(12)

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 leases and some of these leases contain renewal and purchase options at fair market values. Rental expense incurred under these leases consisted of the following:


	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2016		2015		2014
	(Thousands of dollars)
Aircraft	$	44,130	$	45,360	$	44,908
Other		9,451		8,358		7,790

Total	$	53,581	$	53,718	$	52,698

Included in the above rental expense is $-0- million in 2016, $-0- million in 2015, and $0.5 million in 2014 paid to GE Air, Inc. and Gonsoulin Enterprises, Inc. for the lease of aircraft and real estate. Each of GE Air, Inc. and Gonsoulin Enterprises, Inc. is owned by our Chairman, CEO and majority voting shareholder.

The following table presents the remaining aggregate lease commitments under operating leases having initial non-cancelable terms in excess of one year. The table includes renewal periods on the principal operating facility lease.


	Aircraft		Other		Total
	(Thousands of dollars)
2017	$	40,560	$	5,012	$	45,572
2018		36,879		3,394		40,273
2019		30,226		2,759		32,985
2020		26,387		1,907		28,294
2021		25,253		1,013		26,266
Thereafter		56,330		10		56,340

	$	215,635	$	14,095	$	229,730

Purchase Options

As of December 31, 2016, we had options to purchase aircraft under lease becoming exercisable in 2017 through 2021. The aggregate option purchase prices are $55.7 million in 2017, $127.0 million in 2018, $129.0 million in 2019, and $22.7 million in 2020. Under current conditions, we believe that it is unlikely that we will exercise the 2017 purchase options. Whether we exercise the remaining options will depend upon several factors, including market conditions and our available cash at the respective exercise dates.

Guarantees

In the normal course of business with customers, vendors, and others, we provide guarantees, performance, and payment bonds pursuant to certain agreements. The aggregate amount of these guarantees and bonds at December 31, 2016 was $1.0 million.

Purchase Commitments

In the fourth quarter of 2016, we entered into a contract to purchase two medium aircraft for use in our Oil and Gas segment. We expect to take delivery of the aircraft in the second quarter of 2017. The total remaining purchase commitment is $17.9 million.

Total aircraft deposits of $4.8 million were included in Other Assets as of December 31, 2016. This amount represents deposits for aircraft purchase contracts and deposits on future lease buyout options. In the event the buyout options are not exercised, the deposits will be applied as lease payments.

Environmental Matters

PHI has recorded an estimated liability of $0.15 million as of December 31, 2016 for environmental response costs. Previously, PHI conducted environmental surveys of its former Lafayette Facility located at the Lafayette Regional Airport, which former facility PHI vacated in 2001, and determined that limited soil and groundwater contamination exist at two parcels of land at the former facility. An Assessment Report for both parcels was submitted in 2003 (and updated in 2006) to the Louisiana Department of Environmental Quality (LDEQ) and the Louisiana Department of Natural Resources (LDNR). Approvals for the Assessment Report were received from the LDEQ and LDNR in 2010 and 2011, respectively. Since that time, PHI has performed groundwater sampling of the required groundwater monitor well installations at both former PHI facility parcels and submitted these sampling reports to the LDEQ. Pursuant to an agreement with the LDEQ, PHI provided groundwater sample results semi-annually to the LDEQ for both former PHI facility parcels from 2005 to 2015. LDEQ approved a reduction in the sampling program from semi-annual to annual groundwater monitoring in 2015. Based on PHI’s working relationship and agreements with the LDEQ, and the results of ongoing former facility parcel monitoring, PHI believes that ultimate remediation costs for the subject parcels will not be material to PHI’s consolidated financial position, operations or cash flows.

Legal Matters

From time to time, we are involved in various legal actions incidental to our business, including actions relating to employee claims, actions relating to medical malpractice claims, various tax issues, grievance hearings before labor regulatory agencies, and miscellaneous third party tort actions. The outcome of these proceedings is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on our financial position, results of operations or cash flows.