10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

or

☐ 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)

Louisiana	72-0395707
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2001 SE Evangeline Thruway
Lafayette, Louisiana	70508
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (337) 235-2452

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes:  ☒   No:  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes:  ☒    No:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer:	☐	Accelerated filer:	☒	Smaller reporting company:	☒
Non-accelerated filer:	☐			Emerging Growth Company:	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes:  ☐    No:  ☒

Securities registered pursuant to Section 12(b) of the Act: None

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 1, 2019
Voting Common Stock	2,905,757 shares
Non-Voting Common Stock	12,919,681 shares

PHI, INC.

Index – Form 10-Q

Part I – Financial Information
Item 1.	Financial Statements – Unaudited
	Condensed Consolidated Balance Sheets – June 30, 2019 and December 31, 2018	5
	Condensed Consolidated Statements of Operations – Quarter and Six Months ended June 30, 2019 and 2018	6
	Condensed Consolidated Statements of Comprehensive Loss – Quarter and Six Months ended June 30, 2019 and 2018	7
	Condensed Consolidated Statements of Shareholders’ Equity – Quarter and Six Months ended June 30, 2019 and 2018	8
	Condensed Consolidated Statements of Cash Flows – Six Months ended June 30, 2019 and 2018	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 4.	Controls and Procedures	54
Part II – Other Information
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	57
	Signatures	58

2

Special Note Regarding Pending Bankruptcy Proceedings

On March 14, 2019, PHI, Inc. and its four principal U.S. subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”).  On August 2, 2019, the Bankruptcy Court issued an order confirming the Debtors’ plan of reorganization. Subject to the conditions described herein, the Debtors currently plan to emerge from bankruptcy by the end of August 2019.

Special Note Regarding Forward-Looking Statements

All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and other periodic reports filed by PHI, Inc. (the “Company,” “PHI,” “we” or “our”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other written or oral statements made by it or on its behalf, are “forward-looking” statements, as defined by (and subject to the “safe harbor” protections under) the federal securities laws. When used herein, the words “anticipates,” “expects,” “believes,” “seeks,” “hopes,” “intends,” “plans,” “projects” and similar words and expressions are intended to identify forward-looking statements. Forward-looking statements are based on a number of judgments and assumptions as of the date such statements are made about future events, many of which are beyond our control. These forward-looking statements, and the assumptions on which they are based, (i) are not guarantees of future events, (ii) are inherently speculative and (iii) are subject to significant risk and uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us in those statements if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. All of our forward-looking statements are qualified in their entirety by reference to our discussion of certain important factors that could cause our actual results to differ materially from those anticipated, estimated, projected or implied by us in those forward-looking statements. Factors that could cause our results to differ materially from the expectations expressed in such forward-looking statements include but are not limited to the following:

• our ability to consummate our plan or reorganization, either on the terms and schedule currently contemplated or at all;

• our ability to develop and implement successful business strategies, including our ability to attain the goals stated in our plan of reorganization;

• our ability to implement operational improvement efficiencies;

• our ability to comply with the financial covenants contained in certain of our financing arrangements;

• our ability to access the credit markets on favorable terms, whether caused by changes in our financial position, lower debt credit ratings, unstable markets or otherwise; 

• the impact of current or future governmental regulations, including but not limited to the impact of new and pending regulation of healthcare, aviation safety and export controls;

• illiquidity in the trading of our securities, including limitations caused by the delisting of our common stock from Nasdaq and the subsequent trading of our securities in the over-the-counter market;

• reduction in demand for our services due to volatility of oil and gas prices and the level of domestic and overseas exploration and production activity, which depends on several factors outside of our control;

• our dependence on a small number of customers for a significant amount of our revenue and our significant credit exposure within the oil and gas industry;

• the adverse impact of customers electing to terminate or reduce our services;

• any failure to maintain our strong safety record;

• our ability to secure favorable customer contracts or otherwise remain able to profitably deploy our existing fleet of aircraft;

• the availability of adequate insurance;

• adverse changes in the value of our aircraft or our ability to sell them in the secondary markets;

• political, economic, payment, regulatory and other risks and uncertainties associated with our international operations, some of which are conducted in challenging business environments;

• the effects of competition and changes in technology;

• the special risks of our air medical operations, including collections risks and potential medical malpractice claims;

• weather conditions and seasonal factors, including tropical storms;

• our ability to timely realize the anticipated benefits of our December 29, 2017 acquisition of additional offshore operations;

• the hazards associated with operating in an inherently risky business, including the possibility that regulators could ground our aircraft for extended periods of time or indefinitely;

• our ability to timely collect our receivables in full;

3

• our ability to receive timely delivery of ordered aircraft and parts from a limited number of suppliers, and the availability of working capital, loans or lease financing to acquire such assets;

• changes in fuel prices;

• our ability to attract and retain key personnel and to avoid work stoppages or other labor problems, which as indicated above may be impacted by the Chapter 11 Cases;

• changes in our operating plans or strategies, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, market conditions or otherwise;

• environmental and litigation risks;

• the effects of more general factors, such as changes in interest rates, operating costs, tax rates, or general economic or geopolitical conditions;

• and other risks referenced in (i) Item 1A of Part II or elsewhere in this report, (ii) Item 1A or elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018 or (iii) other of our filings with the U.S. Securities and Exchange Commission ("SEC").

Additional factors or risks that we currently deem immaterial, that are not presently known to us, that arise in the future or that are not specific to us could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned not to unduly rely upon our forward-looking statements, which speak only as of the date made. PHI undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or developments, changed circumstances, or otherwise. Further, we may make changes to our business strategies and plans (including our capital spending plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results.

4

PART I – FINANCIAL INFORMATION

Item1. FINANCIAL STATEMENTS

PHI, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except share data)

(Unaudited)

	June 30, 2019			December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	21,882		$	50,874
Short-term investments		76,141			14,232
Accounts receivable – net
Trade		174,499			168,459
Other		8,845			14,006
Inventories of spare parts – net		54,242			56,698
Prepaid expenses		13,072			11,419
Income taxes receivable		509			950
Total current assets		349,190			316,638
Property and equipment – net		885,669			902,485
Right of use assets		144,944			—
Restricted cash and investments		19,739			19,781
Other assets		20,937			18,378
Deferred income taxes		5,137			4,944
Total assets	$	1,425,616		$	1,262,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Senior Notes issued March 17, 2014, net of debt issuance cost of $260	$	—		$	499,740
Accounts payable		70,615			50,289
Accrued and other current liabilities		38,483			45,292
Current portion of operating lease liabilities		27,535			—
Current maturities of long term debt		1,750			—
Total current liabilities		138,383			595,321
Long-term debt:
Term loan issued March 13, 2019, net of debt issuance costs of $5,254		62,996			—
Related party term loan issued September 28, 2018, net of debt issuance costs of $546 and $765, respectively		129,454			129,235
Deferred income taxes		51,964			59,178
Other long-term liabilities		3,673			5,059
Long-term operating lease liabilities		118,167			—
Total liabilities not subject to compromise		504,637			788,793
Liabilities subject to compromise		513,125			—
Total liabilities		1,017,762			788,793
Commitments and contingencies (Note 11)
Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		291			291
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,919,681 issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1,291			1,291
Additional paid-in capital		316,143			314,316
Accumulated other comprehensive income (loss)		(4,040	)		(3,952	)
Retained earnings		94,169			161,487
Total shareholders’ equity		407,854			473,433
Total liabilities and shareholders’ equity	$	1,425,616		$	1,262,226

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

PHI, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of dollars and shares, except per share data)

(Unaudited)

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Operating revenues, net	$	165,172		$	169,243		$	317,062		$	329,607
Expenses:
Direct expenses		153,514			155,083			310,390			311,309
Selling, general and administrative expenses		17,591			14,485			42,458			29,944
Total operating expenses		171,105			169,568			352,848			341,253
(Gain) loss on disposal of assets		(95	)		(171	)		(44	)		708
Equity in income of unconsolidated affiliate		(1,039	)		(81	)		(2,400	)		(45	)
Operating loss		(4,799	)		(73	)		(33,342	)		(12,309	)
Interest expense		3,927			8,340			12,093			16,537
Reorganization items, net		26,503			—			28,103			—
Other income, net		(333	)		364			(293	)		1,404
		30,097			8,704			39,903			17,941
Loss before income taxes		(34,896	)		(8,777	)		(73,245	)		(30,250	)
Income tax (benefit) expense		(2,819	)		(1,684	)		(5,927	)		(6,175	)
Net loss	$	(32,077	)	$	(7,093	)	$	(67,318	)	$	(24,075	)
Weighted average shares outstanding:
Basic		15,825			15,806			15,825			15,806
Diluted		15,825			15,806			15,825			15,806
Net loss per share:
Basic	$	(2.03	)	$	(0.45	)	$	(4.25	)	$	(1.52	)
Diluted	$	(2.03	)	$	(0.45	)	$	(4.25	)	$	(1.52	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

PHI, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Thousands of dollars)

(Unaudited)

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net loss	$	(32,077	)	$	(7,093	)	$	(67,318	)	$	(24,075	)
Unrealized (loss) gain on short-term investments		—			(107	)		—			363
Currency translation adjustments		(928	)		160			(121	)		627
Changes in pension plan assets and benefit obligations		—			7			—			(1	)
Tax effect of the above-listed adjustments		25			100			33			(85	)
Total comprehensive loss	$	(32,980	)	$	(6,933	)	$	(67,406	)	$	(23,171	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

PHI, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Thousands of dollars and shares)

(Unaudited) 

	Voting Common Stock				Non-Voting Common Stock					Additional			Accumulated Other Com-
	Shares		Amount		Shares			Amount		Paid-in Capital			prehensive (Loss) Income			Retained Earnings			Shareholders' Equity
Balance at March 31, 2018		2,906		291		12,905			1,290		309,672			464			286,018		$	597,735
Net loss		—		—		—			—		—			—			(7,092	)		(7,092	)
Unrealized gain on short-term investments		—		—		—			—		—			(4	)		—			(4	)
Changes in pension plan assets and benefit obligations		—		—		—			—		—			4			—			4
Amortization of unearned stock-based compensation		—		—		—			—		813			—			—			813
Cash payment of Performance Based stock units		—		—		—			—		—			—			—			—
Currency translation adjustment		—		—		—			—		—			160			—			160
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		(2	)		1		(2	)		—			—			(1	)
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		3			—		(50	)		—			—			(50	)
Balance at June 30, 2018		2,906	$	291		12,906		$	1,291	$	310,433		$	624		$	278,926		$	591,565

	Voting Common Stock				Non-Voting Common Stock				Additional		Accumulated Other Com-
	Shares		Amount		Shares		Amount		Paid-in Capital		prehensive (Loss) Income			Retained Earnings			Shareholders' Equity
Balance at March 31, 2019		2,906	$	291		12,919	$	1,291	$	314,818	$	(3,138	)	$	126,246		$	439,508
Net loss		—		—		—		—		—		—			(32,077	)		(32,077	)
Amortization of unearned stock-based compensation		—		—		—		—		1,325		—			—			1,325
Cash payment of Performance Based stock units																		—
Currency translation adjustment		—		—		—		—		—		(902	)		—			(902	)
Balance at June 30, 2019		2,906	$	291		12,919	$	1,291	$	316,143	$	(4,040	)	$	94,169		$	407,854

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

PHI, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Thousands of dollars and shares)

(Unaudited) 

	Voting Common Stock				Non-Voting Common Stock				Additional			Accumulated Other Com-
	Shares		Amount		Shares		Amount		Paid-in Capital			prehensive (Loss) Income			Retained Earnings			Shareholders' Equity
Balance at January 1, 2018		2,906	$	291		12,897	$	1,289	$	308,353		$	(280	)	$	303,001		$	612,654
Net loss		—		—		—		—		—			—			(24,075	)		(24,075	)
Unrealized gain on short-term investments		—		—		—		—		—			278			—			278
Changes in pension plan assets and benefit obligations		—		—		—		—		—			(1	)		—			(1	)
Amortization of unearned stock-based compensation		—		—		—		—		2,132			—			—			2,132
Currency translation adjustment		—		—		—		—		—			627			—			627
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		9		2		(2	)		—			—			—
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		—		—		(50	)		—			—			(50	)
Balance at June 30, 2018		2,906	$	291		12,906	$	1,291	$	310,433		$	624		$	278,926		$	591,565

	Voting Common Stock				Non-Voting Common Stock				Additional			Accumulated Other Com-
	Shares		Amount		Shares		Amount		Paid-in Capital			prehensive (Loss) Income			Retained Earnings			Shareholders' Equity
Balance at January 1, 2019		2,906	$	291		12,919	$	1,291	$	314,316		$	(3,952	)	$	161,487		$	473,433
Net loss		—		—		—		—		—			—			(67,318	)		(67,318	)
Amortization of unearned stock-based compensation		—		—		—		—		2,640			—			—			2,640
Cash payment of Performance Based stock units										(813	)								(813	)
Currency translation adjustment		—		—		—		—		—			(88	)		—			(88	)
Balance at June 30, 2019		2,906	$	291		12,919	$	1,291	$	316,143		$	(4,040	)	$	94,169		$	407,854

9

PHI, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
Operating activities:
Net loss	$	(67,318	)	$	(24,075	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		38,775			38,598
Deferred income taxes		(7,407	)		(7,446	)
(Gain) loss on asset dispositions		(44	)		708
Equity in (income) loss of unconsolidated affiliate, net		(2,400	)		(45	)
Inventory valuation reserves		1,416			3,308
Changes in operating assets and liabilities		13,301			(5,638	)
Net cash (used in) provided by operating activities		(23,677	)		5,410
Investing activities:
Purchase of property and equipment		(8,970	)		(18,098	)
Proceeds from asset dispositions		1,235			1,453
Purchase of short-term investments		(183,421	)		(260,996	)
Proceeds from sale of short-term investments		121,512			264,918
Payment of deposit on aircraft		(50	)		—
Refund of deposit on aircraft		503			—
Loan to unconsolidated affiliate		—			(274	)
Net cash used in investing activities		(69,191	)		(12,997	)
Financing activities:
Debt issuance cost		(5,668	)		—
Proceeds from line of credit		—			34,295
Payments on line of credit		—			(29,575	)
Repurchase of common stock					(51	)
Proceeds from Term Loan		70,000			—
Net cash provided by financing activities		64,332			4,669
Effect of exchange rate changes on cash		(483	)		—
Decrease in cash, cash equivalents and restricted cash		(29,019	)		(2,918	)
Cash, cash equivalents and restricted cash at the beginning of period		58,564			8,770
Cash, cash equivalents and restricted cash at end of period	$	29,545		$	5,852
Supplemental Disclosures Cash Flow Information
Cash paid during the period for:
Reorganization items, net	$	6,204		$	—
Interest	$	3,599		$	15,755
Income taxes	$	1,688		$	813
Noncash investing activities:
Other current liabilities and accrued payables related to purchase of property and equipment	$	96		$	272

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of PHI, Inc. and its subsidiaries (“PHI” or the “Company” or “we” or “our”). In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting of only normal, recurring adjustments, necessary to present fairly the financial results for the interim periods presented. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the consolidated financial statements and the accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Our financial results, particularly as they relate to our Oil and Gas segment, are influenced by seasonal fluctuations as discussed in our Annual Report on Form 10-K for the year ended December 31, 2018. For this and other reasons, the results of operations for interim periods are not necessarily indicative of the operating results that may be expected for a full fiscal year.

Going Concern - The financial statements accompanying this Quarterly Report have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which contemplates our continuation as a going concern. As discussed further in Note 2 below, our operations are currently subject to the jurisdiction of the Bankruptcy Code.

The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared assuming that PHI will continue as a going concern and contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our ability to continue as a going concern is contingent upon our ability to successfully implement our plan of reorganization approved by the Bankruptcy Court on August 2, 2019, among other factors. The risks and uncertainties surrounding our Chapter 11 proceedings raise substantial doubt as to our ability to continue as a going concern.

Under the absolute priority scheme established by the Bankruptcy Code, unless our creditors agree otherwise, all of our pre-petition liabilities and post-petition liabilities must be satisfied in full before the holders of our existing common stock may receive any distribution or retain any property under a plan of reorganization. Although Note 2 describes the general terms of our confirmed plan of reorganization, the ultimate recovery to creditors and shareholders will not be fully determined unless and until we can fully implement such plan. The accompanying Unaudited Condensed Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the filing of the Chapter 11 Cases. See Note 2 for additional information.

Supplemental Cash Flow Information - The following table sets forth the Company’s reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statement of Cash Flows (in thousands):

	June 30,		December 31,		June 30,		December 31,
	2019		2018		2018		2017
Cash and Cash Equivalents	$	21,882	$	50,874	$	5,852	$	8,770
Restricted Cash		7,663		7,690		—		—
Total Cash, Cash Equivalents and Restricted Cash	$	29,545	$	58,564	$	5,852	$	8,770

Recently adopted accounting principles

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASC 842). ASC 842 replaces the existing guidance on leasing transactions in ASC 840 and requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASC 842 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. The Company adopted the new standard effective January 1, 2019.

11

The Company elected the transition methodology provided by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, whereby it applied the requirements of ASC 842 on a prospective basis as of the adoption date of January 1, 2019, without retrospectively adjusting prior periods. The Company elected to adopt the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. The Company elected to keep leases with an initial term of 12 months or less off of the balance sheet. The Company intends to recognize those lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company also elected to combined lease and non-lease components in the computations of lease obligations and right-of-use assets. During our evaluation of ASU 2016-02, we concluded that certain of our helicopter service contracts contain a lease component. Our typical helicopter service contracts qualify for a practical expedient, which is available to lessors under certain circumstances, to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We have applied this practical expedient and intend to combine the lease and service components of our revenue contracts and continue to account for the combined component under Topic 606, Revenue from Contracts with Customers.

The Company completed the implementation of an information technology system to track and account for its leases and updated its accounting policies to support the accounting for leases under ASC 842. The Company completed its lease inventory and determined its most significant leases involve aircraft and facilities. For additional information, see Note 13.

2. BANKRUPTCY FILING

Initiation of Chapter 11 Proceedings

On March 14, 2019 (the "Petition Date"), PHI and four of its domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions (the "Chapter 11 Cases") in the United States Bankruptcy Court for the Northern District of Texas (the "Bankruptcy Court") for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Chapter 11 Cases are being jointly administered under the caption "In re PHI, Inc., et al., Case No. 19-30923."

Shortly following the Petition Date, the Bankruptcy Court entered certain orders facilitating the Debtors' operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay employee wages and benefits, and pay vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date.

The Debtors are currently operating their businesses and managing their properties as "debtors in possession" in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Certain subsidiaries of PHI (collectively, the "Non-Filing Entities") are not part of the Chapter 11 Cases. The Non-Filing Entities will continue to operate their businesses in the normal course and their results are included in our interim Unaudited Condensed Consolidated Financial Statements.

Significant Bankruptcy Court Actions

Development of Reorganization Plan.  On April 1, 2019, the Debtors filed with the Bankruptcy Court their initial plan of reorganization under the Bankruptcy Code. Following such filing, the Debtors remained in discussions with various stakeholders in an attempt to obtain additional input about maximizing the value of the enterprise. Following mediation in late May 2019, on June 5, 2019, the Company entered into a settlement plan term sheet (the “Term Sheet”) with the Official Committee of Unsecured Creditors (the “UCC”) and certain other key stakeholders that resolved the UCC’s key objections and motions, subject to satisfaction of certain conditions contained within the Term Sheet.  

Among other things, the Term Sheet provides that, upon our emergence from bankruptcy, our current secured lenders will be repaid and our current unsecured creditors will, subject to various exceptions and limitations, receive equity in a newly-reorganized parent company issuer. The Term Sheet further provides that, contingent upon the effectiveness of the Company’s plan of reorganization, Mr. Al A. Gonsoulin, who currently serves as the Company’s Chairman and Chief Executive Officer, will retire from all positions held with the Company and its subsidiaries, including as a member of the Board of Directors, effective upon the date of the Company’s emergence from the Chapter 11 Cases (the “Emergence Date”). The Term Sheet further provides that Mr. Lance F. Bospflug, who currently serves as President, Chief Operating Officer and a director of the Company, will be appointed to succeed Mr. Gonsoulin as Chief Executive Officer of the Company on the Emergence Date and will continue to serve as a member of the Board.

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On June 13, 2019, the Debtors filed their second amended joint plan of organization and related disclosure statement, which, among other things, reflected restructuring terms agreed upon in the Term Sheet. On June 18, 2019, the Debtors entered into a term sheet reflecting a settlement with the Official Committee of Equity Security Holders. Subject to certain exceptions, this settlement contemplates issuing to our current equity holders three-year warrants entitling the holders to acquire under certain specified terms and conditions up to an aggregate of 5% of the reorganized parent’s equity interests issued and outstanding as of our emergence from bankruptcy, subject to dilution in connection with future equity issuances. On June 18, 2019, the Debtors filed their third amended joint plan of reorganization (the “Third Amended Plan”) and related disclosure statement (the “Disclosure Statement”). On June 19, 2019, the Bankruptcy Court approved the Disclosure Statement and authorized the Debtors to commence solicitation of approval of the Plan under the Bankruptcy Code.

Equity Commitment Agreement.  In connection with the Chapter 11 Cases, on July 11, 2019, the Debtors entered into an Equity Commitment Agreement (the “Commitment Agreement”) with certain of the Company’s unsecured creditors (each a “Commitment Party” and collectively, the “Commitment Parties”). The Commitment Agreement is a component of the settlement plan agreed upon between the Company and certain creditors under the Term Sheet.

Subject to the terms and conditions of the Commitment Agreement, the Commitment Parties have agreed, in the aggregate, to provide up to $75 million cash (the “Equity Commitment”) in exchange for shares of common stock in the reorganized parent company. Under the Commitment Agreement, the shares would be issued at a discount of 25% to the value assigned to such shares in the Plan (as defined below). In addition, each of the Commitment Parties would be paid their pro rata share of an overall commitment fee of $15 million. The commitment fee would be paid on the Emergence Date in the form of additional shares of common stock of the reorganized parent company. Under the Commitment Agreement, the Company also agreed to enter into a registration rights agreement with certain Commitment Parties entitling such Commitment Parties under certain circumstances to request that the Company register their equity securities in the Company for sale under the rules of the U.S. Securities and Exchange Commission (the “SEC”).

The Commitment Agreement prohibits the Company from soliciting alternative financing or restructuring proposals, although the Company’s board of directors (the “Board”) can respond to an unsolicited alternative proposal if doing so would be required by its fiduciary duties.

The obligations of each Commitment Party to consummate the transactions contemplated by the Commitment Agreement are subject to specified conditions including, but not limited to, the Debtors’ compliance in all material respects with the terms of the Plan, the absence of a material adverse change in our business, our attainment of certain specified funding and liquidity thresholds, and the absence at the closing of any material breach of the representations, warranties and covenants made by the Debtors in the Commitment Agreement.

The Commitment Agreement may be terminated in a number of circumstances. We will be required to pay (i) a $3.75 million termination fee if we terminate the Commitment Agreement in connection with the Board’s exercise of its fiduciary duties and certain other conditions are met, including entering into an agreement to effect an alternative transaction within 12 months, or (ii) a higher termination fee if the Commitment Parties terminate the Commitment Agreement in certain other limited circumstances.

Term Loan Commitments.  The Debtors have received binding commitments from lenders to fund on the Emergence Date the full amount of a $225 million first lien senior secured term loan that would mature in five years, subject to the satisfaction of certain conditions summarized herein. This term loan facility is a component of the reorganization plan agreed upon between the Debtors and certain of their creditors in the Term Sheet. The definitive documentation that is expected to govern this term loan facility has not yet been finalized or executed. Accordingly, we cannot assure you that the term loan facility will be completed as contemplated, or at all. For additional information, see Note 6.

Plan Supplementation.  On June 23, 2019, the Debtors filed a supplement to their Third Amended Plan (the “Plan Supplement” and, collectively with the Third Amended Plan, the “Plan”) which included various documentation related to the Plan, including a partial list of the directors expected to be named to the new parent company and updated disclosure regarding our equity value. Prior to the hearing to confirm the Plan held on July 30, 2019, the Debtors filed additional documentation, including drafts of organizational documents of the new parent company and additional information about our post-emergence management incentive program.

Plan Confirmation.  At a hearing held on July 30, 2019, the Bankruptcy Court confirmed the Plan, and on August 2, 2019, the Bankruptcy Court issued a written order to this effect. Implementation of the Plan is subject to the satisfaction or due waiver of several conditions, including without limitation (i) consummation of the debt and equity transactions contemplated by the Term Sheet and described herein, (ii) the payment in full of our secured lenders, (iii) certain minimum liquidity levels, (iv) the finalization of various documentation, (v) compliance with various regulatory requirements, (vi) the payment of various expenses and (vii) the implementation of the restructuring in a manner consistent with the Plan and certain stipulations contained therein.

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Other.  The description of our Chapter 11 Cases in this Note 2 and elsewhere in this report does not purport to be complete and is qualified in its entirety by reference to (i) our filings with the Bankruptcy Court, all of which are publicly available in the manner described elsewhere herein, and (ii) the exhibits to this report.

Executive Compensation Plans

In connection with the Chapter 11 Cases, the Compensation Committee of the Board of Directors of the Company has adopted on behalf of the Company a Key Employee Incentive Plan (the "KEIP") and a Key Employee Retention Plan ("KERP"). The KEIP is designed to incentivize seven of the Company's senior executives by providing a total potential cash award pool of approximately $4.2 million for performance at threshold levels, $5.6 million at plan target levels and $7.0 million for performance exceeding plan, target levels. Payouts under the KEIP are contingent upon emergence from Chapter 11, achievement of certain financial targets and achievement of certain safety metrics. The KERP is designed to enhance retention of up to 61 other non-insider employees and provides a total award pool of approximately $3.5 million cash.  The Bankruptcy Court has approved both the KEIP and the KERP.

Financial Reporting in Reorganization

Effective on the Petition Date, the Company began to apply accounting standards applicable to reorganizations, which are applicable to companies under Chapter 11 bankruptcy protection. They require the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as reorganization items, net in the Unaudited Condensed Consolidated Statements of Operations. In addition, the balance sheet must distinguish pre-petition liabilities subject to compromise ("LSTC") of the Debtors from pre-petition liabilities that are not subject to compromise, post-petition liabilities, and liabilities of non-Debtor entities in the accompanying Unaudited Condensed Consolidated Balance Sheets. LSTC are pre-petition obligations that are not fully secured and have at least a possibility of not being repaid at the full claim amount. Where there is uncertainty about whether a secured claim will be paid or impaired pursuant to the Chapter 11 Cases, the Company has classified the entire amount of the claim as an outstanding liability.

Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in- possession, certain claims against the Debtors in existence before the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtors continue business operations as debtors in possession. These claims are reflected in the unaudited Condensed Consolidated Balance Sheets at June 30, 2019 as LSTC. Additional LSTC may arise after the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtors' assets (secured claims) also are stayed, although the holders of such claims have the right to move the Bankruptcy Court for relief from the stay.  The Company's secured claims are secured primarily by liens on certain of the Debtors’ receivables, inventory and spare parts and certain of their specified aircraft.

Liabilities Subject to Compromise

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors' business and assets. Among other things, the Bankruptcy Court authorized, but did not require, the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes, and certain critical vendors.

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts classified as LSTC may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, the determination of secured status of certain claims, the determination as to the value of any collateral securing claims, proof of claims, or other events.  See Note 7 - “Liabilities Subject to Compromise” for a specific discussion on balances subject to compromise.

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Process for Implementation of Plan of Reorganization

Although the Plan provides that the Debtors will emerge from bankruptcy as a going concern, there can be no assurance at this time that the Debtors will be able to successfully consummate the Plan or any other alternative restructuring transaction that satisfies the conditions of the Bankruptcy Code and is confirmed by the Bankruptcy Court, or that the Plan will be implemented successfully. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Reorganization Items, Net

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of professional and other bankruptcy-related fees for the period from March 15, 2019 through June 30, 2019.  See Note 19.

3. INVESTMENTS

We classify all of our short-term investments as available-for-sale.  We carry these at fair value and report unrealized gains and losses, net of taxes, in Accumulated other comprehensive loss, which is a separate component of shareholders’ equity in our Condensed Consolidated Balance Sheets.  These unrealized gains and losses are also reflected in our Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Shareholders’ Equity.  We determine cost, gains, and losses using the specific identification method.

Investments consisted of the following as of June 30, 2019:

	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	88,217	$	—	$	—	$	88,217
Deferred compensation plan assets included in other assets		889		—		—		889
Total	$	89,106	$	—	$	—	$	89,106

Investments consisted of the following as of December 31, 2018:

	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	26,308	$	—	$	—	$	26,308
Deferred compensation plan assets included in other assets		772		—		—		772
Total	$	27,080	$	—	$	—	$	27,080

At June 30, 2019 and December 31, 2018, we classified $12.1 million of our aggregate investments as long-term investments and recorded them in our Condensed Consolidated Balance Sheets as restricted cash and investments, as they are securing outstanding letters of credit with maturities beyond one year.

4. VALUATION ACCOUNTS

We establish the amount of our allowance for doubtful accounts based upon factors relating to the credit risk of specific customers, current market conditions, and other information. Our allowance for doubtful accounts was approximately $6.3 million and $6.1 million at June 30, 2019, and December 31, 2018, respectively.

Revenues related to flights generated by our Air Medical segment are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care when the services are provided.  The allowance for contractual discounts was $140.5 million and $123.8 million as of June 30, 2019 and December 31, 2018, respectively. The allowance for uncompensated care was $45.5 million and $51.9 million as of June 30, 2019 and December 31, 2018, respectively.

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Included in the allowance for uncompensated care listed above is the value of services to patients who are unable to pay when it is determined that they qualify for charity care. The value of these services was $1.6 million and $1.7 million for the quarters ended June 30, 2019 and 2018, respectively. The value of these services was $3.5 million and $3.3 million for the six months ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.3 million and $0.4 million for the quarters ended June 30, 2019 and 2018, respectively.  The estimated cost of providing charity services was $0.8 million for the six months ended June 30, 2019 and 2018, respectively. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on our Air Medical segment’s total expenses divided by gross patient service revenue.

The allowance for contractual discounts and estimated uncompensated care (expressed as a percentage of gross segment accounts receivable) as of the dates listed below was as follows:

	June 30, 2019	December 31, 2018
Allowance for Contractual Discounts	55%	51%
Allowance for Uncompensated Care	18%	22%

We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were $19.4 million and $17.9 million at June 30, 2019 and December 31, 2018, respectively.

5. FAIR VALUE MEASUREMENTS

Accounting standards require that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:

	June 30, 2019
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	88,217	$	88,217	$	—
Deferred compensation plan assets		889		889		—
Total	$	89,106	$	89,106	$	—

	December 31, 2018
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	26,308	$	26,308	$	—
Deferred compensation plan assets		772		772		—
Total	$	27,080	$	27,080	$	—

We hold our short-term investments in an investment fund consisting of high quality money market instruments of governmental and private issuers, which is classified as a short-term investment.  Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.  These items are traded with sufficient frequency and volume to provide pricing on an ongoing basis.   The fair values of the investments in these funds are based on observable market prices, and therefore, have been categorized in Level 1 in the fair value hierarchy.  Level 2 inputs reflect quoted prices for identical assets or liabilities that are not actively traded.  These items may not be traded daily; examples include commercial paper, corporate bonds and U.S. government agencies debt.  There have been no reclassifications of assets between Level 1 and Level 2 investments during the periods covered by the financial statements included in this report.  We hold no Level 2 or Level 3 investments.

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Cash, accounts receivable, accounts payable and accrued liabilities, and term loan debt all had fair values approximating their carrying amounts at June 30, 2019 and December 31, 2018. We determine the estimated fair value of our 5.25% Senior Notes due 2019 (the "Senior Notes") using Level 2 inputs, including quoted market indications of similar publicly-traded debt. The fair value of our 5.25% Senior Notes due 2019, based on quoted market prices, was $245.0 million and $344.2 million at June 30, 2019 and December 31, 2018, respectively.  We provide no assurances, however, that the ultimate recovery of the holders of these notes pursuant to the Chapter 11 Cases will correspond to these fair values as of these prior dates.

6. DEBT

Listed below is information regarding our indebtedness.  All indebtedness owed under our Senior Notes as of June 30, 2019 is classified as subject to compromise, and as of December 31, 2018 was classified as short-term debt on our balance sheet.  The Thirty-Two, LLC and Blue Torch term loans are classified as long-term debt as of June 30, 2019, except for the amount due within the next twelve months.

	June 30, 2019					December 31, 2018
	Principal			Unamortized Debt Issuance Debt Cost		Principal			Unamortized Debt Issuance Debt Cost
Unsecured	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019	$	500,000		$	—	$	500,000		$	260
Secured
Term Loan - Blue Torch Finance, LLC, interest payable quarterly at LIBOR plus 6%, maturing March 13, 2023		70,000			5,254		—			—
Related Party Term Loan - Thirty Two L.L.C., interest payable quarterly at 6%, due September 28, 2020		130,000			546		130,000			765
Total indebtedness		700,000			5,800		630,000			1,025
Less: Current maturities		(1,750	)		—		(500,000	)		—
	$	698,250		$	5,800	$	130,000		$	1,025

Senior Notes - Subject to the automatic stay of the Bankruptcy Code, our 5.25% Senior Notes (the “Senior Notes”) matured on March 15, 2019.  These notes are unconditionally guaranteed on a senior basis by each of PHI, Inc.’s wholly-owned domestic subsidiaries. These notes and related guarantees are the general, unsecured obligations of PHI, Inc. and the guarantors. For more information regarding the impact of our bankruptcy proceedings on the Senior Notes, see Note 2.

Blue Torch Loan Agreement - On March 13, 2019, we entered into a Loan Agreement, dated the same date (the “Blue Torch Agreement”), by and among the Company, as borrower, certain of our subsidiaries as guarantors party thereto, the lenders from time to time party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent, for a first lien term loan of up to $70.0 million (the “Blue Torch Loan”). Immediately upon entering into the Blue Torch Agreement, and prior to the filing of the Chapter 11 Cases, we borrowed $70.0 million thereunder, the net proceeds of which (after the payment of transaction expenses and fees thereunder) we have used to continue to fund our working capital and liquidity requirements during the pendency of the Chapter 11 Cases. For additional information regarding our Chapter 11 Cases, see Notes 2 and 7 herein and Notes 1 and 19 to our filed 2018 10-K.

The remaining principal amount of the Blue Torch Loan is due March 13, 2023. At our election, borrowings under the Blue Torch Loan bear interest at either the LIBOR Rate (as defined in the Blue Torch Agreement) plus 6% or the Base Rate (as defined in the Blue Torch Agreement) plus 5%. The Blue Torch Loan is secured by a first lien on 91 aircraft registered and located in Australia, Canada, and the United States (which are currently deployed primarily in our oil and gas and technical services operations), the related spare parts for such aircraft, and certain other non-working capital assets, as well as a second lien on all working capital assets (second in priority to the liens granted under our below-described term loan agreement, dated as of September 28, 2018, with Thirty Two, L.L.C.). The Blue Torch Agreement contains customary pre-payment requirements. In addition, we paid on March 13, 2019 a funding fee, which is subject to forgiveness based on certain future events.

The Blue Torch Agreement contains certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s and each guarantor’s incurrence of additional indebtedness or liens, mergers, dispositions of assets, investments, restricted payments, modifications to material agreements, sale and leasebacks, transactions with affiliates, fundamental changes, locations of certain aircraft and acquisitions of assets. In addition, the financial covenants under the Blue Torch Agreement require us to maintain certain specified minimum levels of liquidity, fixed charge coverage and appraised collateral values, and certain specified maximum levels of secured leverage, all of which are explained in greater detail of our prior SEC reports.          The Blue Torch Agreement also contains customary affirmative covenants and customary representations and warranties.  As of the date of the financial statements, included in this report, we believe we were in compliance with these covenants.

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The Blue Torch Agreement specifies certain customary events of default, including, among others,certain change of control events. The filings of the Chapter 11 Cases neither constituted an event of default nor accelerated payment of the Company’s indebtedness under the Blue Torch Agreement. As noted in Note 2, we plan to repay the Blue Torch Loan in full upon emergence from bankruptcy, assuming we consummate our Plan on the terms confirmed by order of the Bankruptcy Court on August 2, 2019.

Related Party Term Loan - On September 28, 2018, we entered into a term loan agreement with Thirty Two L.L.C., which provided   us with a term loan of $130.0 million maturing on September 28, 2020. This loan bears interest at an annual fixed rate of 6% payable quarterly, with all principal due on maturity. Thirty Two L.L.C., an entity wholly-owned by our current CEO and controlling shareholder, is a related party.

Obligations under the term loan are guaranteed by PHI Air Medical, L.L.C. and PHI Tech Services, Inc., both of which are wholly-owned by us. Our obligations and the guarantors’ obligations are secured primarily by all of their respective inventory, spare parts and accounts receivable located in the U.S.

The related party term loan agreement contains customary restrictive covenants that, subject to certain exceptions and limitations, limit or restrict our ability to, among other things, (i) purchase, retire or redeem any shares of our capital stock; (ii) incur indebtedness; (iii) mortgage or encumber our assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control of PHI; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into us; (vii) sell or lease all or substantially all of our assets; or (viii) acquire all or a substantial part of the assets or capital stock of another entity.  The term loan agreement contains no financial covenants. The term loan agreement contains customary representations and warranties, affirmative covenants and events of default.  As noted in Note 2, we plan to repay all of the principal and a portion of the accrued and unpaid interest under the related party term loan in full upon emergence from bankruptcy, assuming we consummate our Plan on the terms confirmed by order of the Bankruptcy Court on August 2, 2019.

Letter of Credit - At June 30, 2019, we had $19.7 million of outstanding letters of credit secured by a like amount of restricted cash, $12.1 million of which secured certain domestic operations or insurance policies and $7.6 million of which guaranteed our performance under an international contract.  At December 31, 2018, we had $19.8 million of outstanding letters of credit issued for the same purposes.

Other - PHI, Inc. has cash management arrangements with certain of its principal subsidiaries, in which substantial portions of the subsidiaries’ cash is regularly advanced to PHI, Inc.  Although PHI, Inc. periodically repays these advances to fund the subsidiaries’ cash requirements throughout the year, at any given point in time PHI, Inc. may owe a substantial sum to its subsidiaries under these advances, which, in accordance with GAAP, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets.  For additional information, see Note 15.

Acceleration of Certain Debt Obligations - The commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under the indenture governing our 5.25% Senior Notes due 2019 and our term loan agreement with Thirty Two, L.L.C. Any efforts to enforce payment of such financial obligations under such instruments and agreements are automatically stayed as a result of the Chapter 11 Cases and the holders’ rights of enforcement in respect of such financial obligations are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Subsequent Event

As described in greater detail in Note 2, we have received binding commitments from lenders to fund on the Emergence Date the full amount of a $225 million first lien senior secured term loan that would mature in five years (the “Exit Term Loan”), subject to the finalization, execution and delivery of definitive documentation and the satisfaction of various other conditions described below in this Note 6. The following description of the terms of the Exit Term Loan is only a summary, does not purport to be complete and is qualified in its entirety by reference to the form of term loan credit agreement that we filed with the SEC as an exhibit to our Current Report on Form 8-K dated July 22, 2019.

Borrower. All borrowings under the Exit Term Loan are expected to be incurred by a new parent holding company (the “Borrower”) to be formed under the Debtors’ plan of reorganization, which is expected to own directly or indirectly all of the outstanding equity interests of the Debtors upon their emergence from the bankruptcy proceedings.

Maturity. The Exit Term Loan would mature five years after the closing of the Exit Term Loan.

Guarantees and Security. The Borrower’s obligations under the Exit Term Loan are expected to be guaranteed, subject to certain exceptions, by all of its existing and future material domestic subsidiaries.

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The Exit Term Loan is expected to be secured by a first-priority security interest on substantially all of assets of the Borrower and the guarantors party to the Exit Term Loan, excluding certain assets reserved to potentially collateralize a future asset-backed revolving credit facility.

Use of Proceeds. The borrowings under the Exit Term Loan would be used (i) to pay in full and discharge all of the Company’s indebtedness under debt agreements with Thirty Two, L.L.C. and Blue Torch Finance L.L.C., (ii) to pay various transaction expenses, and (iii) for general corporate purposes.

Interest Rates and Fees. Borrowings under the Exit Term Loan are expected to be subject to a 2.0% original issuance discount.

The Exit Term Loan will bear interest on the unpaid principal amount at a rate equal to, at our option, either:

• a base rate determined by reference to the highest of (i) the prime rate in effect for such day as determined by Credit Suisse as its prime rate in effect at its principal office in New York City, (ii) the federal funds effective rate plus 0.5% and (iii) one-month LIBOR, adjusted for statutory reserve requirements, plus 1.0%, in each case, plus an applicable margin; or

• A LIBOR rate determined by reference to the London interbank offered rate for U.S. dollars for the relevant interest period, adjusted for statutory reserve requirements, plus the applicable margin. The LIBOR rate will be subject to a 1.00% floor.

The applicable margin for borrowings under the Exit Term Loan would be 6.0% with respect to the base rate borrowings and 7.0% with respect to LIBOR borrowings.

We will pay customary fees and expenses in connection with obtaining funding commitments, including certain additional fees if the term loan is not funded by the end of August 30, 2019.

Prepayments. Amounts borrowed under the Exit Term Loan would amortize quarterly at an annual rate of 2.50% in the first and second years of the facility, 5.00% in the third year, and 7.50% thereafter, with the balance payable on the maturity date of the Exit Term Loan.

The Borrower would be required to prepay the Exit Term Loan, subject to exceptions and limitations, with:

• 100% of the net cash proceeds from any issuance or incurrence of indebtedness (other than indebtedness to be permitted by the Exit Term Loan);

• The net cash proceeds of certain asset sales, subject to certain exceptions and limitations; and

• The net cash proceeds from the sale of our Air Medical segment of the business.

Beginning with the fiscal year ending December 31, 2020, the Borrower will be required to prepay the Exit Term Loan in an amount equal to a certain percentage of its excess cash flow for each fiscal year, which percentage is based on the Borrower’s consolidated net total leverage ratio for the applicable fiscal year.

The Borrower may voluntarily prepay loans outstanding under the Exit Term Loan, in whole or in part, without premium or penalty (except as described below) in minimum amounts to be determined, at any time, subject to customary “breakage” costs with respect to LIBOR rate loans.

The Borrower would be required to pay a “prepayment premium” in connection with certain prepayments of the Exit Term Loan equal to a percentage of the principal amount so prepaid as follows:

• during the first year following the closing date of the Exit Term Loan – the greater of (x) 1.0% of the principal amount prepaid and (y) the excess of: (i) the present value at such date of prepayment of (A) 2.0% of the principal amount so prepaid plus (B) the aggregate interest that would have accrued on such amount from the date of prepayment through the first anniversary of the closing of the Term Loan Facility, computed using a discount rate equal to the treasury rate plus 50 basis points discounted to the prepayment on a semi-annual basis, over (ii) the principal amount such loans;

• during the second year following the closing date of the Exit Term Loan – 2.0%;

• during the third year following the closing date of the Exit Term Loan – 1.0%; and

• during the fourth year following the closing date of the Exit Term Loan and thereafter – 0%.

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Covenants and Events of Default. The Exit Term Loan will contain customary restrictive covenants that, subject to certain exceptions and limitations, will limit or restrict the ability of the Borrower and its restricted subsidiaries (as defined in the Exit Term Loan) to, among other things, (i) purchase, retire or redeem any shares of their capital stock; (ii) incur indebtedness; (iii) mortgage or encumber their assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into the Borrower or the restricted subsidiaries; (vii) sell or lease all or substantially all of the assets of the Borrower or its restricted subsidiaries; or (viii) acquire all or a substantial part of the assets or capital stock of another entity. The Exit Term Loan will also contain a $20.0 million minimum liquidity financial covenant.

In addition, the Exit Term Loan will contain customary representations and warranties, affirmative covenants and events of default. Upon an event of default, the lenders (as defined in the Exit Term Loan) are entitled, subject to certain limitations, to declare the term loan, any other loans and all other obligations of the Borrower or its subsidiaries to the lenders immediately due and payable and to take all actions permitted to be taken by a secured creditor.

Conditions to Term Loan Facility. The obligations of the initial lenders to provide the Exit Term Loan is subject to certain conditions, including without limitation, the absence at the closing of any material breach of the representations, warranties and covenants made by the Borrower and its restricted subsidiaries.

7. LIABILITIES SUBJECT TO COMPROMISE

As a result of the filing of the Chapter 11 Cases on March 14, 2019, we have classified unsecured pre-petition liabilities that are expected to be impaired pursuant to the Plan as liabilities subject to compromise in our Condensed Consolidated Balance Sheet at June 30, 2019.  Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. If there was uncertainty at the time of determination about whether a secured claim was under-secured or would be impaired under the Plan, we reflected the entire amount of the claim as an outstanding liability. The amounts classified at June 30, 2019 as liabilities subject to compromise represent the Company’s estimate as of the filing date of this report of claims as of June 30, 2019 expected to be allowed under the Plan.

The Company’s obligations under the Senior Notes have been affected by the bankruptcy filing. As such, the outstanding balance of these Senior Notes and related accrued pre-petition interest have been classified as liabilities subject to compromise in the condensed consolidated balance sheet as of June 30, 2019.

Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities have been stayed during the pendency of the Chapter 11 Cases. Although payment of pre-petition claims is generally not permitted, the Bankruptcy Court approved the Debtors’ “first day” motions allowing, among other things, the Company to pay prepetition employee wages and benefits without interruption, maintain its insurance programs, utilize its current cash management system, and pay undisputed prepetition obligations owed to its vendors and trade creditors in the ordinary course of business. As a result of this approval, the Company continues to pay certain pre-petition claims in designated categories and subject to certain terms and conditions in the ordinary course of business, and we have not classified these liabilities as subject to compromise in the Condensed Consolidated Balance Sheet as of June 30, 2019. With respect to pre-petition claims, the Company notified all known claimants of the deadline to file a proof of claim with the Court.

The Company has been paying and intends to continue to pay post-petition claims in the ordinary course of business.  The following table reflects pre-petition liabilities that are subject to compromise included in our Condensed Consolidated Balance Sheet as of June 30, 2019. See Note 6 - “Debt” for further information on our Senior Notes and related balances subject to compromise:

	June 30, 2019
	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019	$	500,000
Accrued interest payable		13,125
Total liabilities subject to compromise	$	513,125

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8. EARNINGS PER SHARE

The components of basic and diluted earnings per share for the quarter and six months ended June 30, 2019 and 2018 are as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,825		15,806		15,825		15,806
Dilutive effect of unvested restricted stock units		—		—		—		—
Weighted average outstanding shares of common stock, diluted (1)		15,825		15,806		15,825		15,806

⁽¹⁾ For the quarter ended June 30, 2019 and 2018, 0 and 425,317 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively, as they were anti-dilutive to earnings per share. For the six months ended June 30, 2019 and 2018, 0 and 14,258 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively as they were anti-dilutive to earnings per share.

9. STOCK-BASED COMPENSATION

We recognize the cost of employee compensation received in the form of equity instruments based on the grant date fair value of those awards. The table below sets forth the total amount of stock-based compensation expense for the quarter and six months ended June 30, 2019 and 2018.

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Stock-based compensation expense:
Time-based restricted stock units	$	845	$	435	$	1,685	$	1,077
Performance-based restricted stock units		480		378		955		1,055
Total stock-based compensation expense	$	1,325	$	813	$	2,640	$	2,132

During the quarter and six months ended June 30, 2019, no time-based restricted units or performance units were awarded to managerial employees.

During the quarter and six months ended June 30, 2018, 321,831 time-based restricted units and 448,012 performance-based restricted units were awarded to managerial employees.

On February 20, 2019, the PHI Compensation Committee approved the vesting of the 2017 performance RSUs based on the Company’s financial results exceeding the pre-determined business performance metrics set in 2017 for the two year performance period (January 1, 2017 - December 31, 2018). The PHI Compensation Committee decided to settle these vested RSU awards in cash based upon the closing market price on February 20, 2019, the date of the committee's certification that the performance metrics were met ($2.21 per share). The total amount of cash paid was $0.8 million.  On February 20, 2019, the Compensation Committee certified that the performance metrics for performance-based restricted stock units granted in 2016 had not been met, which resulted in the forfeiture of 667,238 of such RSUs.

10. ASSET DISPOSALS

During the first quarter of 2019, there were no sales or disposals of aircraft.  During the second quarter of 2019, we disposed of two light aircraft previously utilized in the Technical Services segment.  The contract was terminated and these aircraft no longer met our strategic needs.  Cash proceeds totaled $1.2 million, resulting in a gain of $0.2 million on the disposal of these assets.  This gain was offset partially by a net loss on other assets disposals.

During the first quarter of 2018, we disposed of one light aircraft previously utilized in the Air Medical segment and donated to a charitable organization one aircraft previously used in our Oil and Gas segment. During the second quarter of 2018, we disposed of one medium and one light aircraft previously utilized in the Oil & Gas segment. These aircraft no longer met our strategic needs.  Cash proceeds totaled $1.5 million, resulting in a $0.7 million loss on the disposal of these assets.

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11. COMMITMENTS AND CONTINGENCIES

Commitments – We currently have no aircraft purchase commitments.

Environmental Matters – We have recorded an estimated liability of $0.15 million as of June 30, 2019 for environmental response costs. Previously, we conducted environmental surveys of our former Lafayette Facility located at the Lafayette Regional Airport, which we 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, we have performed groundwater sampling of the required groundwater monitor well installations at both parcels and submitted these sampling reports to the LDEQ.  Pursuant to an agreement with the LDEQ, we provided groundwater sample results semi-annually to the LDEQ for both parcels from 2005 to 2015. The LDEQ approved a reduction in the sampling program from semi-annual to annual groundwater monitoring in 2015.  Based on our working relationship and agreements with the LDEQ, and the results of ongoing former facility parcel monitoring, we believe that ultimate remediation costs for the subject parcels will not be material to our 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, medical malpractice claims, 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 our presently pending 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.

Notwithstanding the foregoing, any litigation pending against us or any of the Debtors as of the Petition Date and any claims that could be asserted against us or an of the Debtors that arose prior to the Petition Date are automatically stayed as a result of the commencement of the Chapter 11 Cases pursuant to the section 362(2) of the Bankruptcy Code, subject to certain statutory exceptions.  These matters will be subject to resolution in accordance with the Bankruptcy Code and applicable orders of the Bankruptcy Court.

12. REVENUE RECOGNITION

In 2014, the Financial Accounting Standard Board ("the FASB") issued ASC 606, Revenue from Contracts with Customers (“ASC 606”), replacing the existing accounting standard and industry specific guidance for revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The underlying principle of the new standard is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.  ASC 606 became effective on January 1, 2018 and we adopted it using the modified retrospective method applied to open contracts and only to the version of the contracts in effect as of January 1, 2018. There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

In general, under ASC 606, we recognize revenue when a service or good is sold to a customer and a contract exists. At contract inception, we assess the goods and services promised in our contracts with customers and identify all performance obligations for each distinct promise that transfers a good or service (or bundle of goods or services) to the customer. To identify the performance obligations, we consider all goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. Revenue is recognized when control of the identified distinct goods or services has been transferred to the customer, the transaction price has been determined and allocated to the performed performance obligations and we have determined that collection has occurred or is probable of occurring.

Taxes billed to and collected from customers and remitted to governmental authorities are reported as revenue on a net basis in our financial statements.  Thus, we exclude taxes billed to the customer and collected on behalf of governmental agencies to be remitted to these agencies from the transaction price in determining the revenue related to contracts with a customer.

Oil & Gas Revenue Recognition - We provide helicopter services to oil and gas customers operating in the Gulf of Mexico and a number of foreign countries.  Revenues are recognized when performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered.

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Air Medical Revenue Recognition - We provide helicopter services to hospitals and emergency service providers in several U.S. states, or to individual patients in the U.S. in which case we are paid by either a commercial insurance company, federal or state agency, or the patient.  Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model.  Revenues related to the independent provider model services are recorded in the period in which we satisfy our performance obligations under contracts by providing our services to our customers based upon established billing rates net of contractual allowances under agreements with third party payors and net of uncompensated care allowances. These amounts are due from patients, third-party payors (including health insurers and government programs), and others and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, we bill the patients and third-party payors several days after the services are performed.  Revenues generated under the traditional provider model are recognized as performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled in exchange for services rendered.

Oil & Gas Performance Obligations - A performance obligation arises under contracts with customers to render services and is the unit of account under ASC 606.  Operating revenue from our Oil and Gas segment is derived mainly from fixed-term contracts with our customers, a substantial portion of which are competitively bid.   A small portion of our Oil and Gas segment revenue is derived from providing services on an "ad-hoc" basis.   Our fixed-term contracts typically have original terms of one to seven years (subject to provisions permitting early termination on relatively short notice by the customers). We account for services rendered separately if they are distinct and the services are separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered on its own or with other resources that are readily available to the customer.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  Within this contract type for helicopter services, we determined that each contract has a single distinct performance obligation. These services include a fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. We also provide services to clients on an “ad hoc” basis, which usually entails a shorter contract notice period and duration. The charges for ad hoc services are based on an hourly rate or a daily or monthly fixed fee plus additional fees for each hour flown. The nature of our variable charges within our flight services contracts are not effective until a customer-initiated flight order and the actual hours flown are determined; therefore, the associated flight revenue generally cannot be reasonably and reliably estimated before hand. A contract’s standalone selling prices are determined based upon the prices that we charge for our services rendered.  The majority of our revenue is recognized as performance obligations satisfied over time, by measuring progress towards satisfying the contracted services in a manner that best depicts the transfer of services to the customer, which is generally represented by a period of 30 days or less.  We typically invoice customers on a monthly basis with the term between invoicing and when the payment is due typically being between 30 and 60 days.

Air Medical Performance Obligations - Performance obligations are determined based upon the nature of the services provided. Under the independent provider model, we measure the performance obligation from the moment the patient is loaded into the aircraft until it reaches its destination. Under this model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area.  Under the traditional provider model, we contract directly with the customer to provide their transportation services.  These contracts are typically awarded or renewed through competitive bidding and typically permit early termination by the customer on relatively short notice. As a traditional provider, we typically bill a fixed monthly rate for aircraft availability and an hourly rate for flight time. For each of these types of helicopter services, we have determined that each has a single distinct performance obligation.  Traditional provider models services include fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. The variable charges within such contracts are not effective until the customer initiates a flight order and the actual hours flown are determined; therefore, the associated revenue generally cannot be reasonably and reliably estimated beforehand. For the traditional provider model, we determine the transaction price based upon standard charges for goods and services provided.

As an independent provider, we bill for our services on the basis of a flat rate plus a variable charge per patient-loaded mile, regardless of aircraft model, and are typically compensated by private insurance, Medicaid or Medicare, or directly by transported patients who self-pay. We recognize revenues for performance obligations satisfied at a point in time, which generally relate to patients receiving air medical services when: (1) services are provided; and (2) we do not believe the patient requires additional services. For the independent provider model, we determine the transaction price based upon gross charges for services provided reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with Company policy, and/or implicit price concessions provided to uninsured patients. We determine estimates of contractual adjustments and discounts based upon contractual agreements, our discount policy, and historical experience. We determine our estimate of implicit price concessions based upon our historical collection experience with these classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups, rather than individually. The financial statement effects of using this practical expedient are not materially different from an individual contract approach.

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We estimate contractual allowances and uncompensated care based on historical collection experience by payor category. The main payor categories are Medicaid, Medicare, private insurance, and self-pay. Changes in payor mix, reimbursement rates and uncompensated care rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts by category. The allowance percentages calculated are applied to the payor categories, and the necessary adjustments are made to the revenue allowance. In our Air Medical Segment, the allowance for contractual discounts against outstanding accounts receivable was $140.5 million, and $123.8 million as of June 30, 2019, and December 31, 2018, respectively, and the allowance for uncompensated care against outstanding accounts receivable was $45.5 million, and $51.9 million as of June 30, 2019 and December 31, 2018, respectively. Included in the allowance for uncompensated care above is the value of services to patients who are unable to pay when it is determined that they qualify as charity care. The value of these services was $1.6 million, and $1.7 million for the quarter ended on June 30, 2019 and 2018, respectively. The value of these services was $3.5 million and $3.3 million for the six months ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.3 million and $0.4 million for the quarters ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.8 million for the six months ended June 30, 2019 and 2018, respectively. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on the Air Medical independent provider model’s total expenses divided by gross patient service revenue.

In determining the allowance estimates for our Air Medical segment’s billing, receivables and revenue, we utilize the prior twelve months’ payment history and current trends in payor behavior by each separate payor group, which we evaluate on a state by state basis. A percentage of amounts collected compared to the total invoice is determined from this process and applied to the current month’s billings and receivables. If a receivable related to the self-pay category is outstanding twelve months or greater, we record a reserve equal to 100% of the receivable. Receivables related to other payor categories are scrutinized when they are outstanding for nine months or longer and additional allowances are recorded if warranted.

As of June 30, 2019 and December 31, 2018, net receivables related to our (i) Oil and Gas segment were $86.2 million and $74.1 million, (ii) Air Medical segment were $95.8 million and $90.2 million and (iii) Technical Services segment were $1.3 million and $4.1 million, respectively.

We generally have a right to consideration in an amount that corresponds directly with the value to the customer of the entity's performance completed to date and may recognize revenue in the amount to which the entity has a right to invoice. We have elected to use the invoice practical expedient for revenue recognized when performance obligations are satisfied over time. In addition, payment for goods and services rendered is typically due in the subsequent month following satisfaction of our performance obligation. Our contracts typically include termination clauses that allow both parties to terminate existing contracts with a 30 to 180 day notice period.

Our Technical Services segment - provides helicopter flight services and helicopter repair and overhaul services for existing flight operations customers that own their own aircraft. Under this segment, we periodically provide certain services to governmental customers, including our agreement to operate six aircraft for the National Science Foundation in Antarctica. Under this segment, we also offer certain software as a service to our Oil and Gas customers.   Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration we expect to be entitled to in exchange for services rendered.   For these helicopter services, we determined that each has a single distinct performance obligation.

The following table presents the Company’s revenues by segment disaggregated by type (in thousands):

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Service Revenue
Oil & Gas	$	90,023	$	97,068	$	174,969	$	192,702
Air Medical		69,507		67,151		126,153		124,139
Technical Services		5,642		5,024		15,940		12,766
Total Services	$	165,172	$	169,243	$	317,062	$	329,607
Air Medical Revenue
Traditional provider model	$	12,401	$	12,085	$	24,378	$	23,956
Independent provider model		57,106		55,066		101,775		100,183
Total Air Medical Revenues	$	69,507	$	67,151	$	126,153	$	124,139

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13. LEASES

The Company adopted ASU 2016-02 standard on a prospective basis on January 1, 2019 and used the effective date as the date of initial application.  Therefore, prior period financial information has not been adjusted and continues to be reflected in accordance with the Company’s historical accounting policy.  The standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

The Company elected to adopt the "package of practical expedients" under ASU No. 2018-11, which allows the Company to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. The Company also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes.

The adoption of ASU 2016-02 had the effects specified in Note 1.

Accounting Policy for Leases

The Company determines if an arrangement is a lease at inception.  All of the Company’s leases are operating leases and are included in ROU assets, accounts payable and operating lease liabilities in the Company's Condensed Consolidated Balance Sheet at June 30, 2019.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make lease payments arising from the lease.  Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.  The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.  The Company’s lease terms may include options to extend or terminate the lease.  The lease term includes options to extend when we are reasonably certain to exercise the option.  We are not, however, reasonably certain that we will exercise any of the options to extend and as such, they have not been included in the remaining lease terms.

Overview

We lease certain aircraft, facilities, and equipment used in our operations.  The related lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals, and certain real estate leases also include renewal options.  We generally pay all insurance, taxes, and maintenance expenses associated with these leases, and these costs are not included in the lease liability and are recognized in the period in which they are incurred.

Total operating lease expense was $11.4 million and $12.1 million for the three months ended June 30, 2019 and 2018, respectively.  For the three months ended June 30, 2019, a portion of the total operating lease expense relating to short-term leases was $1.6 million.  The operating lease expense was $22.6 million and $23.8 million for the six months ended June 30, 2019 and 2018, respectively.  For the six months ended June 30, 2019, a portion of the total operating lease expense relating to short-term was $3.0 million.

Operating leases at June 30, 2019 were as follows (in thousands):

	June 30, 2019
	(Thousands of dollars)
Operating lease right-of-use-assets	$	144,944
Current portion of operating lease liabilities		27,535
Operating lease liabilities		118,167
Total operating lease liabilities	$	145,702
Cash paid for operating leases		21,475
ROU assets obtained in exchange for lease obligations		9,402
Weighted average remaining lease term	5 years
Weighted average discount rate		8.25	%

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Maturities of operating lease liabilities at June 30, 2019 are as follows (in thousands):

	Operating
Six Months Ending June 30,	Leases
	Thousands of dollars
Remainder of 2019	$	19,615
2020		37,140
2021		36,297
2022		34,254
2023		23,872
Thereafter		33,975
Total lease payments		185,153
Less imputed interest		(39,451	)
Total	$	145,702

As of December 31, 2018, future total rentals on our non-cancellable operating leases were $160 million in the aggregate, which consisted of the following: $36 million in 2019; $33 million in 2020; $31 million in 2021; $29 million in 2022; $20 million in 2023; and $11 million thereafter.

We are currently in the process of renegotiating certain of our leases in connection with the Chapter 11 Cases.  These negotiations, if successfully completed, will likely impact our obligation under our outstanding leases.

14. SEGMENT INFORMATION

PHI is primarily a provider of helicopter transport services, including helicopter maintenance and repair services. We report our financial results through the three reportable segments further described below.

A segment’s operating profit or loss 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 small portion that is allocated.  Direct charges represent the vast majority of segment selling, general and administrative expenses.  Allocated selling, general and administrative expenses are based primarily on total segment costs as a percentage of total operating costs. A significant portion of our selling, general and administrative expenses are neither charged nor allocated to our segments.

Oil and Gas Segment - Our Oil and Gas segment, headquartered in Lafayette, Louisiana, provides helicopter services primarily for the major integrated and independent oil and gas production companies transporting personnel or equipment to offshore platforms in the Gulf of Mexico and a number of foreign countries. Our customers include Shell Oil Company, BP America Production Company, ExxonMobil Production Company, and ConocoPhillips Company, with whom we have worked for 35 or more years, and ENI Petroleum, with whom we have worked for more than 20 years. At June 30, 2019, we had available for use 121 aircraft in this segment.

Our fixed-term contracts typically have original terms of one year to seven years (subject to provisions permitting early termination upon short notice by the customers), with payment in U.S. dollars. For the quarters ended June 30, 2019 and 2018, respectively, approximately 55% and 57% of our total operating revenues were generated by our Oil and Gas segment, with approximately 85% and 87% of these revenues from fixed-term customer contracts.  For the six months ended June 30, 2019 and 2018, respectively, approximately 55% and 58% of our total operating revenues were generated by our Oil and Gas segment, with approximately 85% and 87% of these revenues from fixed-term customer contracts.  The remaining 15% of these revenues were attributable to work in the spot market and ad hoc flights for contracted customers.

Air Medical Segment - The operations of our Air Medical segment are headquartered in Phoenix, Arizona, where we maintain significant separate facilities and administrative staff dedicated to this segment.

We provide Air Medical transportation services for hospitals and emergency service agencies throughout the U.S.  As of June 30, 2019, our Air Medical segment operated approximately 111 aircraft in 18 states at 81 separate locations.

Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model. Under the independent provider model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area. Under the traditional provider model, we contract directly with the customer to provide their transportation services, with the contracts typically awarded or renewed through competitive bidding. For the quarters ended June 30, 2019 and 2018, approximately 42% and 40% of our total operating revenues were generated by our Air Medical segment.  For the six months ended June 30, 2019 and 2018, approximately 40% and 38% of our total operating revenues were generated by our Air Medical segment.

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Estimates regarding the payor mix and changes in reimbursement rates are the factors most subject to sensitivity and variability in calculating our allowances.  We compute a historical payment analysis of accounts fully closed, by category.

Provisions for contractual discounts and estimated uncompensated care for our Air Medical segment (expressed as a percentage of gross segment billings) were as follows for the periods listed below:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Provision for contractual discounts		70	%		67	%		68	%		66	%
Provision for uncompensated care		8	%		7	%		9	%		8	%

These percentages are affected by various factors, including rate increases and changes in the number of transports by payor mix.

Net reimbursement per transport from commercial payors generally increases when a rate increase is implemented.  Net reimbursement from certain commercial payors, as well as Medicare and Medicaid, generally does not increase proportionately with rate increases.

Net revenue attributable to Insurance, Medicare, Medicaid, and Self-Pay (expressed as a percentage of net Air Medical revenues) were as follows for the periods listed below:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Insurance		67	%		72	%		67	%		72	%
Medicare		23	%		19	%		23	%		20	%
Medicaid		9	%		8	%		8	%		8	%
Self-Pay		1	%		1	%		2	%		—	%

We also have a limited number of contracts with hospitals under which we receive a fixed fee component for aircraft availability and a variable fee component for flight time.  Most of our contracts with hospitals contain provisions permitting early termination by the hospital, typically with 180 days’ notice for any reason and generally with penalty.  Those contracts generated approximately 15% and 16% of the segment’s revenues for the quarters ended June 30, 2019 and 2018, respectively.  Those contracts generated approximately 17% and 18% of the segment’s revenues for the six months ended June 30, 2019 and 2018, respectively.

We also derive a small portion of the segment’s revenues from providing services under our patient navigation business.

Technical Services Segment - Our 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 our service costs.  In the past, we also periodically provided flight services to governmental customers under this segment, including operating six aircraft for the National Science Foundation in Antarctica under a contract that lapsed on April 30, 2019.  We sold two light aircraft during the quarter that were assigned to this contract, leaving four aircraft remaining in this segment.  Also included in this segment are our proprietary Helipass operations, which provide software as a service to certain of our Oil and Gas customers for the purpose of passenger check-in and compliance verification.

For each of the quarters ended June 30, 2019 and 2018, approximately and 3% of our total operating revenues were generated by our Technical Services segment, respectively.  For each of the six month periods ended June 30, 2019 and 2018, approximately 5% and 4% of our total operating revenues were generated by our Technical Services segment, respectively.

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Summarized financial information concerning our reportable operating segments for the quarters and six months ended June 30, 2019 and 2018 is as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Thousands of dollars)						(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	90,023		$	97,068		$	174,969		$	192,702
Air Medical		69,507			67,151			126,153			124,139
Technical Services		5,642			5,024			15,940			12,766
Total operating revenues, net		165,172			169,243			317,062			329,607
Segment direct expenses
Oil and Gas (1)		89,061			94,442			179,031			190,985
Air Medical		59,310			56,776			116,391			110,608
Technical Services		4,104			3,784			12,568			9,671
Total direct expenses		152,475			155,002			307,990			311,264
Segment selling, general and administrative expenses
Oil and Gas		4,672			4,400			9,432			9,321
Air Medical		4,141			3,254			7,433			6,421
Technical Services		152			340			300			710
Total selling, general and administrative expenses		8,965			7,994			17,165			16,452
Total segment direct and selling, general and administrative expenses		161,440			162,996			325,155			327,716
Net segment (loss) profit
Oil and Gas		(3,710	)		(1,774	)		(13,494	)		(7,604	)
Air Medical		6,056			7,121			2,329			7,110
Technical Services		1,386			900			3,072			2,385
Total net segment profit		3,732			6,247			(8,093	)		1,891
Other, net (3)		428			(193	)		337			(2,112	)
Unallocated selling, general and administrative costs (1) (4)		(8,626	)		(6,491	)		(25,293	)		(13,492	)
Reorganization items, net		(26,503	)		—			(28,103	)		—
Interest expense		(3,927	)		(8,340	)		(12,093	)		(16,537	)
(Loss) earnings before income taxes	$	(34,896	)	$	(8,777	)	$	(73,245	)	$	(30,250	)

(1) Included in direct expenses and unallocated selling, general, and administrative costs are the depreciation and amortization expense amounts below:

	Depreciation and Amortization Expense
	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Segment Direct Expense:
Oil and Gas	$	11,618	$	11,486	$	22,896	$	23,269
Air Medical		5,485		6,091		10,771		11,715
Technical Services		133		142		204		287
Total	$	17,236	$	17,719	$	33,871	$	35,271
Unallocated SG&A	$	3,095	$	1,412	$	4,904	$	3,327

(2) Includes equity in (earnings) of unconsolidated affiliates, net.

(3) Consists of (gains) losses on disposition of property and equipment and other income.

(4) Represents corporate overhead expenses not allocable to segments.

28

15. INVESTMENT IN VARIABLE INTEREST ENTITY

We account for our investment in PHI Century Limited ("PHIC") as a variable interest entity, which is defined as an entity that either (a) has insufficient equity to permit the entity to finance its operations without additional subordinated financial support or (b) has equity investors who lack the characteristics of a controlling financial interest.  As of June 30, 2019, we had a 49% investment in the common stock of PHIC, a Ghanaian entity. We acquired our 49% interest on May 26, 2011, PHIC’s date of incorporation. The purpose of PHIC is to provide oil and gas flight services in Ghana and the West African region. For the quarter ended June 30, 2019, we recorded income in equity of this unconsolidated affiliate of $1.0 million compared to income in equity of less than $0.1 million for the quarter ended June 30, 2018 relative to our 49% equity ownership. For the six months ended June 30, 2019 and 2018, we recorded income in equity of this unconsolidated affiliate of $2.4 million and less than $0.1 million, respectively. We had $4.1 million and $4.8 million of trade receivables from PHIC as of June 30, 2019 and December 31, 2018, respectively. In 2018, we loaned PHIC $0.4 million for operating purposes. This loan balance is included in Accounts receivable - other on our Condensed Consolidated Balance Sheets at June 30, 2019. Our investment in the common stock of PHIC is included in Other Assets on our Condensed Consolidated Balance Sheets and was $2.9 million at June 30, 2019 and $0.5 million at December 31, 2018.

16. OTHER COMPREHENSIVE INCOME

Amounts reclassified from Accumulated other comprehensive income are not material and, therefore, not presented separately in the Condensed Consolidated Statements of Comprehensive Income.

17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed further in Note 6, 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 PHI, Inc.’s 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”) the guarantor subsidiaries and the non-guarantor subsidiaries, each 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.

29

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

(Unaudited)

	June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	8,170		$	2,223	$	11,489		$	—		$	21,882
Short-term investments		76,141			—		—			—			76,141
Accounts receivable – net		64,467			101,381		23,676			(6,180	)		183,344
Intercompany receivable		—			98,616		22,116			(120,732	)		—
Inventories of spare parts – net		29,871			20,929		3,442			—			54,242
Prepaid expenses		8,944			2,805		1,323			—			13,072
Income taxes receivable		7			502		—			—			509
Total current assets		187,600			226,456		62,046			(126,912	)		349,190
Investment in subsidiaries		475,391			—		—			(475,391	)		—
Property and equipment – net		562,880			283,231		39,558			—			885,669
Right of use assets		116,918			11,652		16,374			—			144,944
Restricted cash and investments		19,739			—		—			—			19,739
Other assets		18,678			1,071		1,188			—			20,937
Deferred income tax		—			—		5,137			—			5,137
Total assets	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,526		$	6,437	$	5,832		$	(6,180	)	$	70,615
Accrued and other current liabilities		19,667			13,500		5,316			—			38,483
Current portion of operating lease liabilities		20,823			3,404		3,308			—			27,535
Current maturities of long-term debt		1,750			—		—			—			1,750
Intercompany payable		63,263			17,125		40,344			(120,732	)		—
Total current liabilities		170,029			40,466		54,800			(126,912	)		138,383
Long-term Debt		192,450			—		—			—			192,450
Deferred income taxes and other long-term liabilities		93,711			67,234		12,859			—			173,804
Liabilities subject to compromise		513,125			—		—			—			513,125
Shareholders’ Equity:
Common stock and paid-in capital		317,725			77,951		132,426			(210,377	)		317,725
Accumulated other comprehensive loss		(3	)		—		(4,037	)		—			(4,040	)
Retained earnings		94,169			336,759		(71,745	)		(265,014	)		94,169
Total shareholders’ equity		411,891			414,710		56,644			(475,391	)		407,854
Total liabilities and shareholders’ equity	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616

30

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

	December 31, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	39,091		$	1,259	$	10,524		$	—		$	50,874
Short-term investments		14,232			—		—			—			14,232
Accounts receivable – net		64,416			93,060		28,812			(3,823	)		182,465
Intercompany receivable		—			91,468		—			(91,468	)		—
Inventories of spare parts – net		43,933			9,577		3,188			—			56,698
Prepaid expenses		7,295			2,520		1,604			—			11,419
Income taxes receivable		394			556		—			—			950
Total current assets		169,361			198,440		44,128			(95,291	)		316,638
Investment in subsidiaries and others		471,790			—		—			(471,790	)		—
Property and equipment – net		576,763			287,375		38,347			—			902,485
Restricted investments		19,781			—		—			—			19,781
Other assets		17,179			1,199		—			—			18,378
Deferred income tax		—			—		4,944			—			4,944
Total assets	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Senior Notes issued March 17, 2014	$	499,740		$	—	$	—		$	—		$	499,740
Accounts payable		44,089			4,587		5,452			(3,839	)		50,289
Accrued and other current liabilities		25,158			12,335		7,799			—			45,292
Intercompany payable		74,336			—		17,116			(91,452	)		—
Total current liabilities		643,323			16,922		30,367			(95,291	)		595,321
Long-term debt		129,235			—		—			—			129,235
Deferred income taxes and other long-term liabilities		4,934			58,752		551			—			64,237
Shareholders’ Equity:
Common stock and paid-in capital		315,898			77,951		132,650			(210,601	)		315,898
Accumulated other comprehensive loss		(3	)		—		(3,949	)		—			(3,952	)
Retained earnings		161,487			333,389		(72,200	)		(261,189	)		161,487
Total shareholders’ equity		477,382			411,340		56,501			(471,790	)		473,433
Total liabilities and shareholders’ equity	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226

31

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	75,707		$	72,628	$	24,912		$	(8,075	)	$	165,172
Expenses:
Direct expenses		76,288			61,915		23,386			(8,075	)		153,514
Selling, general and administrative expenses		10,459			4,293		2,843			(4	)		17,591
Total operating expenses		86,747			66,208		26,229			(8,079	)		171,105
Loss on disposal of assets, net		(102	)		9		(2	)		—			(95	)
Equity in income of unconsolidated affiliates, net		(1,039	)		—		—			—			(1,039	)
Operating (loss) income		(9,899	)		6,411		(1,315	)		4			(4,799	)
Equity in net income of consolidated subsidiaries		(4,952	)		—		—			4,952			—
Interest expense		3,908			19		—			—			3,927
Reorganization items, net		26,503			—		—			—			26,503
Other income, net		(46	)		—		(291	)		4			(333	)
		25,413			19		(291	)		4,956			30,097
(Loss) earnings before income taxes		(35,312	)		6,392		(1,024	)		(4,952	)		(34,896	)
Income tax (benefit) expense		(3,235	)		792		(376	)		—			(2,819	)
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	79,857		$	68,717	$	51,404		$	(30,735	)	$	169,243
Expenses:
Direct expenses		78,955			58,263		48,658			(30,793	)		155,083
Selling, general and administrative expenses		8,395			3,256		2,838			(4	)		14,485
Total operating expenses		87,350			61,519		51,496			(30,797	)		169,568
Gain on disposal of assets, net		(150	)		—		(21	)		—			(171	)
Equity in income of unconsolidated affiliates, net		(81	)		—		—			—			(81	)
Operating (loss) income		(7,262	)		7,198		(71	)		62			(73	)
Equity in net income of consolidated subsidiaries		(6,064	)		—		—			6,064			—
Interest expense		8,337			—		542			(539	)		8,340
Other income, net		(365	)		—		128			601			364
		1,908			—		670			6,126			8,704
(Loss) earnings before income taxes		(9,170	)		7,198		(741	)		(6,064	)		(8,777	)
Income tax (benefit) expense		(2,077	)		—		393			—			(1,684	)
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)

32

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	149,740		$	131,930		$	49,251		$	(13,859	)	$	317,062
Expenses:
Direct expenses		160,793			120,941			42,515			(13,859	)		310,390
Selling, general and administrative expenses		28,507			7,731			6,229			(9	)		42,458
Total operating expenses		189,300			128,672			48,744			(13,868	)		352,848
Loss (gain) on disposal of assets, net		(51	)		9			(2	)		—			(44	)
Equity in income of unconsolidated affiliates, net		(2,400	)		—			—			—			(2,400	)
Operating (loss) income		(37,109	)		3,249			509			9			(33,342	)
Equity in net income of consolidated subsidiaries		(3,825	)		—			—			3,825			—
Interest expense		12,070			23			—			—			12,093
Regorganizations items, net		28,103			—			—			—			28,103
Other income, net		(235	)		—			(67	)		9			(293	)
		36,113			23			(67	)		3,834			39,903
(Loss) earnings before income taxes		(73,222	)		3,226			576			(3,825	)		(73,245	)
Income tax (benefit) expense		(5,904	)		(144	)		121			—			(5,927	)
Net (loss) earnings	$	(67,318	)	$	3,370		$	455		$	(3,825	)	$	(67,318	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	157,949		$	127,426	$	100,900		$	(56,668	)	$	329,607
Expenses:
Direct expenses		162,953			113,627		91,436			(56,707	)		311,309
Selling, general and administrative expenses		17,143			6,423		6,388			(10	)		29,944
Total operating expenses		180,096			120,050		97,824			(56,717	)		341,253
Loss (gain) on disposal of assets, net		729			—		(21	)		—			708
Equity in income of unconsolidated affiliates, net		(45	)		—		—			—			(45	)
Operating (loss) income		(22,831	)		7,376		3,097			49			(12,309	)
Equity in net income of consolidated subsidiaries		(8,163	)		—		—			8,163			—
Interest expense		16,533			—		1,085			(1,081	)		16,537
Other income, net		(63	)		—		337			1,130			1,404
		8,307			—		1,422			8,212			17,941
(Loss) earnings before income taxes		(31,138	)		7,376		1,675			(8,163	)		(30,250	)
Income tax (benefit) expense		(7,063	)		—		888			—			(6,175	)
Net (loss) earnings	$	(24,075	)	$	7,376	$	787		$	(8,163	)	$	(24,075	)

33

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)
Currency translation adjustments		—			—		(928	)		—			(928	)
Tax effect of the above-listed adjustments		—			—		25			—			25
Total comprehensive (loss) income	$	(32,077	)	$	5,600	$	(1,551	)	$	(4,952	)	$	(32,980	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)
Unrealized gain on short-term investments		(107	)		—		—			—			(107	)
Currency translation adjustments		—			—		160			—			160
Changes in pension plan asset and benefit obligation		7			—		—			—			7
Tax effect of the above-listed adjustments		100			—		—			—			100
Total comprehensive (loss) income	$	(7,093	)	$	7,198	$	(974	)	$	(6,064	)	$	(6,933	)

34

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(67,318	)	$	3,370	$	455		$	(3,825	)		(67,318	)
Currency translation adjustment		—			—		(121	)		—			(121	)
Tax effect of the above-listed adjustments		—			—		33			—			33
Total comprehensive (loss) income	$	(67,318	)	$	3,370	$	367		$	(3,825	)	$	(67,406	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net (loss) earnings	$	(24,075	)	$	7,376	$	787	$	(8,163	)		(24,075	)
Unrealized gain on short-term investments		363			—		—		—			363
Currency translation adjustment		—			—		627		—			627
Changes in pension plan asset and benefit obligation		(1	)		—		—		—			(1	)
Tax effect of the above-listed adjustments		(85	)		—		—		—			(85	)
Total comprehensive (loss) income	$	(23,798	)	$	7,376	$	1,414	$	(8,163	)	$	(23,171	)

35

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(20,773	)	$	(6,064	)	$	3,160		$	—	$	(23,677	)
Investing activities:													—
Purchase of property and equipment		(5,956	)		—			(3,014	)		—		(8,970	)
Proceeds from asset dispositions		1,235			—			—			—		1,235
Purchase of short-term investments		(183,421	)		—			—			—		(183,421	)
Proceeds from sale of short-term investments		121,512			—			—			—		121,512
Payment of deposit on aircraft		(50	)										(50	)
Refund of deposit on aircraft		503			—			—			—		503
Loan to unconsolidated affiliate		—			—			—			—		—
Net cash used in investing activities		(66,177	)		—			(3,014	)		—		(69,191	)
Financing activities:													—
Debt issuance costs		(5,668	)		—			—			—		(5,668	)
Proceeds from Term Loan		70,000			—			—					70,000
Due to/from affiliate, net		(8,330	)		7,028			1,302			—		—
Net cash provided by (used in) financing activities		56,002			7,028			1,302			—		64,332
Effect of exchange rate changes on cash		—			—			(483	)		—		(483	)
Increase (decrease) in cash		(30,948	)		964			965			—		(29,019	)
Cash, cash equivalents and restricted cash at beginning of period		46,781			1,259			10,524			—		58,564
Cash, cash equivalents and restricted cash at end of period	$	15,833		$	2,223		$	11,489		$	—	$	29,545

36

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(506	)	$	3,306		$	2,610		$	—	$	5,410
Investing activities:
Purchase of property and equipment		(16,768	)		—			(1,330	)		—		(18,098	)
Proceeds from asset dispositions		1,453			—			—			—		1,453
Purchase of short-term investments		(260,996	)		—			—			—		(260,996	)
Proceeds from sale of short-term investments		264,918			—			—			—		264,918
Loan to unconsolidated affiliate		(274	)		—			—			—		(274	)
Net cash used in investing activities		(11,667	)		—			(1,330	)		—		(12,997	)
Financing activities:
Proceeds from line of credit		34,295			—			—			—		34,295
Payments on line of credit		(29,575	)		—			—			—		(29,575	)
Due to/from affiliate, net		7,510			(3,073	)		(4,437	)		—		—
Repurchase of common stock		(51	)		—			—			—		(51	)
Net cash provided by (used in) financing activities		12,179			(3,073	)		(4,437	)		—		4,669
Increase (decrease) in cash		6			233			(3,157	)		—		(2,918	)
Cash, beginning of period		47			1,072			7,651			—		8,770
Cash, end of period	$	53		$	1,305		$	4,494		$	—	$	5,852

18. DEBTOR IN POSSESSION FINANCIAL INFORMATION

The financial statements below represent the condensed financial statements of the Debtors.  The Debtors are PHI, Inc., PHI Air Medical, LLC, PHI Tech Services, Inc., PHI Helipass, LLC, and AM Equity Holdings, LLC. Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the Debtors and the non–debtor subsidiaries have not been eliminated in the Debtors’ financial statements.

37

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED BALANCE SHEETS

(Thousands of dollars, except share data)

(Unaudited)

	June 30, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	10,310
Short-term investments		76,141
Accounts receivable – net
Trade		153,460
Other		6,120
Inventories of spare parts – net		50,800
Prepaid expenses		11,749
Income taxes receivable		509
Total current assets		309,089
Property and equipment – net		846,095
Right of use assets		127,821
Restricted cash and investments		19,739
Other assets		150,536
Total assets	$	1,453,280
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	66,187
Accrued and other current liabilities		33,168
Current portion of operating lease liabilities		24,125
Current maturities of long term debt		1,750
Total current liabilities		125,230
Long-term debt:
Term loan issued March 13, 2019, net of debt issuance costs of $5,254		62,996
Related party term loan issued September 28, 2018, net of debt issuance costs of $546		129,454
Deferred income taxes		52,135
Other long-term liabilities		3,673
Long-term operating lease liabilities		104,491
Total liabilities not subject to compromise		477,979
Liabilities subject to compromise		513,125
Total liabilities		991,104
Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		291
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,919,681 issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1,290
Additional paid-in capital		314,499
Accumulated other comprehensive income (loss)		(3	)
Retained earnings		146,099
Total shareholders’ equity		462,176
Total liabilities and shareholders’ equity	$	1,453,280

38

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	Quarter			Six Months
	Ended June 30, 2019
Operating revenues, net	$	139,501		$	266,164
Expenses:		—			—
Direct expenses		129,319			266,368
Selling, general and administrative expenses		14,746			36,228
Total operating expenses		144,065			302,596
Loss on disposal of assets		(93	)		(42	)
Equity in (income) loss of unconsolidated affiliates, net		(1,039	)		(2,400	)
Operating (loss) income		(3,432	)		(33,990	)
Interest expense		3,927			12,093
Reorganization items, net		26,503			28,103
Other income – net		(42	)		(226	)
		30,388			39,970
Loss before income taxes		(33,820	)		(73,960	)
Income tax benefit		(2,443	)		(6,048	)
Net loss	$	(31,377	)	$	(67,912	)

39

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	Six Months Ended June 30,
	2019
Operating activities:
Net loss		(67,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		29,799
Deferred income taxes		(6,492	)
Loss (gain) on asset dispositions		(42	)
Equity in (income) loss of unconsolidated affiliate, net		(2,400	)
Inventory valuation reserves		1,110
Changes in operating assets and liabilities		19,751
Net cash used in operating activities		(26,186	)
Investing activities:
Purchase of property and equipment		(7,817	)
Proceeds from asset dispositions		1,235
Purchase of short-term investments		(183,421	)
Proceeds from sale of short-term investments		121,512
Payment of deposit on aircraft		(50	)
Refund of deposit on aircraft		503
Net cash used in investing activities		(68,038	)
Financing activities:
Debt issuance cost		(5,668	)
Proceeds from Term Loan		70,000
Net cash provided by financing activities		64,332
Decrease in cash, cash equivalents and restricted cash		(29,892	)
Cash, cash equivalents and restricted cash at the beginning of period		47,865
Cash, cash equivalents and restricted cash end of period	$	17,973

19. REORGANIZATION ITEMS

ASC 852 requires that transactions and events directly associated with our Chapter 11 reorganization be distinguished from the ongoing operations of the business. The Company refers to “Reorganization items” on its condensed consolidated statements of earnings (loss) to reflect the revenues, expenses, gains and losses that are the direct result of the reorganization of the business consist of professional fees of $1.6 million for the three months ended March 31, 2019 and $26.5 million for the three months ended June 30, 2019.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with (i) the accompanying unaudited condensed consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form 10-K for the year ended December 31, 2018, including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein.

Overview

As described further in Note 14, we are primarily a provider of helicopter transport services and derive most of our revenue from providing these services to the energy and medical industries.  Our consolidated results of operations are principally driven by the following factors:

• We expect the pending Chapter 11 Cases will impact our business. Certain of our customers have advised us that they will not enter into additional contracts with us during the Chapter 11 Cases.  We also are expending substantial amounts of cash on professional fees relating to the reorganization process. For information on additional impacts of the Chapter 11 Cases, see (i) the balance of this Item 2, (ii) Note 2 and (iii) Item 1A of Part II of this report.

• The level of offshore oil and gas exploration and production activities in the areas in which we operate.  Operating revenues from our Oil and Gas segment relate substantially to operations in the Gulf of Mexico and a couple of our other key offshore markets.  Many of the helicopters we have purchased recently are larger aircraft intended to service deepwater activities and the margins we earn on these aircraft are generally higher than on smaller aircraft.  During periods when the level of offshore activity increases, demand for our offshore flight services typically increases, directly affecting our revenue and profitability.  Also, during periods when deepwater offshore activity increases, the demand for our medium and heavy aircraft usually increases, creating a positive impact on revenue and earnings.  Conversely, a reduction in offshore oil and gas activities generally, or deepwater offshore activity particularly, typically negatively impacts our aircraft utilization, flight volumes, and overall demand for our aircraft, thereby creating a negative impact on our revenue and earnings.

• Patient transports and flight volume in our Air Medical segment.  In the independent provider programs under our Air Medical segment, our revenue is directly dependent upon the number and length of patient transports provided in a given period, which is impacted primarily by the number of bases operated by us, competitive factors and weather.  The volume of flight utilization of our aircraft by our customers under our traditional provider Air Medical programs also has a direct impact on the amount of revenue earned in a given period, although to a lesser degree than under our independent provider programs.  Independent provider programs generated approximately 80%, 80%, 81% and 74% of our Air Medical segment revenues for the six months ended June 30, 2019, and 2018, with the balance of our Air Medical segment revenue attributable to our traditional provider programs.

• Payor mix and reimbursement rates in our Air Medical segment.  Under our independent provider programs, our revenue recognition, net of allowances, during any particular period is dependent upon the rate at which our various types of customers reimburse us for our Air Medical services, which we refer to as our “payor mix.” Reimbursement rates vary among payor types and typically the reimbursement rate of commercial insurers is higher than Medicare, Medicaid, and self-pay reimbursement rates.  Moreover, Medicare and Medicaid reimbursement rates have decreased in recent years and our receipt of payments from these programs is subject to various regulatory and appropriations risks discussed in our periodic reports filed with the SEC. Changes during any particular period in our payor mix, reimbursement rates, or uncompensated care rates will have a direct impact on our revenues.

• Direct expenses.  Our business is capital-intensive and highly competitive. Salaries and aircraft maintenance comprise a large portion of our operating expenses.  Our aircraft must be maintained to a high standard of quality and undergo periodic and routine maintenance procedures.  Higher utilization of our aircraft will result in more frequent maintenance, resulting in higher maintenance costs.  In periods of low flight activity, we continue to maintain our aircraft, consequently reducing our margins.  In addition, we are also dependent upon pilots, mechanics, and medical crew to operate our business.  To attract and retain qualified personnel, we must maintain competitive wages, which places downward pressure on our margins.

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As noted above, the performance of our oil and gas operations is largely dependent upon the level of offshore oil and gas activities, which in turn is based largely on volatile commodity prices. See “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. Since mid-2014, prevailing oil prices have been substantially lower than prices for several years before then. Consequently, several of our oil and gas customers curtailed their exploration or production levels, lowered their capital expenditures, reduced their staffs or requested arrangements with vendors designed to reduce their operating costs, including flight sharing arrangements and alternative platform staffing rotations. These changes created overcapacity in the offshore flight services industry and negatively impacted our oil and gas operations since the first quarter of 2015. Over the course of the downturn, several of our offshore customers have requested reductions in the volume or pricing of our flight services or have re-bid existing contracts, all of which has further reduced our aircraft utilization rates and intensified pricing pressures. Although various experts believe the negative consequences of the market downturn have crested, we cannot assure you of this. For information on the adverse impact of this market downturn on our liquidity, see “- Liquidity and Capital Resources" below.

Voluntary Reorganization under Chapter 11

On March 14, 2019, the Debtors filed voluntary petitions in the Bankruptcy Court seeking relief under the Bankruptcy Code. The Chapter 11 Cases are being jointly administered under the caption "In re PHI, Inc., et al., Case No. 19-30923." Documents filed on the docket of and other information related to the Chapter 11 Cases are available free of charge online at https://restructuring.primeclerk.com/PHI. Documents and other information available on such website are not part of this document and shall not be deemed incorporated by reference in this document. The Debtors are authorized to continue to operate their businesses and manage their properties as "debtors in possession" under the jurisdiction of the Bankruptcy Code and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Certain subsidiaries of PHI (collectively, the "Non-Filing Entities") were not part of the Chapter 11 Cases. The Non-Filing Entities will continue to operate their businesses in the normal course and their results are included in our interim Unaudited Condensed Consolidated Financial Statements.

Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the commencement date of the cases. Accordingly, except with respect to certain payments required to be made as adequate protection under the Bankruptcy Code and applicable Bankruptcy Court orders, any efforts to enforce payment obligations under the Company's pre-petition debt instruments are automatically stayed as a result of the filing of the Chapter 11 Cases and are subject to the applicable provisions of the Bankruptcy Code.

Our Plan has been confirmed, but has not yet been implemented. We plan to implement our Plan by the end of August 2019, but cannot assure you of this. Unless and until our Plan is implemented, the Company's operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process. As a result of these risks and uncertainties, the amount and composition of the Company's assets, liabilities, officers and directors could be significantly different following the outcome of the Chapter 11 Cases. The description of the Company's operations, properties, liquidity, capital resources, capital structure, ownership or governance included in this or other of our periodic reports or in the Plan may not accurately reflect its operations, properties, liquidity, capital resources, capital structure, ownership or governance following resolution of the Chapter 11 Cases.

The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared assuming that PHI will successfully emerge from bankruptcy and continue as a going concern and contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our ability to continue as a going concern is contingent upon our ability to successfully implement our Plan, among other factors. The risks and uncertainties surrounding our Chapter 11 proceedings raise substantial doubt as to our ability to continue as a going concern.

Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business and subject to restrictions of our term loan financing (see Note 6 of Notes to our Condensed Consolidated Financial Statements) and applicable orders of the Bankruptcy Court, for amounts other than those reflected in the accompanying Unaudited Condensed Consolidated Financial Statements. Any such actions occurring during the Chapter 11 Cases confirmed by the Bankruptcy Court could materially impact the amounts and classifications of assets and liabilities reported in PHIs' interim Unaudited Condensed Consolidated Financial Statements.

Under the absolute priority scheme established by the Bankruptcy Code, unless our creditors agree otherwise, all of our pre-petition liabilities and post-petition liabilities must be satisfied in full before the holders of our existing common stock may receive any distribution or retain any property under a plan of reorganization. For more information, see Note 2 to our Condensed Consolidated Financial Statements.

42

Results of Operations

The following tables present operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the quarters ended June 30, 2019 and 2018.

	Quarter Ended June 30,						Favorable (Unfavorable)
	2019			2018
	(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues
Oil and Gas	$	90,023		$	97,068		$	(7,045	)
Air Medical		69,507			67,151			2,356
Technical Services		5,642			5,024			618
Total operating revenues, net		165,172			169,243			(4,071	)
Segment direct expenses
Oil and Gas (1)		89,061			94,442			5,381
Air Medical		59,310			56,776			(2,534	)
Technical Services		4,104			3,784			(320	)
Total direct expenses		152,475			155,002			2,527
Segment selling, general and administrative expenses
Oil and Gas		4,672			4,400			(272	)
Air Medical		4,141			3,254			(887	)
Technical Services		152			340			188
Total selling, general and administrative expenses		8,965			7,994			(971	)
Total segment direct and selling, general and administrative expenses		161,440			162,996			1,556
Net segment (loss) profit
Oil and Gas		(3,710	)		(1,774	)		(1,936	)
Air Medical		6,056			7,121			(1,065	)
Technical Services		1,386			900			486
Total net segment profit (2)		3,732			6,247			(2,515	)
Other, net (3)		428			(193	)		621
Unallocated selling, general and administrative costs (4)		(8,626	)		(6,491	)		(2,135	)
Reorganization items, net		(26,503	)		—			(26,503	)
Interest expense		(3,927	)		(8,340	)		4,413
(Loss) earnings before income taxes		(34,896	)		(8,777	)		(26,119	)
Income tax (benefit) expense		(2,819	)		(1,684	)		1,135
Net loss	$	(32,077	)	$	(7,093	)	$	(24,984	)
Flight hours:
Oil and Gas		18,149			22,089			(3,940	)
Air Medical (5)		10,716			9,992			724
Technical Services		82			38			44
Total		28,947			32,119			(3,172	)
Air Medical Transports (6)		5,707			4,925			782

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(1) Includes Equity in gain/loss of unconsolidated affiliate.  

(2) Total net segment profit has not been prepared in accordance with generally accepted accounting principles (“GAAP”). Management believes this non-GAAP financial measure provides meaningful supplemental information regarding our results of operations. A description of the adjustments to and reconciliations of total net segment profit to the most comparable GAAP financial measure is as follows:

	Quarter Ended June 30,
	2019			2018
Total net segment profit	$	3,732		$	6,247
Other, net		428			(193	)
Unallocated selling, general and administrative costs		(8,626	)		(6,491	)
Reorganization items, net		(26,503	)
Interest expense		(3,927	)		(8,340	)
(Loss) before income taxes	$	(34,896	)	$	(8,777	)

(3) Includes gains on disposition of property and equipment, asset impairments, and other income.

(4) Represents corporate overhead expenses not allocated to segments.

(5) Flight hours include 2,221 flight hours associated with traditional provider contracts during the second quarter of 2019, compared to 2,479 flight hours in the prior year quarter.

(6) Represents individual patient transports for the period.

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The following tables present operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the six months ended June 30, 2019 and 2018.

	Six Months Ended June 30,						Favorable (Unfavorable)
	2019			2018
	(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues
Oil and Gas	$	174,969		$	192,702		$	(17,733	)
Air Medical		126,153			124,139			2,014
Technical Services		15,940			12,766			3,174
Total operating revenues, net		317,062			329,607			(12,545	)
Segment direct expenses
Oil and Gas (1)		179,031			190,985			11,954
Air Medical		116,391			110,608			(5,783	)
Technical Services		12,568			9,671			(2,897	)
Total direct expenses		307,990			311,264			3,274
Segment selling, general and administrative expenses
Oil and Gas		9,432			9,321			(111	)
Air Medical		7,433			6,421			(1,012	)
Technical Services		300			710			410
Total selling, general and administrative expenses		17,165			16,452			(713	)
Total segment direct and selling, general and administrative expenses		325,155			327,716			2,561
Net segment (loss) profit
Oil and Gas		(13,494	)		(7,604	)		(5,890	)
Air Medical		2,329			7,110			(4,781	)
Technical Services		3,072			2,385			687
Total net segment (loss) profit (2)		(8,093	)		1,891			(9,984	)
Other, net (3)		337			(2,112	)		2,449
Unallocated selling, general and administrative costs (4)		(25,293	)		(13,492	)		(11,801	)
Reorganization items, net		(28,103	)		—			(28,103	)
Interest expense		(12,093	)		(16,537	)		4,444
(Loss) earnings before income taxes		(73,245	)		(30,250	)		(42,995	)
Income tax benefit		(5,927	)		(6,175	)		(248	)
Net loss	$	(67,318	)	$	(24,075	)	$	(43,243	)
Flight hours:
Oil and Gas		33,779			42,978			(9,199	)
Air Medical (5)		19,304			18,822			482
Technical Services		463			479			(16	)
Total		53,546			62,279			(8,733	)
Air Medical Transports (6)		10,206			9,324			882
Aircraft operated at period end: (7)
Oil and Gas		121			125
Air Medical		111			109
Technical Services		4			6
Total		236			240

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(1) Includes Equity in gain/loss of unconsolidated affiliate.  

(2) Total net segment profit has not been prepared in accordance with generally accepted accounting principles (“GAAP”). Management believes this non-GAAP financial measure provides meaningful supplemental information regarding our results of operations. A description of the adjustments to and reconciliations of total net segment profit to the most comparable GAAP financial measure is as follows:

	Six Months Ended June 30,
	2019			2018
Total net segment (loss) profit	$	(8,093	)	$	1,891
Other, net		337			(2,112	)
Unallocated selling, general and administrative costs		(25,293	)		(13,492	)
Reorganization items, net		(28,103	)
Interest expense		(12,093	)		(16,537	)
(Loss) before income taxes	$	(73,245	)	$	(30,250	)

(3) Includes gains on disposition of property and equipment, asset impairments, and other income.

(4) Represents corporate overhead expenses not allocated to segments.

(5) Flight hours include 4,111 flight hours associated with traditional provider contracts during the first half of 2019, compared to 4,701 flight hours in the first half of the prior year.

(6) Represents individual patient transports for the period.

(7) Represents the total number of aircraft available for use, not all of which were deployed in service as of the date indicated.

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Quarter Ended June 30, 2019 compared with Quarter Ended June 30, 2018

Operating Revenues - Operating revenues for the three months ended June 30, 2019 were $165.2 million, compared to $169.3 million for the three months ended June 30, 2018, a decrease of $4.1 million.  Oil and Gas segment operating revenues decreased $7.1 million for the three months ended June 30, 2019. As discussed further below, this decrease is attributable to decreases in both our International and Gulf of Mexico operations.  Air Medical segment operating revenues increased by $2.4 million. Technical Services segment operating revenues increased $0.6 million.

Total flight hours for the three months ended June 30, 2019 were 28,947 compared to 32,119 for the three months ended June 30, 2018.  As explained in more detail below, Oil and Gas segment flight hours decreased 3,940 hours.  Air Medical segment flight hours increased 724 hours for the three months ended June 30, 2019, due to an increase of 982 flight hours for our independent provider programs and a decrease of 258 flight hours in our traditional provider programs.  As discussed further below, individual patient transports in the Air Medical segment were 5,707 for the three months ended June 30, 2019, compared to transports of 4,925 for the three months ended June 30, 2018.

Direct Expenses -Direct operating expense was $152.5 million for the three months ended June 30, 2019, compared to $155.0 million for the three months ended June 30, 2018, a decrease of $2.5 million. We experienced a decrease in spare parts expense of $4.7 million and a decrease in aircraft warranty cost of $1.4 million. Equity in income of our Ghanaian affiliate increased $1.0 million, primarily due to increased flight hours (see below).  Fuel expense decreased $0.8 million due to decreased flight volume.  These reductions were partially offset by an increase in employee compensation expense of $4.1 million primarily due to staffing of new bases in our Air Medical segment. Cost of goods sold increased $0.9 million due to government work in the Technical Services segment. Other items increased $0.4 million, net.

Selling, General and Administrative Expenses -Selling, general and administrative expenses were $17.6 million for the three months ended June 30, 2019, compared to $14.5 million for the three months ended June 30, 2018.  The $3.1 million increase is primarily due to an increase in retention compensation attributable to the KERP approved by the Bankruptcy Court in April 2019.  See Note 2.  

Loss/Gain on Disposal of Assets, Net -The gain on asset dispositions was $0.1 million for the three months ended June 30, 2019 compared to a gain of $0.2 million for the three months ended June 30, 2018. See Note 10.

Equity in (Income) Loss of Unconsolidated Affiliates -Equity in the income of our unconsolidated affiliate attributable to our investment in a Ghanaian entity was $1.0 million for the three months ended June 30, 2019, compared to income of less than $0.1 million for the three months ended June 30, 2018. The $1.0 million increase is primarily attributable to increased flight hours due to additional drilling activity in the region.  See Note 15.

Interest Expense -Interest expense was $3.9 million for the three months ended June 30, 2019 and $8.3 million for the three months ended June 30, 2018.  The $4.4 million decrease is due a $6.6 million decrease in interest expense for our Senior notes that matured March 15, 2019 (attributable to classifying all accrued and unpaid interest as liabilities subject to compromise) and $1.5 million decrease in interest expense for our revolving credit facility that was refinanced September 28, 2018.  These reductions were offset by a $2.0 million increase in interest for our term loan from Thirty-Two, LLC, and a $1.5 million increase in interest for our Blue Torch Loan.  Other items increased $0.2 million, net.

Reorganization Expenses.  As a result of filing the Chapter 11 Cases in mid-March 2019, we incurred net reorganization expenses of $26.5 million during the quarter ended June 30, 2019, most of which related to the payment of professionals. We did not incur any such expenses during the quarter ended June 30, 2018.

Other Loss (Income) -Other Income, net was $0.3 million for the three months ended June 30, 2019 compared to other loss, net of $0.4 million for the same period in 2018.  Net unrealized currency exchange rate losses decreased $1.0 million, partially offset by a decrease in interest income of $0.3 million.

Income Tax Benefit - Income tax benefit for the three months ended June 30, 2019 was $2.8 million compared to income tax benefit of $1.7 million for the three months ended June 30, 2018.  Our $2.8 million income tax benefit for the three months ended June 30, 2019 is attributable to our net loss from operations of $32.1 million.  Our effective tax rate was 8.1% and 19.2% for the three months ended June 30, 2019 and June 30, 2018, respectively. The decrease in the effective rate for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 is primarily the result of non-deductible professional fees associated with the Chapter 11 Cases.

Net Loss -Net loss for the three months ended June 30, 2019 was $32.1 million compared to net loss of $7.1 million for the three months ended June 30, 2018.  Loss before income taxes for the three months ended June 30, 2019 was $34.9 million compared to loss before income taxes of $8.8 million for the same period in 2018.  Loss per diluted share was $2.03 for the current quarter compared to loss per diluted share of $0.45 for the prior year quarter.  The $26.1 million increase in loss before

47

income taxes for the quarter ended June 30, 2019 is primarily attributable to $26.5 million of reorganization items related to our restructuring efforts, anincrease in segment loss and a decrease in segment profit for our Oil and Gas Operations and Air Medical Operations, respectively, as discussed further below. These items werepartially offset by a decrease in interest expense. We had $15.8 million weighted average diluted common shares outstanding for the three months ended June 30, 2019 and 2018, respectively.

Segment Discussion

Oil and Gas -Oil and Gas segment revenues were $90.0 million for the three months ended June 30, 2019, compared to $97.1 million for the three months ended June 30, 2018, a decrease of $7.1 million.  Revenues from our Gulf of Mexico operations decreased $6.0 million, primarily due to fewer aircraft on contract.  Revenues from our international operations decreased $1.1 million during the quarter ended June 30, 2019, primarily due to lower flight hours in Australia, New Zealand, Trinidad, Canada, Israel, and the cessation of a contract in Papua New Guinea.  These decreases were partially offset by revenue increases in Ghana due to increased flight hours.  Our Oil and Gas segment revenues are primarily driven by the amount of contracted aircraft flight hours and prevailing rates.  Costs are primarily fixed based on the number of aircraft operated, with a variable portion that is driven by flight hours.

Oil and Gas segment flight hours were 18,149 for the most recently completed quarter compared to 22,089 for the same quarter in the prior year, a decrease of 3,940 flight hours. This decrease is attributable to 2,983 fewer flight hours in our Gulf of Mexico operations and 957 fewer flight hours from our international operations.

The number of aircraft available for use in the segment was 121 at June 30, 2019, compared to 125 at June 30, 2018.  During the quarter ended June 30, 2019, we transferred one medium aircraft to the Air Medical segment.

Direct expense in our Oil and Gas segment was $89.1 million for the three months ended June 30, 2019, compared to $94.4 million for the three months ended June 30, 2018, a decrease of $5.3 million.  Employee compensation expense decreased $0.9 million, primarily due to a decrease in labor for aircraft maintenance.  Equity in income of our Ghanaian affiliate increased $1.0 million due to increased flight hours attributable to increased drilling activity in the region.  Aircraft rent expense decreased $0.9 million due to lease terminations, and fuel expense decreased $0.9 million due to lower flight hours. Spare parts, repairs, and warranty costs decreased $2.9 million due to lower flight hours. These decreases were partially offset by an increase in aircraft depreciation expense of $1.2 million.  Other items increased $.1 million, net.

Selling, general and administrative segment expenses increased slightly at $4.7 million for the three months ended June 30, 2019 compared to $4.4 million for the three months ended June 30, 2018.  The $0.3 million increase is due to the accrual of compensation expense under our KEIP (See Note 2 Bankruptcy Filing).

Oil and Gas segment loss was $3.7 million for the three months ended June 30, 2019, compared to a loss of $1.8 million for the three months ended June 30, 2018.  The $1.9 million increase in segment loss is attributable to the $7.1 million decrease in segment revenues, partially offset by the $5.2 million decrease in aggregate segment expenses.

Air Medical -Air Medical segment revenues were $69.5 million for the three months ended June 30, 2019 compared to $67.1 million for the three months ended June 30, 2018, an increase of $2.4 million.  Revenue from our independent provider model increased $2.1 million. Revenues from our traditional provider and other air medical segment operations increased $0.3 million.  Revenue from operating bases opened [during or] after the second quarter of 2018 were $6.4 million, but this increase was partially offset by revenue decreases of $4.0 million from existing and closed bases.  We experienced an increase in medicare and self-pay transports, compared to the prior year quarter.  Patient transports were 5,707 for the three months ended June 30, 2019, compared to 4,925 for the same period in the prior year.  Patient transports for new bases increased by 677 transports while transports for existing and closed bases increased by 105 transports, net.  

The number of aircraft available for use in the segment was 111 at June 30, 2019 compared to 109 at June 30, 2018.  During the quarter ended June 30, 2019, we added one medium aircraft transferred from the Oil & Gas segment.

Direct expense in our Air Medical segment was $59.3 million for the three months ended June 30, 2019, compared to $56.8 million for the three months ended June 30, 2018, an increase of $2.5 million.  This increase is due primarily to $5.8 million in increased expenses related to new bases that were not operating for part or all of the quarter in the prior year.  This increase in expense was partially offset by decreases in cost for existing bases of $3.3 million.  Spare parts and repairs decreased $2.2 million, depreciation expense decreased $0.5 million, and fuel decreased $0.2 million.  Other items for existing bases decreased $0.4 million, net.

Selling, general and administrative segment expenses were $4.1 million for the three months ended June 30, 2019, compared to $3.3 million for the three months ended June 30, 2018.  The $0.8 million increase is due to $0.5 million related to

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compensation expense under our KEIP and KERP (see Note 2 Bankruptcy Filing), $0.1 million related to other equity-based compensation expense, and $0.2 million for other payroll items, net.

Air Medical segment profit was $6.1 million for the three months ended June 30, 2019, compared to a segment profit of $7.1 million for the three months ended June 30, 2018. The $1.0 million decrease in profit is attributable to a decrease in profit from our independent provider model bases of  $2.4 million, partially offset by an increase in profit from our traditional bases and other air medical programs, net.

Technical Services -Technical Services segment revenues were $5.6 million for the three months ended June 30, 2019, compared to $5.0 million for the three months ended June 30, 2018. The $0.6 million increase in revenue is due to an increase in revenue related to government work of $0.5 million, and an increase in revenue from Helipass of $0.1 million. Direct expenses increased to $4.1 million for the three months ended June 30, 2019, compared to $3.8 million for the same period in 2018.  Technical Services segment earnings was $1.4 million for the three months ended June 30, 2019, compared to $0.9 million for the three months ended June 30, 2018, and is primarily attributable to the above-mentioned revenue increases.

For additional information on our segments, see Note 14.

Six Months Ended June 30, 2019 compared with Six Months Ended June 30, 2018

Combined Operations

Operating Revenues -Operating revenues for the six months ended June 30, 2019 were $317.1 million, compared to $329.6 million for the six months ended June 30, 2018, a decrease of $12.5 million.  Oil and Gas segment operating revenues decreased $17.7 million for the six months ended June 30, 2019. As discussed further below, this increase is attributable to decreases in both our International and Gulf of Mexico operations.  Air Medical segment operating revenues increased $2.0 million due principally to an increase in revenues from both our independent provider operations and traditional provider programs.  Technical Services segment operating revenues increased $3.2 million.

Total flight hours for the six months ended June 30, 2019 were 53,546 compared to 62,279 for the six months ended June 30, 2018.  As explained in more details below, Oil and Gas segment flight hours decreased 9,199 hours.  Air Medical segment flight hours increased 482 hours for the six months ended June 30, 2019, due to increased flight hours for our independent provider program, partially offset by a decrease in fight hours for our traditional provider programs.  As discussed further below, individual patient transports in the Air Medical segment were 10,206 for the six months ended June 30, 2019, compared to transports of 9,324 for the six months ended June 30, 2018.

Direct Expenses -Direct operating expense was $308.0 million for the six months ended June 30, 2019, compared to $311.2 million for the six months ended June 30, 2018, a decrease of $3.2 million. Spare parts, repairs, and warranty costs decreased $5.7 million.  Equity in income of our Ghanaian affiliate increased $2.4 million.  Fuel expense decreased $1.8 million due to lower flight hours, aircraft rent decreased $1.4 million, and aircraft insurance decreased $0.5 million. These decreases were partially offset by a $4.8 million increase in employee compensation costs, primarily due to staffing of new bases in our Air Medical segment and partially due to expenses under the KERP, see Note 2. Employee compensation expense represented approximately 47% and 45% of total direct expense for the six-month periods ended June 30, 2019 and 2018, respectively.  Cost of goods sold increased $3.7 million due to government work in the Technical Services segment.  Other items increased $0.1 million, net.

Selling, General and Administrative Expenses -Selling, general and administrative expenses were $42.5 million for the six months ended June 30, 2019, compared to $29.9 million for the six months ended June 30, 2018.  The $12.6 million increase is primarily due to costs associated with our restructuring efforts. These items include a $3.9 million increase in compensation expense arising under our KEIP and KERP (see Note 2 Bankruptcy Filing), a $3.3 million increase in consulting fees, a $4.2 million increase in attorney fees, and a $1.8 million increase in severance pay due to a voluntary early retirement plan offered to certain of our employees.  Other items decreased $0.6 million, net.

Loss/Gain on Disposal of Assets, Net -The gain on asset dispositions for the six months ended June 30, 2019 was less than $0.1 million.  For the six months ended June 30, 2018, we recorded a loss on assets dispositions $0.7 million. See Note 10.

Equity in (Income) Loss of Unconsolidated Affiliate -Equity in the income of our unconsolidated affiliates attributable to our investment in a Ghanaian entity was $2.4 million for the six months ended June 30, 2019, comparted to less than $0.1 million for the six months ended June 30, 2018. The $2.4 million increase is primarily attributable to increased flight hours due to additional drilling activity in the region.  See Note 15.

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Interest Expense -Interest expense was $12.1 million for the six months ended June 30, 2019 compared to $16.5 million for the six months ended June 30, 2018.  The $4.4 million decrease is due to a $7.7 million reduction in interest expense for our senior notes that matured March 15, 2019 (attributable to classifying all accrued and unpaid interest as liability subject to compromise) and a $2.7 million decrease in interest expense for our revolving credit facility that was refinanced September 28, 2018.  These reductions were offset by a $3.9 million increase in interest for our term loan from Thirty-Two, LLC, and a $1.8 million increase in interest for our Blue Torch Loan. Other items increased $0.3 million, net.

Reorganization Expenses.  As a result of filing the Chapter 11 Cases in mid-March 2019, we incurred net reorganization expenses of $28.1 million during the six months ended June 30, 2019, most of which related to the payment of professionals. We did not incur any such expenses during the six months ended June 30, 2018.

Other (Income) Loss -Other income, net was $0.3 million for the six months ended June 30, 2019 compared to other loss, net of $1.4 million for the same period in 2018.  Exchange losses decreased $1.5 million and losses on sales of investments decreased $0.6 million.  These increases to income were offset by a reduction in interest income of $0.4 million due to lower investment balances.  

Income Tax benefit - Income tax benefit for the six months ended June 30, 2019 was $5.9 million compared to income tax benefit of $6.2 million for the six months ended June 30, 2019.  Our $5.9 million income tax benefit for the six months ended June 30, 2019 is attributable to our loss before income taxes of $73.2 million.  Our effective tax rate was 8.1% and 20.4% for the six months ended June 30, 2019 and June 30, 2018, respectively. The decrease in the effective rate for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 is primarily the result of non-deductible professional fees associated with the Chapter 11 Cases.

Net Loss -Net loss for the six months ended June 30, 2019 was $67.3 million compared to net loss of $24.1 million for the six months ended June 30, 2018.  Loss before income taxes for the six months ended June 30, 2019 was $73.2 million compared to loss before income taxes of $30.3 million for the same period in 2018.  Loss per diluted share was $4.25 for the six months ended June 30, 2019 compared to loss per diluted share of $1.52 for the prior year six months.  The increase in loss before income taxes for the six months ended June 30, 2019 is primarily attributable to the reorganization items related to our restructuring efforts, an increase in our Oil & Gas segment loss and a decrease in our Air Medical segment profit, as discussed further below. We had 15.8 million weighted average diluted common shares outstanding for the six months ended June 30, 2019 and 2018, respectively.

Segment Discussion

Oil and Gas -Oil and Gas segment revenues were $175.0 million for the six months ended June 30, 2019, compared to $192.7 million for the six months ended June 30, 2018. Of this $17.7 million decrease, $11.0 million was attributable to a decrease in revenues derived from our Gulf of Mexico Business, and the remainder was attributable to a decrease in revenues from our international aircraft operations, primarily from decreases in our Australia, New Zealand, and Trinidad operations. Our Oil and Gas segment revenues are primarily driven by the amount of contracted aircraft flight hours and prevailing rates. Costs are primarily fixed based on the number of aircraft operated, with a variable portion that is driven by flight hours.

Oil and Gas segment flight hours were 33,779 for the current six months compared to 42,978 for the same six months in the prior year. Of this decrease of 9,199 flight hours, 7,060 were attributable to our Gulf of Mexico operations and 2,139 hours were attributable to our International operations due to lower utilization of all of our aircraft model types.

The number of aircraft available for use in the segment was 121 at June 30, 2019, compared to 125 at December 31, 2018.  We terminated a lease on one heavy aircraft and transferred two light and one medium aircraft to the Air Medical segment.

Direct expense in our Oil and Gas segment was $179.0 million for the six months ended June 30, 2019, compared to $191.0 million for the six months ended June 30, 2018, a decrease of $12.0 million. We experienced a decreased in spare parts and repairs expense of $4.3 million, a decrease in fuel expenses of $1.9 million, and a decrease in warranty cost of $1.5 million, all due to lower flight hours. Aircraft rent decreased $2.0 million due to a return of a heavy aircraft and a newly negotiated lease rate. Equity in income of our Ghanaian entity increased $2.4 million. Other items increased $0.2 million, net.

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Selling, general and administrative segment expenses were $9.4 million for the six months ended June 30, 2019 and $9.3 million for the six months ended June 30, 2018.  KEIP and KERP expense increased $0.4 million (see Note 2 Bankruptcy), partially offset by a $0.2 million decrease in airfare.  Other items decreased $0.1 million, net.

Oil and Gas segment loss was $13.4 million for the six months ended June 30, 2019, compared to a loss of $7.6 million for the six months ended June 30, 2018.  The $5.8 million increase in segment loss is attributable to a $17.7 million decrease in segment revenues, partially offset by $11.9 reduction in expenses described above.

Air Medical -Air Medical segment revenues were $126.1 million for the six months ended June 30, 2019, compared to $124.1 million for the six months ended June 30, 2018. This increase of $2.0 million is attributable to a $1.5 million increase in independent provider program revenue and a $0.5 million increase in traditional provider program revenue.  Revenue from new bases that were not operating for part or all of the six months in the prior year increased $11.8 million, but was partially offset by revenue decreases of $9.8 million from existing and closed bases. We experienced an increase in medicare and self-pay transports, compared to the same period in the prior year.  Patient transports were 10,206 for the six months ended June 30, 2019, compared to 9,324 for the same period in the prior year.

The number of aircraft available for use in the segment was 111 at June 30, 2019 compared to 108 at December 31, 2018. The three aircraft additions were transfers between segments.

Direct expense in our Air Medical segment was $116.4 million for the six months ended June 30, 2019, compared to $110.6 million for the six months ended June 30, 2018, an increase of $5.8 million. Employee compensation costs increased $5.0 million and contract medical labor increased $3.0 million, both due to newly opened bases. These increases were partially offset by a decrease of $1.9 million in aircraft maintenance costs.  Other items decreased $0.3 million, net.

Selling, general and administrative segment expenses were $7.4 million for the six months ended June 30, 2019 and $6.4 million for the six months ended June 30, 2018. The increase is due in part to the compensation expense under our KEIP and KERP (See Note 2 – Bankruptcy Filing).

Air Medical segment profit was $2.3 million for the six months ended June 30, 2019, compared to a segment profit of $7.1 million for the six months ended June 30, 2018. The $4.8 million decrease in profit is primarily attributable to the increased expenses described above.

Technical Services - Technical Services segment revenues were $15.9 million for the six months ended June 30, 2019, compared to $12.8 million for the six months ended June 30, 2018.  The $3.1 million increase in revenue is due primarily to an increase in revenue from our (i) Helipass operations, (ii) parts sales and (iii) new government contract that began in 2018. Direct expenses increased $2.9 million compared to the prior year six month period, principally due to the increase expenses in our new government contract.  Technical Services segment profit was $3.1 million for the six months ended June 30, 2019, compared to segment profit of $2.4 million for the six months ended June 30, 2018.

For additional information on our segments, see Note 14.

Liquidity and Capital Resources

General

Our ongoing liquidity requirements arise primarily from the purchase or leasing of aircraft, the maintenance and refurbishment of aircraft, the opening of new aircraft bases, the expansion or improvement of facilities, the acquisition of equipment and inventory, and other working capital needs, as well as the costs associated with our Chapter 11 Cases during their pendency.  Our principal sources of liquidity historically have been net cash provided by our operations, and borrowings under revolving credit or term loan facilities or periodic senior note offerings. We have also periodically funded certain of our aircraft acquisitions through sale-leaseback transactions.

Historical Cash and Cash Flow Information

Cash and Short-Term Investments - Our cash position was $21.9 million at June 30, 2019, compared to $50.9 million at December 31, 2018. Short-term investments were $76.1 million at June 30, 2019, compared to $14.2 million at December 31, 2018. We also had $19.7 million and $19.8 million in restricted investments at June 30, 2019 and December 31, 2018, respectively, securing outstanding letters of credit.

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Operating Activities -Net cash used in operating activities was $23.7 million for the six months ended June 30, 2019, compared to net cash provided of $5.4 million for the same period in 2018, a decrease of $29.1 million.  An increase in net loss adjusted for the non-cash items accounted for a $48.0 million decrease in cash flow from operations.  This was offset by an $18.9 increase in cash provided by changes in our operating assets and liabilities, primarily due to outstanding reorganization payables.

Investing Activities -Net cash used in investing activities was $69.2 million for the three months ended June 30, 2019, compared to cash used in investing activities of $13.0 million for the same period in 2018.  Net purchases of short-term investments used $61.9 million of cash during the six months ended June 30, 2019, compared to $3.9 million provided by net sales in the comparable prior year period. Capital expenditures were $9.0 million for the six months ended June 30, 2019, compared to $18.1 million for the same period in 2018. Gross proceeds from asset dispositions were $1.2 million during the six months of 2019, compared to proceeds of $1.5 million for the same period in 2018.

Financing Activities -Financing activities during the six months ended June 30, 2019 included proceeds from our new term loan (See Note 6) of $70.0 million and payments of debt issuance costs of $5.7 million. Financing activities during the six months ended June 30, 2018 included net borrowings of $4.7 million on our revolving credit facility, and less than $0.1 million used to repurchase shares of our non-voting common stock to satisfy withholding tax obligations of our employees.

Liquidity - Our ability to maintain adequate liquidity throughout the reorganization process and beyond depends upon several factors, including (i) the length and final outcome of the reorganization process, (ii) the successful management of our business, and (iii) the appropriate management of our operating and capital expenses. Our anticipated liquidity requirements are highly sensitive to each of these factors. Upon emergence from bankruptcy, we currently expect to require additional financing to support future operations, and have commenced initial efforts to explore our alternatives.

For additional information on our cash flows, see our condensed consolidated statements of cash flows included in Item 1 of Part I of this report.

Debt Obligations

Senior Notes -In 2014, we issued $500.0 million principal amount of 5.25% Senior Notes. These notes matured on March 15, 2019. For more information, see Note 6.

Blue Torch Loan.  We borrowed $70.0 million from Blue Torch Finance, LLC shortly before the commencement of the Chapter 11 Cases (the “Blue Torch Loan”). For more information about the Blue Torch Loan, see Note 6.

Related Party Term Loan -We owe $130.0 million under a term loan provided by the financing affiliate of our current CEO and controlling shareholder (the “Related Party Loan”). On September 28, 2018, we applied the proceeds from the Related Party Loan principally to repay approximately $122.7 million of principal and accrued interest under our senior secured revolving credit facility. Obligations under the term loan are guaranteed by two of our principal subsidiaries, and the Company’s obligation under the term loan and the guarantors’ obligations under their guaranty agreement are secured by inventory and accounts receivable located in the United States, as well as certain spare parts. For additional information, see (i) Note 6 and (ii) our current reports on Form 8-K filed with the SEC on September 28, 2018 and March 15, 2019.

Other -At June 30, 2019, we had $19.7 million of outstanding letters of credit secured by a like amount of restricted cash. Approximately $12.1 million of these letters of credit were issued under a letter of credit facility, with the remainder represented by a free-standing letter of credit issued by our former revolving credit lender. For additional information, see Note 6.

For additional information on our debt obligations and letters of credit, see Note 6.

Impact of Bankruptcy

Impact of Filing Chapter 11 Cases -The commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under our Senior Notes and Related Party Loan. The related instruments and agreements provide that as a result of the commencement of the Chapter 11 Cases, the financial obligation thereunder, including any principal amount, together with accrued interest thereon, will be immediately due and payable. Any efforts to enforce payment of such financial obligations under such instruments and agreements were automatically stayed as result of the filing of the Chapter 11 Cases and the holders’ rights of enforcement of such financial obligations are subject to the applicable provisions of the Bankruptcy Code.

Impact of Implementing our Plan - As noted in Notes 2 and 6, we propose under the Plan to enter into the Exit Term Loan on the Emergence Date principally to refinance and discharge in full our obligations under the Blue Torch Loan and Related Party

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Loan, subject to satifying all conditions to obtaining the Exit Term Loan and implementing our Plan. Our Plan further contemplates that our current unsecured creditors will, subject to various exceptions and limitations, receive equity in our newly-reorganized parent company issuer, which would result in lower post-emergence consolidated debt balances for us compared to our consolidated debt balances prior to the Chapter 11 Cases. See Notes 2 and 6. We are considering seeking an asset-backed revolving credit facility after the Emergence Date to provide us with greater financial flexibility. However, no definitive decision has been made to take this action, and no assurances can be provided that any such efforts would be successful.

Contractual Obligations

General - The table below sets out our contractual obligations as of  June 30, 2019, related to our aircraft and other operating lease obligations, related party term loan, and 5.25% Senior Notes that matured March 15, 2019.  The amounts set forth below reflect our obligations recorded on our Condensed Consolidated Balance Sheet as of June 30, 2019 and do not reflect the impact of the Chapter 11 Cases.  Each contractual obligation included in the table contains various terms, conditions, and covenants that, if violated, accelerate the payment of that obligation under certain specified circumstances.

			Payment Due by Year
	Total		2019		2020		2021		2022		2023		Beyond 2023
			Thousands of dollars
Aircraft lease obligations	$	112,624	$	10,835	$	22,555	$	24,488	$	25,987	$	19,213	$	9,546
Other lease obligations		33,079		3,102		4,916		4,454		3,327		1,866		15,414
Debt (1)		700,000		500,000		130,000		—		—		70,000		—
Senior notes interest (1)		13,125		13,125		—		—		—		—		—
Thirty-Two, LLC Interest (2)		2,500		2,500		—		—		—		—		—
	$	861,328	$	529,562	$	157,471	$	28,942	$	29,314	$	91,079	$	24,960

(1) “Debt” reflects the principal amount of debt due under our outstanding senior notes and our term loans, whereas “senior notes interest” reflects interest accrued under our fixed-rate senior notes only.  The actual amount of principal and interest paid in all years may differ from the amounts presented above due to the possible future payment or refinancing of outstanding debt or the issuance of new debt.

(2) Interest reflects the amount due per the mediation settlement agreement.

The table above reflects only contractual obligations as of June 30, 2019 and excludes, among other things, (i) commitments made thereafter, (ii) options to purchase assets, including those described in the next paragraph, (iii) contingent liabilities, (iv) capital expenditures that we plan, but are not committed, to make, (v) open purchase orders and (vi) other long-term liabilities, such as accruals for litigation or taxes, that are not contractual in nature.

Operating Lease Commitments - At June 30, 2019, we leased 17 of our 236 aircraft (or 7%) under 17 separate aircraft lease agreements with 13 lessors. As of June 30, 2019, we had options to purchase aircraft under these leases becoming exercisable in 2019 and 2020.  The aggregate option purchase prices are $64.8 million in 2019 and $22.7 million in 2020.  Under current conditions, we believe it is unlikely that we will exercise these purchase options arising over the next year, unless opportunistic conditions arise.  As noted above, we are currently renegotiating several of our aircraft leases in connection with the Chapter 11 Cases.

For other related information, see “Risk Factors” contained in Item 1A of Part II of this report.

Other - For additional information on our contemplated capital expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital Expenditures” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.

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.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of changes in the value of financial instruments, or in future net income or cash flows, in response to changing market conditions.

Prior to the retirement of our revolving credit facility on September 28, 2018, our earnings were subject to changes in short-term interest rates due to the variable interest rate payable under facility.

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Our new term loan with Blue Torch, LLC. is subject to changes in short-term interest rates due the variable component of LIBOR.  Based on the principal amount weighted average loan balance of our variable-rate debt during the three months ended June 30, 2019, a 10% increase (0.2403%) in interest rates would have reduced our annual pre-tax earnings approximately $0.2 million, but would not have changed the fair market value of this debt.

Our $500.0 million principal amount of 5.25% Senior Notes that matured on March 15, 2019 accrued interest at a fixed rate of 5.25% and therefore changes in market interest rates do not affect our interest payment obligations on the notes.  The fair market value of our 5.25% Senior Notes will vary as changes occur to general market interest rates, and our creditworthiness.  At June 30, 2019, the market value of the notes was approximately $245.0 million, based on quoted market prices. See Note 4.

The interest and other payments we earn and recognize on our investments in money market funds  are subject to the risk of declines in general market interest rates.

See Note 4 for additional information.

Item 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by us in the reports that we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, including to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events and the inability to eliminate misconduct completely.  As a result, we cannot assure you that our disclosure controls and procedures will detect all errors or fraud.

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PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, see “Legal Matters” in Note 9 to our financial statements included in this report, incorporated herein by reference.

Item 1A.  RISK FACTORS

For information regarding certain risks relating to our operations, any of which could negatively affect our business, financial condition, operating results or prospects, see (i) Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2018 and (ii) the supplemental disclosure below.

We may not be able to consummate our Plan of Reorganization.

As noted elsewhere herein, on August 2, 2019, the Bankruptcy Court entered a confirmation order confirming the Debtors’ Third Amended Joint Plan of Reorganization filed with the Bankruptcy Court on June 18, 2019, as thereafter supplemented (collectively the “Plan”). The Plan contemplates a series of restructuring transactions, including without limitation borrowing additional funds principally to refinance existing debt, issuing additional equity securities, implementing a new holding company structure, settling bankruptcy claims in the manner contemplated under the Plan and making various regulatory filings in connection therewith. We expect to complete all these transactions and filings and to fully implement the Plan effective as of the end of August 2019, at which time we would emerge from Chapter 11. However, implementation of the Plan, as well as several of its component transactions, are subject to various conditions that must either be met or duly waived on or prior to such effective date, including those described in Note 2. It is also possible that the Plan could be amended or supplemented in accordance with the Bankruptcy Code prior to the Plan becoming effective. For these reasons, we can give you no assurance as to when, or ultimately if, the Plan (or any other plan or reorganization) will become effective.  As such, there is raise substantial doubt about our ability to continue as a going concern.

Even if our Plan of Reorganization is consummated, we may not be able to achieve our stated goals.

Even if the Plan or another Chapter 11 plan of reorganization is consummated, we will continue to be impacted by the adverse publicity associated with filing the Chapter 11 Cases. We cannot accurately predict or quantify the ultimate impact that our bankruptcy proceedings will ultimately have on our business, ability to attract future work and capital, ability to attract and retain key employees, financial condition, results of operations, and prospects. Moreover, after any successful emergence from bankruptcy, we will continue to face a number of risks, including a deterioration in commodity prices, overcapacity of helicopters, adverse weather conditions, changes in demand for our services, increased expenses, increased competition, or other changes in our markets or industry. Accordingly, we cannot guarantee that the Plan or any other Chapter 11 plan of reorganization will achieve our stated goals.

Furthermore, even if our debts are reduced or discharged through the Plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of our Chapter 11 proceedings. Our access to additional financing is, and for the foreseeable future will likely continue to be, limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, if they are available at all.

Assuming we successfully emerge from bankruptcy, our post-emergence reported financial results may not be comparable to our historical reported results.

Assuming we successfully emerge from bankruptcy as anticipated, we have determined that we will be required to adopt fresh start accounting, which will require us to record at fair value our assets and liabilities as of the fresh start reporting date. In connection with this change, we currently plan to change our accounting principles relating to the depreciation of our aircraft and inventory valuation.  Accordingly, as previously reported, we expect that our financial condition and results of operations following our anticipated emergence from bankruptcy will not be comparable to the financial condition and results of operations reflected in our historical financial statements. The lack of comparable historical financial information could adversely impact the marketability of our securities.

55

Our actual financial results after emergence from our Chapter 11 Cases may not be comparable to our projections filed with the Bankruptcy Court in the course of our Chapter 11 Cases.

We filed with the Bankruptcy Court and the SEC projected financial information to demonstrate to the Bankruptcy Court the feasibility of our Plan and our ability to continue operations following our emergence from the Chapter 11 Cases. Those projections (and similar projections furnished to individuals during the Chapter 11 Cases in connection with their proposed investment in us) were prepared solely for the purpose of the Chapter 11 Cases and have not been, and will not be, updated on an ongoing basis. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections and valuation estimates may prove to be wrong in material respects. Actual results will likely vary significantly from those contemplated by the projections. For all of these reasons, investors should view our publicly-filed projections as speculative and should not rely on these projections.

The amount of publicly-available information concerning us may decrease substantially following our anticipated emergence from bankruptcy.

We expect to have fewer than 300 stockholders of record upon emergence from bankruptcy, and therefore will be eligible to terminate the registration of our common stock under the Exchange Act. Although no definitive decision has been made as to whether or when to take such action, we are currently contemplating filing documentation with the SEC after the Emergence Date that would voluntarily deregister our securities under Section 12(g) of the Exchange Act and suspend our reporting obligations under Section 15(d) of the Exchange Act. If we do so, our obligations to file periodic reports would be suspended or terminated. Although we could thereafter voluntarily elect to provide information to our security holders, we would not be legally obligated to do so. To the extent these actions limit the amount of publicly-available information concerning us and our securities, our ability to raise additional funds, the ability of our security holders to sell their securities, and the liquidity and trading prices of our securities could all be negatively impacted.

We expect to be subject to a different capital and governance structure following our anticipated emergence from bankruptcy.

Currently, all of our outstanding voting and non-voting common stock is issued by PHI, Inc., a Louisiana corporation. If the Plan is implemented on the terms contemplated on the date of this filing, a newly-organized Delaware corporation will issue a single class of common stock and two separate classes of warrants. As in the past, the organizational documents governing our equity securities will continue to include restrictions on the ability of non-U.S. citizens to exceed certain restrictions on their aggregate voting powers. These restrictions could limit the trading liquidity of our securities.

We expect to continue to be subject to the risk that future legislation or regulation could negatively impact our Air Medical operations.

As discussed in detail in our prior reports, in recent years legislators, regulators and consumer interest groups have focused on billing practices used in the air medical industry and have either implemented or proposed changes that have or could reduce the payments received by our Air Medical segment from federal reimbursement programs such as Medicare and Medicaid. Legislation currently pending in the U.S. Senate seeks to change how air ambulances bill for their services. Although we cannot predict at this point the ultimate impact of this or similar legislation, it is possible that these legislative initiatives could adversely impact our business.

We expect to continue to be subject to the risk of failing to comply with the covenants in our future financing arrangements.

If our Plan is implemented as anticipated, we expect to continue at emergence from bankruptcy to be subject to financing arrangements containing negative covenants that may materially restrict our operations. Similarly, we expect that our future financing arrangements will likely contain similar covenants. Our ability to meet certain of these covenants can be affected by events beyond our control, and we cannot assure you that we will meet them in the future. Any such failure to meet such covenants would constitute an event of default, which could potentially result in additional defaults or the acceleration of payment obligations under cross-default or cross-acceleration provisions in other of our agreements. We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by these restrictive covenants. These restrictions could also limit our ability to obtain future financings, make needed capital expenditures, withstand a downturn in our business or the economy in general, or otherwise conduct necessary corporate activities.

56

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 20, 2019, the PHI Compensation Committee approved the vesting of the 2017 performance RSUs based on the Company’s financial results exceeding the pre-determined business performance metrics set in 2017 for the two year performance period (January 1, 2017 - December 31, 2018).  As discussed in greater detail in Note 9, the PHI Compensation Committee decided to settle these vested RSU awards in cash.

Item 3. DEFAULTS UPON SENIOR SECURITIES

The commencement of the Chapter 11 Cases, described in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Overview-Voluntary reorganization under Chapter 11" above, constituted an event of default that accelerated the obligations under the indenture governing our Senior Notes and our term loan agreement with Thirty Two, L.L.C.  Any efforts to enforce payment of such financial obligations were automatically stayed as a result of the Chapter 11 Cases, and the holders' rights of enforcement are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Item 4. MINE SAFETY DISCLOSURES

None.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

(a) Exhibits

10.1	Third Amended Joint Plan of Reorganization of the Debtors filed with the Bankruptcy Court on June 18, 2019 (incorporated herein by reference to Exhibit 2.1 to PHI’s current report on Form 8-K, filed August 6, 2019).
10.2	Disclosure Statement of the Debtors for the Third Amended Joint Plan of Reorganization filed with the Bankruptcy Court (incorporated herein by reference to Exhibit 99.1 to PHI’s current report on Form 8-K, filed August 6, 2019).
10.3	Equity Commitment Agreement dated as of July 11, 2019 among the Debtors and the Commitment Parties thereto (incorporated herein by reference to Exhibit 10.1 to PHI’s current report on Form 8-K filed July 17, 2019).
10.4	Form of Term Loan Credit Agreement (incorporated herein by reference to Exhibit 10.1 to PHI’s current report on Form 8-K filed July 24, 2019).
10.5	Confirmation Order of the Bankruptcy Court issued on August 2, 2019 (incorporated herein by reference to Exhibit 99.2 to PHI’s current report on Form 8-K filed August 6, 2019).
31.1*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al A. Gonsoulin, Chairman and Chief Executive Officer.
31.2*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Trudy P. McConnaughhay, Chief Financial Officer.
32.1*	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Al A. Gonsoulin, Chairman and Chief Executive Officer.
32.2*	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Trudy P. McConnaughhay, Chief Financial Officer.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

*       Filed herewith

57

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PHI, Inc.
August 9, 2019	By:	/s/ Al A. Gonsoulin
		Al A. Gonsoulin
		Chairman and Chief Executive Officer
August 9, 2019	By:	/s/ Trudy P. McConnaughhay
		Trudy P. McConnaughhay
		Chief Financial Officer

58

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER’S

CERTIFICATION UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Al A. Gonsoulin, Chairman and Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PHI, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2019
By:	/s/ Al A. Gonsoulin
Al A. Gonsoulin
Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER’S

CERTIFICATION UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Trudy McConnaughhay, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PHI, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2019
By:	/s/ Trudy McConnaughhay
Trudy McConnaughhay
Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

Al A. Gonsoulin, Chairman and Chief Executive Officer of PHI, Inc. (the “Company”), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

1. the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2019
	By:	/s/ Al A. Gonsoulin
		Al A. Gonsoulin
		Chairman and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

Trudy McConnaughhay, Chief Financial Officer of PHI, Inc. (the “Company”), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her knowledge:

1. the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2019
	By:	/s/ Trudy McConnaughhay
		Trudy McConnaughhay
		Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	PHII
Entity Registrant Name	PHI INC
Entity Central Index Key	0000350403
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Address, State or Province	Louisiana
Entity File Number	0-9827
Entity Tax Identification Number	720395707
Entity Address, Address Line One	2001 SE Evangeline Thruway
Entity Address, City or Town	Lafayette
Entity Address, Postal Zip Code	70508
City Area Code	(337)
Local Phone Number	235-2452
Voting Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		2,905,757
Non-Voting Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		12,919,681

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 21,882	$ 50,874
Short-term investments	76,141	14,232
Accounts receivable – net
Trade	174,499	168,459
Other	8,845	14,006
Inventories of spare parts – net	54,242	56,698
Prepaid expenses	13,072	11,419
Income taxes receivable	509	950
Total current assets	349,190	316,638
Property and equipment – net	885,669	902,485
Right of use assets	144,944
Restricted cash and investments	19,739	19,781
Other assets	20,937	18,378
Deferred income taxes	5,137	4,944
Total assets	1,425,616	1,262,226
Current Liabilities:
Senior Notes issued March 17, 2014, net of debt issuance cost of $260		499,740
Accounts payable	70,615	50,289
Accrued and other current liabilities	38,483	45,292
Current portion of operating lease liabilities	27,535
Current maturities of long term debt	1,750	500,000
Total current liabilities	138,383	595,321
Long-term debt:
Term loan issued March 13, 2019, net of debt issuance costs of $5,254	62,996
Related party term loan issued September 28, 2018, net of debt issuance costs of $546 and $765, respectively	129,454	129,235
Deferred income taxes	51,964	59,178
Other long-term liabilities	3,673	5,059
Long-term operating lease liabilities	118,167
Total liabilities not subject to compromise	504,637	788,793
Liabilities subject to compromise	513,125
Total liabilities	1,017,762	788,793
Commitments and contingencies (Note 11)
Shareholders’ Equity:
Additional paid-in capital	316,143	314,316
Accumulated other comprehensive income (loss)	(4,040)	(3,952)
Retained earnings	94,169	161,487
Total shareholders’ equity	407,854	473,433
Total liabilities and shareholders’ equity	1,425,616	1,262,226
Voting Common Stock [Member]
Shareholders’ Equity:
Common stock	291	291
Non-Voting Common Stock [Member]
Shareholders’ Equity:
Common stock	1,291	1,291
Total shareholders’ equity	$ 1,291	$ 1,291

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Voting Common Stock [Member]
Common stock, par value (in USD per share)	$ 0.10	$ 0.10
Common stock, shares authorized (shares)	12,500,000	12,500,000
Common stock, shares issued (shares)	2,905,757	2,905,757
Common stock, shares outstanding (shares)	2,905,757	2,905,757
Non-Voting Common Stock [Member]
Common stock, par value (in USD per share)	$ 0.10	$ 0.10
Common stock, shares authorized (shares)	37,500,000	37,500,000
Common stock, shares issued (shares)	12,919,681	12,919,681
Common stock, shares outstanding (shares)	12,919,681	12,919,681
Term Loan [Member]
Debt issuance costs	$ 5,254	$ 260
Note Payable, Related Party [Member]
Debt issuance costs	$ 546	$ 765

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Operating revenues, net	$ 165,172	$ 169,243	$ 317,062	$ 329,607
Expenses:
Direct expenses	153,514	155,083	310,390	311,309
Selling, general and administrative expenses	17,591	14,485	42,458	29,944
Total operating expenses	171,105	169,568	352,848	341,253
(Gain) loss on disposal of assets	(95)	(171)	(44)	708
Equity in income of unconsolidated affiliate	(1,039)	(81)	(2,400)	(45)
Operating loss	(4,799)	(73)	(33,342)	(12,309)
Interest expense	3,927	8,340	12,093	16,537
Reorganization items, net	26,503		28,103
Other income, net	(333)	364	(293)	1,404
Total expenses	30,097	8,704	39,903	17,941
Loss before income taxes	(34,896)	(8,777)	(73,245)	(30,250)
Income tax (benefit) expense	(2,819)	(1,684)	(5,927)	(6,175)
Net loss	$ (32,077)	$ (7,093)	$ (67,318)	$ (24,075)
Weighted average shares outstanding:
Basic	15,825	15,806	15,825	15,806
Diluted	15,825	15,806	15,825	15,806
Net loss per share:
Basic	$ (2.03)	$ (0.45)	$ (4.25)	$ (1.52)
Diluted	$ (2.03)	$ (0.45)	$ (4.25)	$ (1.52)

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (32,077)	$ (7,093)	$ (67,318)	$ (24,075)
Unrealized (loss) gain on short-term investments		(107)		363
Currency translation adjustments	(928)	160	(121)	627
Changes in pension plan assets and benefit obligations		7		(1)
Tax effect of the above-listed adjustments	25	100	33	(85)
Total comprehensive loss	$ (32,980)	$ (6,933)	$ (67,406)	$ (23,171)

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Non-Voting Common Stock [Member]	Voting Common Stock [Member] Voting Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2017	$ 612,654	$ 1,289	$ 291	$ 308,353	$ (280)	$ 303,001
Balance, Shares at Dec. 31, 2017		12,897	2,906
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(24,075)					(24,075)
Unrealized gain on short-term investments	278				278
Changes in pension plan assets and benefit obligations	(1)				(1)
Amortization of unearned stock-based compensation	2,132			2,132
Currency translation adjustment	627				627
Issuance of non-voting common stock (upon vesting of restricted stock units)		$ 2		(2)
Issuance of non-voting common stock (upon vesting of restricted stock units), shares		9
Cancellation of restricted non-voting stock units for tax withholdings on vested shares	(50)			(50)
Balance at Jun. 30, 2018	591,565	$ 1,291	$ 291	310,433	624	278,926
Balance, Shares at Jun. 30, 2018		12,906	2,906
Balance at Mar. 31, 2018	597,735	$ 1,290	$ 291	309,672	464	286,018
Balance, Shares at Mar. 31, 2018		12,905	2,906
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(7,092)					(7,092)
Unrealized gain on short-term investments	(4)				(4)
Changes in pension plan assets and benefit obligations	4				4
Amortization of unearned stock-based compensation	813			813
Currency translation adjustment	160				160
Issuance of non-voting common stock (upon vesting of restricted stock units)	(1)	$ 1		(2)
Issuance of non-voting common stock (upon vesting of restricted stock units), shares		(2)
Cancellation of restricted non-voting stock units for tax withholdings on vested shares	(50)			(50)
Cancellation of restricted non-voting stock units for tax withholdings on vested shares, Shares		3
Balance at Jun. 30, 2018	591,565	$ 1,291	$ 291	310,433	624	278,926
Balance, Shares at Jun. 30, 2018		12,906	2,906
Balance at Dec. 31, 2018	473,433	$ 1,291	$ 291	314,316	(3,952)	161,487
Balance, Shares at Dec. 31, 2018		12,919	2,906
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(67,318)					(67,318)
Amortization of unearned stock-based compensation	2,640			2,640
Cash payment of Performance Based stock units	(813)			(813)
Currency translation adjustment	(88)				(88)
Balance at Jun. 30, 2019	407,854	$ 1,291	$ 291	316,143	(4,040)	94,169
Balance, Shares at Jun. 30, 2019		12,919	2,906
Balance at Mar. 31, 2019	439,508	$ 1,291	$ 291	314,818	(3,138)	126,246
Balance, Shares at Mar. 31, 2019		12,919	2,906
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(32,077)					(32,077)
Amortization of unearned stock-based compensation	1,325			1,325
Currency translation adjustment	(902)				(902)
Balance at Jun. 30, 2019	$ 407,854	$ 1,291	$ 291	$ 316,143	$ (4,040)	$ 94,169
Balance, Shares at Jun. 30, 2019		12,919	2,906

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities:
Net loss	$ (67,318)	$ (24,075)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	38,775	38,598
Deferred income taxes	(7,407)	(7,446)
(Gain) loss on asset dispositions	(44)	708
Equity in (income) loss of unconsolidated affiliate, net	(2,400)	(45)
Inventory valuation reserves	1,416	3,308
Changes in operating assets and liabilities	13,301	(5,638)
Net cash (used in) provided by operating activities	(23,677)	5,410
Investing activities:
Purchase of property and equipment	(8,970)	(18,098)
Proceeds from asset dispositions	1,235	1,453
Purchase of short-term investments	(183,421)	(260,996)
Proceeds from sale of short-term investments	121,512	264,918
Payment of deposit on aircraft	(50)	0
Refund of deposit on aircraft	503	0
Loan to unconsolidated affiliate		(274)
Net cash used in investing activities	(69,191)	(12,997)
Financing activities:
Debt issuance cost	(5,668)	0
Proceeds from line of credit		34,295
Payments on line of credit		(29,575)
Repurchase of common stock		(51)
Proceeds from Term Loan	70,000	0
Net cash provided by financing activities	64,332	4,669
Effect of exchange rate changes on cash	(483)	0
Decrease in cash, cash equivalents and restricted cash	(29,019)	(2,918)
Cash, cash equivalents and restricted cash at the beginning of period	58,564	8,770
Cash, cash equivalents and restricted cash at end of period	29,545	5,852
Cash paid during the period for:
Reorganization items, net	6,204	0
Interest	3,599	15,755
Income taxes	1,688	813
Noncash investing activities:
Other current liabilities and accrued payables related to purchase of property and equipment	$ 96	$ 272

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of PHI, Inc. and its subsidiaries (“PHI” or the “Company” or “we” or “our”). In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting of only normal, recurring adjustments, necessary to present fairly the financial results for the interim periods presented. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the consolidated financial statements and the accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Our financial results, particularly as they relate to our Oil and Gas segment, are influenced by seasonal fluctuations as discussed in our Annual Report on Form 10-K for the year ended December 31, 2018. For this and other reasons, the results of operations for interim periods are not necessarily indicative of the operating results that may be expected for a full fiscal year.

Going Concern - The financial statements accompanying this Quarterly Report have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which contemplates our continuation as a going concern. As discussed further in Note 2 below, our operations are currently subject to the jurisdiction of the Bankruptcy Code.

The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared assuming that PHI will continue as a going concern and contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our ability to continue as a going concern is contingent upon our ability to successfully implement our plan of reorganization approved by the Bankruptcy Court on August 2, 2019, among other factors. The risks and uncertainties surrounding our Chapter 11 proceedings raise substantial doubt as to our ability to continue as a going concern.

Under the absolute priority scheme established by the Bankruptcy Code, unless our creditors agree otherwise, all of our pre-petition liabilities and post-petition liabilities must be satisfied in full before the holders of our existing common stock may receive any distribution or retain any property under a plan of reorganization. Although Note 2 describes the general terms of our confirmed plan of reorganization, the ultimate recovery to creditors and shareholders will not be fully determined unless and until we can fully implement such plan. The accompanying Unaudited Condensed Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the filing of the Chapter 11 Cases. See Note 2 for additional information.

Supplemental Cash Flow Information - The following table sets forth the Company’s reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statement of Cash Flows (in thousands):

	June 30,		December 31,		June 30,		December 31,
	2019		2018		2018		2017
Cash and Cash Equivalents	$	21,882	$	50,874	$	5,852	$	8,770
Restricted Cash		7,663		7,690		—		—
Total Cash, Cash Equivalents and Restricted Cash	$	29,545	$	58,564	$	5,852	$	8,770

Recently adopted accounting principles

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASC 842). ASC 842 replaces the existing guidance on leasing transactions in ASC 840 and requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASC 842 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. The Company adopted the new standard effective January 1, 2019.

The Company elected the transition methodology provided by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, whereby it applied the requirements of ASC 842 on a prospective basis as of the adoption date of January 1, 2019, without retrospectively adjusting prior periods. The Company elected to adopt the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. The Company elected to keep leases with an initial term of 12 months or less off of the balance sheet. The Company intends to recognize those lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company also elected to combined lease and non-lease components in the computations of lease obligations and right-of-use assets. During our evaluation of ASU 2016-02, we concluded that certain of our helicopter service contracts contain a lease component. Our typical helicopter service contracts qualify for a practical expedient, which is available to lessors under certain circumstances, to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We have applied this practical expedient and intend to combine the lease and service components of our revenue contracts and continue to account for the combined component under Topic 606, Revenue from Contracts with Customers.

The Company completed the implementation of an information technology system to track and account for its leases and updated its accounting policies to support the accounting for leases under ASC 842. The Company completed its lease inventory and determined its most significant leases involve aircraft and facilities. For additional information, see Note 13.

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Bankruptcy Filing

6 Months Ended

Jun. 30, 2019

Reorganizations [Abstract]

Bankruptcy Filing

2. BANKRUPTCY FILING

Initiation of Chapter 11 Proceedings

On March 14, 2019 (the "Petition Date"), PHI and four of its domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions (the "Chapter 11 Cases") in the United States Bankruptcy Court for the Northern District of Texas (the "Bankruptcy Court") for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Chapter 11 Cases are being jointly administered under the caption "In re PHI, Inc., et al., Case No. 19-30923."

Shortly following the Petition Date, the Bankruptcy Court entered certain orders facilitating the Debtors' operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay employee wages and benefits, and pay vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date.

The Debtors are currently operating their businesses and managing their properties as "debtors in possession" in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Certain subsidiaries of PHI (collectively, the "Non-Filing Entities") are not part of the Chapter 11 Cases. The Non-Filing Entities will continue to operate their businesses in the normal course and their results are included in our interim Unaudited Condensed Consolidated Financial Statements.

Significant Bankruptcy Court Actions

Development of Reorganization Plan.  On April 1, 2019, the Debtors filed with the Bankruptcy Court their initial plan of reorganization under the Bankruptcy Code. Following such filing, the Debtors remained in discussions with various stakeholders in an attempt to obtain additional input about maximizing the value of the enterprise. Following mediation in late May 2019, on June 5, 2019, the Company entered into a settlement plan term sheet (the “Term Sheet”) with the Official Committee of Unsecured Creditors (the “UCC”) and certain other key stakeholders that resolved the UCC’s key objections and motions, subject to satisfaction of certain conditions contained within the Term Sheet.  

Among other things, the Term Sheet provides that, upon our emergence from bankruptcy, our current secured lenders will be repaid and our current unsecured creditors will, subject to various exceptions and limitations, receive equity in a newly-reorganized parent company issuer. The Term Sheet further provides that, contingent upon the effectiveness of the Company’s plan of reorganization, Mr. Al A. Gonsoulin, who currently serves as the Company’s Chairman and Chief Executive Officer, will retire from all positions held with the Company and its subsidiaries, including as a member of the Board of Directors, effective upon the date of the Company’s emergence from the Chapter 11 Cases (the “Emergence Date”). The Term Sheet further provides that Mr. Lance F. Bospflug, who currently serves as President, Chief Operating Officer and a director of the Company, will be appointed to succeed Mr. Gonsoulin as Chief Executive Officer of the Company on the Emergence Date and will continue to serve as a member of the Board.

On June 13, 2019, the Debtors filed their second amended joint plan of organization and related disclosure statement, which, among other things, reflected restructuring terms agreed upon in the Term Sheet. On June 18, 2019, the Debtors entered into a term sheet reflecting a settlement with the Official Committee of Equity Security Holders. Subject to certain exceptions, this settlement contemplates issuing to our current equity holders three-year warrants entitling the holders to acquire under certain specified terms and conditions up to an aggregate of 5% of the reorganized parent’s equity interests issued and outstanding as of our emergence from bankruptcy, subject to dilution in connection with future equity issuances. On June 18, 2019, the Debtors filed their third amended joint plan of reorganization (the “Third Amended Plan”) and related disclosure statement (the “Disclosure Statement”). On June 19, 2019, the Bankruptcy Court approved the Disclosure Statement and authorized the Debtors to commence solicitation of approval of the Plan under the Bankruptcy Code.

Equity Commitment Agreement.  In connection with the Chapter 11 Cases, on July 11, 2019, the Debtors entered into an Equity Commitment Agreement (the “Commitment Agreement”) with certain of the Company’s unsecured creditors (each a “Commitment Party” and collectively, the “Commitment Parties”). The Commitment Agreement is a component of the settlement plan agreed upon between the Company and certain creditors under the Term Sheet.

Subject to the terms and conditions of the Commitment Agreement, the Commitment Parties have agreed, in the aggregate, to provide up to $75 million cash (the “Equity Commitment”) in exchange for shares of common stock in the reorganized parent company. Under the Commitment Agreement, the shares would be issued at a discount of 25% to the value assigned to such shares in the Plan (as defined below). In addition, each of the Commitment Parties would be paid their pro rata share of an overall commitment fee of $15 million. The commitment fee would be paid on the Emergence Date in the form of additional shares of common stock of the reorganized parent company. Under the Commitment Agreement, the Company also agreed to enter into a registration rights agreement with certain Commitment Parties entitling such Commitment Parties under certain circumstances to request that the Company register their equity securities in the Company for sale under the rules of the U.S. Securities and Exchange Commission (the “SEC”).

The Commitment Agreement prohibits the Company from soliciting alternative financing or restructuring proposals, although the Company’s board of directors (the “Board”) can respond to an unsolicited alternative proposal if doing so would be required by its fiduciary duties.

The obligations of each Commitment Party to consummate the transactions contemplated by the Commitment Agreement are subject to specified conditions including, but not limited to, the Debtors’ compliance in all material respects with the terms of the Plan, the absence of a material adverse change in our business, our attainment of certain specified funding and liquidity thresholds, and the absence at the closing of any material breach of the representations, warranties and covenants made by the Debtors in the Commitment Agreement.

The Commitment Agreement may be terminated in a number of circumstances. We will be required to pay (i) a $3.75 million termination fee if we terminate the Commitment Agreement in connection with the Board’s exercise of its fiduciary duties and certain other conditions are met, including entering into an agreement to effect an alternative transaction within 12 months, or (ii) a higher termination fee if the Commitment Parties terminate the Commitment Agreement in certain other limited circumstances.

Term Loan Commitments.  The Debtors have received binding commitments from lenders to fund on the Emergence Date the full amount of a $225 million first lien senior secured term loan that would mature in five years, subject to the satisfaction of certain conditions summarized herein. This term loan facility is a component of the reorganization plan agreed upon between the Debtors and certain of their creditors in the Term Sheet. The definitive documentation that is expected to govern this term loan facility has not yet been finalized or executed. Accordingly, we cannot assure you that the term loan facility will be completed as contemplated, or at all. For additional information, see Note 6.

Plan Supplementation.  On June 23, 2019, the Debtors filed a supplement to their Third Amended Plan (the “Plan Supplement” and, collectively with the Third Amended Plan, the “Plan”) which included various documentation related to the Plan, including a partial list of the directors expected to be named to the new parent company and updated disclosure regarding our equity value. Prior to the hearing to confirm the Plan held on July 30, 2019, the Debtors filed additional documentation, including drafts of organizational documents of the new parent company and additional information about our post-emergence management incentive program.

Plan Confirmation.  At a hearing held on July 30, 2019, the Bankruptcy Court confirmed the Plan, and on August 2, 2019, the Bankruptcy Court issued a written order to this effect. Implementation of the Plan is subject to the satisfaction or due waiver of several conditions, including without limitation (i) consummation of the debt and equity transactions contemplated by the Term Sheet and described herein, (ii) the payment in full of our secured lenders, (iii) certain minimum liquidity levels, (iv) the finalization of various documentation, (v) compliance with various regulatory requirements, (vi) the payment of various expenses and (vii) the implementation of the restructuring in a manner consistent with the Plan and certain stipulations contained therein.

Other.  The description of our Chapter 11 Cases in this Note 2 and elsewhere in this report does not purport to be complete and is qualified in its entirety by reference to (i) our filings with the Bankruptcy Court, all of which are publicly available in the manner described elsewhere herein, and (ii) the exhibits to this report.

Executive Compensation Plans

In connection with the Chapter 11 Cases, the Compensation Committee of the Board of Directors of the Company has adopted on behalf of the Company a Key Employee Incentive Plan (the "KEIP") and a Key Employee Retention Plan ("KERP"). The KEIP is designed to incentivize seven of the Company's senior executives by providing a total potential cash award pool of approximately $4.2 million for performance at threshold levels, $5.6 million at plan target levels and $7.0 million for performance exceeding plan, target levels. Payouts under the KEIP are contingent upon emergence from Chapter 11, achievement of certain financial targets and achievement of certain safety metrics. The KERP is designed to enhance retention of up to 61 other non-insider employees and provides a total award pool of approximately $3.5 million cash.  The Bankruptcy Court has approved both the KEIP and the KERP.

Financial Reporting in Reorganization

Effective on the Petition Date, the Company began to apply accounting standards applicable to reorganizations, which are applicable to companies under Chapter 11 bankruptcy protection. They require the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as reorganization items, net in the Unaudited Condensed Consolidated Statements of Operations. In addition, the balance sheet must distinguish pre-petition liabilities subject to compromise ("LSTC") of the Debtors from pre-petition liabilities that are not subject to compromise, post-petition liabilities, and liabilities of non-Debtor entities in the accompanying Unaudited Condensed Consolidated Balance Sheets. LSTC are pre-petition obligations that are not fully secured and have at least a possibility of not being repaid at the full claim amount. Where there is uncertainty about whether a secured claim will be paid or impaired pursuant to the Chapter 11 Cases, the Company has classified the entire amount of the claim as an outstanding liability.

Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in- possession, certain claims against the Debtors in existence before the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtors continue business operations as debtors in possession. These claims are reflected in the unaudited Condensed Consolidated Balance Sheets at June 30, 2019 as LSTC. Additional LSTC may arise after the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtors' assets (secured claims) also are stayed, although the holders of such claims have the right to move the Bankruptcy Court for relief from the stay.  The Company's secured claims are secured primarily by liens on certain of the Debtors’ receivables, inventory and spare parts and certain of their specified aircraft.

Liabilities Subject to Compromise

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors' business and assets. Among other things, the Bankruptcy Court authorized, but did not require, the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes, and certain critical vendors.

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts classified as LSTC may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, the determination of secured status of certain claims, the determination as to the value of any collateral securing claims, proof of claims, or other events.  See Note 7 - “Liabilities Subject to Compromise” for a specific discussion on balances subject to compromise.

Process for Implementation of Plan of Reorganization

Although the Plan provides that the Debtors will emerge from bankruptcy as a going concern, there can be no assurance at this time that the Debtors will be able to successfully consummate the Plan or any other alternative restructuring transaction that satisfies the conditions of the Bankruptcy Code and is confirmed by the Bankruptcy Court, or that the Plan will be implemented successfully. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Reorganization Items, Net

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of professional and other bankruptcy-related fees for the period from March 15, 2019 through June 30, 2019.  See Note 19.

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Investments

6 Months Ended

Jun. 30, 2019

Investments Debt And Equity Securities [Abstract]

Investments

3. INVESTMENTS

We classify all of our short-term investments as available-for-sale.  We carry these at fair value and report unrealized gains and losses, net of taxes, in Accumulated other comprehensive loss, which is a separate component of shareholders’ equity in our Condensed Consolidated Balance Sheets.  These unrealized gains and losses are also reflected in our Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Shareholders’ Equity.  We determine cost, gains, and losses using the specific identification method.

Investments consisted of the following as of June 30, 2019:

	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	88,217	$	—	$	—	$	88,217
Deferred compensation plan assets included in other assets		889		—		—		889
Total	$	89,106	$	—	$	—	$	89,106

Investments consisted of the following as of December 31, 2018:

	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	26,308	$	—	$	—	$	26,308
Deferred compensation plan assets included in other assets		772		—		—		772
Total	$	27,080	$	—	$	—	$	27,080

At June 30, 2019 and December 31, 2018, we classified $12.1 million of our aggregate investments as long-term investments and recorded them in our Condensed Consolidated Balance Sheets as restricted cash and investments, as they are securing outstanding letters of credit with maturities beyond one year.

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Valuation Accounts

6 Months Ended

Jun. 30, 2019

Revenue Recognition And Valuation Accounts [Abstract]

Valuation Accounts

4. VALUATION ACCOUNTS

We establish the amount of our allowance for doubtful accounts based upon factors relating to the credit risk of specific customers, current market conditions, and other information. Our allowance for doubtful accounts was approximately $6.3 million and $6.1 million at June 30, 2019, and December 31, 2018, respectively.

Revenues related to flights generated by our Air Medical segment are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care when the services are provided.  The allowance for contractual discounts was $140.5 million and $123.8 million as of June 30, 2019 and December 31, 2018, respectively. The allowance for uncompensated care was $45.5 million and $51.9 million as of June 30, 2019 and December 31, 2018, respectively.

Included in the allowance for uncompensated care listed above is the value of services to patients who are unable to pay when it is determined that they qualify for charity care. The value of these services was $1.6 million and $1.7 million for the quarters ended June 30, 2019 and 2018, respectively. The value of these services was $3.5 million and $3.3 million for the six months ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.3 million and $0.4 million for the quarters ended June 30, 2019 and 2018, respectively.  The estimated cost of providing charity services was $0.8 million for the six months ended June 30, 2019 and 2018, respectively. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on our Air Medical segment’s total expenses divided by gross patient service revenue.

The allowance for contractual discounts and estimated uncompensated care (expressed as a percentage of gross segment accounts receivable) as of the dates listed below was as follows:

	June 30, 2019	December 31, 2018
Allowance for Contractual Discounts	55%	51%
Allowance for Uncompensated Care	18%	22%

We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were $19.4 million and $17.9 million at June 30, 2019 and December 31, 2018, respectively.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. FAIR VALUE MEASUREMENTS

Accounting standards require that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:

	June 30, 2019
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	88,217	$	88,217	$	—
Deferred compensation plan assets		889		889		—
Total	$	89,106	$	89,106	$	—

	December 31, 2018
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	26,308	$	26,308	$	—
Deferred compensation plan assets		772		772		—
Total	$	27,080	$	27,080	$	—

We hold our short-term investments in an investment fund consisting of high quality money market instruments of governmental and private issuers, which is classified as a short-term investment.  Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.  These items are traded with sufficient frequency and volume to provide pricing on an ongoing basis.   The fair values of the investments in these funds are based on observable market prices, and therefore, have been categorized in Level 1 in the fair value hierarchy.  Level 2 inputs reflect quoted prices for identical assets or liabilities that are not actively traded.  These items may not be traded daily; examples include commercial paper, corporate bonds and U.S. government agencies debt.  There have been no reclassifications of assets between Level 1 and Level 2 investments during the periods covered by the financial statements included in this report.  We hold no Level 2 or Level 3 investments.

Cash, accounts receivable, accounts payable and accrued liabilities, and term loan debt all had fair values approximating their carrying amounts at June 30, 2019 and December 31, 2018. We determine the estimated fair value of our 5.25% Senior Notes due 2019 (the "Senior Notes") using Level 2 inputs, including quoted market indications of similar publicly-traded debt. The fair value of our 5.25% Senior Notes due 2019, based on quoted market prices, was $245.0 million and $344.2 million at June 30, 2019 and December 31, 2018, respectively.  We provide no assurances, however, that the ultimate recovery of the holders of these notes pursuant to the Chapter 11 Cases will correspond to these fair values as of these prior dates.

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Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt

6. DEBT

Listed below is information regarding our indebtedness.  All indebtedness owed under our Senior Notes as of June 30, 2019 is classified as subject to compromise, and as of December 31, 2018 was classified as short-term debt on our balance sheet.  The Thirty-Two, LLC and Blue Torch term loans are classified as long-term debt as of June 30, 2019, except for the amount due within the next twelve months.

	June 30, 2019					December 31, 2018
	Principal			Unamortized Debt Issuance Debt Cost		Principal			Unamortized Debt Issuance Debt Cost
Unsecured	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019	$	500,000		$	—	$	500,000		$	260
Secured
Term Loan - Blue Torch Finance, LLC, interest payable quarterly at LIBOR plus 6%, maturing March 13, 2023		70,000			5,254		—			—
Related Party Term Loan - Thirty Two L.L.C., interest payable quarterly at 6%, due September 28, 2020		130,000			546		130,000			765
Total indebtedness		700,000			5,800		630,000			1,025
Less: Current maturities		(1,750	)		—		(500,000	)		—
	$	698,250		$	5,800	$	130,000		$	1,025

Senior Notes - Subject to the automatic stay of the Bankruptcy Code, our 5.25% Senior Notes (the “Senior Notes”) matured on March 15, 2019.  These notes are unconditionally guaranteed on a senior basis by each of PHI, Inc.’s wholly-owned domestic subsidiaries. These notes and related guarantees are the general, unsecured obligations of PHI, Inc. and the guarantors. For more information regarding the impact of our bankruptcy proceedings on the Senior Notes, see Note 2.

Blue Torch Loan Agreement - On March 13, 2019, we entered into a Loan Agreement, dated the same date (the “Blue Torch Agreement”), by and among the Company, as borrower, certain of our subsidiaries as guarantors party thereto, the lenders from time to time party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent, for a first lien term loan of up to $70.0 million (the “Blue Torch Loan”). Immediately upon entering into the Blue Torch Agreement, and prior to the filing of the Chapter 11 Cases, we borrowed $70.0 million thereunder, the net proceeds of which (after the payment of transaction expenses and fees thereunder) we have used to continue to fund our working capital and liquidity requirements during the pendency of the Chapter 11 Cases. For additional information regarding our Chapter 11 Cases, see Notes 2 and 7 herein and Notes 1 and 19 to our filed 2018 10-K.

The remaining principal amount of the Blue Torch Loan is due March 13, 2023. At our election, borrowings under the Blue Torch Loan bear interest at either the LIBOR Rate (as defined in the Blue Torch Agreement) plus 6% or the Base Rate (as defined in the Blue Torch Agreement) plus 5%. The Blue Torch Loan is secured by a first lien on 91 aircraft registered and located in Australia, Canada, and the United States (which are currently deployed primarily in our oil and gas and technical services operations), the related spare parts for such aircraft, and certain other non-working capital assets, as well as a second lien on all working capital assets (second in priority to the liens granted under our below-described term loan agreement, dated as of September 28, 2018, with Thirty Two, L.L.C.). The Blue Torch Agreement contains customary pre-payment requirements. In addition, we paid on March 13, 2019 a funding fee, which is subject to forgiveness based on certain future events.

The Blue Torch Agreement contains certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s and each guarantor’s incurrence of additional indebtedness or liens, mergers, dispositions of assets, investments, restricted payments, modifications to material agreements, sale and leasebacks, transactions with affiliates, fundamental changes, locations of certain aircraft and acquisitions of assets. In addition, the financial covenants under the Blue Torch Agreement require us to maintain certain specified minimum levels of liquidity, fixed charge coverage and appraised collateral values, and certain specified maximum levels of secured leverage, all of which are explained in greater detail of our prior SEC reports.          The Blue Torch Agreement also contains customary affirmative covenants and customary representations and warranties.  As of the date of the financial statements, included in this report, we believe we were in compliance with these covenants.

The Blue Torch Agreement specifies certain customary events of default, including, among others,   certain change of control events. The filings of the Chapter 11 Cases neither constituted an event of default nor accelerated payment of the Company’s indebtedness under the Blue Torch Agreement. As noted in Note 2, we plan to repay the Blue Torch Loan in full upon emergence from bankruptcy, assuming we consummate our Plan on the terms confirmed by order of the Bankruptcy Court on August 2, 2019.

Related Party Term Loan - On September 28, 2018, we entered into a term loan agreement with Thirty Two L.L.C., which provided   us with a term loan of $130.0 million maturing on September 28, 2020. This loan bears interest at an annual fixed rate of 6% payable quarterly, with all principal due on maturity. Thirty Two L.L.C., an entity wholly-owned by our current CEO and controlling shareholder, is a related party.

Obligations under the term loan are guaranteed by PHI Air Medical, L.L.C. and PHI Tech Services, Inc., both of which are wholly-owned by us. Our obligations and the guarantors’ obligations are secured primarily by all of their respective inventory, spare parts and accounts receivable located in the U.S.

The related party term loan agreement contains customary restrictive covenants that, subject to certain exceptions and limitations, limit or restrict our ability to, among other things, (i) purchase, retire or redeem any shares of our capital stock; (ii) incur indebtedness; (iii) mortgage or encumber our assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control of PHI; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into us; (vii) sell or lease all or substantially all of our assets; or (viii) acquire all or a substantial part of the assets or capital stock of another entity.  The term loan agreement contains no financial covenants. The term loan agreement contains customary representations and warranties, affirmative covenants and events of default.  As noted in Note 2, we plan to repay all of the principal and a portion of the accrued and unpaid interest under the related party term loan in full upon emergence from bankruptcy, assuming we consummate our Plan on the terms confirmed by order of the Bankruptcy Court on August 2, 2019.

Letter of Credit - At June 30, 2019, we had $19.7 million of outstanding letters of credit secured by a like amount of restricted cash, $12.1 million of which secured certain domestic operations or insurance policies and $7.6 million of which guaranteed our performance under an international contract.  At December 31, 2018, we had $19.8 million of outstanding letters of credit issued for the same purposes.

Other - PHI, Inc. has cash management arrangements with certain of its principal subsidiaries, in which substantial portions of the subsidiaries’ cash is regularly advanced to PHI, Inc.  Although PHI, Inc. periodically repays these advances to fund the subsidiaries’ cash requirements throughout the year, at any given point in time PHI, Inc. may owe a substantial sum to its subsidiaries under these advances, which, in accordance with GAAP, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets.  For additional information, see Note 15.

Acceleration of Certain Debt Obligations - The commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under the indenture governing our 5.25% Senior Notes due 2019 and our term loan agreement with Thirty Two, L.L.C. Any efforts to enforce payment of such financial obligations under such instruments and agreements are automatically stayed as a result of the Chapter 11 Cases and the holders’ rights of enforcement in respect of such financial obligations are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Subsequent Event

As described in greater detail in Note 2, we have received binding commitments from lenders to fund on the Emergence Date the full amount of a $225 million first lien senior secured term loan that would mature in five years (the “Exit Term Loan”), subject to the finalization, execution and delivery of definitive documentation and the satisfaction of various other conditions described below in this Note 6. The following description of the terms of the Exit Term Loan is only a summary, does not purport to be complete and is qualified in its entirety by reference to the form of term loan credit agreement that we filed with the SEC as an exhibit to our Current Report on Form 8-K dated July 22, 2019.

Borrower. All borrowings under the Exit Term Loan are expected to be incurred by a new parent holding company (the “Borrower”) to be formed under the Debtors’ plan of reorganization, which is expected to own directly or indirectly all of the outstanding equity interests of the Debtors upon their emergence from the bankruptcy proceedings.

Maturity. The Exit Term Loan would mature five years after the closing of the Exit Term Loan.

Guarantees and Security. The Borrower’s obligations under the Exit Term Loan are expected to be guaranteed, subject to certain exceptions, by all of its existing and future material domestic subsidiaries.

The Exit Term Loan is expected to be secured by a first-priority security interest on substantially all of assets of the Borrower and the guarantors party to the Exit Term Loan, excluding certain assets reserved to potentially collateralize a future asset-backed revolving credit facility.

Use of Proceeds. The borrowings under the Exit Term Loan would be used (i) to pay in full and discharge all of the Company’s indebtedness under debt agreements with Thirty Two, L.L.C. and Blue Torch Finance L.L.C., (ii) to pay various transaction expenses, and (iii) for general corporate purposes.

Interest Rates and Fees. Borrowings under the Exit Term Loan are expected to be subject to a 2.0% original issuance discount.

The Exit Term Loan will bear interest on the unpaid principal amount at a rate equal to, at our option, either:

• a base rate determined by reference to the highest of (i) the prime rate in effect for such day as determined by Credit Suisse as its prime rate in effect at its principal office in New York City, (ii) the federal funds effective rate plus 0.5% and (iii) one-month LIBOR, adjusted for statutory reserve requirements, plus 1.0%, in each case, plus an applicable margin; or

• A LIBOR rate determined by reference to the London interbank offered rate for U.S. dollars for the relevant interest period, adjusted for statutory reserve requirements, plus the applicable margin. The LIBOR rate will be subject to a 1.00% floor.

The applicable margin for borrowings under the Exit Term Loan would be 6.0% with respect to the base rate borrowings and 7.0% with respect to LIBOR borrowings.

We will pay customary fees and expenses in connection with obtaining funding commitments, including certain additional fees if the term loan is not funded by the end of August 30, 2019.

Prepayments. Amounts borrowed under the Exit Term Loan would amortize quarterly at an annual rate of 2.50% in the first and second years of the facility, 5.00% in the third year, and 7.50% thereafter, with the balance payable on the maturity date of the Exit Term Loan.

The Borrower would be required to prepay the Exit Term Loan, subject to exceptions and limitations, with:

• 100% of the net cash proceeds from any issuance or incurrence of indebtedness (other than indebtedness to be permitted by the Exit Term Loan);

• The net cash proceeds of certain asset sales, subject to certain exceptions and limitations; and

• The net cash proceeds from the sale of our Air Medical segment of the business.

Beginning with the fiscal year ending December 31, 2020, the Borrower will be required to prepay the Exit Term Loan in an amount equal to a certain percentage of its excess cash flow for each fiscal year, which percentage is based on the Borrower’s consolidated net total leverage ratio for the applicable fiscal year.

The Borrower may voluntarily prepay loans outstanding under the Exit Term Loan, in whole or in part, without premium or penalty (except as described below) in minimum amounts to be determined, at any time, subject to customary “breakage” costs with respect to LIBOR rate loans.

The Borrower would be required to pay a “prepayment premium” in connection with certain prepayments of the Exit Term Loan equal to a percentage of the principal amount so prepaid as follows:

• during the first year following the closing date of the Exit Term Loan – the greater of (x) 1.0% of the principal amount prepaid and (y) the excess of: (i) the present value at such date of prepayment of (A) 2.0% of the principal amount so prepaid plus (B) the aggregate interest that would have accrued on such amount from the date of prepayment through the first anniversary of the closing of the Term Loan Facility, computed using a discount rate equal to the treasury rate plus 50 basis points discounted to the prepayment on a semi-annual basis, over (ii) the principal amount such loans;

• during the second year following the closing date of the Exit Term Loan – 2.0%;

• during the third year following the closing date of the Exit Term Loan – 1.0%; and

• during the fourth year following the closing date of the Exit Term Loan and thereafter – 0%.

Covenants and Events of Default. The Exit Term Loan will contain customary restrictive covenants that, subject to certain exceptions and limitations, will limit or restrict the ability of the Borrower and its restricted subsidiaries (as defined in the Exit Term Loan) to, among other things, (i) purchase, retire or redeem any shares of their capital stock; (ii) incur indebtedness; (iii) mortgage or encumber their assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into the Borrower or the restricted subsidiaries; (vii) sell or lease all or substantially all of the assets of the Borrower or its restricted subsidiaries; or (viii) acquire all or a substantial part of the assets or capital stock of another entity. The Exit Term Loan will also contain a $20.0 million minimum liquidity financial covenant.

In addition, the Exit Term Loan will contain customary representations and warranties, affirmative covenants and events of default. Upon an event of default, the lenders (as defined in the Exit Term Loan) are entitled, subject to certain limitations, to declare the term loan, any other loans and all other obligations of the Borrower or its subsidiaries to the lenders immediately due and payable and to take all actions permitted to be taken by a secured creditor.

Conditions to Term Loan Facility. The obligations of the initial lenders to provide the Exit Term Loan is subject to certain conditions, including without limitation, the absence at the closing of any material breach of the representations, warranties and covenants made by the Borrower and its restricted subsidiaries.

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Liabilities Subject to Compromise

6 Months Ended

Jun. 30, 2019

Reorganizations [Abstract]

Liabilities Subject to Compromise

7. LIABILITIES SUBJECT TO COMPROMISE

As a result of the filing of the Chapter 11 Cases on March 14, 2019, we have classified unsecured pre-petition liabilities that are expected to be impaired pursuant to the Plan as liabilities subject to compromise in our Condensed Consolidated Balance Sheet at June 30, 2019.  Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. If there was uncertainty at the time of determination about whether a secured claim was under-secured or would be impaired under the Plan, we reflected the entire amount of the claim as an outstanding liability. The amounts classified at June 30, 2019 as liabilities subject to compromise represent the Company’s estimate as of the filing date of this report of claims as of June 30, 2019 expected to be allowed under the Plan.

The Company’s obligations under the Senior Notes have been affected by the bankruptcy filing. As such, the outstanding balance of these Senior Notes and related accrued pre-petition interest have been classified as liabilities subject to compromise in the condensed consolidated balance sheet as of June 30, 2019.

Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities have been stayed during the pendency of the Chapter 11 Cases. Although payment of pre-petition claims is generally not permitted, the Bankruptcy Court approved the Debtors’ “first day” motions allowing, among other things, the Company to pay prepetition employee wages and benefits without interruption, maintain its insurance programs, utilize its current cash management system, and pay undisputed prepetition obligations owed to its vendors and trade creditors in the ordinary course of business. As a result of this approval, the Company continues to pay certain pre-petition claims in designated categories and subject to certain terms and conditions in the ordinary course of business, and we have not classified these liabilities as subject to compromise in the Condensed Consolidated Balance Sheet as of June 30, 2019. With respect to pre-petition claims, the Company notified all known claimants of the deadline to file a proof of claim with the Court.

The Company has been paying and intends to continue to pay post-petition claims in the ordinary course of business.  The following table reflects pre-petition liabilities that are subject to compromise included in our Condensed Consolidated Balance Sheet as of June 30, 2019. See Note 6 - “Debt” for further information on our Senior Notes and related balances subject to compromise:

	June 30, 2019
	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019	$	500,000
Accrued interest payable		13,125
Total liabilities subject to compromise	$	513,125

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

8. EARNINGS PER SHARE

The components of basic and diluted earnings per share for the quarter and six months ended June 30, 2019 and 2018 are as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,825		15,806		15,825		15,806
Dilutive effect of unvested restricted stock units		—		—		—		—
Weighted average outstanding shares of common stock, diluted (1)		15,825		15,806		15,825		15,806

⁽¹⁾ For the quarter ended June 30, 2019 and 2018, 0 and 425,317 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively, as they were anti-dilutive to earnings per share. For the six months ended June 30, 2019 and 2018, 0 and 14,258 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively as they were anti-dilutive to earnings per share.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

9. STOCK-BASED COMPENSATION

We recognize the cost of employee compensation received in the form of equity instruments based on the grant date fair value of those awards. The table below sets forth the total amount of stock-based compensation expense for the quarter and six months ended June 30, 2019 and 2018.

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Stock-based compensation expense:
Time-based restricted stock units	$	845	$	435	$	1,685	$	1,077
Performance-based restricted stock units		480		378		955		1,055
Total stock-based compensation expense	$	1,325	$	813	$	2,640	$	2,132

During the quarter and six months ended June 30, 2019, no time-based restricted units or performance units were awarded to managerial employees.

During the quarter and six months ended June 30, 2018, 321,831 time-based restricted units and 448,012 performance-based restricted units were awarded to managerial employees.

On February 20, 2019, the PHI Compensation Committee approved the vesting of the 2017 performance RSUs based on the Company’s financial results exceeding the pre-determined business performance metrics set in 2017 for the two year performance period (January 1, 2017 - December 31, 2018). The PHI Compensation Committee decided to settle these vested RSU awards in cash based upon the closing market price on February 20, 2019, the date of the committee's certification that the performance metrics were met ($2.21 per share). The total amount of cash paid was $0.8 million.  On February 20, 2019, the Compensation Committee certified that the performance metrics for performance-based restricted stock units granted in 2016 had not been met, which resulted in the forfeiture of 667,238 of such RSUs.

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Asset Disposals

6 Months Ended

Jun. 30, 2019

Property Plant And Equipment [Abstract]

Asset Disposals

10. ASSET DISPOSALS

During the first quarter of 2019, there were no sales or disposals of aircraft.  During the second quarter of 2019, we disposed of two light aircraft previously utilized in the Technical Services segment.  The contract was terminated and these aircraft no longer met our strategic needs.  Cash proceeds totaled $1.2 million, resulting in a gain of $0.2 million on the disposal of these assets.  This gain was offset partially by a net loss on other assets disposals.

During the first quarter of 2018, we disposed of one light aircraft previously utilized in the Air Medical segment and donated to a charitable organization one aircraft previously used in our Oil and Gas segment. During the second quarter of 2018, we disposed of one medium and one light aircraft previously utilized in the Oil & Gas segment. These aircraft no longer met our strategic needs.  Cash proceeds totaled $1.5 million, resulting in a $0.7 million loss on the disposal of these assets.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. COMMITMENTS AND CONTINGENCIES

Commitments – We currently have no aircraft purchase commitments.

Environmental Matters – We have recorded an estimated liability of $0.15 million as of June 30, 2019 for environmental response costs. Previously, we conducted environmental surveys of our former Lafayette Facility located at the Lafayette Regional Airport, which we 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, we have performed groundwater sampling of the required groundwater monitor well installations at both parcels and submitted these sampling reports to the LDEQ.  Pursuant to an agreement with the LDEQ, we provided groundwater sample results semi-annually to the LDEQ for both parcels from 2005 to 2015. The LDEQ approved a reduction in the sampling program from semi-annual to annual groundwater monitoring in 2015.  Based on our working relationship and agreements with the LDEQ, and the results of ongoing former facility parcel monitoring, we believe that ultimate remediation costs for the subject parcels will not be material to our 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, medical malpractice claims, 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 our presently pending 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.

Notwithstanding the foregoing, any litigation pending against us or any of the Debtors as of the Petition Date and any claims that could be asserted against us or an of the Debtors that arose prior to the Petition Date are automatically stayed as a result of the commencement of the Chapter 11 Cases pursuant to the section 362(2) of the Bankruptcy Code, subject to certain statutory exceptions.  These matters will be subject to resolution in accordance with the Bankruptcy Code and applicable orders of the Bankruptcy Court.

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Revenue Recognition

6 Months Ended

Jun. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue Recognition

12. REVENUE RECOGNITION

In 2014, the Financial Accounting Standard Board ("the FASB") issued ASC 606, Revenue from Contracts with Customers (“ASC 606”), replacing the existing accounting standard and industry specific guidance for revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The underlying principle of the new standard is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.  ASC 606 became effective on January 1, 2018 and we adopted it using the modified retrospective method applied to open contracts and only to the version of the contracts in effect as of January 1, 2018. There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

In general, under ASC 606, we recognize revenue when a service or good is sold to a customer and a contract exists. At contract inception, we assess the goods and services promised in our contracts with customers and identify all performance obligations for each distinct promise that transfers a good or service (or bundle of goods or services) to the customer. To identify the performance obligations, we consider all goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. Revenue is recognized when control of the identified distinct goods or services has been transferred to the customer, the transaction price has been determined and allocated to the performed performance obligations and we have determined that collection has occurred or is probable of occurring.

Taxes billed to and collected from customers and remitted to governmental authorities are reported as revenue on a net basis in our financial statements.  Thus, we exclude taxes billed to the customer and collected on behalf of governmental agencies to be remitted to these agencies from the transaction price in determining the revenue related to contracts with a customer.

Oil & Gas Revenue Recognition - We provide helicopter services to oil and gas customers operating in the Gulf of Mexico and a number of foreign countries.  Revenues are recognized when performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered.

Air Medical Revenue Recognition - We provide helicopter services to hospitals and emergency service providers in several U.S. states, or to individual patients in the U.S. in which case we are paid by either a commercial insurance company, federal or state agency, or the patient.  Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model.  Revenues related to the independent provider model services are recorded in the period in which we satisfy our performance obligations under contracts by providing our services to our customers based upon established billing rates net of contractual allowances under agreements with third party payors and net of uncompensated care allowances. These amounts are due from patients, third-party payors (including health insurers and government programs), and others and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, we bill the patients and third-party payors several days after the services are performed.  Revenues generated under the traditional provider model are recognized as performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled in exchange for services rendered.

Oil & Gas Performance Obligations - A performance obligation arises under contracts with customers to render services and is the unit of account under ASC 606.  Operating revenue from our Oil and Gas segment is derived mainly from fixed-term contracts with our customers, a substantial portion of which are competitively bid.   A small portion of our Oil and Gas segment revenue is derived from providing services on an "ad-hoc" basis.   Our fixed-term contracts typically have original terms of one to seven years (subject to provisions permitting early termination on relatively short notice by the customers). We account for services rendered separately if they are distinct and the services are separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered on its own or with other resources that are readily available to the customer.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  Within this contract type for helicopter services, we determined that each contract has a single distinct performance obligation. These services include a fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. We also provide services to clients on an “ad hoc” basis, which usually entails a shorter contract notice period and duration. The charges for ad hoc services are based on an hourly rate or a daily or monthly fixed fee plus additional fees for each hour flown. The nature of our variable charges within our flight services contracts are not effective until a customer-initiated flight order and the actual hours flown are determined; therefore, the associated flight revenue generally cannot be reasonably and reliably estimated before hand. A contract’s standalone selling prices are determined based upon the prices that we charge for our services rendered.  The majority of our revenue is recognized as performance obligations satisfied over time, by measuring progress towards satisfying the contracted services in a manner that best depicts the transfer of services to the customer, which is generally represented by a period of 30 days or less.  We typically invoice customers on a monthly basis with the term between invoicing and when the payment is due typically being between 30 and 60 days.

Air Medical Performance Obligations - Performance obligations are determined based upon the nature of the services provided. Under the independent provider model, we measure the performance obligation from the moment the patient is loaded into the aircraft until it reaches its destination. Under this model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area.  Under the traditional provider model, we contract directly with the customer to provide their transportation services.  These contracts are typically awarded or renewed through competitive bidding and typically permit early termination by the customer on relatively short notice. As a traditional provider, we typically bill a fixed monthly rate for aircraft availability and an hourly rate for flight time. For each of these types of helicopter services, we have determined that each has a single distinct performance obligation.  Traditional provider models services include fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. The variable charges within such contracts are not effective until the customer initiates a flight order and the actual hours flown are determined; therefore, the associated revenue generally cannot be reasonably and reliably estimated beforehand. For the traditional provider model, we determine the transaction price based upon standard charges for goods and services provided.

As an independent provider, we bill for our services on the basis of a flat rate plus a variable charge per patient-loaded mile, regardless of aircraft model, and are typically compensated by private insurance, Medicaid or Medicare, or directly by transported patients who self-pay. We recognize revenues for performance obligations satisfied at a point in time, which generally relate to patients receiving air medical services when: (1) services are provided; and (2) we do not believe the patient requires additional services. For the independent provider model, we determine the transaction price based upon gross charges for services provided reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with Company policy, and/or implicit price concessions provided to uninsured patients. We determine estimates of contractual adjustments and discounts based upon contractual agreements, our discount policy, and historical experience. We determine our estimate of implicit price concessions based upon our historical collection experience with these classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups, rather than individually. The financial statement effects of using this practical expedient are not materially different from an individual contract approach.

We estimate contractual allowances and uncompensated care based on historical collection experience by payor category. The main payor categories are Medicaid, Medicare, private insurance, and self-pay. Changes in payor mix, reimbursement rates and uncompensated care rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts by category. The allowance percentages calculated are applied to the payor categories, and the necessary adjustments are made to the revenue allowance. In our Air Medical Segment, the allowance for contractual discounts against outstanding accounts receivable was $140.5 million, and $123.8 million as of June 30, 2019, and December 31, 2018, respectively, and the allowance for uncompensated care against outstanding accounts receivable was $45.5 million, and $51.9 million as of June 30, 2019 and December 31, 2018, respectively. Included in the allowance for uncompensated care above is the value of services to patients who are unable to pay when it is determined that they qualify as charity care. The value of these services was $1.6 million, and $1.7 million for the quarter ended on June 30, 2019 and 2018, respectively. The value of these services was $3.5 million and $3.3 million for the six months ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.3 million and $0.4 million for the quarters ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.8 million for the six months ended June 30, 2019 and 2018, respectively. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on the Air Medical independent provider model’s total expenses divided by gross patient service revenue.

In determining the allowance estimates for our Air Medical segment’s billing, receivables and revenue, we utilize the prior twelve months’ payment history and current trends in payor behavior by each separate payor group, which we evaluate on a state by state basis. A percentage of amounts collected compared to the total invoice is determined from this process and applied to the current month’s billings and receivables. If a receivable related to the self-pay category is outstanding twelve months or greater, we record a reserve equal to 100% of the receivable. Receivables related to other payor categories are scrutinized when they are outstanding for nine months or longer and additional allowances are recorded if warranted.

As of June 30, 2019 and December 31, 2018, net receivables related to our (i) Oil and Gas segment were $86.2 million and $74.1 million, (ii) Air Medical segment were $95.8 million and $90.2 million and (iii) Technical Services segment were $1.3 million and $4.1 million, respectively.

We generally have a right to consideration in an amount that corresponds directly with the value to the customer of the entity's performance completed to date and may recognize revenue in the amount to which the entity has a right to invoice. We have elected to use the invoice practical expedient for revenue recognized when performance obligations are satisfied over time. In addition, payment for goods and services rendered is typically due in the subsequent month following satisfaction of our performance obligation. Our contracts typically include termination clauses that allow both parties to terminate existing contracts with a 30 to 180 day notice period.

Our Technical Services segment - provides helicopter flight services and helicopter repair and overhaul services for existing flight operations customers that own their own aircraft. Under this segment, we periodically provide certain services to governmental customers, including our agreement to operate six aircraft for the National Science Foundation in Antarctica. Under this segment, we also offer certain software as a service to our Oil and Gas customers.   Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration we expect to be entitled to in exchange for services rendered.   For these helicopter services, we determined that each has a single distinct performance obligation.

The following table presents the Company’s revenues by segment disaggregated by type (in thousands):

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Service Revenue
Oil & Gas	$	90,023	$	97,068	$	174,969	$	192,702
Air Medical		69,507		67,151		126,153		124,139
Technical Services		5,642		5,024		15,940		12,766
Total Services	$	165,172	$	169,243	$	317,062	$	329,607
Air Medical Revenue
Traditional provider model	$	12,401	$	12,085	$	24,378	$	23,956
Independent provider model		57,106		55,066		101,775		100,183
Total Air Medical Revenues	$	69,507	$	67,151	$	126,153	$	124,139

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

13. LEASES

The Company adopted ASU 2016-02 standard on a prospective basis on January 1, 2019 and used the effective date as the date of initial application.  Therefore, prior period financial information has not been adjusted and continues to be reflected in accordance with the Company’s historical accounting policy.  The standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

The Company elected to adopt the "package of practical expedients" under ASU No. 2018-11, which allows the Company to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. The Company also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes.

The adoption of ASU 2016-02 had the effects specified in Note 1.

Accounting Policy for Leases

The Company determines if an arrangement is a lease at inception.  All of the Company’s leases are operating leases and are included in ROU assets, accounts payable and operating lease liabilities in the Company's Condensed Consolidated Balance Sheet at June 30, 2019.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make lease payments arising from the lease.  Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.  The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.  The Company’s lease terms may include options to extend or terminate the lease.  The lease term includes options to extend when we are reasonably certain to exercise the option.  We are not, however, reasonably certain that we will exercise any of the options to extend and as such, they have not been included in the remaining lease terms.

Overview

We lease certain aircraft, facilities, and equipment used in our operations.  The related lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals, and certain real estate leases also include renewal options.  We generally pay all insurance, taxes, and maintenance expenses associated with these leases, and these costs are not included in the lease liability and are recognized in the period in which they are incurred.

Total operating lease expense was $11.4 million and $12.1 million for the three months ended June 30, 2019 and 2018, respectively.  For the three months ended June 30, 2019, a portion of the total operating lease expense relating to short-term leases was $1.6 million.  The operating lease expense was $22.6 million and $23.8 million for the six months ended June 30, 2019 and 2018, respectively.  For the six months ended June 30, 2019, a portion of the total operating lease expense relating to short-term was $3.0 million.

Operating leases at June 30, 2019 were as follows (in thousands):

	June 30, 2019
	(Thousands of dollars)
Operating lease right-of-use-assets	$	144,944
Current portion of operating lease liabilities		27,535
Operating lease liabilities		118,167
Total operating lease liabilities	$	145,702
Cash paid for operating leases		21,475
ROU assets obtained in exchange for lease obligations		9,402
Weighted average remaining lease term	5 years
Weighted average discount rate		8.25	%

Maturities of operating lease liabilities at June 30, 2019 are as follows (in thousands):

	Operating
Six Months Ending June 30,	Leases
	Thousands of dollars
Remainder of 2019	$	19,615
2020		37,140
2021		36,297
2022		34,254
2023		23,872
Thereafter		33,975
Total lease payments		185,153
Less imputed interest		(39,451	)
Total	$	145,702

As of December 31, 2018, future total rentals on our non-cancellable operating leases were $160 million in the aggregate, which consisted of the following: $36 million in 2019; $33 million in 2020; $31 million in 2021; $29 million in 2022; $20 million in 2023; and $11 million thereafter.

We are currently in the process of renegotiating certain of our leases in connection with the Chapter 11 Cases.  These negotiations, if successfully completed, will likely impact our obligation under our outstanding leases.

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Segment Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information

14. SEGMENT INFORMATION

PHI is primarily a provider of helicopter transport services, including helicopter maintenance and repair services. We report our financial results through the three reportable segments further described below.

A segment’s operating profit or loss 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 small portion that is allocated.  Direct charges represent the vast majority of segment selling, general and administrative expenses.  Allocated selling, general and administrative expenses are based primarily on total segment costs as a percentage of total operating costs. A significant portion of our selling, general and administrative expenses are neither charged nor allocated to our segments.

Oil and Gas Segment - Our Oil and Gas segment, headquartered in Lafayette, Louisiana, provides helicopter services primarily for the major integrated and independent oil and gas production companies transporting personnel or equipment to offshore platforms in the Gulf of Mexico and a number of foreign countries. Our customers include Shell Oil Company, BP America Production Company, ExxonMobil Production Company, and ConocoPhillips Company, with whom we have worked for 35 or more years, and ENI Petroleum, with whom we have worked for more than 20 years. At June 30, 2019, we had available for use 121 aircraft in this segment.

Our fixed-term contracts typically have original terms of one year to seven years (subject to provisions permitting early termination upon short notice by the customers), with payment in U.S. dollars. For the quarters ended June 30, 2019 and 2018, respectively, approximately 55% and 57% of our total operating revenues were generated by our Oil and Gas segment, with approximately 85% and 87% of these revenues from fixed-term customer contracts.  For the six months ended June 30, 2019 and 2018, respectively, approximately 55% and 58% of our total operating revenues were generated by our Oil and Gas segment, with approximately 85% and 87% of these revenues from fixed-term customer contracts.  The remaining 15% of these revenues were attributable to work in the spot market and ad hoc flights for contracted customers.

Air Medical Segment - The operations of our Air Medical segment are headquartered in Phoenix, Arizona, where we maintain significant separate facilities and administrative staff dedicated to this segment.

We provide Air Medical transportation services for hospitals and emergency service agencies throughout the U.S.  As of June 30, 2019, our Air Medical segment operated approximately 111 aircraft in 18 states at 81 separate locations.

Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model. Under the independent provider model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area. Under the traditional provider model, we contract directly with the customer to provide their transportation services, with the contracts typically awarded or renewed through competitive bidding. For the quarters ended June 30, 2019 and 2018, approximately 42% and 40% of our total operating revenues were generated by our Air Medical segment.  For the six months ended June 30, 2019 and 2018, approximately 40% and 38% of our total operating revenues were generated by our Air Medical segment.

Estimates regarding the payor mix and changes in reimbursement rates are the factors most subject to sensitivity and variability in calculating our allowances.  We compute a historical payment analysis of accounts fully closed, by category.

Provisions for contractual discounts and estimated uncompensated care for our Air Medical segment (expressed as a percentage of gross segment billings) were as follows for the periods listed below:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Provision for contractual discounts		70	%		67	%		68	%		66	%
Provision for uncompensated care		8	%		7	%		9	%		8	%

These percentages are affected by various factors, including rate increases and changes in the number of transports by payor mix.

Net reimbursement per transport from commercial payors generally increases when a rate increase is implemented.  Net reimbursement from certain commercial payors, as well as Medicare and Medicaid, generally does not increase proportionately with rate increases.

Net revenue attributable to Insurance, Medicare, Medicaid, and Self-Pay (expressed as a percentage of net Air Medical revenues) were as follows for the periods listed below:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Insurance		67	%		72	%		67	%		72	%
Medicare		23	%		19	%		23	%		20	%
Medicaid		9	%		8	%		8	%		8	%
Self-Pay		1	%		1	%		2	%		—	%

We also have a limited number of contracts with hospitals under which we receive a fixed fee component for aircraft availability and a variable fee component for flight time.  Most of our contracts with hospitals contain provisions permitting early termination by the hospital, typically with 180 days’ notice for any reason and generally with penalty.  Those contracts generated approximately 15% and 16% of the segment’s revenues for the quarters ended June 30, 2019 and 2018, respectively.  Those contracts generated approximately 17% and 18% of the segment’s revenues for the six months ended June 30, 2019 and 2018, respectively.

We also derive a small portion of the segment’s revenues from providing services under our patient navigation business.

Technical Services Segment - Our 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 our service costs.  In the past, we also periodically provided flight services to governmental customers under this segment, including operating six aircraft for the National Science Foundation in Antarctica under a contract that lapsed on April 30, 2019.  We sold two light aircraft during the quarter that were assigned to this contract, leaving four aircraft remaining in this segment.  Also included in this segment are our proprietary Helipass operations, which provide software as a service to certain of our Oil and Gas customers for the purpose of passenger check-in and compliance verification.

For each of the quarters ended June 30, 2019 and 2018, approximately and 3% of our total operating revenues were generated by our Technical Services segment, respectively.  For each of the six month periods ended June 30, 2019 and 2018, approximately 5% and 4% of our total operating revenues were generated by our Technical Services segment, respectively.

Summarized financial information concerning our reportable operating segments for the quarters and six months ended June 30, 2019 and 2018 is as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Thousands of dollars)						(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	90,023		$	97,068		$	174,969		$	192,702
Air Medical		69,507			67,151			126,153			124,139
Technical Services		5,642			5,024			15,940			12,766
Total operating revenues, net		165,172			169,243			317,062			329,607
Segment direct expenses
Oil and Gas (1)		89,061			94,442			179,031			190,985
Air Medical		59,310			56,776			116,391			110,608
Technical Services		4,104			3,784			12,568			9,671
Total direct expenses		152,475			155,002			307,990			311,264
Segment selling, general and administrative expenses
Oil and Gas		4,672			4,400			9,432			9,321
Air Medical		4,141			3,254			7,433			6,421
Technical Services		152			340			300			710
Total selling, general and administrative expenses		8,965			7,994			17,165			16,452
Total segment direct and selling, general and administrative expenses		161,440			162,996			325,155			327,716
Net segment (loss) profit
Oil and Gas		(3,710	)		(1,774	)		(13,494	)		(7,604	)
Air Medical		6,056			7,121			2,329			7,110
Technical Services		1,386			900			3,072			2,385
Total net segment profit		3,732			6,247			(8,093	)		1,891
Other, net (3)		428			(193	)		337			(2,112	)
Unallocated selling, general and administrative costs (1) (4)		(8,626	)		(6,491	)		(25,293	)		(13,492	)
Reorganization items, net		(26,503	)		—			(28,103	)		—
Interest expense		(3,927	)		(8,340	)		(12,093	)		(16,537	)
(Loss) earnings before income taxes	$	(34,896	)	$	(8,777	)	$	(73,245	)	$	(30,250	)

(1) Included in direct expenses and unallocated selling, general, and administrative costs are the depreciation and amortization expense amounts below:

	Depreciation and Amortization Expense
	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Segment Direct Expense:
Oil and Gas	$	11,618	$	11,486	$	22,896	$	23,269
Air Medical		5,485		6,091		10,771		11,715
Technical Services		133		142		204		287
Total	$	17,236	$	17,719	$	33,871	$	35,271
Unallocated SG&A	$	3,095	$	1,412	$	4,904	$	3,327

(2) Includes equity in (earnings) of unconsolidated affiliates, net.

(3) Consists of (gains) losses on disposition of property and equipment and other income.

(4) Represents corporate overhead expenses not allocable to segments.

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Investment in Variable Interest Entity

6 Months Ended

Jun. 30, 2019

Investment In Variable Interest Entity And Other Investments And Affiliates [Abstract]

Investment in Variable Interest Entity

15. INVESTMENT IN VARIABLE INTEREST ENTITY

We account for our investment in PHI Century Limited ("PHIC") as a variable interest entity, which is defined as an entity that either (a) has insufficient equity to permit the entity to finance its operations without additional subordinated financial support or (b) has equity investors who lack the characteristics of a controlling financial interest.  As of June 30, 2019, we had a 49% investment in the common stock of PHIC, a Ghanaian entity. We acquired our 49% interest on May 26, 2011, PHIC’s date of incorporation. The purpose of PHIC is to provide oil and gas flight services in Ghana and the West African region. For the quarter ended June 30, 2019, we recorded income in equity of this unconsolidated affiliate of $1.0 million compared to income in equity of less than $0.1 million for the quarter ended June 30, 2018 relative to our 49% equity ownership. For the six months ended June 30, 2019 and 2018, we recorded income in equity of this unconsolidated affiliate of $2.4 million and less than $0.1 million, respectively. We had $4.1 million and $4.8 million of trade receivables from PHIC as of June 30, 2019 and December 31, 2018, respectively. In 2018, we loaned PHIC $0.4 million for operating purposes. This loan balance is included in Accounts receivable - other on our Condensed Consolidated Balance Sheets at June 30, 2019. Our investment in the common stock of PHIC is included in Other Assets on our Condensed Consolidated Balance Sheets and was $2.9 million at June 30, 2019 and $0.5 million at December 31, 2018.

XML

Other Comprehensive Income

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Other Comprehensive Income

16. OTHER COMPREHENSIVE INCOME

Amounts reclassified from Accumulated other comprehensive income are not material and, therefore, not presented separately in the Condensed Consolidated Statements of Comprehensive Income.

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Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Condensed Consolidating Financial Information

17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed further in Note 6, 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 PHI, Inc.’s 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”) the guarantor subsidiaries and the non-guarantor subsidiaries, each 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)

	June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	8,170		$	2,223	$	11,489		$	—		$	21,882
Short-term investments		76,141			—		—			—			76,141
Accounts receivable – net		64,467			101,381		23,676			(6,180	)		183,344
Intercompany receivable		—			98,616		22,116			(120,732	)		—
Inventories of spare parts – net		29,871			20,929		3,442			—			54,242
Prepaid expenses		8,944			2,805		1,323			—			13,072
Income taxes receivable		7			502		—			—			509
Total current assets		187,600			226,456		62,046			(126,912	)		349,190
Investment in subsidiaries		475,391			—		—			(475,391	)		—
Property and equipment – net		562,880			283,231		39,558			—			885,669
Right of use assets		116,918			11,652		16,374			—			144,944
Restricted cash and investments		19,739			—		—			—			19,739
Other assets		18,678			1,071		1,188			—			20,937
Deferred income tax		—			—		5,137			—			5,137
Total assets	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,526		$	6,437	$	5,832		$	(6,180	)	$	70,615
Accrued and other current liabilities		19,667			13,500		5,316			—			38,483
Current portion of operating lease liabilities		20,823			3,404		3,308			—			27,535
Current maturities of long-term debt		1,750			—		—			—			1,750
Intercompany payable		63,263			17,125		40,344			(120,732	)		—
Total current liabilities		170,029			40,466		54,800			(126,912	)		138,383
Long-term Debt		192,450			—		—			—			192,450
Deferred income taxes and other long-term liabilities		93,711			67,234		12,859			—			173,804
Liabilities subject to compromise		513,125			—		—			—			513,125
Shareholders’ Equity:
Common stock and paid-in capital		317,725			77,951		132,426			(210,377	)		317,725
Accumulated other comprehensive loss		(3	)		—		(4,037	)		—			(4,040	)
Retained earnings		94,169			336,759		(71,745	)		(265,014	)		94,169
Total shareholders’ equity		411,891			414,710		56,644			(475,391	)		407,854
Total liabilities and shareholders’ equity	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

	December 31, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	39,091		$	1,259	$	10,524		$	—		$	50,874
Short-term investments		14,232			—		—			—			14,232
Accounts receivable – net		64,416			93,060		28,812			(3,823	)		182,465
Intercompany receivable		—			91,468		—			(91,468	)		—
Inventories of spare parts – net		43,933			9,577		3,188			—			56,698
Prepaid expenses		7,295			2,520		1,604			—			11,419
Income taxes receivable		394			556		—			—			950
Total current assets		169,361			198,440		44,128			(95,291	)		316,638
Investment in subsidiaries and others		471,790			—		—			(471,790	)		—
Property and equipment – net		576,763			287,375		38,347			—			902,485
Restricted investments		19,781			—		—			—			19,781
Other assets		17,179			1,199		—			—			18,378
Deferred income tax		—			—		4,944			—			4,944
Total assets	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Senior Notes issued March 17, 2014	$	499,740		$	—	$	—		$	—		$	499,740
Accounts payable		44,089			4,587		5,452			(3,839	)		50,289
Accrued and other current liabilities		25,158			12,335		7,799			—			45,292
Intercompany payable		74,336			—		17,116			(91,452	)		—
Total current liabilities		643,323			16,922		30,367			(95,291	)		595,321
Long-term debt		129,235			—		—			—			129,235
Deferred income taxes and other long-term liabilities		4,934			58,752		551			—			64,237
Shareholders’ Equity:
Common stock and paid-in capital		315,898			77,951		132,650			(210,601	)		315,898
Accumulated other comprehensive loss		(3	)		—		(3,949	)		—			(3,952	)
Retained earnings		161,487			333,389		(72,200	)		(261,189	)		161,487
Total shareholders’ equity		477,382			411,340		56,501			(471,790	)		473,433
Total liabilities and shareholders’ equity	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	75,707		$	72,628	$	24,912		$	(8,075	)	$	165,172
Expenses:
Direct expenses		76,288			61,915		23,386			(8,075	)		153,514
Selling, general and administrative expenses		10,459			4,293		2,843			(4	)		17,591
Total operating expenses		86,747			66,208		26,229			(8,079	)		171,105
Loss on disposal of assets, net		(102	)		9		(2	)		—			(95	)
Equity in income of unconsolidated affiliates, net		(1,039	)		—		—			—			(1,039	)
Operating (loss) income		(9,899	)		6,411		(1,315	)		4			(4,799	)
Equity in net income of consolidated subsidiaries		(4,952	)		—		—			4,952			—
Interest expense		3,908			19		—			—			3,927
Reorganization items, net		26,503			—		—			—			26,503
Other income, net		(46	)		—		(291	)		4			(333	)
		25,413			19		(291	)		4,956			30,097
(Loss) earnings before income taxes		(35,312	)		6,392		(1,024	)		(4,952	)		(34,896	)
Income tax (benefit) expense		(3,235	)		792		(376	)		—			(2,819	)
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	79,857		$	68,717	$	51,404		$	(30,735	)	$	169,243
Expenses:
Direct expenses		78,955			58,263		48,658			(30,793	)		155,083
Selling, general and administrative expenses		8,395			3,256		2,838			(4	)		14,485
Total operating expenses		87,350			61,519		51,496			(30,797	)		169,568
Gain on disposal of assets, net		(150	)		—		(21	)		—			(171	)
Equity in income of unconsolidated affiliates, net		(81	)		—		—			—			(81	)
Operating (loss) income		(7,262	)		7,198		(71	)		62			(73	)
Equity in net income of consolidated subsidiaries		(6,064	)		—		—			6,064			—
Interest expense		8,337			—		542			(539	)		8,340
Other income, net		(365	)		—		128			601			364
		1,908			—		670			6,126			8,704
(Loss) earnings before income taxes		(9,170	)		7,198		(741	)		(6,064	)		(8,777	)
Income tax (benefit) expense		(2,077	)		—		393			—			(1,684	)
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	149,740		$	131,930		$	49,251		$	(13,859	)	$	317,062
Expenses:
Direct expenses		160,793			120,941			42,515			(13,859	)		310,390
Selling, general and administrative expenses		28,507			7,731			6,229			(9	)		42,458
Total operating expenses		189,300			128,672			48,744			(13,868	)		352,848
Loss (gain) on disposal of assets, net		(51	)		9			(2	)		—			(44	)
Equity in income of unconsolidated affiliates, net		(2,400	)		—			—			—			(2,400	)
Operating (loss) income		(37,109	)		3,249			509			9			(33,342	)
Equity in net income of consolidated subsidiaries		(3,825	)		—			—			3,825			—
Interest expense		12,070			23			—			—			12,093
Regorganizations items, net		28,103			—			—			—			28,103
Other income, net		(235	)		—			(67	)		9			(293	)
		36,113			23			(67	)		3,834			39,903
(Loss) earnings before income taxes		(73,222	)		3,226			576			(3,825	)		(73,245	)
Income tax (benefit) expense		(5,904	)		(144	)		121			—			(5,927	)
Net (loss) earnings	$	(67,318	)	$	3,370		$	455		$	(3,825	)	$	(67,318	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	157,949		$	127,426	$	100,900		$	(56,668	)	$	329,607
Expenses:
Direct expenses		162,953			113,627		91,436			(56,707	)		311,309
Selling, general and administrative expenses		17,143			6,423		6,388			(10	)		29,944
Total operating expenses		180,096			120,050		97,824			(56,717	)		341,253
Loss (gain) on disposal of assets, net		729			—		(21	)		—			708
Equity in income of unconsolidated affiliates, net		(45	)		—		—			—			(45	)
Operating (loss) income		(22,831	)		7,376		3,097			49			(12,309	)
Equity in net income of consolidated subsidiaries		(8,163	)		—		—			8,163			—
Interest expense		16,533			—		1,085			(1,081	)		16,537
Other income, net		(63	)		—		337			1,130			1,404
		8,307			—		1,422			8,212			17,941
(Loss) earnings before income taxes		(31,138	)		7,376		1,675			(8,163	)		(30,250	)
Income tax (benefit) expense		(7,063	)		—		888			—			(6,175	)
Net (loss) earnings	$	(24,075	)	$	7,376	$	787		$	(8,163	)	$	(24,075	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)
Currency translation adjustments		—			—		(928	)		—			(928	)
Tax effect of the above-listed adjustments		—			—		25			—			25
Total comprehensive (loss) income	$	(32,077	)	$	5,600	$	(1,551	)	$	(4,952	)	$	(32,980	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)
Unrealized gain on short-term investments		(107	)		—		—			—			(107	)
Currency translation adjustments		—			—		160			—			160
Changes in pension plan asset and benefit obligation		7			—		—			—			7
Tax effect of the above-listed adjustments		100			—		—			—			100
Total comprehensive (loss) income	$	(7,093	)	$	7,198	$	(974	)	$	(6,064	)	$	(6,933	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(67,318	)	$	3,370	$	455		$	(3,825	)		(67,318	)
Currency translation adjustment		—			—		(121	)		—			(121	)
Tax effect of the above-listed adjustments		—			—		33			—			33
Total comprehensive (loss) income	$	(67,318	)	$	3,370	$	367		$	(3,825	)	$	(67,406	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net (loss) earnings	$	(24,075	)	$	7,376	$	787	$	(8,163	)		(24,075	)
Unrealized gain on short-term investments		363			—		—		—			363
Currency translation adjustment		—			—		627		—			627
Changes in pension plan asset and benefit obligation		(1	)		—		—		—			(1	)
Tax effect of the above-listed adjustments		(85	)		—		—		—			(85	)
Total comprehensive (loss) income	$	(23,798	)	$	7,376	$	1,414	$	(8,163	)	$	(23,171	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(20,773	)	$	(6,064	)	$	3,160		$	—	$	(23,677	)
Investing activities:													—
Purchase of property and equipment		(5,956	)		—			(3,014	)		—		(8,970	)
Proceeds from asset dispositions		1,235			—			—			—		1,235
Purchase of short-term investments		(183,421	)		—			—			—		(183,421	)
Proceeds from sale of short-term investments		121,512			—			—			—		121,512
Payment of deposit on aircraft		(50	)										(50	)
Refund of deposit on aircraft		503			—			—			—		503
Loan to unconsolidated affiliate		—			—			—			—		—
Net cash used in investing activities		(66,177	)		—			(3,014	)		—		(69,191	)
Financing activities:													—
Debt issuance costs		(5,668	)		—			—			—		(5,668	)
Proceeds from Term Loan		70,000			—			—					70,000
Due to/from affiliate, net		(8,330	)		7,028			1,302			—		—
Net cash provided by (used in) financing activities		56,002			7,028			1,302			—		64,332
Effect of exchange rate changes on cash		—			—			(483	)		—		(483	)
Increase (decrease) in cash		(30,948	)		964			965			—		(29,019	)
Cash, cash equivalents and restricted cash at beginning of period		46,781			1,259			10,524			—		58,564
Cash, cash equivalents and restricted cash at end of period	$	15,833		$	2,223		$	11,489		$	—	$	29,545

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(506	)	$	3,306		$	2,610		$	—	$	5,410
Investing activities:
Purchase of property and equipment		(16,768	)		—			(1,330	)		—		(18,098	)
Proceeds from asset dispositions		1,453			—			—			—		1,453
Purchase of short-term investments		(260,996	)		—			—			—		(260,996	)
Proceeds from sale of short-term investments		264,918			—			—			—		264,918
Loan to unconsolidated affiliate		(274	)		—			—			—		(274	)
Net cash used in investing activities		(11,667	)		—			(1,330	)		—		(12,997	)
Financing activities:
Proceeds from line of credit		34,295			—			—			—		34,295
Payments on line of credit		(29,575	)		—			—			—		(29,575	)
Due to/from affiliate, net		7,510			(3,073	)		(4,437	)		—		—
Repurchase of common stock		(51	)		—			—			—		(51	)
Net cash provided by (used in) financing activities		12,179			(3,073	)		(4,437	)		—		4,669
Increase (decrease) in cash		6			233			(3,157	)		—		(2,918	)
Cash, beginning of period		47			1,072			7,651			—		8,770
Cash, end of period	$	53		$	1,305		$	4,494		$	—	$	5,852

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Debtor in Possession Financial Information

6 Months Ended

Jun. 30, 2019

Reorganizations [Abstract]

Debtor in Possession Financial Information

18. DEBTOR IN POSSESSION FINANCIAL INFORMATION

The financial statements below represent the condensed financial statements of the Debtors.  The Debtors are PHI, Inc., PHI Air Medical, LLC, PHI Tech Services, Inc., PHI Helipass, LLC, and AM Equity Holdings, LLC. Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the Debtors and the non–debtor subsidiaries have not been eliminated in the Debtors’ financial statements.

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED BALANCE SHEETS

(Thousands of dollars, except share data)

(Unaudited)

	June 30, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	10,310
Short-term investments		76,141
Accounts receivable – net
Trade		153,460
Other		6,120
Inventories of spare parts – net		50,800
Prepaid expenses		11,749
Income taxes receivable		509
Total current assets		309,089
Property and equipment – net		846,095
Right of use assets		127,821
Restricted cash and investments		19,739
Other assets		150,536
Total assets	$	1,453,280
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	66,187
Accrued and other current liabilities		33,168
Current portion of operating lease liabilities		24,125
Current maturities of long term debt		1,750
Total current liabilities		125,230
Long-term debt:
Term loan issued March 13, 2019, net of debt issuance costs of $5,254		62,996
Related party term loan issued September 28, 2018, net of debt issuance costs of $546		129,454
Deferred income taxes		52,135
Other long-term liabilities		3,673
Long-term operating lease liabilities		104,491
Total liabilities not subject to compromise		477,979
Liabilities subject to compromise		513,125
Total liabilities		991,104
Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		291
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,919,681 issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1,290
Additional paid-in capital		314,499
Accumulated other comprehensive income (loss)		(3	)
Retained earnings		146,099
Total shareholders’ equity		462,176
Total liabilities and shareholders’ equity	$	1,453,280

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	Quarter			Six Months
	Ended June 30, 2019
Operating revenues, net	$	139,501		$	266,164
Expenses:		—			—
Direct expenses		129,319			266,368
Selling, general and administrative expenses		14,746			36,228
Total operating expenses		144,065			302,596
Loss on disposal of assets		(93	)		(42	)
Equity in (income) loss of unconsolidated affiliates, net		(1,039	)		(2,400	)
Operating (loss) income		(3,432	)		(33,990	)
Interest expense		3,927			12,093
Reorganization items, net		26,503			28,103
Other income – net		(42	)		(226	)
		30,388			39,970
Loss before income taxes		(33,820	)		(73,960	)
Income tax benefit		(2,443	)		(6,048	)
Net loss	$	(31,377	)	$	(67,912	)

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	Six Months Ended June 30,
	2019
Operating activities:
Net loss		(67,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		29,799
Deferred income taxes		(6,492	)
Loss (gain) on asset dispositions		(42	)
Equity in (income) loss of unconsolidated affiliate, net		(2,400	)
Inventory valuation reserves		1,110
Changes in operating assets and liabilities		19,751
Net cash used in operating activities		(26,186	)
Investing activities:
Purchase of property and equipment		(7,817	)
Proceeds from asset dispositions		1,235
Purchase of short-term investments		(183,421	)
Proceeds from sale of short-term investments		121,512
Payment of deposit on aircraft		(50	)
Refund of deposit on aircraft		503
Net cash used in investing activities		(68,038	)
Financing activities:
Debt issuance cost		(5,668	)
Proceeds from Term Loan		70,000
Net cash provided by financing activities		64,332
Decrease in cash, cash equivalents and restricted cash		(29,892	)
Cash, cash equivalents and restricted cash at the beginning of period		47,865
Cash, cash equivalents and restricted cash end of period	$	17,973

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Reorganization Items

6 Months Ended

Jun. 30, 2019

Reorganizations [Abstract]

Reorganization Items

19. REORGANIZATION ITEMS

ASC 852 requires that transactions and events directly associated with our Chapter 11 reorganization be distinguished from the ongoing operations of the business. The Company refers to “Reorganization items” on its condensed consolidated statements of earnings (loss) to reflect the revenues, expenses, gains and losses that are the direct result of the reorganization of the business consist of professional fees of $1.6 million for the three months ended March 31, 2019 and $26.5 million for the three months ended June 30, 2019.

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Basis of Presentation Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Supplemental Cash Flow Information

The following table sets forth the Company’s reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statement of Cash Flows (in thousands):

	June 30,		December 31,		June 30,		December 31,
	2019		2018		2018		2017
Cash and Cash Equivalents	$	21,882	$	50,874	$	5,852	$	8,770
Restricted Cash		7,663		7,690		—		—
Total Cash, Cash Equivalents and Restricted Cash	$	29,545	$	58,564	$	5,852	$	8,770

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Investments (Tables)

6 Months Ended

Jun. 30, 2019

Investments Debt And Equity Securities [Abstract]

Components of Investments

Investments consisted of the following as of June 30, 2019:

	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	88,217	$	—	$	—	$	88,217
Deferred compensation plan assets included in other assets		889		—		—		889
Total	$	89,106	$	—	$	—	$	89,106

Investments consisted of the following as of December 31, 2018:

	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	26,308	$	—	$	—	$	26,308
Deferred compensation plan assets included in other assets		772		—		—		772
Total	$	27,080	$	—	$	—	$	27,080

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Valuation Accounts (Tables)

6 Months Ended

Jun. 30, 2019

Revenue Recognition And Valuation Accounts [Abstract]

Schedule of Allowance for Contractual Discounts and Estimated Uncompensated Care as a Percentage of Gross Segment Accounts Receivable

The allowance for contractual discounts and estimated uncompensated care (expressed as a percentage of gross segment accounts receivable) as of the dates listed below was as follows:

	June 30, 2019	December 31, 2018
Allowance for Contractual Discounts	55%	51%
Allowance for Uncompensated Care	18%	22%

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Summary of Valuation of Investments and Financial Instruments Pricing Levels

The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:

	June 30, 2019
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	88,217	$	88,217	$	—
Deferred compensation plan assets		889		889		—
Total	$	89,106	$	89,106	$	—

	December 31, 2018
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	26,308	$	26,308	$	—
Deferred compensation plan assets		772		772		—
Total	$	27,080	$	27,080	$	—

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Debt (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Components of Debt

Listed below is information regarding our indebtedness.  All indebtedness owed under our Senior Notes as of June 30, 2019 is classified as subject to compromise, and as of December 31, 2018 was classified as short-term debt on our balance sheet.  The Thirty-Two, LLC and Blue Torch term loans are classified as long-term debt as of June 30, 2019, except for the amount due within the next twelve months.

	June 30, 2019					December 31, 2018
	Principal			Unamortized Debt Issuance Debt Cost		Principal			Unamortized Debt Issuance Debt Cost
Unsecured	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019	$	500,000		$	—	$	500,000		$	260
Secured
Term Loan - Blue Torch Finance, LLC, interest payable quarterly at LIBOR plus 6%, maturing March 13, 2023		70,000			5,254		—			—
Related Party Term Loan - Thirty Two L.L.C., interest payable quarterly at 6%, due September 28, 2020		130,000			546		130,000			765
Total indebtedness		700,000			5,800		630,000			1,025
Less: Current maturities		(1,750	)		—		(500,000	)		—
	$	698,250		$	5,800	$	130,000		$	1,025

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Liabilities Subject to Compromise (Tables)

6 Months Ended

Jun. 30, 2019

Reorganizations [Abstract]

Schedule of Liabilities Subject to Compromise

The following table reflects pre-petition liabilities that are subject to compromise included in our Condensed Consolidated Balance Sheet as of June 30, 2019. See Note 6 - “Debt” for further information on our Senior Notes and related balances subject to compromise:

	June 30, 2019
	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019	$	500,000
Accrued interest payable		13,125
Total liabilities subject to compromise	$	513,125

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Components of Basic and Diluted Earnings Per Share

The components of basic and diluted earnings per share for the quarter and six months ended June 30, 2019 and 2018 are as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,825		15,806		15,825		15,806
Dilutive effect of unvested restricted stock units		—		—		—		—
Weighted average outstanding shares of common stock, diluted (1)		15,825		15,806		15,825		15,806

⁽¹⁾ For the quarter ended June 30, 2019 and 2018, 0 and 425,317 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively, as they were anti-dilutive to earnings per share. For the six months ended June 30, 2019 and 2018, 0 and 14,258 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively as they were anti-dilutive to earnings per share.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Share Based Compensation Expense

The table below sets forth the total amount of stock-based compensation expense for the quarter and six months ended June 30, 2019 and 2018.

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Stock-based compensation expense:
Time-based restricted stock units	$	845	$	435	$	1,685	$	1,077
Performance-based restricted stock units		480		378		955		1,055
Total stock-based compensation expense	$	1,325	$	813	$	2,640	$	2,132

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2019

Revenue From Contract With Customer [Abstract]

Disaggregation of Revenue

The following table presents the Company’s revenues by segment disaggregated by type (in thousands):

	For the Quarter Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Service Revenue
Oil & Gas	$	90,023	$	97,068	$	174,969	$	192,702
Air Medical		69,507		67,151		126,153		124,139
Technical Services		5,642		5,024		15,940		12,766
Total Services	$	165,172	$	169,243	$	317,062	$	329,607
Air Medical Revenue
Traditional provider model	$	12,401	$	12,085	$	24,378	$	23,956
Independent provider model		57,106		55,066		101,775		100,183
Total Air Medical Revenues	$	69,507	$	67,151	$	126,153	$	124,139

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Operating Leases

Operating leases at June 30, 2019 were as follows (in thousands):

	June 30, 2019
	(Thousands of dollars)
Operating lease right-of-use-assets	$	144,944
Current portion of operating lease liabilities		27,535
Operating lease liabilities		118,167
Total operating lease liabilities	$	145,702
Cash paid for operating leases		21,475
ROU assets obtained in exchange for lease obligations		9,402
Weighted average remaining lease term	5 years
Weighted average discount rate		8.25	%

Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities at June 30, 2019 are as follows (in thousands):

	Operating
Six Months Ending June 30,	Leases
	Thousands of dollars
Remainder of 2019	$	19,615
2020		37,140
2021		36,297
2022		34,254
2023		23,872
Thereafter		33,975
Total lease payments		185,153
Less imputed interest		(39,451	)
Total	$	145,702

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Provisions for Contractual Discounts and Estimated Uncompensated Care as a Percentage of Gross Segment Billings

Provisions for contractual discounts and estimated uncompensated care for our Air Medical segment (expressed as a percentage of gross segment billings) were as follows for the periods listed below:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Provision for contractual discounts		70	%		67	%		68	%		66	%
Provision for uncompensated care		8	%		7	%		9	%		8	%

Schedule of Net Revenue Attributable to Insurance, Medicare, Medicaid, and Self-Pay as Percentage of Net Air Medical Revenues

Net revenue attributable to Insurance, Medicare, Medicaid, and Self-Pay (expressed as a percentage of net Air Medical revenues) were as follows for the periods listed below:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Insurance		67	%		72	%		67	%		72	%
Medicare		23	%		19	%		23	%		20	%
Medicaid		9	%		8	%		8	%		8	%
Self-Pay		1	%		1	%		2	%		—	%

Schedule of Financial Information Concerning Reportable Operating Segments

Summarized financial information concerning our reportable operating segments for the quarters and six months ended June 30, 2019 and 2018 is as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Thousands of dollars)						(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	90,023		$	97,068		$	174,969		$	192,702
Air Medical		69,507			67,151			126,153			124,139
Technical Services		5,642			5,024			15,940			12,766
Total operating revenues, net		165,172			169,243			317,062			329,607
Segment direct expenses
Oil and Gas (1)		89,061			94,442			179,031			190,985
Air Medical		59,310			56,776			116,391			110,608
Technical Services		4,104			3,784			12,568			9,671
Total direct expenses		152,475			155,002			307,990			311,264
Segment selling, general and administrative expenses
Oil and Gas		4,672			4,400			9,432			9,321
Air Medical		4,141			3,254			7,433			6,421
Technical Services		152			340			300			710
Total selling, general and administrative expenses		8,965			7,994			17,165			16,452
Total segment direct and selling, general and administrative expenses		161,440			162,996			325,155			327,716
Net segment (loss) profit
Oil and Gas		(3,710	)		(1,774	)		(13,494	)		(7,604	)
Air Medical		6,056			7,121			2,329			7,110
Technical Services		1,386			900			3,072			2,385
Total net segment profit		3,732			6,247			(8,093	)		1,891
Other, net (3)		428			(193	)		337			(2,112	)
Unallocated selling, general and administrative costs (1) (4)		(8,626	)		(6,491	)		(25,293	)		(13,492	)
Reorganization items, net		(26,503	)		—			(28,103	)		—
Interest expense		(3,927	)		(8,340	)		(12,093	)		(16,537	)
(Loss) earnings before income taxes	$	(34,896	)	$	(8,777	)	$	(73,245	)	$	(30,250	)

(1) Included in direct expenses and unallocated selling, general, and administrative costs are the depreciation and amortization expense amounts below:

Depreciation and Amortization Expense Included in Direct Expenses and Unallocated Selling, General, and Administrative Costs

	Depreciation and Amortization Expense
	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Thousands of dollars)
Segment Direct Expense:
Oil and Gas	$	11,618	$	11,486	$	22,896	$	23,269
Air Medical		5,485		6,091		10,771		11,715
Technical Services		133		142		204		287
Total	$	17,236	$	17,719	$	33,871	$	35,271
Unallocated SG&A	$	3,095	$	1,412	$	4,904	$	3,327

(2) Includes equity in (earnings) of unconsolidated affiliates, net.

(3) Consists of (gains) losses on disposition of property and equipment and other income.

(4) Represents corporate overhead expenses not allocable to segments.

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Condensed Consolidating Financial Information (Tables)

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Condensed Consolidating Balance Sheets

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

(Unaudited)

	June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	8,170		$	2,223	$	11,489		$	—		$	21,882
Short-term investments		76,141			—		—			—			76,141
Accounts receivable – net		64,467			101,381		23,676			(6,180	)		183,344
Intercompany receivable		—			98,616		22,116			(120,732	)		—
Inventories of spare parts – net		29,871			20,929		3,442			—			54,242
Prepaid expenses		8,944			2,805		1,323			—			13,072
Income taxes receivable		7			502		—			—			509
Total current assets		187,600			226,456		62,046			(126,912	)		349,190
Investment in subsidiaries		475,391			—		—			(475,391	)		—
Property and equipment – net		562,880			283,231		39,558			—			885,669
Right of use assets		116,918			11,652		16,374			—			144,944
Restricted cash and investments		19,739			—		—			—			19,739
Other assets		18,678			1,071		1,188			—			20,937
Deferred income tax		—			—		5,137			—			5,137
Total assets	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,526		$	6,437	$	5,832		$	(6,180	)	$	70,615
Accrued and other current liabilities		19,667			13,500		5,316			—			38,483
Current portion of operating lease liabilities		20,823			3,404		3,308			—			27,535
Current maturities of long-term debt		1,750			—		—			—			1,750
Intercompany payable		63,263			17,125		40,344			(120,732	)		—
Total current liabilities		170,029			40,466		54,800			(126,912	)		138,383
Long-term Debt		192,450			—		—			—			192,450
Deferred income taxes and other long-term liabilities		93,711			67,234		12,859			—			173,804
Liabilities subject to compromise		513,125			—		—			—			513,125
Shareholders’ Equity:
Common stock and paid-in capital		317,725			77,951		132,426			(210,377	)		317,725
Accumulated other comprehensive loss		(3	)		—		(4,037	)		—			(4,040	)
Retained earnings		94,169			336,759		(71,745	)		(265,014	)		94,169
Total shareholders’ equity		411,891			414,710		56,644			(475,391	)		407,854
Total liabilities and shareholders’ equity	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

	December 31, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	39,091		$	1,259	$	10,524		$	—		$	50,874
Short-term investments		14,232			—		—			—			14,232
Accounts receivable – net		64,416			93,060		28,812			(3,823	)		182,465
Intercompany receivable		—			91,468		—			(91,468	)		—
Inventories of spare parts – net		43,933			9,577		3,188			—			56,698
Prepaid expenses		7,295			2,520		1,604			—			11,419
Income taxes receivable		394			556		—			—			950
Total current assets		169,361			198,440		44,128			(95,291	)		316,638
Investment in subsidiaries and others		471,790			—		—			(471,790	)		—
Property and equipment – net		576,763			287,375		38,347			—			902,485
Restricted investments		19,781			—		—			—			19,781
Other assets		17,179			1,199		—			—			18,378
Deferred income tax		—			—		4,944			—			4,944
Total assets	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Senior Notes issued March 17, 2014	$	499,740		$	—	$	—		$	—		$	499,740
Accounts payable		44,089			4,587		5,452			(3,839	)		50,289
Accrued and other current liabilities		25,158			12,335		7,799			—			45,292
Intercompany payable		74,336			—		17,116			(91,452	)		—
Total current liabilities		643,323			16,922		30,367			(95,291	)		595,321
Long-term debt		129,235			—		—			—			129,235
Deferred income taxes and other long-term liabilities		4,934			58,752		551			—			64,237
Shareholders’ Equity:
Common stock and paid-in capital		315,898			77,951		132,650			(210,601	)		315,898
Accumulated other comprehensive loss		(3	)		—		(3,949	)		—			(3,952	)
Retained earnings		161,487			333,389		(72,200	)		(261,189	)		161,487
Total shareholders’ equity		477,382			411,340		56,501			(471,790	)		473,433
Total liabilities and shareholders’ equity	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226

Condensed Consolidating Statements of Operations

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	75,707		$	72,628	$	24,912		$	(8,075	)	$	165,172
Expenses:
Direct expenses		76,288			61,915		23,386			(8,075	)		153,514
Selling, general and administrative expenses		10,459			4,293		2,843			(4	)		17,591
Total operating expenses		86,747			66,208		26,229			(8,079	)		171,105
Loss on disposal of assets, net		(102	)		9		(2	)		—			(95	)
Equity in income of unconsolidated affiliates, net		(1,039	)		—		—			—			(1,039	)
Operating (loss) income		(9,899	)		6,411		(1,315	)		4			(4,799	)
Equity in net income of consolidated subsidiaries		(4,952	)		—		—			4,952			—
Interest expense		3,908			19		—			—			3,927
Reorganization items, net		26,503			—		—			—			26,503
Other income, net		(46	)		—		(291	)		4			(333	)
		25,413			19		(291	)		4,956			30,097
(Loss) earnings before income taxes		(35,312	)		6,392		(1,024	)		(4,952	)		(34,896	)
Income tax (benefit) expense		(3,235	)		792		(376	)		—			(2,819	)
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	79,857		$	68,717	$	51,404		$	(30,735	)	$	169,243
Expenses:
Direct expenses		78,955			58,263		48,658			(30,793	)		155,083
Selling, general and administrative expenses		8,395			3,256		2,838			(4	)		14,485
Total operating expenses		87,350			61,519		51,496			(30,797	)		169,568
Gain on disposal of assets, net		(150	)		—		(21	)		—			(171	)
Equity in income of unconsolidated affiliates, net		(81	)		—		—			—			(81	)
Operating (loss) income		(7,262	)		7,198		(71	)		62			(73	)
Equity in net income of consolidated subsidiaries		(6,064	)		—		—			6,064			—
Interest expense		8,337			—		542			(539	)		8,340
Other income, net		(365	)		—		128			601			364
		1,908			—		670			6,126			8,704
(Loss) earnings before income taxes		(9,170	)		7,198		(741	)		(6,064	)		(8,777	)
Income tax (benefit) expense		(2,077	)		—		393			—			(1,684	)
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	149,740		$	131,930		$	49,251		$	(13,859	)	$	317,062
Expenses:
Direct expenses		160,793			120,941			42,515			(13,859	)		310,390
Selling, general and administrative expenses		28,507			7,731			6,229			(9	)		42,458
Total operating expenses		189,300			128,672			48,744			(13,868	)		352,848
Loss (gain) on disposal of assets, net		(51	)		9			(2	)		—			(44	)
Equity in income of unconsolidated affiliates, net		(2,400	)		—			—			—			(2,400	)
Operating (loss) income		(37,109	)		3,249			509			9			(33,342	)
Equity in net income of consolidated subsidiaries		(3,825	)		—			—			3,825			—
Interest expense		12,070			23			—			—			12,093
Regorganizations items, net		28,103			—			—			—			28,103
Other income, net		(235	)		—			(67	)		9			(293	)
		36,113			23			(67	)		3,834			39,903
(Loss) earnings before income taxes		(73,222	)		3,226			576			(3,825	)		(73,245	)
Income tax (benefit) expense		(5,904	)		(144	)		121			—			(5,927	)
Net (loss) earnings	$	(67,318	)	$	3,370		$	455		$	(3,825	)	$	(67,318	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	157,949		$	127,426	$	100,900		$	(56,668	)	$	329,607
Expenses:
Direct expenses		162,953			113,627		91,436			(56,707	)		311,309
Selling, general and administrative expenses		17,143			6,423		6,388			(10	)		29,944
Total operating expenses		180,096			120,050		97,824			(56,717	)		341,253
Loss (gain) on disposal of assets, net		729			—		(21	)		—			708
Equity in income of unconsolidated affiliates, net		(45	)		—		—			—			(45	)
Operating (loss) income		(22,831	)		7,376		3,097			49			(12,309	)
Equity in net income of consolidated subsidiaries		(8,163	)		—		—			8,163			—
Interest expense		16,533			—		1,085			(1,081	)		16,537
Other income, net		(63	)		—		337			1,130			1,404
		8,307			—		1,422			8,212			17,941
(Loss) earnings before income taxes		(31,138	)		7,376		1,675			(8,163	)		(30,250	)
Income tax (benefit) expense		(7,063	)		—		888			—			(6,175	)
Net (loss) earnings	$	(24,075	)	$	7,376	$	787		$	(8,163	)	$	(24,075	)

Condensed Consolidated Statements of Comprehensive Income (Loss)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)
Currency translation adjustments		—			—		(928	)		—			(928	)
Tax effect of the above-listed adjustments		—			—		25			—			25
Total comprehensive (loss) income	$	(32,077	)	$	5,600	$	(1,551	)	$	(4,952	)	$	(32,980	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)
Unrealized gain on short-term investments		(107	)		—		—			—			(107	)
Currency translation adjustments		—			—		160			—			160
Changes in pension plan asset and benefit obligation		7			—		—			—			7
Tax effect of the above-listed adjustments		100			—		—			—			100
Total comprehensive (loss) income	$	(7,093	)	$	7,198	$	(974	)	$	(6,064	)	$	(6,933	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(67,318	)	$	3,370	$	455		$	(3,825	)		(67,318	)
Currency translation adjustment		—			—		(121	)		—			(121	)
Tax effect of the above-listed adjustments		—			—		33			—			33
Total comprehensive (loss) income	$	(67,318	)	$	3,370	$	367		$	(3,825	)	$	(67,406	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net (loss) earnings	$	(24,075	)	$	7,376	$	787	$	(8,163	)		(24,075	)
Unrealized gain on short-term investments		363			—		—		—			363
Currency translation adjustment		—			—		627		—			627
Changes in pension plan asset and benefit obligation		(1	)		—		—		—			(1	)
Tax effect of the above-listed adjustments		(85	)		—		—		—			(85	)
Total comprehensive (loss) income	$	(23,798	)	$	7,376	$	1,414	$	(8,163	)	$	(23,171	)

Condensed Consolidating Statements of Cash Flows

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(20,773	)	$	(6,064	)	$	3,160		$	—	$	(23,677	)
Investing activities:													—
Purchase of property and equipment		(5,956	)		—			(3,014	)		—		(8,970	)
Proceeds from asset dispositions		1,235			—			—			—		1,235
Purchase of short-term investments		(183,421	)		—			—			—		(183,421	)
Proceeds from sale of short-term investments		121,512			—			—			—		121,512
Payment of deposit on aircraft		(50	)										(50	)
Refund of deposit on aircraft		503			—			—			—		503
Loan to unconsolidated affiliate		—			—			—			—		—
Net cash used in investing activities		(66,177	)		—			(3,014	)		—		(69,191	)
Financing activities:													—
Debt issuance costs		(5,668	)		—			—			—		(5,668	)
Proceeds from Term Loan		70,000			—			—					70,000
Due to/from affiliate, net		(8,330	)		7,028			1,302			—		—
Net cash provided by (used in) financing activities		56,002			7,028			1,302			—		64,332
Effect of exchange rate changes on cash		—			—			(483	)		—		(483	)
Increase (decrease) in cash		(30,948	)		964			965			—		(29,019	)
Cash, cash equivalents and restricted cash at beginning of period		46,781			1,259			10,524			—		58,564
Cash, cash equivalents and restricted cash at end of period	$	15,833		$	2,223		$	11,489		$	—	$	29,545

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(506	)	$	3,306		$	2,610		$	—	$	5,410
Investing activities:
Purchase of property and equipment		(16,768	)		—			(1,330	)		—		(18,098	)
Proceeds from asset dispositions		1,453			—			—			—		1,453
Purchase of short-term investments		(260,996	)		—			—			—		(260,996	)
Proceeds from sale of short-term investments		264,918			—			—			—		264,918
Loan to unconsolidated affiliate		(274	)		—			—			—		(274	)
Net cash used in investing activities		(11,667	)		—			(1,330	)		—		(12,997	)
Financing activities:
Proceeds from line of credit		34,295			—			—			—		34,295
Payments on line of credit		(29,575	)		—			—			—		(29,575	)
Due to/from affiliate, net		7,510			(3,073	)		(4,437	)		—		—
Repurchase of common stock		(51	)		—			—			—		(51	)
Net cash provided by (used in) financing activities		12,179			(3,073	)		(4,437	)		—		4,669
Increase (decrease) in cash		6			233			(3,157	)		—		(2,918	)
Cash, beginning of period		47			1,072			7,651			—		8,770
Cash, end of period	$	53		$	1,305		$	4,494		$	—	$	5,852

XML

Debtor in Possession Financial Information (Tables)

6 Months Ended

Jun. 30, 2019

Condensed Financial Statements Captions [Line Items]

Condensed Consolidating Balance Sheets

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

(Unaudited)

	June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	8,170		$	2,223	$	11,489		$	—		$	21,882
Short-term investments		76,141			—		—			—			76,141
Accounts receivable – net		64,467			101,381		23,676			(6,180	)		183,344
Intercompany receivable		—			98,616		22,116			(120,732	)		—
Inventories of spare parts – net		29,871			20,929		3,442			—			54,242
Prepaid expenses		8,944			2,805		1,323			—			13,072
Income taxes receivable		7			502		—			—			509
Total current assets		187,600			226,456		62,046			(126,912	)		349,190
Investment in subsidiaries		475,391			—		—			(475,391	)		—
Property and equipment – net		562,880			283,231		39,558			—			885,669
Right of use assets		116,918			11,652		16,374			—			144,944
Restricted cash and investments		19,739			—		—			—			19,739
Other assets		18,678			1,071		1,188			—			20,937
Deferred income tax		—			—		5,137			—			5,137
Total assets	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,526		$	6,437	$	5,832		$	(6,180	)	$	70,615
Accrued and other current liabilities		19,667			13,500		5,316			—			38,483
Current portion of operating lease liabilities		20,823			3,404		3,308			—			27,535
Current maturities of long-term debt		1,750			—		—			—			1,750
Intercompany payable		63,263			17,125		40,344			(120,732	)		—
Total current liabilities		170,029			40,466		54,800			(126,912	)		138,383
Long-term Debt		192,450			—		—			—			192,450
Deferred income taxes and other long-term liabilities		93,711			67,234		12,859			—			173,804
Liabilities subject to compromise		513,125			—		—			—			513,125
Shareholders’ Equity:
Common stock and paid-in capital		317,725			77,951		132,426			(210,377	)		317,725
Accumulated other comprehensive loss		(3	)		—		(4,037	)		—			(4,040	)
Retained earnings		94,169			336,759		(71,745	)		(265,014	)		94,169
Total shareholders’ equity		411,891			414,710		56,644			(475,391	)		407,854
Total liabilities and shareholders’ equity	$	1,381,206		$	522,410	$	124,303		$	(602,303	)	$	1,425,616

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

	December 31, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	39,091		$	1,259	$	10,524		$	—		$	50,874
Short-term investments		14,232			—		—			—			14,232
Accounts receivable – net		64,416			93,060		28,812			(3,823	)		182,465
Intercompany receivable		—			91,468		—			(91,468	)		—
Inventories of spare parts – net		43,933			9,577		3,188			—			56,698
Prepaid expenses		7,295			2,520		1,604			—			11,419
Income taxes receivable		394			556		—			—			950
Total current assets		169,361			198,440		44,128			(95,291	)		316,638
Investment in subsidiaries and others		471,790			—		—			(471,790	)		—
Property and equipment – net		576,763			287,375		38,347			—			902,485
Restricted investments		19,781			—		—			—			19,781
Other assets		17,179			1,199		—			—			18,378
Deferred income tax		—			—		4,944			—			4,944
Total assets	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Senior Notes issued March 17, 2014	$	499,740		$	—	$	—		$	—		$	499,740
Accounts payable		44,089			4,587		5,452			(3,839	)		50,289
Accrued and other current liabilities		25,158			12,335		7,799			—			45,292
Intercompany payable		74,336			—		17,116			(91,452	)		—
Total current liabilities		643,323			16,922		30,367			(95,291	)		595,321
Long-term debt		129,235			—		—			—			129,235
Deferred income taxes and other long-term liabilities		4,934			58,752		551			—			64,237
Shareholders’ Equity:
Common stock and paid-in capital		315,898			77,951		132,650			(210,601	)		315,898
Accumulated other comprehensive loss		(3	)		—		(3,949	)		—			(3,952	)
Retained earnings		161,487			333,389		(72,200	)		(261,189	)		161,487
Total shareholders’ equity		477,382			411,340		56,501			(471,790	)		473,433
Total liabilities and shareholders’ equity	$	1,254,874		$	487,014	$	87,419		$	(567,081	)	$	1,262,226

Condensed Consolidating Statements of Operations

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Quarter Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	75,707		$	72,628	$	24,912		$	(8,075	)	$	165,172
Expenses:
Direct expenses		76,288			61,915		23,386			(8,075	)		153,514
Selling, general and administrative expenses		10,459			4,293		2,843			(4	)		17,591
Total operating expenses		86,747			66,208		26,229			(8,079	)		171,105
Loss on disposal of assets, net		(102	)		9		(2	)		—			(95	)
Equity in income of unconsolidated affiliates, net		(1,039	)		—		—			—			(1,039	)
Operating (loss) income		(9,899	)		6,411		(1,315	)		4			(4,799	)
Equity in net income of consolidated subsidiaries		(4,952	)		—		—			4,952			—
Interest expense		3,908			19		—			—			3,927
Reorganization items, net		26,503			—		—			—			26,503
Other income, net		(46	)		—		(291	)		4			(333	)
		25,413			19		(291	)		4,956			30,097
(Loss) earnings before income taxes		(35,312	)		6,392		(1,024	)		(4,952	)		(34,896	)
Income tax (benefit) expense		(3,235	)		792		(376	)		—			(2,819	)
Net (loss) earnings	$	(32,077	)	$	5,600	$	(648	)	$	(4,952	)	$	(32,077	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Quarter Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	79,857		$	68,717	$	51,404		$	(30,735	)	$	169,243
Expenses:
Direct expenses		78,955			58,263		48,658			(30,793	)		155,083
Selling, general and administrative expenses		8,395			3,256		2,838			(4	)		14,485
Total operating expenses		87,350			61,519		51,496			(30,797	)		169,568
Gain on disposal of assets, net		(150	)		—		(21	)		—			(171	)
Equity in income of unconsolidated affiliates, net		(81	)		—		—			—			(81	)
Operating (loss) income		(7,262	)		7,198		(71	)		62			(73	)
Equity in net income of consolidated subsidiaries		(6,064	)		—		—			6,064			—
Interest expense		8,337			—		542			(539	)		8,340
Other income, net		(365	)		—		128			601			364
		1,908			—		670			6,126			8,704
(Loss) earnings before income taxes		(9,170	)		7,198		(741	)		(6,064	)		(8,777	)
Income tax (benefit) expense		(2,077	)		—		393			—			(1,684	)
Net (loss) earnings	$	(7,093	)	$	7,198	$	(1,134	)	$	(6,064	)	$	(7,093	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	149,740		$	131,930		$	49,251		$	(13,859	)	$	317,062
Expenses:
Direct expenses		160,793			120,941			42,515			(13,859	)		310,390
Selling, general and administrative expenses		28,507			7,731			6,229			(9	)		42,458
Total operating expenses		189,300			128,672			48,744			(13,868	)		352,848
Loss (gain) on disposal of assets, net		(51	)		9			(2	)		—			(44	)
Equity in income of unconsolidated affiliates, net		(2,400	)		—			—			—			(2,400	)
Operating (loss) income		(37,109	)		3,249			509			9			(33,342	)
Equity in net income of consolidated subsidiaries		(3,825	)		—			—			3,825			—
Interest expense		12,070			23			—			—			12,093
Regorganizations items, net		28,103			—			—			—			28,103
Other income, net		(235	)		—			(67	)		9			(293	)
		36,113			23			(67	)		3,834			39,903
(Loss) earnings before income taxes		(73,222	)		3,226			576			(3,825	)		(73,245	)
Income tax (benefit) expense		(5,904	)		(144	)		121			—			(5,927	)
Net (loss) earnings	$	(67,318	)	$	3,370		$	455		$	(3,825	)	$	(67,318	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	157,949		$	127,426	$	100,900		$	(56,668	)	$	329,607
Expenses:
Direct expenses		162,953			113,627		91,436			(56,707	)		311,309
Selling, general and administrative expenses		17,143			6,423		6,388			(10	)		29,944
Total operating expenses		180,096			120,050		97,824			(56,717	)		341,253
Loss (gain) on disposal of assets, net		729			—		(21	)		—			708
Equity in income of unconsolidated affiliates, net		(45	)		—		—			—			(45	)
Operating (loss) income		(22,831	)		7,376		3,097			49			(12,309	)
Equity in net income of consolidated subsidiaries		(8,163	)		—		—			8,163			—
Interest expense		16,533			—		1,085			(1,081	)		16,537
Other income, net		(63	)		—		337			1,130			1,404
		8,307			—		1,422			8,212			17,941
(Loss) earnings before income taxes		(31,138	)		7,376		1,675			(8,163	)		(30,250	)
Income tax (benefit) expense		(7,063	)		—		888			—			(6,175	)
Net (loss) earnings	$	(24,075	)	$	7,376	$	787		$	(8,163	)	$	(24,075	)

Condensed Consolidating Statements of Cash Flows

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2019
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(20,773	)	$	(6,064	)	$	3,160		$	—	$	(23,677	)
Investing activities:													—
Purchase of property and equipment		(5,956	)		—			(3,014	)		—		(8,970	)
Proceeds from asset dispositions		1,235			—			—			—		1,235
Purchase of short-term investments		(183,421	)		—			—			—		(183,421	)
Proceeds from sale of short-term investments		121,512			—			—			—		121,512
Payment of deposit on aircraft		(50	)										(50	)
Refund of deposit on aircraft		503			—			—			—		503
Loan to unconsolidated affiliate		—			—			—			—		—
Net cash used in investing activities		(66,177	)		—			(3,014	)		—		(69,191	)
Financing activities:													—
Debt issuance costs		(5,668	)		—			—			—		(5,668	)
Proceeds from Term Loan		70,000			—			—					70,000
Due to/from affiliate, net		(8,330	)		7,028			1,302			—		—
Net cash provided by (used in) financing activities		56,002			7,028			1,302			—		64,332
Effect of exchange rate changes on cash		—			—			(483	)		—		(483	)
Increase (decrease) in cash		(30,948	)		964			965			—		(29,019	)
Cash, cash equivalents and restricted cash at beginning of period		46,781			1,259			10,524			—		58,564
Cash, cash equivalents and restricted cash at end of period	$	15,833		$	2,223		$	11,489		$	—	$	29,545

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	For the Six Months Ended June 30, 2018
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(506	)	$	3,306		$	2,610		$	—	$	5,410
Investing activities:
Purchase of property and equipment		(16,768	)		—			(1,330	)		—		(18,098	)
Proceeds from asset dispositions		1,453			—			—			—		1,453
Purchase of short-term investments		(260,996	)		—			—			—		(260,996	)
Proceeds from sale of short-term investments		264,918			—			—			—		264,918
Loan to unconsolidated affiliate		(274	)		—			—			—		(274	)
Net cash used in investing activities		(11,667	)		—			(1,330	)		—		(12,997	)
Financing activities:
Proceeds from line of credit		34,295			—			—			—		34,295
Payments on line of credit		(29,575	)		—			—			—		(29,575	)
Due to/from affiliate, net		7,510			(3,073	)		(4,437	)		—		—
Repurchase of common stock		(51	)		—			—			—		(51	)
Net cash provided by (used in) financing activities		12,179			(3,073	)		(4,437	)		—		4,669
Increase (decrease) in cash		6			233			(3,157	)		—		(2,918	)
Cash, beginning of period		47			1,072			7,651			—		8,770
Cash, end of period	$	53		$	1,305		$	4,494		$	—	$	5,852

Phi, Inc. and Debtors [Member]

Condensed Financial Statements Captions [Line Items]

Condensed Consolidating Balance Sheets

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED BALANCE SHEETS

(Thousands of dollars, except share data)

(Unaudited)

	June 30, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	10,310
Short-term investments		76,141
Accounts receivable – net
Trade		153,460
Other		6,120
Inventories of spare parts – net		50,800
Prepaid expenses		11,749
Income taxes receivable		509
Total current assets		309,089
Property and equipment – net		846,095
Right of use assets		127,821
Restricted cash and investments		19,739
Other assets		150,536
Total assets	$	1,453,280
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	66,187
Accrued and other current liabilities		33,168
Current portion of operating lease liabilities		24,125
Current maturities of long term debt		1,750
Total current liabilities		125,230
Long-term debt:
Term loan issued March 13, 2019, net of debt issuance costs of $5,254		62,996
Related party term loan issued September 28, 2018, net of debt issuance costs of $546		129,454
Deferred income taxes		52,135
Other long-term liabilities		3,673
Long-term operating lease liabilities		104,491
Total liabilities not subject to compromise		477,979
Liabilities subject to compromise		513,125
Total liabilities		991,104
Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		291
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,919,681 issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1,290
Additional paid-in capital		314,499
Accumulated other comprehensive income (loss)		(3	)
Retained earnings		146,099
Total shareholders’ equity		462,176
Total liabilities and shareholders’ equity	$	1,453,280

Condensed Consolidating Statements of Operations

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

	Quarter			Six Months
	Ended June 30, 2019
Operating revenues, net	$	139,501		$	266,164
Expenses:		—			—
Direct expenses		129,319			266,368
Selling, general and administrative expenses		14,746			36,228
Total operating expenses		144,065			302,596
Loss on disposal of assets		(93	)		(42	)
Equity in (income) loss of unconsolidated affiliates, net		(1,039	)		(2,400	)
Operating (loss) income		(3,432	)		(33,990	)
Interest expense		3,927			12,093
Reorganization items, net		26,503			28,103
Other income – net		(42	)		(226	)
		30,388			39,970
Loss before income taxes		(33,820	)		(73,960	)
Income tax benefit		(2,443	)		(6,048	)
Net loss	$	(31,377	)	$	(67,912	)

Condensed Consolidating Statements of Cash Flows

PHI, INC. AND DEBTOR'S

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

	Six Months Ended June 30,
	2019
Operating activities:
Net loss		(67,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		29,799
Deferred income taxes		(6,492	)
Loss (gain) on asset dispositions		(42	)
Equity in (income) loss of unconsolidated affiliate, net		(2,400	)
Inventory valuation reserves		1,110
Changes in operating assets and liabilities		19,751
Net cash used in operating activities		(26,186	)
Investing activities:
Purchase of property and equipment		(7,817	)
Proceeds from asset dispositions		1,235
Purchase of short-term investments		(183,421	)
Proceeds from sale of short-term investments		121,512
Payment of deposit on aircraft		(50	)
Refund of deposit on aircraft		503
Net cash used in investing activities		(68,038	)
Financing activities:
Debt issuance cost		(5,668	)
Proceeds from Term Loan		70,000
Net cash provided by financing activities		64,332
Decrease in cash, cash equivalents and restricted cash		(29,892	)
Cash, cash equivalents and restricted cash at the beginning of period		47,865
Cash, cash equivalents and restricted cash end of period	$	17,973

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Basis of Presentation - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Cash and Cash Equivalents	$ 21,882	$ 50,874	$ 5,852	$ 8,770
Restricted Cash	7,663	7,690	0	0
Total Cash, Cash Equivalents and Restricted Cash	$ 29,545	$ 58,564	$ 5,852	$ 8,770

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Bankruptcy Filing - Additional Information (Details) $ in Thousands			6 Months Ended
	Aug. 02, 2019 USD ($)	Jun. 18, 2019	Jun. 30, 2019 USD ($)	Jul. 11, 2019 USD ($)	Mar. 18, 2019 USD ($) executive employee	Mar. 14, 2019 subsidiary
Reorganizations [Line Items]
Number of domestic subsidiaries | subsidiary						4
Reorganization plan, description			Subject to certain exceptions, this settlement contemplates issuing to our current equity holders three-year warrants entitling the holders to acquire under certain specified terms and conditions up to an aggregate of 5% of the reorganized parent’s equity interests issued and outstanding as of our emergence from bankruptcy, subject to dilution in connection with future equity issuances.
Reorganization plan, term of warrants issued or to be issued		3 years
Number of senior executives incentivized to stay under retention plan | executive					7
Potential retention funds available to senior executives if milestone plan metrics reach Threshold			$ 4,200
Potential retention funds available to senior executives if certain milestone plan metrics are achieved					$ 5,600
Potential retention funds available to senior executives if milestone metrics exceed plan					$ 7,000
Number of non-insider employees incentivized to stay under retention plan | employee					61
Potential retention funds available to non-insider employees					$ 3,500
Subsequent Event [Member] | First Lien Senior Secured Term Loan [Member]
Reorganizations [Line Items]
Term loan commitments from lenders	$ 225,000
Term loan commitments, maturity term	5 years
Commitment Agreement [Member]
Reorganizations [Line Items]
Debtor-in-possession financing arrangement, description			Subject to the terms and conditions of the Commitment Agreement, the Commitment Parties have agreed, in the aggregate, to provide up to $75 million cash (the “Equity Commitment”) in exchange for shares of common stock in the reorganized parent company. Under the Commitment Agreement, the shares would be issued at a discount of 25% to the value assigned to such shares in the Plan (as defined below). In addition, each of the Commitment Parties would be paid their pro rata share of an overall commitment fee of $15 million. The commitment fee would be paid on the Emergence Date in the form of additional shares of common stock of the reorganized parent company.
Debtor-in-possession financing, termination description			The Commitment Agreement may be terminated in a number of circumstances. We will be required to pay (i) a $3.75 million termination fee if we terminate the Commitment Agreement in connection with the Board’s exercise of its fiduciary duties and certain other conditions are met, including entering into an agreement to effect an alternative transaction within 12 months, or (ii) a higher termination fee if the Commitment Parties terminate the Commitment Agreement in certain other limited circumstances.
Commitment Agreement [Member] | Subsequent Event [Member]
Reorganizations [Line Items]
Percentage of discount on shares to be issued to commitment parties				25.00%
Overall commitment fee payable to commitment parties				$ 15,000
Termination fee payable to commitment parties, subject to conditions				3,750
Maximum [Member]
Reorganizations [Line Items]
Reorganization plan, ownership percentage of equity interests on emergence from bankruptcy		5.00%
Maximum [Member] | Commitment Agreement [Member] | Subsequent Event [Member]
Reorganizations [Line Items]
Debtor-in-possession financing, amount arranged				$ 75,000

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Investments - Components of Investments (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Cost Basis	$ 89,106	$ 27,080
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	89,106	27,080
Money Market Mutual Funds [Member]
Debt Securities, Available-for-sale [Line Items]
Cost Basis	88,217	26,308
Fair Value	88,217	26,308
Deferred Compensation Plan Assets [Member]
Debt Securities, Available-for-sale [Line Items]
Cost Basis	889	772
Fair Value	$ 889	$ 772

XML

Investments - Additional Information (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Restricted Cash and Investments [Member]
Schedule Of Investment Income Reported Amounts By Category [Line Items]
Long-term investments	$ 12.1	$ 12.1

XML

Valuation Accounts - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items]
Allowance for doubtful accounts	$ 6.3		$ 6.3		$ 6.1
Value of services to patients who are unable to pay	1.6	$ 1.7	3.5	$ 3.3
Estimated cost of providing charity services	0.3	$ 0.4	0.8	$ 0.8
Valuation reserves related to obsolescence and slow moving inventory	19.4		19.4		17.9
Air Medical [Member]
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items]
Allowance for contractual discounts against outstanding accounts receivable	140.5		140.5		123.8
Allowance for uncompensated care against outstanding accounts receivable	$ 45.5		$ 45.5		$ 51.9

XML

Valuation Accounts - Schedule of Allowance for Contractual Discounts and Estimated Uncompensated Care as a Percentage of Gross Segment Accounts Receivable (Detail) - Air Medical [Member] - Trade Accounts Receivable [Member]	Jun. 30, 2019	Dec. 31, 2018
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items]
Allowance for Contractual Discounts	55.00%	51.00%
Allowance for Uncompensated Care	18.00%	22.00%

XML

Fair Value Measurements - Summary of Valuation of Investments and Financial Instruments Pricing Levels (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 89,106	$ 27,080
Deferred Compensation Plan Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	889	772
Money Market Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	88,217	26,308
(Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	89,106	27,080
(Level 1) [Member] | Deferred Compensation Plan Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	889	772
(Level 1) [Member] | Money Market Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 88,217	$ 26,308

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	Jun. 30, 2019	Dec. 31, 2018	Mar. 17, 2014
Fair Value Measurements Disclosure [Line Items]
The fair value investments reclassification of assets between level 1 and level 2	$ 0	$ 0
The fair value of Senior Notes, based on quoted market prices	$ 245,000,000	$ 344,200,000
5.25% Senior Notes due March 15, 2019 [Member] | Senior Notes [Member]
Fair Value Measurements Disclosure [Line Items]
Interest rate on Senior Notes	5.25%	5.25%	5.25%
(Level 2) [Member]
Fair Value Measurements Disclosure [Line Items]
Investments	$ 0	$ 0
Fair Value, Inputs, Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Investments	$ 0	$ 0

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Debt - Components of Long-term Debt (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 13, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Principal	$ 700,000		$ 630,000
Unamortized debt issuance debt costs	5,800		1,025
Long-term Debt, Current Maturities	(1,750)		(500,000)
Long-term debt	698,250		130,000
5.25% Senior Notes due March 15, 2019 [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Principal	500,000		500,000
Unamortized debt issuance debt costs			260
6% Blue Torch Finance, LLC Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Principal	70,000	$ 70,000
Unamortized debt issuance debt costs	5,254
6% Related Party Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Principal	130,000		130,000
Unamortized debt issuance debt costs	$ 546		$ 765

XML

Debt - Components of Long-term Debt (Additional Information) (Detail)		6 Months Ended
	Mar. 13, 2019	Jun. 30, 2019	Dec. 31, 2018	Mar. 17, 2014
Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	6.00%
5.25% Senior Notes due March 15, 2019 [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Interest rate on debt		5.25%	5.25%	5.25%
Debt, maturity date		Mar. 15, 2019
6% Blue Torch Finance, LLC Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Debt, maturity date		Mar. 13, 2023
6% Blue Torch Finance, LLC Term Loan [Member] | Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		6.00%
6% Related Party Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Interest rate on debt		6.00%
Debt, maturity date		Sep. 28, 2020

XML

Debt - Additional Information (Detail)			6 Months Ended
	Aug. 02, 2019 USD ($)	Mar. 13, 2019 USD ($) Air-craft	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 28, 2018 USD ($)	Mar. 17, 2014 USD ($)
Debt Instrument [Line Items]
Long-term Debt, Gross			$ 700,000,000	$ 630,000,000
Letters of credit outstanding under the facility			19,700,000	$ 19,800,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Letters of credit outstanding under the facility			$ 7,600,000
Term Loan [Member]
Debt Instrument [Line Items]
Number of Aircraft Securing Debt Agreement | Air-craft		91
Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		6.00%
Term Loan [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		5.00%
5.25% Senior Notes due March 15, 2019 [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Interest rate on debt			5.25%	5.25%		5.25%
Debt, maturity date			Mar. 15, 2019
Long-term Debt, Gross			$ 500,000,000	$ 500,000,000
Related party term loan, amount issued						$ 500,000,000
6% Blue Torch Finance, LLC Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Debt, maturity date			Mar. 13, 2023
Long-term Debt, Gross		$ 70,000,000	$ 70,000,000
Long-term debt, borrowed amount		$ 70,000,000
6% Blue Torch Finance, LLC Term Loan [Member] | Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate			6.00%
6% Related Party Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Interest rate on debt			6.00%
Debt, maturity date			Sep. 28, 2020
Long-term Debt, Gross			$ 130,000,000	$ 130,000,000
Related party term loan, amount issued					$ 130,000,000
Letter of Credit to Secure workers Compensation Policies, Air Medical License, and a Traditional Provider Contract [Member]
Debt Instrument [Line Items]
Letters of credit outstanding under the facility			$ 12,100,000
Exit Term Loan [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 225,000,000
Debt Instrument, Basis Spread on Variable Rate	0.50%
Debt instrument maturity period	5 years
Interest rate on debt	2.00%
Debt instrument interest rate percentage amortization, year one	2.50%
Debt instrument interest rate percentage amortization, year two	2.50%
Debt instrument interest rate percentage amortization, year three	5.00%
Debt instrument interest rate percentage amortization, thereafter	7.50%
Percentage of required prepayment cash proceeds from debt issuance	100.00%
Percentage of principal amount prepaid	1.00%
Percentage of principal amount prepaid including accrued interest	2.00%
Percentage of principal amount prepaid second year	2.00%
Percentage of principal amount prepaid third year	1.00%
Percentage of principal amount prepaid fourth year and thereafter	0.00%
Financial covenant minimum liquidity	$ 20,000,000
Exit Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Interest rate on debt	7.00%
Debt Instrument, Basis Spread on Variable Rate	1.00%
Exit Term Loan [Member] | Base Rate [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Interest rate on debt	6.00%
Exit Term Loan [Member] | Federal Funds Effective Rate [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%
Exit Term Loan [Member] | Floor Rate [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%

XML

Liabilities Subject to Compromise (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Debt Instrument [Line Items]
Total liabilities subject to compromise	$ 513,125
5.25% Senior Notes due March 15, 2019 [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Total liabilities subject to compromise	500,000
Accrued Interest Payable [Member]
Debt Instrument [Line Items]
Total liabilities subject to compromise	$ 13,125

XML

Earnings Per Share - Components of Basic and Diluted Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
Weighted average outstanding shares of common stock, basic	15,825	15,806	15,825	15,806
Dilutive effect of unvested restricted stock units		0		0
Weighted average outstanding shares of common stock, diluted	15,825	15,806	15,825	15,806

XML

Earnings Per Share - Components of Basic and Diluted Earnings Per Share (Additional Information) (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
Anti-dilutive securities (in shares)	0	425,317	0	14,258

XML

Stock-Based Compensation - Summary of Share Based Compensation Expense (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Feb. 20, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock-based compensation expense:
Total stock-based compensation expense		$ 1,325	$ 813	$ 2,640	$ 2,132
Non Voting Performance Units [Member]
Stock-based compensation expense:
Performance period for performance RSUs	2 years
Share price (in USD per share)	$ 2.21
Cash settlement for performance awards	$ 800
Time-based Restricted Stock Units [Member]
Stock-based compensation expense:
Total stock-based compensation expense		845	$ 435	$ 1,685	$ 1,077
Grants to managerial employees			321,831	0	321,831
Performance-based Restricted Units [Member]
Stock-based compensation expense:
Total stock-based compensation expense		$ 480	$ 378	$ 955	$ 1,055
Grants to managerial employees			448,012	0	448,012
Performance-based Restricted Units [Member] | 2016 Grant [Member]
Stock-based compensation expense:
Forfeited (shares)	667,238

XML

Asset Disposals - Additional Information (Detail) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 Air-craft	Mar. 31, 2018 Air-craft	Jun. 30, 2019 USD ($) Air-craft	Jun. 30, 2018 USD ($) Air-craft
Assets Held For Sale And Impairments [Line Items]
Number of aircraft sold	0
Cash realized from sale of assets | $			$ 1.2	$ 1.5
Gain (loss) on disposal of assets | $			$ 0.2	$ (0.7)
Technical Services Segment [Member]
Assets Held For Sale And Impairments [Line Items]
Number of aircraft sold			2
Air Medical [Member] | Light Aircraft [Member]
Assets Held For Sale And Impairments [Line Items]
Number of aircraft sold		1
Oil and Gas [Member]
Assets Held For Sale And Impairments [Line Items]
Number of aircraft donated		1
Oil and Gas [Member] | Light Aircraft [Member]
Assets Held For Sale And Impairments [Line Items]
Number of aircraft sold				1
Oil and Gas [Member] | Medium Aircraft [Member]
Assets Held For Sale And Impairments [Line Items]
Number of aircraft sold				1

XML

Commitments and Contingencies - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2019 USD ($) Land_Parcel
Commitments And Contingencies Disclosure [Abstract]
Purchase commitment for aircraft	$ 0
Aggregate estimated probable liability environmental matters	$ 150,000
Number of parcels of land exists | Land_Parcel	2

XML

Revenue Recognition (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Revenue from External Customer [Line Items]
Value of uncompensated care services qualified as charity care	$ 1.6	$ 1.7	$ 3.5	$ 3.3
Estimated cost of providing charity services	0.3	$ 0.4	$ 0.8	$ 0.8
Percentage of reserve for receivables outstanding more than nine months (percent)			100.00%
Oil and Gas [Member]
Revenue from External Customer [Line Items]
Accounts receivable, net	86.2		$ 86.2		$ 74.1
Air Medical [Member]
Revenue from External Customer [Line Items]
Allowance for contractual discounts against outstanding accounts receivable	140.5		140.5		123.8
Allowance for uncompensated care against outstanding accounts receivable	45.5		45.5		51.9
Accounts receivable, net	95.8		95.8		90.2
Technical Services [Member]
Revenue from External Customer [Line Items]
Accounts receivable, net	$ 1.3		$ 1.3		$ 4.1
Minimum [Member]
Revenue from External Customer [Line Items]
Accounts receivable invoice term			30 days
Minimum [Member] | Oil and Gas [Member]
Revenue from External Customer [Line Items]
Typical contract length			1 year
Minimum [Member] | Air Medical [Member]
Revenue from External Customer [Line Items]
Contract termination notice period			30 days
Maximum [Member]
Revenue from External Customer [Line Items]
Performance obligations satisfaction period to recognize revenue			30 days
Accounts receivable invoice term			60 days
Maximum [Member] | Oil and Gas [Member]
Revenue from External Customer [Line Items]
Typical contract length			7 years
Maximum [Member] | Air Medical [Member]
Revenue from External Customer [Line Items]
Contract termination notice period			180 days

XML

Revenue Recognition - Disaggregation of Revenue by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Operating revenues, net	$ 165,172	$ 169,243	$ 317,062	$ 329,607
Reportable Operating Segments [Member]
Disaggregation of Revenue [Line Items]
Operating revenues, net	165,172	169,243	317,062	329,607
Reportable Operating Segments [Member] | Oil and Gas [Member]
Disaggregation of Revenue [Line Items]
Operating revenues, net	90,023	97,068	174,969	192,702
Reportable Operating Segments [Member] | Air Medical [Member]
Disaggregation of Revenue [Line Items]
Operating revenues, net	69,507	67,151	126,153	124,139
Reportable Operating Segments [Member] | Air Medical [Member] | Traditional Provider Model [Member]
Disaggregation of Revenue [Line Items]
Operating revenues, net	12,401	12,085	24,378	23,956
Reportable Operating Segments [Member] | Air Medical [Member] | Independent Provider Model [Member]
Disaggregation of Revenue [Line Items]
Operating revenues, net	57,106	55,066	101,775	100,183
Reportable Operating Segments [Member] | Technical Services [Member]
Disaggregation of Revenue [Line Items]
Operating revenues, net	$ 5,642	$ 5,024	$ 15,940	$ 12,766

XML

Leases (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Leases [Abstract]
Operating lease expense	$ 11.4	$ 12.1	$ 22.6	$ 23.8
Short-term lease expense	$ 1.6		$ 3.0

XML

Leases - Operating Leases (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Right of use assets	$ 144,944
Current portion of operating lease liabilities	27,535
Long-term operating lease liabilities	118,167
Total operating lease liabilities	145,702
Cash paid for operating leases	21,475
ROU assets obtained in exchange for lease obligations	$ 9,402
Weighted average remaining lease term	5 years
Weighted average discount rate (percent)	8.25%

XML

Leases - Maturity of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Remainder of 2019	$ 19,615
2020	37,140
2021	36,297
2022	34,254
2023	23,872
Thereafter	33,975
Total lease payments	185,153
Less imputed interest	(39,451)
Total	$ 145,702
Future Lease Payments under ASC 840 [Abstract]
2019		$ 36,000
2020		33,000
2021		31,000
2022		29,000
2023		20,000
Thereafter		11,000
Operating leases, future minimum payments		$ 160,000

XML

Segment Information - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 Air-craft	Jun. 30, 2018	Jun. 30, 2019 Air-craft Segment State Location	Jun. 30, 2018
Segment Reporting Information [Line Items]
Number of reportable segments | Segment			3
Number of aircraft sold	0
National Science Foundation [Member]
Segment Reporting Information [Line Items]
Number of aircraft assigned			6
Number of aircraft sold			2
Number of remaining aircraft in segment			4
Fixed Term Customer Contract [Member] | Customer Concentration Risk [Member] | Sales Revenue Net [Member]
Segment Reporting Information [Line Items]
Segment revenue (percent)	85.00%	87.00%	85.00%	87.00%
Spot Market and Ad Hoc Flight Customer Contracts [Member] | Customer Concentration Risk [Member] | Sales Revenue Net [Member]
Segment Reporting Information [Line Items]
Segment revenue (percent)			15.00%
Hospitals Contracts [Member]
Segment Reporting Information [Line Items]
Contract termination notice period			180 days
Hospitals Contracts [Member] | Customer Concentration Risk [Member] | Sales Revenue Net [Member]
Segment Reporting Information [Line Items]
Segment revenue (percent)	15.00%	16.00%	17.00%	18.00%
Minimum [Member]
Segment Reporting Information [Line Items]
Term of contract			1 year
Maximum [Member]
Segment Reporting Information [Line Items]
Term of contract			7 years
Oil and Gas [Member]
Segment Reporting Information [Line Items]
Number of aircraft available for use			121
Oil and Gas [Member] | Product Concentration Risk [Member] | Sales Revenue Net [Member]
Segment Reporting Information [Line Items]
Segment revenue (percent)	55.00%	57.00%	55.00%	58.00%
Oil and Gas [Member] | Minimum [Member]
Segment Reporting Information [Line Items]
Working period with major customers			35 years
Oil and Gas [Member] | Minimum [Member] | ENI Petroleum [Member]
Segment Reporting Information [Line Items]
Working period with major customers			20 years
Air Medical [Member]
Segment Reporting Information [Line Items]
Number of aircraft assigned			111
Number of states in which company operates aircrafts | State			18
Locations in which company operates Aircrafts | Location			81
Air Medical [Member] | Product Concentration Risk [Member] | Sales Revenue Net [Member]
Segment Reporting Information [Line Items]
Segment revenue (percent)	42.00%	40.00%	40.00%	38.00%
Air Medical [Member] | Minimum [Member]
Segment Reporting Information [Line Items]
Contract termination notice period			30 days
Air Medical [Member] | Maximum [Member]
Segment Reporting Information [Line Items]
Contract termination notice period			180 days
Technical Services [Member] | Product Concentration Risk [Member] | Sales Revenue Net [Member]
Segment Reporting Information [Line Items]
Segment revenue (percent)	3.00%	3.00%	5.00%	4.00%

XML

Segment Information - Schedule of Provisions for Contractual Discounts and Estimated Uncompensated Care as a Percentage of Gross Segment Billings (Detail) - Air Medical [Member]	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Provisions For Contractual Discounts And Estimated Uncompensated Care [Line Items]
Provision for contractual discounts	70.00%	67.00%	68.00%	66.00%
Provision for uncompensated care	8.00%	7.00%	9.00%	8.00%

XML

Segment Information - Schedule of Net Revenue Attributable to Insurance, Medicare, Medicaid, and Self-Pay as Percentage of Net Air Medical Revenues (Detail) - Product Concentration Risk [Member] - Sales Revenue Net [Member] - Air Medical [Member]	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Percentage of net Air Medical revenues	42.00%	40.00%	40.00%	38.00%
Insurance [Member]
Segment Reporting Information [Line Items]
Percentage of net Air Medical revenues	67.00%	72.00%	67.00%	72.00%
Medicare [Member]
Segment Reporting Information [Line Items]
Percentage of net Air Medical revenues	23.00%	19.00%	23.00%	20.00%
Medicaid [Member]
Segment Reporting Information [Line Items]
Percentage of net Air Medical revenues	9.00%	8.00%	8.00%	8.00%
Self-Pay [Member]
Segment Reporting Information [Line Items]
Percentage of net Air Medical revenues	1.00%	1.00%	2.00%

XML

Segment Information - Schedule of Financial Information Concerning Reportable Operating Segments (Detail) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Total operating revenues, net	$ 165,172		$ 169,243	$ 317,062	$ 329,607
Total direct expenses	153,514		155,083	310,390	311,309
Total selling, general and administrative expenses	17,591		14,485	42,458	29,944
Total net segment profit	(4,799)		(73)	(33,342)	(12,309)
Reorganization items, net	(26,503)	$ (1,600)		(28,103)
Interest expense	(3,927)		(8,340)	(12,093)	(16,537)
(Loss) earnings before income taxes	(34,896)		(8,777)	(73,245)	(30,250)
Reportable Operating Segments [Member]
Segment Reporting Information [Line Items]
Total operating revenues, net	165,172		169,243	317,062	329,607
Total direct expenses	152,475		155,002	307,990	311,264
Total selling, general and administrative expenses	8,965		7,994	17,165	16,452
Total segment direct and selling, general and administrative expenses	161,440		162,996	325,155	327,716
Total net segment profit	3,732		6,247	(8,093)	1,891
Reportable Operating Segments [Member] | Oil and Gas [Member]
Segment Reporting Information [Line Items]
Total operating revenues, net	90,023		97,068	174,969	192,702
Total direct expenses	89,061		94,442	179,031	190,985
Total selling, general and administrative expenses	4,672		4,400	9,432	9,321
Total net segment profit	(3,710)		(1,774)	(13,494)	(7,604)
Reportable Operating Segments [Member] | Air Medical [Member]
Segment Reporting Information [Line Items]
Total operating revenues, net	69,507		67,151	126,153	124,139
Total direct expenses	59,310		56,776	116,391	110,608
Total selling, general and administrative expenses	4,141		3,254	7,433	6,421
Total net segment profit	6,056		7,121	2,329	7,110
Reportable Operating Segments [Member] | Technical Services [Member]
Segment Reporting Information [Line Items]
Total operating revenues, net	5,642		5,024	15,940	12,766
Total direct expenses	4,104		3,784	12,568	9,671
Total selling, general and administrative expenses	152		340	300	710
Total net segment profit	1,386		900	3,072	2,385
Segment Reconciling Items [Member]
Segment Reporting Information [Line Items]
Other, net	428		(193)	337	(2,112)
Reorganization items, net	(26,503)			(28,103)
Interest expense	(3,927)		(8,340)	(12,093)	(16,537)
Corporate [Member]
Segment Reporting Information [Line Items]
Unallocated selling, general and administrative costs	$ (8,626)		$ (6,491)	$ (25,293)	$ (13,492)

XML

Segment Information - Depreciation and Amortization Expense Included in Direct Expenses and Unallocated Selling, General, and Administrative Costs (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reportable Operating Segments [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Depreciation and Amortization Expenses	$ 17,236	$ 17,719	$ 33,871	$ 35,271
Reportable Operating Segments [Member] | Oil and Gas [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Depreciation and Amortization Expenses	11,618	11,486	22,896	23,269
Reportable Operating Segments [Member] | Air Medical [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Depreciation and Amortization Expenses	5,485	6,091	10,771	11,715
Reportable Operating Segments [Member] | Technical Services [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Depreciation and Amortization Expenses	133	142	204	287
Corporate [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Depreciation and Amortization Expenses	$ 3,095	$ 1,412	$ 4,904	$ 3,327

XML

Investment in Variable Interest Entity and Other Investments and Affiliates - Additional Information (Detail) - PHI Century Limited [Member] - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Variable Interest Entity [Line Items]
Investment in the common stock			49.00%
PHIC's date of incorporation			May 26, 2011
Earnings in equity of unconsolidated affiliate	$ 1.0		$ 2.4
Trade receivables	4.1		4.1		$ 4.8
Other assets	$ 2.9		$ 2.9		0.5
Accounts Receivable - Other [Member]
Variable Interest Entity [Line Items]
Loan to affiliate					$ 0.4
Maximum [Member]
Variable Interest Entity [Line Items]
Earnings in equity of unconsolidated affiliate		$ 0.1		$ 0.1

XML

Condensed Consolidating Financial Information - Additional Information (Detail) - USD ($)	Jun. 30, 2019	Dec. 31, 2018	Mar. 17, 2014
5.25% Senior Notes due March 15, 2019 [Member] | Senior Notes [Member]
Supplemental Guarantor Financial Information [Line Items]
Senior notes, amount issued			$ 500,000,000
Interest rate on Senior Notes	5.25%	5.25%	5.25%
Domestic Subsidiaries [Member]
Supplemental Guarantor Financial Information [Line Items]
Ownership percentage in domestic subsidiaries	100.00%

XML

Condensed Consolidating Financial Information - Guarantor Subsidiaries - Condensed Consolidating Balance Sheets (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Current Assets:
Cash and cash equivalents	$ 21,882		$ 50,874	$ 5,852		$ 8,770
Short-term investments	76,141		14,232
Accounts receivable – net	183,344		182,465
Inventories of spare parts – net	54,242		56,698
Prepaid expenses	13,072		11,419
Income taxes receivable	509		950
Total current assets	349,190		316,638
Property and equipment – net	885,669		902,485
Right of use assets	144,944
Restricted cash and investments	19,739		19,781
Other assets	20,937		18,378
Deferred income taxes	5,137		4,944
Total assets	1,425,616		1,262,226
Current Liabilities:
Senior Notes issued March 17, 2014			499,740
Accounts payable	70,615		50,289
Accrued and other current liabilities	38,483		45,292
Current portion of operating lease liabilities	27,535
Current maturities of long term debt	1,750		500,000
Total current liabilities	138,383		595,321
Long-term Debt	192,450		129,235
Deferred income taxes and other long-term liabilities	173,804		64,237
Liabilities subject to compromise	513,125
Shareholders’ Equity:
Common stock and paid-in capital	317,725		315,898
Accumulated other comprehensive income (loss)	(4,040)		(3,952)
Retained earnings	94,169		161,487
Total shareholders’ equity	407,854	$ 439,508	473,433	$ 591,565	$ 597,735	$ 612,654
Total liabilities and shareholders’ equity	1,425,616		1,262,226
Eliminations [Member]
Current Assets:
Accounts receivable – net	(6,180)		(3,823)
Intercompany receivable	(120,732)		(91,468)
Total current assets	(126,912)		(95,291)
Investment in subsidiaries	(475,391)		(471,790)
Total assets	(602,303)		(567,081)
Current Liabilities:
Accounts payable	(6,180)		(3,839)
Intercompany payable	(120,732)		(91,452)
Total current liabilities	(126,912)		(95,291)
Shareholders’ Equity:
Common stock and paid-in capital	(210,377)		(210,601)
Retained earnings	(265,014)		(261,189)
Total shareholders’ equity	(475,391)		(471,790)
Total liabilities and shareholders’ equity	(602,303)		(567,081)
Parent Company Only (issuer) [Member] | Reportable Legal Entities [Member]
Current Assets:
Cash and cash equivalents	8,170		39,091
Short-term investments	76,141		14,232
Accounts receivable – net	64,467		64,416
Inventories of spare parts – net	29,871		43,933
Prepaid expenses	8,944		7,295
Income taxes receivable	7		394
Total current assets	187,600		169,361
Investment in subsidiaries	475,391		471,790
Property and equipment – net	562,880		576,763
Right of use assets	116,918
Restricted cash and investments	19,739		19,781
Other assets	18,678		17,179
Total assets	1,381,206		1,254,874
Current Liabilities:
Senior Notes issued March 17, 2014			499,740
Accounts payable	64,526		44,089
Accrued and other current liabilities	19,667		25,158
Current portion of operating lease liabilities	20,823
Current maturities of long term debt	1,750
Intercompany payable	63,263		74,336
Total current liabilities	170,029		643,323
Long-term Debt	192,450		129,235
Deferred income taxes and other long-term liabilities	93,711		4,934
Liabilities subject to compromise	513,125
Shareholders’ Equity:
Common stock and paid-in capital	317,725		315,898
Accumulated other comprehensive income (loss)	(3)		(3)
Retained earnings	94,169		161,487
Total shareholders’ equity	411,891		477,382
Total liabilities and shareholders’ equity	1,381,206		1,254,874
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Current Assets:
Cash and cash equivalents	2,223		1,259
Accounts receivable – net	101,381		93,060
Intercompany receivable	98,616		91,468
Inventories of spare parts – net	20,929		9,577
Prepaid expenses	2,805		2,520
Income taxes receivable	502		556
Total current assets	226,456		198,440
Property and equipment – net	283,231		287,375
Right of use assets	11,652
Other assets	1,071		1,199
Total assets	522,410		487,014
Current Liabilities:
Accounts payable	6,437		4,587
Accrued and other current liabilities	13,500		12,335
Current portion of operating lease liabilities	3,404
Intercompany payable	17,125
Total current liabilities	40,466		16,922
Deferred income taxes and other long-term liabilities	67,234		58,752
Shareholders’ Equity:
Common stock and paid-in capital	77,951		77,951
Retained earnings	336,759		333,389
Total shareholders’ equity	414,710		411,340
Total liabilities and shareholders’ equity	522,410		487,014
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Current Assets:
Cash and cash equivalents	11,489		10,524
Accounts receivable – net	23,676		28,812
Intercompany receivable	22,116
Inventories of spare parts – net	3,442		3,188
Prepaid expenses	1,323		1,604
Total current assets	62,046		44,128
Property and equipment – net	39,558		38,347
Right of use assets	16,374
Other assets	1,188
Deferred income taxes	5,137		4,944
Total assets	124,303		87,419
Current Liabilities:
Accounts payable	5,832		5,452
Accrued and other current liabilities	5,316		7,799
Current portion of operating lease liabilities	3,308
Intercompany payable	40,344		17,116
Total current liabilities	54,800		30,367
Deferred income taxes and other long-term liabilities	12,859		551
Shareholders’ Equity:
Common stock and paid-in capital	132,426		132,650
Accumulated other comprehensive income (loss)	(4,037)		(3,949)
Retained earnings	(71,745)		(72,200)
Total shareholders’ equity	56,644		56,501
Total liabilities and shareholders’ equity	$ 124,303		$ 87,419

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Condensed Consolidating Financial Information - Guarantor Subsidiaries - Condensed Consolidating Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	$ 165,172		$ 169,243	$ 317,062	$ 329,607
Expenses:
Direct expenses	153,514		155,083	310,390	311,309
Selling, general and administrative expenses	17,591		14,485	42,458	29,944
Total operating expenses	171,105		169,568	352,848	341,253
(Gain) loss on asset dispositions	(95)		(171)	(44)	708
Equity in (income) loss of unconsolidated affiliate, net	(1,039)		(81)	(2,400)	(45)
Operating loss	(4,799)		(73)	(33,342)	(12,309)
Interest expense	3,927		8,340	12,093	16,537
Reorganization items, net	26,503	$ 1,600		28,103
Other income, net	(333)		364	(293)	1,404
Total expenses	30,097		8,704	39,903	17,941
Loss before income taxes	(34,896)		(8,777)	(73,245)	(30,250)
Income tax (benefit) expense	(2,819)		(1,684)	(5,927)	(6,175)
Net loss	(32,077)		(7,093)	(67,318)	(24,075)
Eliminations [Member]
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	(8,075)		(30,735)	(13,859)	(56,668)
Expenses:
Direct expenses	(8,075)		(30,793)	(13,859)	(56,707)
Selling, general and administrative expenses	(4)		(4)	(9)	(10)
Total operating expenses	(8,079)		(30,797)	(13,868)	(56,717)
Operating loss	4		62	9	49
Equity in net income of consolidated subsidiaries	4,952		6,064	3,825	8,163
Interest expense			(539)		(1,081)
Other income, net	4		601	9	1,130
Total expenses	4,956		6,126	3,834	8,212
Loss before income taxes	(4,952)		(6,064)	(3,825)	(8,163)
Net loss	(4,952)		(6,064)	(3,825)	(8,163)
Parent Company Only (issuer) [Member] | Reportable Legal Entities [Member]
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	75,707		79,857	149,740	157,949
Expenses:
Direct expenses	76,288		78,955	160,793	162,953
Selling, general and administrative expenses	10,459		8,395	28,507	17,143
Total operating expenses	86,747		87,350	189,300	180,096
(Gain) loss on asset dispositions	(102)		(150)	(51)	729
Equity in (income) loss of unconsolidated affiliate, net	(1,039)		(81)	(2,400)	(45)
Operating loss	(9,899)		(7,262)	(37,109)	(22,831)
Equity in net income of consolidated subsidiaries	(4,952)		(6,064)	(3,825)	(8,163)
Interest expense	3,908		8,337	12,070	16,533
Reorganization items, net	26,503			28,103
Other income, net	(46)		(365)	(235)	(63)
Total expenses	25,413		1,908	36,113	8,307
Loss before income taxes	(35,312)		(9,170)	(73,222)	(31,138)
Income tax (benefit) expense	(3,235)		(2,077)	(5,904)	(7,063)
Net loss	(32,077)		(7,093)	(67,318)	(24,075)
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	72,628		68,717	131,930	127,426
Expenses:
Direct expenses	61,915		58,263	120,941	113,627
Selling, general and administrative expenses	4,293		3,256	7,731	6,423
Total operating expenses	66,208		61,519	128,672	120,050
(Gain) loss on asset dispositions	9			9
Operating loss	6,411		7,198	3,249	7,376
Interest expense	19			23
Total expenses	19			23
Loss before income taxes	6,392		7,198	3,226	7,376
Income tax (benefit) expense	792			(144)
Net loss	5,600		7,198	3,370	7,376
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	24,912		51,404	49,251	100,900
Expenses:
Direct expenses	23,386		48,658	42,515	91,436
Selling, general and administrative expenses	2,843		2,838	6,229	6,388
Total operating expenses	26,229		51,496	48,744	97,824
(Gain) loss on asset dispositions	(2)		(21)	(2)	(21)
Operating loss	(1,315)		(71)	509	3,097
Interest expense			542		1,085
Other income, net	(291)		128	(67)	337
Total expenses	(291)		670	(67)	1,422
Loss before income taxes	(1,024)		(741)	576	1,675
Income tax (benefit) expense	(376)		393	121	888
Net loss	$ (648)		$ (1,134)	$ 455	$ 787

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Condensed Consolidating Financial Information - Guarantor Subsidiaries - Condensed Consolidated Statements of Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Financial Statements Captions [Line Items]
Net (loss) earnings	$ (32,077)	$ (7,093)	$ (67,318)	$ (24,075)
Unrealized (loss) gain on short-term investments		(107)		363
Currency translation adjustments	(928)	160	(121)	627
Changes in pension plan assets and benefit obligations		7		(1)
Tax effect of the above-listed adjustments	25	100	33	(85)
Total comprehensive (loss) income	(32,980)	(6,933)	(67,406)	(23,171)
Eliminations [Member]
Condensed Financial Statements Captions [Line Items]
Net (loss) earnings	(4,952)	(6,064)	(3,825)	(8,163)
Total comprehensive (loss) income	(4,952)	(6,064)	(3,825)	(8,163)
Parent Company Only (issuer) [Member] | Reportable Legal Entities [Member]
Condensed Financial Statements Captions [Line Items]
Net (loss) earnings	(32,077)	(7,093)	(67,318)	(24,075)
Unrealized (loss) gain on short-term investments		(107)		363
Changes in pension plan assets and benefit obligations		7		(1)
Tax effect of the above-listed adjustments		100		(85)
Total comprehensive (loss) income	(32,077)	(7,093)	(67,318)	(23,798)
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Condensed Financial Statements Captions [Line Items]
Net (loss) earnings	5,600	7,198	3,370	7,376
Total comprehensive (loss) income	5,600	7,198	3,370	7,376
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Condensed Financial Statements Captions [Line Items]
Net (loss) earnings	(648)	(1,134)	455	787
Currency translation adjustments	(928)	160	(121)	627
Tax effect of the above-listed adjustments	25		33
Total comprehensive (loss) income	$ (1,551)	$ (974)	$ 367	$ 1,414

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Condensed Consolidating Financial Information - Guarantor Subsidiaries - Condensed Consolidating Statements of Cash Flows (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	$ (23,677)	$ 5,410
Investing activities:
Purchase of property and equipment	(8,970)	(18,098)
Proceeds from asset dispositions	1,235	1,453
Purchase of short-term investments	(183,421)	(260,996)
Proceeds from sale of short-term investments	121,512	264,918
Payment of deposit on aircraft	(50)	0
Refund of deposit on aircraft	503	0
Loan to unconsolidated affiliate		(274)
Net cash used in investing activities	(69,191)	(12,997)
Financing activities:
Debt issuance cost	(5,668)	0
Proceeds from Term Loan	70,000	0
Proceeds from line of credit		34,295
Payments on line of credit		(29,575)
Repurchase of common stock		(51)
Net cash provided by financing activities	64,332	4,669
Effect of exchange rate changes on cash	(483)	0
Decrease in cash, cash equivalents and restricted cash	(29,019)	(2,918)
Cash, cash equivalents and restricted cash at the beginning of period	58,564	8,770
Cash, cash equivalents and restricted cash at end of period	29,545	5,852
Reportable Legal Entities [Member] | Parent Company Only (issuer) [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	(20,773)	(506)
Investing activities:
Purchase of property and equipment	(5,956)	(16,768)
Proceeds from asset dispositions	1,235	1,453
Purchase of short-term investments	(183,421)	(260,996)
Proceeds from sale of short-term investments	121,512	264,918
Payment of deposit on aircraft	(50)
Refund of deposit on aircraft	503
Loan to unconsolidated affiliate		(274)
Net cash used in investing activities	(66,177)	(11,667)
Financing activities:
Debt issuance cost	(5,668)
Proceeds from Term Loan	70,000
Proceeds from line of credit		34,295
Payments on line of credit		(29,575)
Due to/from affiliate, net	(8,330)	7,510
Repurchase of common stock		(51)
Net cash provided by financing activities	56,002	12,179
Decrease in cash, cash equivalents and restricted cash	(30,948)	6
Cash, cash equivalents and restricted cash at the beginning of period	46,781	47
Cash, cash equivalents and restricted cash at end of period	15,833	53
Reportable Legal Entities [Member] | Guarantor Subsidiaries [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	(6,064)	3,306
Financing activities:
Due to/from affiliate, net	7,028	(3,073)
Net cash provided by financing activities	7,028	(3,073)
Decrease in cash, cash equivalents and restricted cash	964	233
Cash, cash equivalents and restricted cash at the beginning of period	1,259	1,072
Cash, cash equivalents and restricted cash at end of period	2,223	1,305
Reportable Legal Entities [Member] | Non-Guarantor Subsidiaries [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	3,160	2,610
Investing activities:
Purchase of property and equipment	(3,014)	(1,330)
Net cash used in investing activities	(3,014)	(1,330)
Financing activities:
Due to/from affiliate, net	1,302	(4,437)
Net cash provided by financing activities	1,302	(4,437)
Effect of exchange rate changes on cash	(483)
Decrease in cash, cash equivalents and restricted cash	965	(3,157)
Cash, cash equivalents and restricted cash at the beginning of period	10,524	7,651
Cash, cash equivalents and restricted cash at end of period	$ 11,489	$ 4,494

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Debtor in Possession - Condensed Balance Sheet (Details) - USD ($) $ / shares in Units, $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Condensed Balance Sheet Statements Captions [Line Items]
Cash and cash equivalents	$ 21,882		$ 50,874	$ 5,852		$ 8,770
Short-term investments	76,141		14,232
Trade	174,499		168,459
Other	8,845		14,006
Inventories of spare parts – net	54,242		56,698
Prepaid expenses	13,072		11,419
Income taxes receivable	509		950
Total current assets	349,190		316,638
Property and equipment – net	885,669		902,485
Right of use assets	144,944
Restricted cash and investments	19,739		19,781
Other assets	20,937		18,378
Total assets	1,425,616		1,262,226
Accounts payable	70,615		50,289
Accrued and other current liabilities	38,483		45,292
Current portion of operating lease liabilities	27,535
Current maturities of long term debt	1,750		500,000
Total current liabilities	138,383		595,321
Term loan issued March 13, 2019, net of debt issuance costs of $5,254	62,996
Related party term loan issued September 28, 2018, net of debt issuance costs of $546 and $765, respectively	129,454		129,235
Deferred income taxes	51,964		59,178
Other long-term liabilities	3,673		5,059
Long-term operating lease liabilities	118,167
Total liabilities not subject to compromise	504,637		788,793
Liabilities subject to compromise	513,125
Total liabilities	1,017,762		788,793
Additional paid-in capital	316,143		314,316
Accumulated other comprehensive income (loss)	(4,040)		(3,952)
Retained earnings	94,169		161,487
Total shareholders’ equity	407,854	$ 439,508	473,433	591,565	$ 597,735	612,654
Total liabilities and shareholders’ equity	1,425,616		1,262,226
Note Payable, Related Party [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Debt issuance costs	546		765
Term Loan [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Debt issuance costs	5,254		260
Voting Common Stock [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Common stock	$ 291		$ 291
Common stock, par value (in USD per share)	$ 0.10		$ 0.10
Common stock, shares authorized (shares)	12,500,000		12,500,000
Common stock, shares issued (shares)	2,905,757		2,905,757
Common stock, shares outstanding (shares)	2,905,757		2,905,757
Non-Voting Common Stock [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Common stock	$ 1,291		$ 1,291
Total shareholders’ equity	$ 1,291	$ 1,291	$ 1,291	$ 1,291	$ 1,290	$ 1,289
Common stock, par value (in USD per share)	$ 0.10		$ 0.10
Common stock, shares authorized (shares)	37,500,000		37,500,000
Common stock, shares issued (shares)	12,919,681		12,919,681
Common stock, shares outstanding (shares)	12,919,681		12,919,681
Phi, Inc. and Debtors [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Cash and cash equivalents	$ 10,310
Short-term investments	76,141
Trade	153,460
Other	6,120
Inventories of spare parts – net	50,800
Prepaid expenses	11,749
Income taxes receivable	509
Total current assets	309,089
Property and equipment – net	846,095
Right of use assets	127,821
Restricted cash and investments	19,739
Other assets	150,536
Total assets	1,453,280
Accounts payable	66,187
Accrued and other current liabilities	33,168
Current portion of operating lease liabilities	24,125
Current maturities of long term debt	1,750
Total current liabilities	125,230
Term loan issued March 13, 2019, net of debt issuance costs of $5,254	62,996
Related party term loan issued September 28, 2018, net of debt issuance costs of $546 and $765, respectively	129,454
Deferred income taxes	52,135
Other long-term liabilities	3,673
Long-term operating lease liabilities	104,491
Total liabilities not subject to compromise	477,979
Liabilities subject to compromise	513,125
Total liabilities	991,104
Additional paid-in capital	314,499
Accumulated other comprehensive income (loss)	(3)
Retained earnings	146,099
Total shareholders’ equity	462,176
Total liabilities and shareholders’ equity	1,453,280
Phi, Inc. and Debtors [Member] | Note Payable, Related Party [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Debt issuance costs	546
Phi, Inc. and Debtors [Member] | Term Loan [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Debt issuance costs	5,254
Phi, Inc. and Debtors [Member] | Voting Common Stock [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Common stock	$ 291
Common stock, par value (in USD per share)	$ 0.10
Common stock, shares authorized (shares)	12,500,000
Common stock, shares issued (shares)	2,905,757
Common stock, shares outstanding (shares)	2,905,757
Phi, Inc. and Debtors [Member] | Non-Voting Common Stock [Member]
Condensed Balance Sheet Statements Captions [Line Items]
Common stock	$ 1,290
Common stock, par value (in USD per share)	$ 0.10
Common stock, shares authorized (shares)	37,500,000
Common stock, shares issued (shares)	12,919,681
Common stock, shares outstanding (shares)	12,919,681

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Debtor in Possession - Condensed Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	$ 165,172		$ 169,243	$ 317,062	$ 329,607
Direct expenses	153,514		155,083	310,390	311,309
Selling, general and administrative expenses	17,591		14,485	42,458	29,944
Total operating expenses	171,105		169,568	352,848	341,253
(Gain) loss on disposal of assets	(95)		(171)	(44)	708
Equity in (income) loss of unconsolidated affiliate, net	(1,039)		(81)	(2,400)	(45)
Operating loss	(4,799)		(73)	(33,342)	(12,309)
Interest expense	3,927		8,340	12,093	16,537
Reorganization items, net	26,503	$ 1,600		28,103
Other income – net	(333)		364	(293)	1,404
Total expenses	30,097		8,704	39,903	17,941
Loss before income taxes	(34,896)		(8,777)	(73,245)	(30,250)
Income tax benefit	(2,819)		(1,684)	(5,927)	(6,175)
Net loss	(32,077)		$ (7,093)	(67,318)	$ (24,075)
Phi, Inc. and Debtors [Member]
Condensed Income Statements, Captions [Line Items]
Total operating revenues, net	139,501			266,164
Direct expenses	129,319			266,368
Selling, general and administrative expenses	14,746			36,228
Total operating expenses	144,065			302,596
(Gain) loss on disposal of assets	(93)			(42)
Equity in (income) loss of unconsolidated affiliate, net	(1,039)			(2,400)
Operating loss	(3,432)			(33,990)
Interest expense	3,927			12,093
Reorganization items, net	26,503			28,103
Other income – net	(42)			(226)
Total expenses	30,388			39,970
Loss before income taxes	(33,820)			(73,960)
Income tax benefit	(2,443)			(6,048)
Net loss	$ (31,377)			$ (67,912)

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Debtor in Possession - Condensed Statement of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Cash Flow Statements, Captions [Line Items]
Net loss	$ (32,077)	$ (7,093)	$ (67,318)	$ (24,075)
Depreciation and amortization			38,775	38,598
Deferred income taxes			(7,407)	(7,446)
(Gain) loss on asset dispositions	(95)	(171)	(44)	708
Equity in (income) loss of unconsolidated affiliate, net	(1,039)	(81)	(2,400)	(45)
Inventory valuation reserves			1,416	3,308
Changes in operating assets and liabilities			13,301	(5,638)
Net cash (used in) provided by operating activities			(23,677)	5,410
Purchase of property and equipment			(8,970)	(18,098)
Proceeds from asset dispositions			1,235	1,453
Purchase of short-term investments			(183,421)	(260,996)
Proceeds from sale of short-term investments			121,512	264,918
Payment of deposit on aircraft			(50)	0
Refund of deposit on aircraft			503	0
Net cash used in investing activities			(69,191)	(12,997)
Debt issuance cost			(5,668)	0
Proceeds from Term Loan			70,000	0
Net cash provided by financing activities			64,332	4,669
Decrease in cash, cash equivalents and restricted cash			(29,019)	(2,918)
Cash, cash equivalents and restricted cash at the beginning of period			58,564	8,770
Cash, cash equivalents and restricted cash at end of period	29,545	$ 5,852	29,545	$ 5,852
Phi, Inc. and Debtors [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net loss	(31,377)		(67,912)
Depreciation and amortization			29,799
Deferred income taxes			(6,492)
(Gain) loss on asset dispositions	(93)		(42)
Equity in (income) loss of unconsolidated affiliate, net	(1,039)		(2,400)
Inventory valuation reserves			1,110
Changes in operating assets and liabilities			19,751
Net cash (used in) provided by operating activities			(26,186)
Purchase of property and equipment			(7,817)
Proceeds from asset dispositions			1,235
Purchase of short-term investments			(183,421)
Proceeds from sale of short-term investments			121,512
Payment of deposit on aircraft			(50)
Refund of deposit on aircraft			503
Net cash used in investing activities			(68,038)
Debt issuance cost			(5,668)
Proceeds from Term Loan			70,000
Net cash provided by financing activities			64,332
Decrease in cash, cash equivalents and restricted cash			(29,892)
Cash, cash equivalents and restricted cash at the beginning of period			47,865
Cash, cash equivalents and restricted cash at end of period	$ 17,973		$ 17,973

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Reorganization Items - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2019
Reorganizations [Abstract]
Reorganization items, net	$ 26,503	$ 1,600	$ 28,103