CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed further in Note 5, on March 17, 2014, PHI, Inc. issued $500.0 million aggregate principal amount of 5.25% Senior Notes due 2019 that are fully and unconditionally guaranteed on a joint and several, senior basis by all of 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 (except for periods ending on or before December 31, 2016, in which case such information for the guarantor and non-guarantor subsidiaries is presented together). 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.

Due to the growth of our international affiliates in Trinidad and Australia which no longer qualify as minor subsidiaries under regulation S-X 210.3-10(h)6, we began reporting all of our non-guarantors subs in a separate column beginning with the quarter ended June 30, 2017.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)

(Unaudited)



	September 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	50		$	1,071	$	1,870		$	—		$	2,991
Short-term investments	204,036			—		—			—			204,036
Accounts receivable – net	77,061			71,727		14,721			(10,772		)	152,737
Intercompany receivable	—			120,376		—			(120,376		)	—
Inventories of spare parts – net	70,617			8,628		—			—			79,245
Prepaid expenses	9,916			1,948		142			—			12,006
Deferred income taxes	10,798			—		—			—			10,798
Income taxes receivable	500			9		—			—			509
Total current assets	372,978			203,759		16,733			(131,148		)	462,322

Investment in subsidiaries	390,840			—		—			(390,840		)	—
Property and equipment – net	621,885			287,841		601			—			910,327
Restricted cash and investments	12,381			—		15			—			12,396
Other assets	8,076			956		—			—			9,032
Total assets	$	1,406,160		$	492,556	$	17,349		$	(521,988	)	$	1,394,077

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	26,587		$	3,557	$	11,235		$	(10,772	)	$	30,607
Accrued and other current liabilities	22,198			9,961		1,544			—			33,703
Intercompany payable	112,015			—		8,361			(120,376		)	—
Total current liabilities	160,800			13,518		21,140			(131,148		)	64,310

Long-term debt	598,182			—		—			—			598,182
Deferred income taxes and other long-term liabilities	65,117			83,891		516			—			149,524
Shareholders’ Equity:
Common stock and paid-in capital	308,634			77,951		1,375			(79,326		)	308,634
Accumulated other comprehensive loss	(244		)	—		—			—			(244		)
Retained earnings	273,671			317,196		(5,682		)	(311,514		)	273,671
Total shareholders’ equity	582,061			395,147		(4,307		)	(390,840		)	582,061
Total liabilities and shareholders’ equity	$	1,406,160		$	492,556	$	17,349		$	(521,988	)	$	1,394,077

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)



	December 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	36		$	2,560		$	—		$	2,596
Short-term investments	289,806			—			—			289,806
Accounts receivable – net	71,458			66,807			—			138,265
Intercompany receivable	—			57,904			(57,904		)	—
Inventories of spare parts – net	61,834			8,568			—			70,402
Prepaid expenses	6,990			2,269			—			9,259
Deferred income taxes	10,798			—			—			10,798
Income taxes receivable	558			(18		)	—			540
Total current assets	441,480			138,090			(57,904		)	521,666

Investment in subsidiaries and others	353,160			—			(353,160		)	—
Property and equipment – net	589,104			314,873			—			903,977
Restricted investments	13,023			15			—			13,038
Other assets	8,660			1,099			—			9,759
Total assets	$	1,405,427		$	454,077		$	(411,064	)	$	1,448,440

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	22,744		$	5,960		$	—		$	28,704
Accrued and other current liabilities	18,725			9,621			—			28,346
Intercompany payable	57,904			—			(57,904		)	—
Total current liabilities	99,373			15,581			(57,904		)	57,050

Long-term debt	631,247			—			—			631,247
Deferred income taxes and other long-term liabilities	75,029			85,336			—			160,365
Shareholders’ Equity:
Common stock and paid-in capital	305,815			79,191			(79,191		)	305,815
Accumulated other comprehensive loss	(478		)	—			—			(478		)
Retained earnings	294,441			273,969			(273,969		)	294,441
Total shareholders’ equity	599,778			353,160			(353,160		)	599,778
Total liabilities and shareholders’ equity	$	1,405,427		$	454,077		$	(411,064	)	$	1,448,440


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)



	For the Quarter Ended September 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	79,644		$	70,692		$	7,784		$	(7,953	)	$	150,167
Expenses:
Direct expenses	83,727			51,247			9,765			(7,953		)	136,786
Selling, general and administrative expenses	8,240			3,141			24			(4		)	11,401
Total operating expenses	91,967			54,388			9,789			(7,957		)	148,187
(Gain) Loss on disposal of assets, net	(4		)	—			—			—			(4		)
Equity in (income) loss of unconsolidated affiliates, net	112			—			(550		)	—			(438		)
Operating (loss) income	(12,431		)	16,304			(1,455		)	4			2,422
Equity in net income of consolidated subsidiaries	(14,850		)	—			—			14,850			—
Interest expense	8,027			—			—			—			8,027
Other income, net	(709		)	(1		)	—			4			(706		)
	(7,532		)	(1		)	—			14,854			7,321
(Loss) earnings before income taxes	(4,899		)	16,305			(1,455		)	(14,850		)	(4,899		)
Income tax (benefit) expense	(1,622		)	—			—			—			(1,622		)
Net (loss) earnings	$	(3,277	)	$	16,305		$	(1,455	)	$	(14,850	)	$	(3,277	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)



	For the Quarter Ended September 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Operating revenues, net	$	79,532		$	78,561	$	—		$	158,093
Expenses:
Direct expenses	83,188			61,750		—			144,938
Selling, general and administrative expenses	10,639			3,092		(350		)	13,381
Total operating expenses	93,827			64,842		(350		)	158,319
Loss on disposal of assets, net	85			—		—			85
Equity in loss of consolidated affiliate	198			—		—			198
Operating (loss) income	(14,578		)	13,719		350			(509		)
Equity in net income of consolidated subsidiaries	(8,372		)	—		8,372			—
Interest expense	7,716			3		—			7,719
Other income, net	(812		)	—		350			(462		)
	(1,468		)	3		8,722			7,257
(Loss) earnings before income taxes	(13,110		)	13,716		(8,372		)	(7,766		)
Income tax (benefit) expense	(8,143		)	5,344		—			(2,799		)
Net (loss) earnings	$	(4,967	)	$	8,372	$	(8,372	)	$	(4,967	)


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

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)



	For the Nine Months Ended September 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	228,973		$	197,022		$	15,987		$	(10,773	)	$	431,209
Expenses:
Direct expenses	238,669			155,434			16,920			(10,773		)	400,250
Selling, general and administrative expenses	29,265			9,296			144			(14		)	38,691
Total operating expenses	267,934			164,730			17,064			(10,787		)	438,941
Loss (gain) on disposal of assets, net	4			(1		)	—			—			3
Equity in loss (income) of unconsolidated affiliates, net	1,040			—			516			—			1,556
Operating (loss) income	(40,005		)	32,293			(1,593		)	14			(9,291		)
Equity in net income of consolidated subsidiaries	(32,093		)	—			—			32,093			—
Interest expense	24,283			22			—			—			24,305
Other income, net	(2,486		)	(2		)	—			14			(2,474		)
	(10,296		)	20			—			32,107			21,831
(Loss) earnings before income taxes	(29,709		)	32,273			(1,593		)	(32,093		)	(31,122		)
Income tax (benefit) expense	(7,911		)	(1,413		)	—			—			(9,324		)
Net (loss) earnings	$	(21,798	)	$	33,686		$	(1,593	)	$	(32,093	)	$	(21,798	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)



	For the Nine Months Ended September 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	260,766		$	228,479		$	—		$	489,245
Expenses:
Direct expenses	264,761			185,148			—			449,909
Selling, general and administrative expenses	28,914			8,766			(848		)	36,832
Total operating expenses	293,675			193,914			(848		)	486,741
Gain on disposal of assets, net	(3,854		)	—			—			(3,854		)
Equity in loss of unconsolidated affiliate	274			—			—			274
Operating (loss) income	(29,329		)	34,565			848			6,084
Equity in net income of consolidated subsidiaries	(20,462		)	—			20,462			—
Interest expense	22,762			30			—			22,792
Other income, net	(2,415		)	(4		)	848			(1,571		)
	(115		)	26			21,310			21,221
(Loss) earnings before income taxes	(29,214		)	34,539			(20,462		)	(15,137		)
Income tax (benefit) expense	(19,592		)	14,077			—			(5,515		)
Net (loss) earnings	$	(9,622	)	$	20,462		$	(20,462	)	$	(9,622	)


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)



	For the Quarter Ended September 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(3,277	)	$	16,305	$	(1,455	)	$	(14,850	)	$	(3,277	)
Unrealized gain on short-term investments	41			—		—			—			41
Changes in pension plan asset and benefit obligation	(24		)	—		—			—			(24		)
Tax effect of the above-listed adjustments	(8		)	—		—			—			(8		)
Total comprehensive (loss) income	$	(3,268	)	$	16,305	$	(1,455	)	$	(14,850	)	$	(3,268	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)



	For the Quarter Ended September 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net (loss) earnings	$	(4,967	)	$	8,372	$	(8,372	)	$	(4,967	)
Unrealized gain on short-term investments	(494		)	—		—			(494		)
Changes in pension plan asset and benefit obligations	1			—		—			1
Tax effect of the above-listed adjustments	178			—		—			178
Total comprehensive (loss) income	$	(5,282	)	$	8,372	$	(8,372	)	$	(5,282	)


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)



	For the Nine Months Ended September 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(21,798	)	$	33,686	$	(1,593	)	$	(32,093	)	$	(21,798	)
Unrealized gain on short-term investments	370			—		—			—			370
Changes in pension plan asset and benefit obligation	(2		)	—		—			—			(2		)
Tax effect of the above-listed adjustments	(134		)	—		—			—			(134		)
Total comprehensive (loss) income	$	(21,564	)	$	33,686	$	(1,593	)	$	(32,093	)	$	(21,564	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)



	For the Quarter Ended September 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net (loss) earnings	$	(9,622	)	$	20,462	$	(20,462	)	$	(9,622	)
Unrealized gain on short-term investments	523			—		—			523
Changes in pension plan asset and benefit obligations	3			—		—			3
Tax effect of the above-listed adjustments	(229		)	—		—			(229		)
Total comprehensive (loss) income	$	(9,325	)	$	20,462	$	(20,462	)	$	(9,325	)


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)



	For the Nine Months Ended September 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(43,328	)	$	33,670		$	7,790		$	—	$	(1,868	)
Investing activities:
Purchase of property and equipment	(49,227		)	—			—			—		(49,227		)
Proceeds from asset dispositions	21			—			—			—		21
Purchase of short-term investments	(268,525		)	—			—			—		(268,525		)
Proceeds from sale of short-term investments	354,250			—			—			—		354,250
Net cash provided by (used in) investing activities	36,519			—			—			—		36,519
Financing activities:
Proceeds from line of credit	99,150			—			—			—		99,150
Payments on line of credit	(133,150		)	—			—			—		(133,150		)
Repurchase of common stock	(256		)	—			—			—		(256		)
Due to/from affiliate, net	41,079			(34,699		)	(6,380		)	—		—
Net cash provided by (used in) financing activities	6,823			(34,699		)	(6,380		)	—		(34,256		)
Increase (decrease) in cash	14			(1,029		)	1,410			—		395
Cash, beginning of period	36			2,100			460			—		2,596
Cash, end of period	$	50		$	1,071		$	1,870		$	—	$	2,991

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)



	For the Nine Months Ended September 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(32,467	)	$	25,319		$	—	$	(7,148	)
Investing activities:
Purchase of property and equipment	(74,647		)	(303		)	—		(74,950		)
Proceeds from asset dispositions	13,233			—			—		13,233
Purchase of short-term investments	(263,204		)	—			—		(263,204		)
Proceeds from sale of short-term investments	259,322			—			—		259,322
Payments of deposits on aircraft	(197		)	—			—		(197		)
Loan to unconsolidated affiliate	(1,200		)	—			—		(1,200		)
Net cash used in investing activities	(66,693		)	(303		)	—		(66,996		)
Financing activities:
Proceeds from line of credit	213,900			—			—		213,900
Payments on line of credit	(139,000		)	—			—		(139,000		)
Repurchase of common stock	(524		)	—			—		(524		)
Due to/from affiliate, net	24,774			(24,774		)	—		—
Net cash provided by (used in) financing activities	99,150			(24,774		)	—		74,376
(Decrease) increase in cash	(10		)	242			—		232
Cash, beginning of period	46			2,361			—		2,407
Cash, end of period	$	36		$	2,603		$	—	$	2,639


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