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CONDENSED CONSOLIDATING FINANCIAL INFORMATION – GUARANTOR SUBSIDIARIES

Our 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several, senior basis by all of our domestic subsidiaries. All of our domestic subsidiaries are 100% owned.

The following supplemental condensed financial information sets forth, on a consolidated basis, the balance sheet, statement of operations, statement of comprehensive income, and statement of cash flows information for PHI, Inc. (“Parent Company Only”) and the guarantor subsidiaries. The eliminating entries eliminate investments in subsidiaries, intercompany balances, and intercompany revenues and expenses. The condensed consolidating financial statements have been prepared on the same basis as the consolidated financial statements of PHI, Inc. The equity method is followed by the parent company within these condensed consolidating financials.

The transactions reflected in due to/from affiliates, net primarily consist of centralized cash management activities between PHI, Inc. and its subsidiaries. Because these balances are treated as short-term borrowing between the Parent Company and its subsidiaries, serve as a financing and cash management tool to meet our short-term operating needs, are large, turn over quickly and are payable on demand, we present borrowings and repayments with our affiliates on a net basis within the condensed consolidating statement of cash flows. Net receivables from our affiliates are considered advances and net payables to our affiliates are considered borrowings, and both changes are presented as financing activities in the condensed consolidating statement of cash flows.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)


	December 31, 2014
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	51		$	6,219	$	—		$	6,270
Short-term investments		185,244			—		—			185,244
Accounts receivable – net		98,001			82,760		—			180,761
Intercompany receivable		—			95,399		(95,399	)		—
Inventories of spare parts – net		65,341			8,452		—			73,793
Prepaid expenses		7,610			1,704		—			9,314
Deferred income taxes		9,915			—		—			9,915
Income taxes receivable		1,068			159		—			1,227

Total current assets		367,230			194,693		(95,399	)		466,524
Investment in subsidiaries and others		358,080			—		(358,080	)		—
Property and equipment, net		638,437			239,381		—			877,818
Restricted investments		15,485			—		—			15,485
Other assets		16,055			198		—			16,253

Total assets	$	1,395,287		$	434,272	$	(453,479	)	$	1,376,080

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	22,578		$	5,122	$	—		$	27,700
Accrued and other current liabilities		34,477			18,335		—			52,812
Intercompany payable		95,270			—		(95,270	)		—

Total current liabilities		152,325			23,457		(95,270	)		80,512
Long-term debt		543,000			—		—			543,000
Deferred income taxes and other long-term liabilities		102,894			52,606		—			155,500
Shareholders’ Equity:
Common stock and paid-in capital		303,082			137,647		(137,647	)		303,082
Accumulated other comprehensive loss		(211	)		—		—			(211	)
Retained earnings		294,197			220,562		(220,562	)		294,197

Total shareholders’ equity		597,068			358,209		(358,209	)		597,068

Total liabilities and shareholders’ equity	$	1,395,287		$	434,272	$	(453,479	)	$	1,376,080

(1)	Foreign subsidiaries represent minor subsidiaries and are included in the guarantors’ subsidiaries amounts.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)


	December 31, 2013
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	52		$	882		$	—		$	934
Short-term investments		85,916			—			—			85,916
Accounts receivable – net		83,988			89,732			—			173,720
Intercompany receivable		129,026			—			(129,026	)		—
Inventories of spare parts – net		71,023			114			—			71,137
Prepaid expenses		6,441			1,916			—			8,357
Deferred income taxes		12,723			—			—			12,723
Income taxes receivable		1,361			510			—			1,871

Total current assets		390,530			93,154			(129,026	)		354,658
Investment in subsidiaries		112,273			—			(112,273	)		—
Property and equipment, net		579,369			206,103			—			785,472
Restricted investments		14,685			—			—			14,685
Other assets		19,111			(603	)		—			18,508

Total assets	$	1,115,968		$	298,654		$	(241,299	)	$	1,173,323

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	31,232		$	5,642		$	—		$	36,874
Accrued liabilities		31,330			23,201			—			54,531
Intercompany payable		—			129,026			(129,026	)		—

Total current liabilities		62,562			157,869			(129,026	)		91,405
Long-term debt		379,000			—			—			379,000
Deferred income taxes and other long-term liabilities		114,441			28,512			—			142,953
Shareholders’ Equity:
Common stock and paid-in capital		298,480			2,674			(2,674	)		298,480
Accumulated other comprehensive loss		(24	)		—			—			(24	)
Retained earnings		261,509			109,599			(109,599	)		261,509

Total shareholders’ equity		559,965			112,273			(112,273	)		559,965

Total liabilities and shareholders’ equity	$	1,115,968		$	298,654		$	(241,299	)	$	1,173,323

(1)	Foreign subsidiaries represent minor subsidiaries and are included in the guarantors’ subsidiaries amounts.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)


	For the year ended December 31, 2014
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	504,180		$	332,090		$	—		$	836,270
Expenses:
Direct expenses		411,398			258,627			(18	)		670,007
Selling, general, and administrative expenses		32,985			10,186			—			43,171

Total operating expenses		444,383			268,813			(18	)		713,178
Loss on disposition of assets, net		848			—			—			848
Impairment of assets		10,508			—			—			10,508
Equity in loss of unconsolidated affiliate		96			—			—			96

Operating income		48,345			63,277			18			111,640
Equity in net earnings of consolidated subsidiaries		(38,740	)		—			38,740			—
Interest expense		29,510			—			—			29,510
Loss on debt extinguishment		29,833			—			—			29,833
Other (income) expense, net		(819	)		(17	)		18			(818	)

		19,784			(17	)		38,758			58,525

Earnings before income taxes		28,561			63,294			(38,740	)		53,115
Income tax expense (benefit)		(4,127	)		24,554			—			20,427

Net earnings	$	32,688		$	38,740		$	(38,740	)	$	32,688


	For the year ended December 31, 2013
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	564,445		$	292,055		$	—		$	856,500
Expenses:
Direct expenses		468,321			244,769			—			713,090
Selling, general, and administrative expenses		29,885			8,935			—			38,820
Management fees		(11,682	)		11,682			—			—

Total operating expenses		486,524			265,386			—			751,910
(Gain) on disposition of assets, net		(16,585	)		(19	)		—			(16,604	)
Impairment of assets		1,227			421			—			1,648
Equity in loss of unconsolidated affiliate		262			—			—			262

Operating income		93,017			26,267			—			119,284
Equity in net earnings of consolidated subsidiaries		(15,567	)		—			15,567			—
Interest expense		29,434			322			—			29,756
Other income, net		(613	)		—			—			(613	)

		13,254			322			15,567			29,413

Earnings before income taxes		79,763			25,945			(15,567	)		90,141
Income tax expense		20,807			10,378			—			31,185

Net earnings	$	58,956		$	15,567		$	(15,567	)	$	58,956

(1)	Foreign subsidiaries represent minor subsidiaries and are included in the guarantors’ subsidiaries amounts.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)


	For the year ended December 31, 2012
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Operating revenues, net	$	415,740		$	230,946	$	—		$	646,686
Expenses:
Direct expenses		355,689			187,835		—			543,524
Selling, general, and administrative expenses		31,384			7,667		—			39,051
Management fees		(9,238	)		9,238		—			—

Total operating expenses		377,835			204,740		—			582,575
Loss on disposition of assets, net		317			—		—			317
Equity in loss of unconsolidated affiliate		863			—		—			863

Operating income		36,725			26,206		—			62,931
Equity in net earnings of consolidated subsidiaries		(15,714	)		—		15,714			—
Interest expense		29,518			15		—			29,533
Other income, net		(651	)		—		—			(651	)

		13,153			15		15,714			28,882

Earnings before income taxes		23,572			26,191		(15,714	)		34,049
Income tax expense		5,515			10,477		—			15,992

Net earnings	$	18,057		$	15,714	$	(15,714	)	$	18,057

(1)	Foreign subsidiaries represent minor subsidiaries and are included in the guarantors’ subsidiaries amounts.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of dollars)


	For the year ended December 31, 2014
	Parent Company Only			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	32,688		$	38,740	$	(38,740	)	$	32,688
Unrealized loss on short-term investments		285			—		—			285
Other unrealized loss		24			—		—			24
Changes in pension plan assets and benefit obligations		(17	)		—		—			(17	)
Tax impact		(105	)		—		—			(105	)

	$	32,501		$	38,740	$	(38,740	)	$	32,501


	For the year ended December 31, 2013
	Parent Company Only			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	58,956		$	15,567	$	(15,567	)	$	58,956
Unrealized gain on short-term investments		44			—		—			44
Changes in pension plan assets and benefit obligations		(2	)		—		—			(2	)
Tax impact		(15	)		—		—			(15	)

	$	58,983		$	15,567	$	(15,567	)	$	58,983


	For the year ended December 31, 2012
	Parent Company Only			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	18,057		$	15,714	$	(15,714	)	$	18,057
Unrealized gain on short-term investments		92			—		—			92
Changes in pension plan assets and benefit obligations		(22	)		—		—			(22	)
Tax impact		(28	)		—		—			(28	)

	$	18,099		$	15,714	$	(15,714	)	$	18,099

(1)	Foreign subsidiaries represent minor subsidiaries and are included in the guarantors’ subsidiaries amounts.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)


	For the year ended December 31, 2014
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	51,476		$	68,043		$	—	$	119,519
Investing activities:
Purchase of property and equipment		(157,690	)		—			—		(157,690	)
Proceeds from asset dispositions		10,266			—			—		10,266
Purchase of short-term investments		(465,094	)		—			—		(465,094	)
Proceeds from sale of short-term investments		363,110			—			—		363,110
Refund of deposits on aircraft		11,506			—			—		11,506
Payments of deposits on aircraft		(6,948	)		—			—		(6,948	)
Other		(200	)		—			—		(200	)

Net cash used in investing activities		(245,050	)		—			—		(245,050	)

Financing activities:
Proceeds from issuance of Senior Notes due 2019		500,000			—			—		500,000
Repayment of Senior Notes due 2018		(300,000	)		—			—		(300,000	)
Premium and cost to retire debt early		(26,749	)		—			—		(26,749	)
Debt issuance costs		(6,232	)		—			—		(6,232	)
Proceeds from line of credit		264,253			—			—		264,253
Payments on line of credit		(300,253	)		—			—		(300,253	)
Repurchase of common stock		(152	)		—			—		(152	)
Due to/from affiliate, net		62,706			(62,706	)		—		—

Net cash provided by financing activities		193,573			(62,706	)		—		130,867

(Decrease) increase in cash		(1	)		5,337			—		5,336
Cash, beginning of year		52			882			—		934

Cash, end of year	$	51		$	6,219		$	—	$	6,270

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)


	For the year ended December 31, 2013
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾⁽²⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	82,660		$	22,436		$	—	$	105,096
Investing activities:
Purchase of property and equipment		(102,726	)		—			—		(102,726	)
Proceeds from asset dispositions		42,197			—			—		42,197
Purchase of short-term investments		(375,503	)		—			—		(375,503	)
Proceeds from sale of short-term investments		338,970			—			—		338,970
Payments of deposits on aircraft		(9,318	)		—			—		(9,318	)
Refunds on deposits on aircraft		8,161			—			—		8,161

Net cash used in investing activities		(98,219	)		—			—		(98,219	)

Financing activities:
Repurchase of common stock		(1,037	)							(1,037	)
Proceeds on line of credit		164,771			—			—		164,771
Payments on line of credit		(172,526	)		—			—		(172,526	)
Due to/from affiliate, net		23,851			(23,851	)		—		—

Net cash provided by financing activities		15,059			(23,851	)		—		(8,792	)

(Decrease) increase in cash		(500	)		(1,415	)		—		(1,915	)
Cash, beginning of year		552			2,297			—		2,849

Cash, end of year	$	52		$	882		$	—	$	934


	For the year ended December 31, 2012
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾⁽²⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	15,781		$	34,769		$	—	$	50,550
Investing activities:
Purchase of property and equipment		(128,475	)		—			—		(128,475	)
Proceeds from asset dispositions		11,302			—			—		11,302
Purchase of short-term investments		(216,265	)		—			—		(216,265	)
Proceeds from sale of short-term investments		249,041			—			—		249,041
Payments of deposits on aircraft		(8,717	)		—			—		(8,717	)
Refunds on deposits on aircraft		2,500			—			—		2,500
Loan to unconsolidated affiliate		(975	)		—			—		(975	)
Other		(50	)		—			—		(50	)

Net cash used in investing activities		(91,639	)		—			—		(91,639	)

Financing activities:
Repurchase of common stock		(1,861	)							(1,861	)
Proceeds on line of credit		127,323			—			—		127,323
Payments on line of credit		(86,615	)		—			—		(86,615	)
Due to/from affiliate, net		33,250			(33,250	)		—		—

Net cash provided by financing activities		72,097			(33,250	)		—		38,847

(Decrease) increase in cash		(3,761	)		1,519			—		(2,242	)
Cash, beginning of year		4,313			778			—		5,091

Cash, end of year	$	552		$	2,297		$	—	$	2,849

(1)	Foreign subsidiaries represent minor subsidiaries and are included in the guarantors’ subsidiaries amounts.

(2)	Cash flows between the Parent Company and Guarantor Subsidiaries related to the Company’s centralized cash management activities in 2013 and 2012 have been adjusted to show the effects on net cash provided by operating and financing activities.