internal Revenue Code. The Company matches 2% for every 1% of an
employees salary deferral contribution, not to exceed 3% of the
employees compensation. The Company contributions were $7.0 million
for the year ended December 31, 2007, $6.2 million for the year ended
December 31, 2006 and $5.4 million for the year ended December 31,
2005. |
|
|
|
The Company maintains a Supplemental Executive Retirement Plan
(SERP). During January 2006, selected active employees were given a
substitute benefit in the Officer Deferred Compensation Plan based on
a calculated present value of the participants interest in the SERP,
except for the four remaining retired participants. As a result,
approximately $2.0 million of the SERP liability was transferred to
the Deferred Compensation Liability in 2006. |
|
|
|
As of December 31, 2006, the Company adopted SFAS
No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans An Amendment of FASB
Statements No. 87, 88, 106 and 132(R), for its SERP
plan. |
|
|
|
The Company recorded the following plan costs for the years ended
December 31, 2007, 2006, and 2005. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
259 |
|
Interest cost |
|
|
56 |
|
|
|
64 |
|
|
|
124 |
|
Recognized actuarial (gain) loss |
|
|
(4 |
) |
|
|
62 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic plan cost |
|
$ |
52 |
|
|
$ |
126 |
|
|
$ |
436 |
|
|
|
|
|
|
|
|
|
|
|
38
The benefit obligation, funded status, and assumptions of the plan on December 31, 2007 and
2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Thousands of dollars) |
|
Change in benefit obligation: |
|
|
|
|
|
|
|
|
Benefit obligation at the beginning of the year |
|
$ |
1,063 |
|
|
$ |
3,413 |
|
Service cost |
|
|
|
|
|
|
|
|
Interest cost |
|
|
56 |
|
|
|
64 |
|
Actuarial loss (gain) |
|
|
24 |
|
|
|
(18 |
) |
Benefits paid |
|
|
(131 |
) |
|
|
(384 |
) |
Transferred to deferred compensation |
|
|
|
|
|
|
(2,012 |
) |
|
|
|
|
|
|
|
Benefit obligation at the end of the year |
|
$ |
1,012 |
|
|
$ |
1,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Thousands of dollars) |
|
Reconciliation of funded status |
|
|
|
|
|
|
|
|
Unfunded status |
|
|
(1,012 |
) |
|
|
(1,063 |
) |
Unrecognized actuarial gains |
|
|
(101 |
) |
|
|
(129 |
) |
|
|
|
|
|
|
|
Total liability included in other long term
liabilities on the consolidated balance sheet |
|
$ |
(1,113 |
) |
|
$ |
(1,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average assumptions |
Discount rate |
|
|
5.4 |
% |
|
|
5.8 |
% |
Amounts recognized in accumulated other comprehensive income consists of approximately
$101,000 and $129,000 pre-tax in unrecognized actuarial gain in 2007 and 2006, respectively.
The SERP plan is an unfunded arrangement. However, the Company has purchased life insurance
contracts on the lives of the participants in anticipation of using the life insurances
cash values and death benefits to help fulfill the obligations of the plan. The Company, as
owner of such policies, may sell or redeem the contracts at any time without any obligation
to the plan participants. The Company recorded expenses of approximately $0.1 million for
2007, $0.2 million for 2006, and $0.5 million for 2005 related to the life insurance
contracts. Cash values of the life insurance contracts, recorded in other assets, are $0.5
million at December 31, 2007 and $0.4 million at December 31, 2006.
The Company maintains an Officer Deferred Compensation Plan that permits key officers to
defer a portion of their compensation. The plan is nonqualified and funded. The Company
has established a separate account for each participant, which is invested and reinvested
from time to time in investments that the participant selects from a list of eligible
investment choices. Earnings and losses on the book reserve accounts accrue to the plan
participants. Liabilities for the plan are included in other long-term liabilities, and the
corresponding investment accounts are included in other assets. Aggregate amounts deferred
under the plans were $3.8 million and $3.2 million, respectively, for the years December 31,
2007 and 2006.
Stock Based Compensation
Under the PHI 1995 Incentive Plan (the 1995 Plan), the Company is authorized to issue up
to 175,000 shares of voting common stock and 575,000 shares of non-voting common stock. The
Compensation Committee of the Board of Directors is authorized under the 1995 Plan to grant
stock options, restricted stock, stock appreciation rights, performance shares, stock
awards, and cash awards. The exercise prices of the stock option grants are equal to the
fair market value of the underlying stock at the date of grant. The 1995 Plan also allows
awards under the plan to fully vest upon a change in control of the Company. In September
of 2001, the Company underwent a change of control as defined in the 1995 plan and as a
result, all awards issued prior to the change of control became fully vested.
39
During the year ended December 31, 2001, the Company granted 20,000 non-voting restricted shares and 150,000 non-voting stock options under the 1995 Plan. The non-voting restricted
shares had a fair value of $11.06 on the date of issue and became unrestricted during 2001. The non-voting stock options are 100% vested and expire on September 1, 2010. Such options
were exercised in 2005. The Company has not issued any shares, options or rights under the 1995 Plan since 2001.
At December 31, 2007, there were 116,520 voting shares and 183,802 non-voting shares
available for issuance under the 1995 Plan. The Company did not record any compensation
expense related to the 1995 Plan for the years ended December 31, 2007 and 2006, and
recorded $0.2 million for the year ended December 31, 2005. There was no unearned stock
compensation expense at December 31, 2007 and 2006.
The following table summarizes employee and director stock option activities for the years
ended December 31, 2007, 2006, and 2005. All of the options were issued with an exercise
price equal to or greater than the market price of the stock at the time of issue.
|
|
|
|
|
|
|
|
|
|
|
1995 |
|
|
|
|
Plan |
|
|
|
|
Options |
|
Weighted |
|
|
Non- |
|
Average |
|
|
Voting |
|
Exercise Price |
Balance outstanding at
December 31, 2004 |
|
|
206,953 |
|
|
$ |
11.57 |
|
Options exercised |
|
|
(150,000 |
) |
|
|
11.06 |
|
Options settled for cash |
|
|
(10,203 |
) |
|
|
8.50 |
|
|
|
|
|
|
|
|
|
|
Balance outstanding at
December 31, 2005 |
|
|
46,750 |
|
|
|
13.87 |
|
Options exercised |
|
|
(8,500 |
) |
|
|
12.75 |
|
Options cancelled |
|
|
(500 |
) |
|
|
12.75 |
|
|
|
|
|
|
|
|
|
|
Balance outstanding at
December 31, 2006 |
|
|
37,750 |
|
|
|
14.14 |
|
Options exercised |
|
|
(15,000 |
) |
|
|
16.25 |
|
|
|
|
|
|
|
|
|
|
Balance outstanding at
December 31, 2007 |
|
|
22,750 |
|
|
|
12.75 |
|
|
|
|
|
|
|
|
|
|
Shares exercisable at
December 31, 2007 |
|
|
22,750 |
|
|
|
12.75 |
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
37,750 |
|
|
|
13.87 |
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
46,750 |
|
|
|
11.57 |
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options outstanding as of December 31, 2007.
All of the outstanding stock options are exercisable.
|
|
|
|
|
Options Outstanding and Exercisable |
|
|
Remaining |
|
|
Number |
|
Contractual |
|
Exercise |
Outstanding |
|
Life (Years) |
|
Price |
22,750 |
|
1.5
|
|
$12.75 |
Incentive Compensation
In 2002, the Company implemented an incentive compensation plan for non-executive and
non-represented employees. For calendar year 2007, the represented pilots were added to
this plan as part of the Companys implemented contract proposals. The plan allows the
Company to pay up to 8.25% of earnings before tax upon achieving a specified earnings
threshold. During 2004, the Company implemented an executive/senior management plan for
certain corporate and business unit management employees. Pursuant to these plans, the
Company accrued an estimated incentive compensation expense of $3.2 million for 2007. The
Company also accrued $0.8 million for the Safety Incentive Bonus for 2007. For the year
40
ended December 31, 2006, the Company did not record incentive compensation expense as
certain established requirements under the plan were not met. For 2005, the Company recorded
$2.3 million of incentive compensation expense related to the above plans.
(7) OTHER ASSETS
The following table summarizes the Companys other assets at December 31, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Thousands of dollars) |
|
Goodwill acquired |
|
$ |
2,747 |
|
|
$ |
2,747 |
|
Security deposits on aircraft |
|
|
13,493 |
|
|
|
10,170 |
|
Deferred financing cost |
|
|
4,468 |
|
|
|
5,231 |
|
Investments |
|
|
4,089 |
|
|
|
3,298 |
|
Other |
|
|
2,351 |
|
|
|
2,370 |
|
|
|
|
|
|
|
|
Total |
|
$ |
27,148 |
|
|
$ |
23,816 |
|
|
|
|
|
|
|
|
During 2007 and 2006, the Company placed security deposits on aircraft to be leased or
purchased. Upon delivery of the aircraft, the deposits will be applied to the lease or
purchase.
(8) FINANCIAL INSTRUMENTS
Fair Value The following table presents the carrying amounts and
estimated fair values of financial instruments held by the Company at
December 31, 2007 and 2006. The table excludes cash and cash
equivalents, short-term investments, accounts receivable, accounts
payable and accrued liabilities, and term notes payable, all of which
had fair values approximating carrying amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007 |
|
|
December 31, 2006 |
|
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
|
|
Amounts |
|
|
Fair Value |
|
|
Amounts |
|
|
Fair Value |
|
Long-term debt |
|
$ |
200,000 |
|
|
$ |
191,000 |
|
|
$ |
200,000 |
|
|
$ |
194,000 |
|
At December 31, 2007 and 2006, the fair value of long-term debt is based on quoted market
indications.
(9) COMMITMENTS AND CONTINGENCIES
Operating Leases The Company leases certain aircraft, facilities,
and equipment used in its operations. The related lease agreements,
which include both non-cancelable and month-to-month terms, generally
provide for fixed monthly rentals and, for certain real estate leases,
renewal options. The Company generally pays all insurance, taxes, and
maintenance expenses associated with these aircraft and some of these
leases contain renewal and purchase options at fair market values.
Rental expense incurred under these leases consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Aircraft |
|
$ |
19,110 |
|
|
$ |
15,663 |
|
|
$ |
5,817 |
|
Other |
|
|
6,715 |
|
|
|
5,174 |
|
|
|
5,167 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
25,825 |
|
|
$ |
20,837 |
|
|
$ |
10,984 |
|
|
|
|
|
|
|
|
|
|
|
In September 2001, the Company began leasing a principal operating facility at Lafayette,
Louisiana for twenty years. The lease expires in 2021 and has three five-year renewal
options.
41
The following table presents the remaining aggregate lease commitments under operating lease
having initial non-cancelable terms in excess of one year. The table includes renewal
periods on the principal operating facility lease.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft |
|
|
Other |
|
|
Total |
|
|
|
(Thousands of dollars) |
|
2008 |
|
$ |
18,274 |
|
|
$ |
3,463 |
|
|
$ |
21,737 |
|
2009 |
|
|
18,274 |
|
|
|
2,726 |
|
|
|
21,000 |
|
2010 |
|
|
18,876 |
|
|
|
2,325 |
|
|
|
21,201 |
|
2011 |
|
|
20,144 |
|
|
|
1,897 |
|
|
|
22,041 |
|
2012 |
|
|
20,811 |
|
|
|
1,442 |
|
|
|
22,253 |
|
Thereafter |
|
|
72,771 |
|
|
|
9,358 |
|
|
|
82,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
169,150 |
|
|
$ |
21,211 |
|
|
$ |
190,361 |
|
|
|
|
|
|
|
|
|
|
|
Purchase Commitments - The Company expects to finance the acquisition of new aircraft,
discussed below, with existing cash and cash equivalents, short-term investments, operating
leases, the issuance of debt or equity securities or some combination thereof. There are no
purchase commitments other than those listed below.
In 2007, the Company took delivery of three transport category aircraft, all of which were
financed with an operating lease, ten medium aircraft and twelve light aircraft for service
in the Oil and Gas segment. The Company also took delivery of four light aircraft and one
fixed wing aircraft for service in the Air Medical segment.
At December 31, 2007, the Company had an order for six additional transport category
aircraft, with scheduled delivery dates throughout 2008 and 2009. The approximate cost for
these aircraft is $127.4 million.
At December 31, 2007, the Company also had orders for 30 additional aircraft with a total
cost of $154.0 million, with scheduled delivery dates throughout 2008 and 2009.
Environmental Matters The Company has an aggregate estimated liability of $0.2 million as
of December 31, 2007 and 2006 for environmental remediation costs that are probable and
estimable. 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. In May
2003, the Company submitted a Louisiana 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. In April, 2006, the Site
Assessment was updated to include recent analytical data. LDEQ is reviewing the assessment
report. Once LDEQ completes its review and reports on whether all contamination has been
fully defined, a risk evaluation in accordance with RECAP will be submitted and evaluated by
LDEQ. At that point, LDEQ will establish what cleanup standards must be met at the site.
When the process is complete, the Company will be in a position to develop an appropriate
remediation plan and determine the resulting cost of remediation. The Company has not
recorded any estimated liability for remediation and contamination and, based upon the May
2003 Site Assessment Report, the April 2006 update and ongoing monitoring, it 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.
During 2004, LDEQ advised PHI that groundwater contaminants impacting monitor wells at the
PHI Lafayette Heliport were originating from an off-site location and that the Company would
no longer be required to perform further monitoring at the site. Subsequently, based upon
site investigation work performed by the Lafayette Airport Commission, the source of the
contamination was identified as residing at another location, for which PHI is not
responsible. The Lafayette Airport Commission has begun remediation of the PHI Lafayette
Heliport.
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
42
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, on June 15, 2005, the Company received a subpoena from the United
States Department of Justice relating to a grand jury investigation of potential antitrust
violations among providers of helicopter transportation services in the Gulf of Mexico. The
Company is cooperating fully with the investigation and believes it has provided all
documents and other information required by the subpoena. The Company has not received any
further communications from the Department of Justice since shortly after providing the
requested information. At this stage, it is not possible to assess the outcome of this
investigation, although based on the information available to date, management does not
expect the outcome of the investigation to have a material adverse effect on its financial
condition, results of operations, or cash flows.
Employee Matters - As previously reported, the Company is involved in Federal Court
litigation in the Western District of Louisiana with the OPEIU (the Office and Professional
Employees International Union), the union representing domestic pilots, over claims of bad
faith bargaining and issues relating to the return to work of striking pilots. Pilots
continue to work under the 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.
A trial on strike-related matters is currently set to start on November 3, 2008. It is not
possible to assess the outcome of that litigation, as these matters are still in the
discovery stage. However, management is of the opinion that the Companys claims and
defenses have substantial merit.
(10) BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
PHI is primarily a provider of helicopter services, including
helicopter maintenance and repair services. The Company has used a
combination of factors to identify its reportable segments as
required by Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). The overriding determination of the Companys segments
is based on how the chief operating decision-maker of the Company
evaluates the Companys results of operations. The underlying
factors include customer bases, types of service, operational
management, physical locations, and underlying economic
characteristics of the types of work the Company performs. Prior to
the change in the Companys reportable segments described below, the Company
had four segments that met the requirements of SFAS 131 for
disclosure. The reportable segments were Oil and Gas, Air Medical,
International, and Technical Services.
During the quarter ended March 31, 2007, the Company combined the oil
and gas customers that were previously included in its International
segment into the Companys Domestic Oil and Gas segment, and eliminated the
term Domestic from that segment. Additionally, the contract work
previously included in the International segment for the National
Science Foundation is now included in the Technical Services segment.
Therefore there are now three reportable segments: Oil and Gas, Air
Medical, and Technical Services. All prior periods have been recast
to conform to the 2007 presentation.
The Oil and Gas segment provides helicopter services to oil and gas
customers operating in the Gulf of Mexico, Angola, and the Democratic
Republic of Congo. The Air Medical segment provides helicopter
services to hospitals and medical programs in several U.S. states,
and also to individuals under which the Company is paid by either a
commercial insurance company, federal or state agency, or the
patient. The Companys Air Evac subsidiary is included in the Air
Medical segment. The Technical Services segment provides helicopter
repair and overhaul services for existing flight operations
customers. The Company also operates four aircraft for the National
Science Foundation in Antarctica under the Technical Services
segment.
Each segment has a portion of selling, general and administrative
expenses that is charged directly to the segment and a portion that
is allocated. Direct charges represent the vast majority of segment
selling, general and administrative expenses. Allocated selling,
general and administrative expenses is based primarily on total
segment costs as a percentage of total operating costs.
43
Air
Medical operations are headquartered in Phoenix, AZ, where the Company
maintains significant separate facilities and administrative staff
dedicated to this segment. Those costs are charged directly to the
Air Medical segment, resulting in a disproportionate share of
selling, general and administrative expenses compared to the
Companys other reportable segments.
Customers of the Company consist principally of major integrated
energy companies and independent exploration and production
companies. The customers, individually or considered as a group
under common ownership, which accounted for greater than 10% of
accounts receivable or 10% of net sales during the periods reflected
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable |
|
Net Sales |
|
|
December 31, |
|
Years Ended December 31, |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
2005 |
Customer A |
|
|
11 |
% |
|
|
11 |
% |
|
|
15 |
% |
|
|
17 |
% |
|
|
14 |
% |
Customer B |
|
|
11 |
% |
|
|
7 |
% |
|
|
12 |
% |
|
|
10 |
% |
|
|
9 |
% |
The following table shows information about the profit or loss and assets of each of the
Companys reportable segments for the years ended December 31, 2007, 2006, and 2005. The
information contains certain allocations, including allocations of depreciation, rents,
insurance, and overhead expenses that the Company deems reasonable and appropriate for the
evaluation of results of operations. The Company does not allocate gains on dispositions of
property and equipment, other income, interest expense, and corporate selling, general, and
administrative expenses to the segments. Where applicable, the tables present the
unallocated amounts to reconcile the totals to the Companys consolidated financial
statements. Segment assets are determined by where they are situated at period-end.
Corporate assets are principally cash and cash equivalents, short-term investments, other
assets, and certain property, and equipment.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
286,118 |
|
|
$ |
270,707 |
|
|
$ |
242,464 |
|
Air Medical |
|
|
149,590 |
|
|
|
133,397 |
|
|
|
112,123 |
|
Technical Services |
|
|
10,698 |
|
|
|
9,014 |
|
|
|
9,023 |
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
446,406 |
|
|
|
413,118 |
|
|
|
363,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment direct expense |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
250,110 |
|
|
|
228,797 |
|
|
|
188,872 |
|
Air Medical |
|
|
137,703 |
|
|
|
130,412 |
|
|
|
104,465 |
|
Technical Services |
|
|
6,608 |
|
|
|
7,063 |
|
|
|
5,926 |
|
|
|
|
|
|
|
|
|
|
|
Total direct expense |
|
|
394,421 |
|
|
|
366,272 |
|
|
|
299,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
|
1,531 |
|
|
|
1,150 |
|
|
|
1,181 |
|
Air Medical |
|
|
7,883 |
|
|
|
7,384 |
|
|
|
6,503 |
|
Technical Services |
|
|
59 |
|
|
|
38 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses |
|
|
9,473 |
|
|
|
8,572 |
|
|
|
7,727 |
|
|
|
|
|
|
|
|
|
|
|
Total direct
and selling, general and administrative expenses |
|
|
403,894 |
|
|
|
374,844 |
|
|
|
306,990 |
|
|
|
|
|
|
|
|
|
|
|
Net segment
profit (loss) |
Oil and Gas |
|
|
34,477 |
|
|
|
40,760 |
|
|
|
52,411 |
|
Air Medical |
|
|
4,004 |
|
|
|
(4,399 |
) |
|
|
1,155 |
|
Technical Services |
|
|
4,031 |
|
|
|
1,913 |
|
|
|
3,054 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
42,512 |
|
|
|
38,274 |
|
|
|
56,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net (1) |
|
|
40,051 |
|
|
|
9,946 |
|
|
|
3,230 |
|
Unallocated selling, general and administrative expenses |
|
|
(20,753 |
) |
|
|
(19,267 |
) |
|
|
(17,169 |
) |
Interest expense |
|
|
(16,121 |
) |
|
|
(17,243 |
) |
|
|
(20,448 |
) |
Loss on debt restructuring |
|
|
|
|
|
|
(12,790 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
$ |
45,689 |
|
|
$ |
(1,080 |
) |
|
$ |
22,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Including gains on disposition of property and equipment and other income. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Expenditures for long
lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
130,574 |
|
|
$ |
107,514 |
|
|
$ |
56,157 |
|
Air Medical |
|
|
35,053 |
|
|
|
14,446 |
|
|
|
39,361 |
|
Technical Services |
|
|
|
|
|
|
518 |
|
|
|
3 |
|
Corporate |
|
|
971 |
|
|
|
775 |
|
|
|
644 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
166,598 |
|
|
$ |
123,253 |
|
|
$ |
96,165 |
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Depreciation and Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
17,211 |
|
|
$ |
17,147 |
|
|
$ |
16,842 |
|
Air Medical |
|
|
8,303 |
|
|
|
8,634 |
|
|
|
6,023 |
|
Technical Services |
|
|
252 |
|
|
|
235 |
|
|
|
223 |
|
Corporate |
|
|
4,281 |
|
|
|
4,281 |
|
|
|
4,045 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
30,047 |
|
|
$ |
30,297 |
|
|
$ |
27,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
$ |
392,154 |
|
|
$ |
284,981 |
|
|
$ |
254,146 |
|
Air Medical |
|
|
184,435 |
|
|
|
164,234 |
|
|
|
138,994 |
|
Technical Services |
|
|
7,481 |
|
|
|
9,984 |
|
|
|
4,950 |
|
Corporate |
|
|
157,226 |
|
|
|
241,771 |
|
|
|
151,119 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
741,296 |
|
|
$ |
700,970 |
|
|
$ |
549,209 |
|
|
|
|
|
|
|
|
|
|
|
The following table presents the Companys revenues from external customers attributed to
operations in the United States and foreign areas and long-lived assets in the United States and
foreign areas.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(Thousands of dollars) |
|
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
424,268 |
|
|
$ |
387,530 |
|
|
$ |
335,418 |
|
International |
|
|
22,138 |
|
|
|
25,588 |
|
|
|
28,192 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
446,406 |
|
|
$ |
413,118 |
|
|
$ |
363,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
478,795 |
|
|
$ |
362,527 |
|
|
$ |
303,924 |
|
International |
|
|
5,324 |
|
|
|
6,938 |
|
|
|
7,754 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
484,119 |
|
|
$ |
369,465 |
|
|
$ |
311,678 |
|
|
|
|
|
|
|
|
|
|
|
(11) EFFECTS OF HURRICANES
At December 31, 2005, the Company recognized a loss from Hurricane
Katrina on August 29, 2005 and Hurricane Rita on September 24, 2005
of approximately $5.6 million consisting of write-off of inventory
and other tangible assets of $2.5 million, incremental repair costs
and costs to relocate operations from damaged or destroyed bases of
$3.1 million. These losses were offset by insurance recoveries of
$5.6 million at December 31, 2005, of which $2.7 million was
reflected as receivable from the insurance carriers in accounts
receivable, other at December 31, 2005. In 2006, the Company
incurred additional repair costs and costs related to relocation of
operations from damaged or destroyed bases of $3.0 million. This
loss was offset by insurance recoveries of $3.0 million in 2006. The
Company received proceeds from insurance carriers totaling $8.6
million, of which $2.9 million and $5.7 million was received in 2005
and 2006, respectively.
46
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
The condensed quarterly results of operations for the years ended
December 31, 2007 and December 31, 2006 (in thousands of dollars,
except per share data) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2007(1) |
|
|
2007 |
|
|
2007 |
|
|
2007 |
|
|
|
(Thousands of dollars, except per share data) |
|
Operating revenues |
|
$ |
101,753 |
|
|
$ |
112,975 |
|
|
$ |
118,401 |
|
|
$ |
113,277 |
|
Gross profit |
|
|
8,520 |
|
|
|
15,856 |
|
|
|
16,974 |
|
|
|
10,635 |
|
Net earnings |
|
|
663 |
|
|
|
7,169 |
|
|
|
8,629 |
|
|
|
11,757 |
|
Net earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.04 |
|
|
|
0.47 |
|
|
|
0.56 |
|
|
|
0.77 |
|
Diluted |
|
|
0.04 |
|
|
|
0.47 |
|
|
|
0.56 |
|
|
|
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2006(2) |
|
|
2006(1) |
|
|
2006(1)
|
|
|
|
(Thousands of dollars, except per share data) |
|
Operating revenues |
|
$ |
101,372 |
|
|
$ |
107,157 |
|
|
$ |
109,315 |
|
|
$ |
95,274 |
|
Gross profit |
|
|
14,317 |
|
|
|
17,946 |
|
|
|
16,091 |
|
|
|
(1,508 |
) |
Net earnings (loss) |
|
|
2,225 |
|
|
|
(2,755 |
) |
|
|
5,122 |
|
|
|
(5,259 |
) |
Net earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.21 |
|
|
|
(0.19 |
) |
|
|
0.34 |
|
|
|
(0.34 |
) |
Diluted |
|
|
0.21 |
|
|
|
(0.19 |
) |
|
|
0.33 |
|
|
|
(0.34 |
) |
|
|
|
(1) |
|
Earnings in the quarters ended September 30, 2006, December 31, 2006, and March
31, 2007, were impacted due to the pilots strike that commenced September 20, 2006.
|
|
(2) |
|
The loss for the quarter ended June 30, 2006 was a result of the $12.8 million
early call premium and associated costs for redemption of the
Companys 9 3/8% Senior Notes
recorded in that period. |
(13) SHAREHOLDERS EQUITY
On April 12, 2006, the Company completed the sale of 4,287,920
non-voting common shares at $35.00 per share and on May 1, 2006, the
Company completed the sale of the over-allotment of 578,680 shares
also at $35.00 per share. Proceeds from the offering were $160.7
million, net of expenses.
The Company had an average of 15.3 million common shares outstanding
for the period ended December 31, 2007, compared to an average of
13.9 million shares for the period ended December 31, 2006. The
increase was the result of the equity offerings in April 2006.
(14) CONDENSED FINANCIAL INFORMATION GUARANTOR ENTITIES
On April 12, 2006, the Company issued $200 million of 7.125% Senior
Notes due 2013 and retired $184.8 million of 9 3/8% Series B Senior
Notes due 2009. On May 1, 2006, the Company redeemed the remaining
$15.2 million 9 3/8% Series B Senior Notes.
The 7.125% Senior Notes are fully and unconditionally guaranteed on a
joint and several, senior basis by all of the Companys Guarantor
Subsidiaries.
The following condensed financial information sets forth, on a
consolidating basis, the balance sheet, statement of operations, and
statement of cash flows information for PHI, Inc. (Parent Company
Only) and the Guarantor Subsidiaries. The principal eliminating
entries eliminate investments in subsidiaries, intercompany balances,
and intercompany revenues and expenses.
47
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,004 |
|
|
$ |
421 |
|
|
$ |
|
|
|
$ |
1,425 |
|
Short-term investments |
|
|
62,970 |
|
|
|
|
|
|
|
|
|
|
|
62,970 |
|
Accounts
receivable net |
|
|
84,318 |
|
|
|
13,766 |
|
|
|
|
|
|
|
98,084 |
|
Inventories of spare parts and supplies |
|
|
55,831 |
|
|
|
|
|
|
|
|
|
|
|
55,831 |
|
Other current assets |
|
|
11,184 |
|
|
|
10 |
|
|
|
|
|
|
|
11,194 |
|
Refundable income taxes |
|
|
525 |
|
|
|
|
|
|
|
|
|
|
|
525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
215,832 |
|
|
|
14,197 |
|
|
|
|
|
|
|
230,029 |
|
Investment in subsidiaries and others |
|
|
59,384 |
|
|
|
|
|
|
|
(59,384 |
) |
|
|
|
|
Intercompany receivable |
|
|
|
|
|
|
50,729 |
|
|
|
(50,729 |
) |
|
|
|
|
Other assets |
|
|
26,878 |
|
|
|
270 |
|
|
|
|
|
|
|
27,148 |
|
Property and equipment, net |
|
|
468,070 |
|
|
|
16,049 |
|
|
|
|
|
|
|
484,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
770,164 |
|
|
$ |
81,245 |
|
|
$ |
(110,113 |
) |
|
$ |
741,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
24,696 |
|
|
$ |
3,758 |
|
|
$ |
|
|
|
$ |
28,454 |
|
Accrued liabilities |
|
|
24,942 |
|
|
|
|
|
|
|
|
|
|
|
24,942 |
|
Intercompany payable |
|
|
50,729 |
|
|
|
|
|
|
|
(50,729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
100,367 |
|
|
|
3,758 |
|
|
|
(50,729 |
) |
|
|
53,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Deferred income taxes and other long-term
liabilities |
|
|
41,128 |
|
|
|
18,103 |
|
|
|
|
|
|
|
59,231 |
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital |
|
|
292,564 |
|
|
|
4,402 |
|
|
|
(4,402 |
) |
|
|
292,564 |
|
Accumulated other comprehensive
income |
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
61 |
|
Retained earnings |
|
|
136,044 |
|
|
|
54,982 |
|
|
|
(54,982 |
) |
|
|
136,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
428,669 |
|
|
|
59,384 |
|
|
|
(59,384 |
) |
|
|
428,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
770,164 |
|
|
$ |
81,245 |
|
|
$ |
(110,113 |
) |
|
$ |
741,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
48
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
385 |
|
|
$ |
435 |
|
|
$ |
|
|
|
$ |
820 |
|
Short-term investments |
|
|
153,414 |
|
|
|
|
|
|
|
|
|
|
|
153,414 |
|
Accounts
receivable net |
|
|
75,642 |
|
|
|
13,652 |
|
|
|
|
|
|
|
89,294 |
|
Inventories of spare parts and supplies |
|
|
55,596 |
|
|
|
|
|
|
|
|
|
|
|
55,596 |
|
Other current assets |
|
|
7,922 |
|
|
|
8 |
|
|
|
|
|
|
|
7,930 |
|
Refundable income taxes |
|
|
44 |
|
|
|
591 |
|
|
|
|
|
|
|
635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
293,003 |
|
|
|
14,686 |
|
|
|
|
|
|
|
307,689 |
|
Investment in subsidiaries and other |
|
|
46,226 |
|
|
|
|
|
|
|
(46,226 |
) |
|
|
|
|
Intercompany receivable |
|
|
|
|
|
|
44,085 |
|
|
|
(44,085 |
) |
|
|
|
|
Other assets |
|
|
23,759 |
|
|
|
57 |
|
|
|
|
|
|
|
23,816 |
|
Property and equipment, net |
|
|
361,570 |
|
|
|
7,895 |
|
|
|
|
|
|
|
369,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
724,558 |
|
|
$ |
66,723 |
|
|
$ |
(90,311 |
) |
|
$ |
700,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
31,461 |
|
|
$ |
4,354 |
|
|
$ |
|
|
|
$ |
35,815 |
|
Accrued liabilities |
|
|
17,487 |
|
|
|
288 |
|
|
|
|
|
|
|
17,775 |
|
Intercompany payable |
|
|
44,085 |
|
|
|
|
|
|
|
(44,085 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
93,033 |
|
|
|
4,642 |
|
|
|
(44,085 |
) |
|
|
53,590 |
|
Long-term debt |
|
|
205,500 |
|
|
|
|
|
|
|
|
|
|
|
205,500 |
|
Deferred income taxes and other long-term
liabilities |
|
|
25,900 |
|
|
|
15,855 |
|
|
|
|
|
|
|
41,755 |
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital |
|
|
292,222 |
|
|
|
4,402 |
|
|
|
(4,402 |
) |
|
|
292,222 |
|
Accumulated other comprehensive
income |
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
77 |
|
Retained earnings |
|
|
107,826 |
|
|
|
41,824 |
|
|
|
(41,824 |
) |
|
|
107,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
400,125 |
|
|
|
46,226 |
|
|
|
(46,226 |
) |
|
|
400,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
724,558 |
|
|
$ |
66,723 |
|
|
$ |
(90,311 |
) |
|
$ |
700,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
49
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
|
$ |
378,092 |
|
|
$ |
68,314 |
|
|
$ |
|
|
|
$ |
446,406 |
|
Management fees |
|
|
2,733 |
|
|
|
|
|
|
|
(2,733 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
34,953 |
|
|
|
|
|
|
|
|
|
|
|
34,953 |
|
Other |
|
|
5,090 |
|
|
|
8 |
|
|
|
|
|
|
|
5,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420,868 |
|
|
|
68,322 |
|
|
|
(2,733 |
) |
|
|
486,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
347,397 |
|
|
|
47,024 |
|
|
|
|
|
|
|
394,421 |
|
Management fees |
|
|
|
|
|
|
2,733 |
|
|
|
(2,733 |
) |
|
|
|
|
Selling, general, and administrative |
|
|
27,140 |
|
|
|
3,086 |
|
|
|
|
|
|
|
30,226 |
|
Equity in net income of consolidated
subsidiaries |
|
|
(13,158 |
) |
|
|
|
|
|
|
13,158 |
|
|
|
|
|
Interest expense |
|
|
16,121 |
|
|
|
|
|
|
|
|
|
|
|
16,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
377,500 |
|
|
|
52,843 |
|
|
|
10,425 |
|
|
|
440,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
43,368 |
|
|
|
15,479 |
|
|
|
(13,158 |
) |
|
|
45,689 |
|
Income taxes |
|
|
15,150 |
|
|
|
2,321 |
|
|
|
|
|
|
|
17,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
28,218 |
|
|
$ |
13,158 |
|
|
$ |
(13,158 |
) |
|
$ |
28,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
|
$ |
357,355 |
|
|
$ |
55,763 |
|
|
$ |
|
|
|
$ |
413,118 |
|
Management fees |
|
|
2,231 |
|
|
|
|
|
|
|
(2,231 |
) |
|
|
|
|
Gain on dispositions of assets, net |
|
|
1,910 |
|
|
|
|
|
|
|
|
|
|
|
1,910 |
|
Other |
|
|
8,016 |
|
|
|
20 |
|
|
|
|
|
|
|
8,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369,512 |
|
|
|
55,783 |
|
|
|
(2,231 |
) |
|
|
423,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
325,115 |
|
|
|
41,157 |
|
|
|
|
|
|
|
366,272 |
|
Management fees |
|
|
|
|
|
|
2,231 |
|
|
|
(2,231 |
) |
|
|
|
|
Selling, general, and administrative |
|
|
25,106 |
|
|
|
2,733 |
|
|
|
|
|
|
|
27,839 |
|
Equity in net income of consolidated
subsidiaries |
|
|
(7,592 |
) |
|
|
|
|
|
|
7,592 |
|
|
|
|
|
Interest expense |
|
|
17,243 |
|
|
|
|
|
|
|
|
|
|
|
17,243 |
|
Loss on debt restructuring |
|
|
12,790 |
|
|
|
|
|
|
|
|
|
|
|
12,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
372,662 |
|
|
|
46,121 |
|
|
|
5,361 |
|
|
|
424,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(3,150 |
) |
|
|
9,662 |
|
|
|
(7,592 |
) |
|
|
(1,080 |
) |
Income taxes |
|
|
(2,483 |
) |
|
|
2,070 |
|
|
|
|
|
|
|
(413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(667 |
) |
|
$ |
7,592 |
|
|
$ |
(7,592 |
) |
|
$ |
(667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
50
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Operating revenues |
|
$ |
310,868 |
|
|
$ |
52,742 |
|
|
$ |
|
|
|
$ |
363,610 |
|
Management fees |
|
|
1,485 |
|
|
|
|
|
|
|
(1,485 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on dispositions of assets, net |
|
|
1,173 |
|
|
|
|
|
|
|
|
|
|
|
1,173 |
|
Other |
|
|
1,988 |
|
|
|
69 |
|
|
|
|
|
|
|
2,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315,514 |
|
|
|
52,811 |
|
|
|
(1,485 |
) |
|
|
366,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
|
263,861 |
|
|
|
35,402 |
|
|
|
|
|
|
|
299,263 |
|
Management fees |
|
|
|
|
|
|
1,485 |
|
|
|
(1,485 |
) |
|
|
|
|
Selling, general, and administrative |
|
|
22,110 |
|
|
|
2,786 |
|
|
|
|
|
|
|
24,896 |
|
Equity in net income of consolidated
subsidiaries |
|
|
(8,921 |
) |
|
|
|
|
|
|
8,921 |
|
|
|
|
|
Interest expense |
|
|
20,448 |
|
|
|
|
|
|
|
|
|
|
|
20,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
297,498 |
|
|
|
39,673 |
|
|
|
7,436 |
|
|
|
344,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
18,016 |
|
|
|
13,138 |
|
|
|
(8,921 |
) |
|
|
22,233 |
|
Income taxes |
|
|
3,862 |
|
|
|
4,217 |
|
|
|
|
|
|
|
8,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
14,154 |
|
|
$ |
8,921 |
|
|
$ |
(8,921 |
) |
|
$ |
14,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
51
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
25,224 |
|
|
$ |
2 |
|
|
$ |
|
|
|
$ |
25,226 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(159,699 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
(159,715 |
) |
Proceeds from asset dispositions |
|
|
58,105 |
|
|
|
|
|
|
|
|
|
|
|
58,105 |
|
Purchase (sale) of short-term investments |
|
|
90,444 |
|
|
|
|
|
|
|
|
|
|
|
90,444 |
|
Other |
|
|
(8,298 |
) |
|
|
|
|
|
|
|
|
|
|
(8,298 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(19,448 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
(19,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds (payments) line of credit, net |
|
|
(5,500 |
) |
|
|
|
|
|
|
|
|
|
|
(5,500 |
) |
Proceeds from exercise of stock options |
|
|
343 |
|
|
|
|
|
|
|
|
|
|
|
343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in by financing activities |
|
|
(5,157 |
) |
|
|
|
|
|
|
|
|
|
|
(5,157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
619 |
|
|
|
(14 |
) |
|
|
|
|
|
|
605 |
|
Cash and cash equivalents, beginning of
period |
|
|
385 |
|
|
|
435 |
|
|
|
|
|
|
|
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
1,004 |
|
|
$ |
421 |
|
|
$ |
|
|
|
$ |
1,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
30,142 |
|
|
$ |
182 |
|
|
$ |
|
|
|
$ |
30,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(123,047 |
) |
|
|
(206 |
) |
|
|
|
|
|
|
(123,253 |
) |
Proceeds from asset dispositions |
|
|
36,809 |
|
|
|
|
|
|
|
|
|
|
|
36,809 |
|
Purchase (sale) of short-term investments |
|
|
(86,889 |
) |
|
|
|
|
|
|
|
|
|
|
(86,889 |
) |
Other |
|
|
(5,595 |
) |
|
|
|
|
|
|
|
|
|
|
(5,595 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(178,722 |
) |
|
|
(206 |
) |
|
|
|
|
|
|
(178,928 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds of
debt issuance Senior Notes |
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Premium and costs to retire debt early |
|
|
(10,208 |
) |
|
|
|
|
|
|
|
|
|
|
(10,208 |
) |
Repayment of Senior Notes |
|
|
(200,000 |
) |
|
|
|
|
|
|
|
|
|
|
(200,000 |
) |
Debt issuance costs |
|
|
(4,857 |
) |
|
|
|
|
|
|
|
|
|
|
(4,857 |
) |
Payments on long-term debt |
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
(1,000 |
) |
Proceeds from line of credit, net |
|
|
2,200 |
|
|
|
|
|
|
|
|
|
|
|
2,200 |
|
Proceeds from stock issuance, net |
|
|
160,722 |
|
|
|
|
|
|
|
|
|
|
|
160,722 |
|
Other |
|
|
(469 |
) |
|
|
|
|
|
|
|
|
|
|
(469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
146,388 |
|
|
|
|
|
|
|
|
|
|
|
146,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
(2,192 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
(2,216 |
) |
Cash and cash equivalents, beginning of
period |
|
|
2,577 |
|
|
|
459 |
|
|
|
|
|
|
|
3,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
385 |
|
|
$ |
435 |
|
|
$ |
|
|
|
$ |
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
52
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 |
|
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Only |
|
|
Subsidiaries(1) |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by operating activities |
|
$ |
27,864 |
|
|
$ |
156 |
|
|
$ |
|
|
|
$ |
28,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(96,161 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(96,165 |
) |
Proceeds from asset dispositions |
|
|
10,751 |
|
|
|
|
|
|
|
|
|
|
|
10,751 |
|
Purchase of short-term investments |
|
|
(52,050 |
) |
|
|
|
|
|
|
|
|
|
|
(52,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(137,460 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(137,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of long-term debt, net |
|
|
(5,975 |
) |
|
|
|
|
|
|
|
|
|
|
(5,975 |
) |
Proceeds from exercise of stock options |
|
|
1,025 |
|
|
|
|
|
|
|
|
|
|
|
1,025 |
|
Proceeds from stock issuance, net |
|
|
113,897 |
|
|
|
|
|
|
|
|
|
|
|
113,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
108,947 |
|
|
|
|
|
|
|
|
|
|
|
108,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) Increase in cash and cash
cash equivalents |
|
|
(649 |
) |
|
|
152 |
|
|
|
|
|
|
|
(497 |
) |
Cash and cash equivalents, beginning of
period |
|
|
3,226 |
|
|
|
307 |
|
|
|
|
|
|
|
3,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
2,577 |
|
|
$ |
459 |
|
|
$ |
|
|
|
$ |
3,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) |
|
Foreign subsidiaries represent minor subsidiaries and are included in the guarantors
subsidiaries amounts. |
53
|
|
|
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
|
|
|
ITEM 9A. CONTROLS AND PROCEDURES |
Disclosure 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 Rules 13a-15(e) and 15d-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 the design and
operation of our disclosure controls and procedures were effective as of such date to
provide assurance 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, and that such information is accumulated and
communicated to management as appropriate to allow timely decisions regarding disclosure.
During the last quarter, there have not been any changes in our internal control over
financial reporting that materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. Our internal control system was designed to provide reasonable
assurance to our management and board of directors regarding the reliability of financial
reporting and preparation of financial statements for external purposes in accordance with
generally accepted accounted principles.
Our management assessed the effectiveness of our internal control over financial reporting
as of December 31, 2007. In making this assessment, we used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on this assessment our management believes that, as of
December 31, 2007, our internal control over financial reporting is effective under those
criteria.
Deloitte & Touche LLP, our independent registered public accounting firm, has issued a
report on the Companys internal control over financial reporting as of December 31, 2007.
This report appears below.
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
PHI, Inc.
Lafayette, Louisiana
We have audited the Internal Control over Financial Reporting of PHI, Inc. and subsidiaries
(the Company) maintained as of December 31, 2007, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. The Companys management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying
Managements Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Companys internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of
internal control, based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a process designed by, or under
the supervision of, the companys principal executive and principal financial officers, or
persons performing similar functions, and effected by the companys board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, based on the criteria established
in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and financial
statement schedule as of and for the year ended December 31, 2007 of the Company and our
report dated March 11, 2008, expressed an unqualified opinion on those financial statements
and financial statement schedule.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 11, 2008
55
|
|
|
ITEM 9.B. |
|
OTHER INFORMATION |
Not Applicable.
PART III
|
|
|
ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Information concerning directors and executive officers required by this item will be included
in our definitive information statement in connection with our 2008 Annual Meeting of Shareholders
and is incorporated herein by reference.
|
|
|
ITEM 11.
|
|
EXECUTIVE COMPENSATION |
Information required by this item will be included in our definitive information statement in
connection with our 2008 Annual Meeting of Shareholders and is incorporated herein by reference.
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT |
Information required by this item will be included in our definitive information statement in
connection with our 2008 Annual Meeting of Shareholders and is incorporated herein by reference.
|
|
|
ITEM 13.
|
|
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Information required by this item will be included in our definitive information statement in
connection with our 2008 Annual Meeting of Shareholders and is incorporated herein by reference.
|
|
|
ITEM 14.
|
|
PRINCIPAL ACCOUNTING FEES AND SERVICES |
Information required by this item will be included in our definitive information statement in
connection with our 2008 Annual Meeting of Shareholders and is incorporated herein by reference.
56
PART IV
|
|
|
ITEM 15.
|
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
|
|
|
|
|
|
|
|
|
1. |
|
Financial Statements |
|
Page
|
|
|
Included in Part II of this report: |
|
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
26 |
|
|
|
|
|
Consolidated Balance Sheets December 31, 2007 and December 31, 2006.
|
|
|
27 |
|
|
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2007,
December 31, 2006, and December 31, 2005.
|
|
|
28 |
|
|
|
|
|
Consolidated Statements of Shareholders Equity for the years ended
December 31, 2007,
December 31, 2006, and December 31, 2005.
|
|
|
29 |
|
|
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2007,
December 31 2006, and December 31, 2005.
|
|
|
30 |
|
|
|
|
|
Notes to Consolidated Financial Statements.
|
|
|
31 |
|
2. |
|
Financial Statement Schedules |
|
|
|
|
|
|
|
|
Schedule II Valuation and Qualifying accounts for the years ended
December 31, 2007,
December 31, 2006 and December 31, 2005.
|
|
|
59 |
|
3. |
|
Exhibits |
|
|
|
|
|
3 |
|
Articles of Incorporation and By-laws |
3.1 |
(i) |
|
Amended and Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit No. 3.1(i) to PHIs Report on Form 10-Q for the quarterly period
ended June 30, 2006). |
|
|
(ii) |
|
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). |
|
4 |
|
Instruments defining the rights of security holders, including indentures. |
|
|
4.1 |
|
Loan Agreement dated as of April 23, 2002 by and among PHI, Inc., Acadian
Composites, LLC, Air Evac Services, Inc., Evangeline Airmotive Inc., and International
Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to
Exhibit 10.3 to PHIs Report on Form 10-Q for the quarterly period ended June 30,
2002, Commission File No. 0-9827). |
|
|
4.2 |
|
First Amendment to Loan Agreement dated June 18, 2004 by and among PHI, Inc.
Acadian Composites, LLC, Air Evac Services, Inc., Evangeline Airmotive Inc., and
International Helicopter Transport, Inc. and Whitney National Bank (incorporated by
reference to Exhibit 10.4 to PHIs Report on Form 10-Q for the quarterly period ended
June 30, 2004). |
|
|
4.3 |
|
Second Amendment to Loan Agreement dated September 30, 2005 by and among
Petroleum Helicopters, Inc., Air Evac Services, Inc., Evangeline Airmotive, Inc., and
International Helicopter Transport, Inc. and Whitney National Bank (incorporated by
reference to Exhibit 4.7 to PHIs Report on Form 10-Q for the quarterly period ended
September 30, 2007). |
|
|
4.4 |
|
Third Amendment to Loan Agreement dated April 12, 2006 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 10.4 to PHIs Report on Form 8-K filed on April
13, 2006). |
|
|
4.5 |
|
Fourth Amendment to Loan Agreement dated September 30, 2006 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 Bank
(incorporated by reference to Exhibit 4.8 to PHIs Report on Form 10-Q for the
quarterly period ended September 30, 2007). |
57
4.6 |
|
Fifth Amendment to Loan Agreement dated August 1, 2007 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 Bank
(incorporated by reference to Exhibit 4.9 to PHIs Report on Form 10-Q for the
quarterly period ended September 30, 2007). |
|
4.7 |
|
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). |
|
4.8 |
|
First Supplemental 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 10.1 to PHIs Report on Form 8-K filed on April 13, 2006). |
|
10 |
|
Material Contracts |
|
10.1 |
|
The Amended and Restated PHI, Inc. 401 (k) Retirement Plan effective January
1, 2007. |
|
10.2 |
|
Amended and Restated PHI, Inc. 1995 Incentive Compensation Plan adopted by
PHIs Board effective July 11, 1995 and approved by the shareholders of PHI on
September 22, 1995 (incorporated by reference to Exhibit 10.3 to PHIs Report on Form
10-K for the year ended December 31, 2006). |
|
10.3 |
|
Form of Non-Qualified Stock Option Agreement under the PHI, Inc. 1995
Incentive Compensation Plan between PHI and certain of its key employees (incorporated
by reference to Exhibit 10.4 to PHIs Report on Form 10-K for the year ended December
31, 2006). |
|
10.4 |
|
Officer Deferred Compensation Plan II adopted by PHIs Board effective
January 1, 2005 (incorporated by reference to Exhibit 10.5 to PHIs Report on Form
10-K for the year ended December 31, 2006). |
|
10.5 |
|
Articles of Agreement Between PHI, Inc. & Office & Professional Employees
International Union and its Local 108 dated June 13, 2001 (incorporated by reference
to Exhibit 10.6 to PHIs Report on Form 10-K for the year ended December 31, 2006). |
|
21 |
|
Subsidiaries of the Registrant |
|
23.1 |
|
Consent of Deloitte & Touche LLP |
|
31.1 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chief Executive Officer. |
|
31.2 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer. |
|
32.1 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Al
A. Gonsoulin, Chief Executive Officer. |
|
32.2 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Michael J. McCann, Chief Financial Officer. |
58
PHI, INC. AND SUBSIDIARIES
Schedule II Valuation and Qualifying Accounts
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
Balance at |
|
Charged to |
|
|
|
|
|
Balance at |
|
|
Beginning |
|
Costs and |
|
|
|
|
|
End |
Description |
|
of Year |
|
Expenses |
|
Deductions |
|
of Year |
|
Year ended December 31, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
50 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
50 |
|
Allowance for obsolescent inventory |
|
|
7,256 |
|
|
|
843 |
|
|
|
639 |
|
|
|
7,460 |
|
Allowance for contractual discounts |
|
|
29,930 |
|
|
|
130,753 |
|
|
|
128,825 |
|
|
|
31,858 |
|
Allowance for uncompensated care |
|
|
20,099 |
|
|
|
42,190 |
|
|
|
43,159 |
|
|
|
19,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
163 |
|
|
$ |
|
|
|
$ |
113 |
|
|
$ |
50 |
|
Allowance for obsolescent inventory |
|
|
6,268 |
|
|
|
1,502 |
|
|
|
514 |
|
|
|
7,256 |
|
Allowance for contractual discounts |
|
|
24,091 |
|
|
|
97,226 |
|
|
|
91,387 |
|
|
|
29,930 |
|
Allowance for uncompensated care |
|
|
11,597 |
|
|
|
40,073 |
|
|
|
31,571 |
|
|
|
20,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
163 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
163 |
|
Allowance for obsolescent inventory |
|
|
6,988 |
|
|
|
(70 |
) |
|
|
650 |
|
|
|
6,268 |
|
Allowance for contractual discounts |
|
|
12,871 |
|
|
|
77,672 |
|
|
|
66,452 |
|
|
|
24,091 |
|
Allowance for uncompensated care |
|
|
7,424 |
|
|
|
26,796 |
|
|
|
22,623 |
|
|
|
11,597 |
|
59
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
|
|
PHI, INC.
|
|
|
By: |
/s/ Michael J. McCann
|
|
|
|
Michael J. McCann |
|
|
|
Chief Financial Officer
(Principal Financial and
Accounting Officer) |
|
|
Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Al A. Gonsoulin
Al A. Gonsoulin
|
|
Chairman of the Board
Chief Executive Officer
and Director
(Principal Executive Officer)
|
|
March 11, 2008 |
|
|
|
|
|
/s/ Lance F. Bospflug
|
|
Director
|
|
March 11, 2008 |
|
|
|
|
|
|
|
|
|
|
/s/ Arthur J. Breault, Jr.
|
|
Director
|
|
March 11, 2008 |
|
|
|
|
|
|
|
|
|
|
/s/ Thomas H. Murphy
|
|
Director
|
|
March 11, 2008 |
|
|
|
|
|
|
|
|
|
|
/s/ Richard H. Matzke
|
|
Director
|
|
March 11, 2008 |
|
|
|
|
|
|
|
|
|
|
/s/ C. Russell Luigs
C. Russell Luigs
|
|
Director
|
|
March 11, 2008 |
|
|
|
|
|
/s/ Michael J. McCann
Michael J. McCann A |
|
Chief Financial Officer
(Principal Financial
and Accounting Officer)
|
|
March 11, 2008 |
60