13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed further in Note 5, on March 17, 2014, PHI, Inc. issued $500.0 million aggregate principal amount of 5.25% Senior Notes due 2019 that are fully and unconditionally guaranteed on a joint and several, senior basis by all of our domestic subsidiaries. PHI, Inc. directly or indirectly owns 100% of all of its domestic subsidiaries.

The supplemental condensed financial information on the following pages 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”) and the guarantor subsidiaries under separate headings. 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 the financial information presented below.

The transactions reflected in “Due to/from affiliates, net” in the following condensed consolidated statements of cash flows primarily consist of centralized cash management activities between PHI, Inc. and its subsidiaries, pursuant to which cash earned by the guarantor subsidiaries is regularly transferred to PHI, Inc. to be centrally managed. Because these balances are treated as short-term borrowings of the Parent Company, serve as a financing and cash management tool to meet our short-term operating needs, turn over quickly and are payable to the guarantor subsidiaries 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 following condensed consolidating statements of cash flows.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

(Unaudited)


	March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	51		$	3,629		$	—		$	3,680
Short-term investments		276,818			—			—			276,818
Accounts receivable – net		65,044			61,226			—			126,270
Intercompany receivable		—			69,862			(69,862	)		—
Inventories of spare parts – net		64,698			8,335			—			73,033
Prepaid expenses		8,144			2,186			—			10,330
Deferred income taxes		10,798			—			—			10,798
Income taxes receivable		341			(18	)		—			323

Total current assets		425,894			145,220			(69,862	)		501,252

Investment in subsidiaries		361,420			—			(361,420	)		—
Property and equipment – net		581,990			314,575			—			896,565
Restricted cash and investments		13,023			15			—			13,038
Other assets		7,819			1,054			—			8,873

Total assets	$	1,390,146		$	460,864		$	(431,282	)	$	1,419,728

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	18,007		$	4,047		$	—		$	22,054
Accrued and other current liabilities		18,034			9,466			—			27,500
Intercompany payable		69,862			—			(69,862	)		—

Total current liabilities		105,903			13,513			(69,862	)		49,554

Long-term debt		633,059			—			—			633,059
Deferred income taxes and other long-term liabilities		65,070			85,931			—			151,001
Shareholders’ Equity:
Common stock and paid-in capital		306,268			79,326			(79,326	)		306,268
Accumulated other comprehensive loss		(375	)		—			—			(375	)
Retained earnings		280,221			282,094			(282,094	)		280,221

Total shareholders’ equity		586,114			361,420			(361,062	)		586,114

Total liabilities and shareholders’ equity	$	1,390,146		$	460,864		$	(431,282	)	$	1,419,728

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)


	December 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	36		$	2,560		$	—		$	2,596
Short-term investments		289,806			—			—			289,806
Accounts receivable – net		71,458			66,807			—			138,265
Intercompany receivable		—			57,904			(57,904	)		—
Inventories of spare parts – net		61,834			8,568			—			70,402
Prepaid expenses		6,990			2,269			—			9,259
Deferred income taxes		10,798			—			—			10,798
Income taxes receivable		558			(18	)		—			540

Total current assets		441,480			138,090			(57,904	)		521,666

Investment in subsidiaries and others		353,160			—			(353,160	)		—
Property and equipment – net		589,104			314,873			—			903,977
Restricted investments		13,023			15			—			13,038
Other assets		8,660			1,099			—			9,759

Total assets	$	1,405,427		$	454,077		$	(411,064	)	$	1,448,440

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	22,744		$	5,960		$	—		$	28,704
Accrued and other current liabilities		18,725			9,621			—			28,346
Intercompany payable		57,904			—			(57,904	)		—

Total current liabilities		99,373			15,581			(57,904	)		57,050

Long-term debt		631,247			—			—			631,247
Deferred income taxes and other long-term liabilities		75,029			85,336			—			160,365
Shareholders’ Equity:
Common stock and paid-in capital		305,815			79,191			(79,191	)		305,815
Accumulated other comprehensive loss		(478	)		—			—			(478	)
Retained earnings		294,441			273,969			(273,969	)		294,441

Total shareholders’ equity		599,778			353,160			(353,160	)		599,778

Total liabilities and shareholders’ equity	$	1,405,427		$	454,077		$	(411,064	)	$	1,448,440

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)


	For the quarter ended March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	74,284		$	60,334		$	—		$	134,618

Expenses:
Direct expenses		82,344			54,169			—			136,513
Selling, general and administrative expenses		10,108			2,940			(4	)		13,044

Total operating expenses		92,452			57,109			(4	)		149,557

Equity in loss of unconsolidated affiliate		1,003			—			—			1,003

Operating (loss) income		(19,171	)		3,225			4			(15,942	)

Equity in net income of consolidated subsidiaries		(2,631	)		—			2,631			—
Interest expense		8,174			21			—			8,195
Other income, net		(1,067	)		(1	)		4			(1,064	)

		4,476			20			2,635			7,131

(Loss) earnings before income taxes		(23,647	)		3,205			(2,631	)		(23,073	)
Income tax (benefit) expense		(8,399	)		574			—			(7,825	)

Net (loss) earnings	$	(15,248	)	$	2,631		$	(2,631	)	$	(15,248	)


	For the quarter ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	91,869		$	72,147		$	—		$	164,016

Expenses:
Direct expenses		92,037			60,517			—			152,554
Selling, general and administrative expenses		9,044			2,802			(173	)		11,673

Total operating expenses		101,081			63,319			(173	)		164,227

Loss on disposal of assets, net		359			—			—			359

Operating (loss) income		(9,571	)		8,828			173			(570	)

Equity in net income of consolidated subsidiaries		(5,054	)		—			5,054			—
Interest expense		7,513			20			—			7,533
Other income, net		(786	)		(2	)		173			(615	)

		1,673			18			5,227			6,918

(Loss) earnings before income taxes		(11,244	)		8,810			(5,054	)		(7,488	)
Income tax (benefit) expense		(2,312	)		3,756			—			1,444

Net (loss) earnings	$	(8,932	)	$	5,054		$	(5,054	)	$	(8,932	)

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)


	For the quarter ended March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾		Eliminations			Consolidated
Net (loss) earnings	$	(15,248	)	$	2,631	$	(2,631	)	$	(15,248	)
Unrealized gain on short-term investments		162			—		—			162
Changes in pension plan asset and benefit obligation		(1	)		—		—			(1	)
Tax effect of preceding gains, losses or changes		(58	)		—		—			(58	)

Total Comprehensive (loss) income	$	(15,145	)	$	2,631	$	(2,631	)	$	(15,145	)


	For the quarter ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net (loss) earnings	$	(8,932	)	$	5,054	$	(5,054	)	$	(8,932	)
Unrealized gain on short-term investments		807			—		—			807
Changes in pension plan asset and benefit obligations		1			—		—			1
Tax effect of preceding gains, losses or changes		(332	)		—		—			(332	)

Total Comprehensive (loss) income	$	(8,456	)	$	5,054	$	(5,054	)	$	(8,456	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)


	For the three months ended March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(19,332	)	$	11,079		$	—	$	(8,253	)

Investing activities:
Purchase of property and equipment		(4,738	)		(51	)		—		(4,789	)
Purchase of short-term investments		(54,867	)		—			—		(54,867	)
Proceeds from sale of short-term investments		67,659			—			—		67,659
Payments of deposits on aircraft		(66	)		—			—		(66	)

Net cash provided by (used in) investing activities		7,988			(51	)		—		7,937

Financing activities:
Proceeds from line of credit		37,300			—			—		37,300
Payments on line of credit		(35,800	)		—			—		(35,800	)
Repurchase of common stock		(100	)							(100	)
Due to/from affiliate, net		9,959			(9,959	)		—		—

Net cash provided by (used in) financing activities		11,359			(9,959	)		—		1,400

Increase in cash		15			1,069			—		1,084
Cash, beginning of period		36			2,560			—		2,596

Cash, end of period	$	51		$	3,629		$	—	$	3,680


	For the three months ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash used in operating activities	$	(13,795	)	$	(2,548	)	$	—	$	(16,343	)

Investing activities:
Purchase of property and equipment		(8,519	)		—			—		(8,519	)
Proceeds from asset dispositions		850			—			—		850
Purchase of short-term investments		(77,677	)		—			—		(77,677	)
Proceeds from sale of short-term investments		76,184			—			—		76,184
Payments of deposits on aircraft		(66	)		—			—		(66	)

Net cash used in investing activities		(9,228	)		—			—		(9,228	)

Financing activities:
Proceeds from line of credit		83,500			—			—		83,500
Payments on line of credit		(53,300	)		—			—		(53,300	)
Repurchase of common stock		(500	)		—			—		(500	)
Due to/from affiliate, net		(6,600	)		6,600			—		—

Net cash provided by financing activities		23,100			6,600			—		29,700

Increase in cash		77			4,052			—		4,129
Cash, beginning of period		46			2,361			—		2,407

Cash, end of period	$	123		$	6,413		$	—	$	6,536

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