UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, ~~D.C.~~D. C. 20549

___________________________________________________________

FORM 10-Q

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

___________________________________________________________

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

For the quarterly period ended ~~September~~June 30, ~~2016~~

2017

☐	~~Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

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

For the transition period fromto

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes: ☒ No: ☐

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



Large accelerated filer:	☐	Accelerated filer: ☒	Smaller reporting company:	☒☐

Non-accelerated filer:	☐ (Do not check if a smaller reporting company)		~~Smaller reporting company:~~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: ☒

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 October 31, 2016~~
~~Voting Common Stock~~		~~2,905,757 shares~~
~~Non-Voting Common Stock~~		~~12,777,358 shares~~

~~PHI, INC.~~

~~Index – Form 10-Q~~


		~~Part I – Financial Information~~

~~Item 1.~~ Class		Outstanding at July 31, 2017
Voting Common Stock		2,905,757 shares
Non-Voting Common Stock		12,892,321 shares

PHI, INC.

Index – Form 10-Q



Part I – Financial Information
Item 1.	Financial Statements – Unaudited
		Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016	3
		3
		Condensed Consolidated Statements of Operations – Quarter ended June 30, 2017 and ~~Nine Months ended September 30,~~ 2016 ~~and 2015~~	4
		4
		Condensed Consolidated Statements of Comprehensive Income – Quarter ended June 30, 2017 and ~~Nine Months ended September 30,~~ 2016 ~~and 2015~~	5
		5
		Condensed Consolidated Statements of Shareholders’ Equity – Quarter ended June 30, 2017 and ~~Nine Months ended September 30,~~ 2016 ~~and 2015~~	6
		6
		Condensed Consolidated Statements of Cash Flows – ~~Nine Months~~Quarter ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	7
		7
		Notes to Condensed Consolidated Financial Statements	8
			8

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
			28

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	41
			42

Item 4.		Controls and Procedures	41	43


		Part II – Other Information

~~Item 1.~~		~~Legal Proceedings~~
44Item 1.	Legal Proceedings	42


Item 1A.		Risk Factors	42
			44

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	42
			44

Item 3.		Defaults Upon Senior Securities	42

44Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42
~~Item 4.~~		~~Mine Safety Disclosures~~
44Item 6.	Exhibits	43


~~Item 5.~~		~~Other Information~~		44

~~Item 6.~~		~~Exhibits~~		45

		Signatures		47	45

PART I – FINANCIAL INFORMATION

~~Item 1.~~

~~FINANCIAL STATEMENTS~~

Item 1. FINANCIAL STATEMENTS

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except share data)

(Unaudited)

   September 30, December 31,
   2016 2015
ASSETS
Current Assets:

Cash
   $ 2,639    $ 2,407
Short-term investments
   289,520    284,523
Accounts receivable – net

Trade
   131,295    138,309
Other
   11,180    6,469
Inventories of spare parts – net
   69,409    69,491
Prepaid expenses
   6,976    8,951
Deferred income taxes
   10,379    10,379
Income taxes receivable
   863    761


Total current assets
   522,261    521,290
Property and equipment – net
   916,560    883,529
Restricted cash and investments
   13,038    15,336
Other assets
   7,334    6,178


Total assets
   $ 1,459,193    $ 1,426,333


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:

Accounts payable
   $ 20,843    $ 31,373
Accrued and other current liabilities
   32,178    44,759


Total current liabilities
   53,021    76,132
Long-term debt:

Revolving credit facility
   132,400    57,500
Senior Notes issued March 17, 2014, net of debt issuance costs of $3,064 and $3,999, respectively
   496,936    496,001
Deferred income taxes
   147,058    153,645
Other long-term liabilities
   8,291    16,057
Commitments and contingencies (Note 9)

Shareholders’ Equity:

Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding
   291    291
Non-voting common stock – par value of $0.10; 25,000,000 shares authorized, 12,777,358 and 12,685,725 issued and outstanding at September 30, 2016 and December 31, 2015, respectively
   1,278    1,269
Additional paid-in capital
   308,690    304,884
Accumulated other comprehensive loss
   (271 ) (567 )
Retained earnings
   311,499    321,121


Total shareholders’ equity
   621,487    626,998


Total liabilities and shareholders’ equity
   $ 1,459,193    $ 1,426,333



	June 30, 2017			December 31, 2016
ASSETS
Current Assets:
Cash	$	2,323		$	2,596
Short-term investments	237,433			289,806
Accounts receivable – net
Trade	133,934			128,662
Other	13,570			9,603
Inventories of spare parts – net	76,155			70,402
Prepaid expenses	13,131			9,259
Deferred income taxes	10,798			10,798
Income taxes receivable	414			540
Total current assets	487,758			521,666
Property and equipment – net	918,134			903,977
Restricted cash and investments	12,396			13,038
Other assets	10,172			9,759
Total assets	$	1,428,460		$	1,448,440
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	27,791		$	28,704
Accrued and other current liabilities	33,384			28,346
Total current liabilities	61,175			57,050
Long-term debt:
Revolving credit facility	133,225			134,000
Senior Notes issued March 17, 2014, net of debt issuance costs of $2,129 and $2,753, respectively	497,871			497,247
Deferred income taxes	143,030			151,713
Other long-term liabilities	9,098			8,652
Commitments and contingencies (Note 9)
Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding	291			291
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,892,321 and 12,779,646 issued and outstanding at June 30, 2017 and December 31, 2016, respectively	1,289			1,278
Additional paid-in capital	305,787			304,246
Accumulated other comprehensive loss	(254		)	(478		)
Retained earnings	276,948			294,441
Total shareholders’ equity	584,061			599,778
Total liabilities and shareholders’ equity	$	1,428,460		$	1,448,440

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

   Quarter Ended Nine Months Ended
   September 30, September 30,
   2016 2015 2016 2015
Operating revenues, net
   $ 158,093    $ 214,733    $ 489,245    $ 617,477
Expenses:

Direct expenses
   144,938    182,064    449,909    520,099
Selling, general and administrative expenses
   13,381    11,575    36,832    34,859


Total operating expenses
   158,319    193,639    486,741    554,958
Loss (gain) on disposal of assets
   85    (165 ) (3,854 ) (238 )
Equity in loss of unconsolidated affiliate
   198    75    274    249


Operating (loss) income
   (509 ) 21,184    6,084    62,508
Interest expense
   7,719    7,366    22,792    21,691
Other income, net
   (462 ) (472 ) (1,571 ) (1,501 )


   7,257    6,894    21,221    20,190


(Loss) earnings before income taxes
   (7,766 ) 14,290    (15,137 ) 42,318
Income tax (benefit) expense
   (2,799 ) 6,621    (5,515 ) 17,832


Net (loss) earnings
   $ (4,967 ) $ 7,669    $ (9,622 ) $ 24,486


Weighted average shares outstanding:

Basic
   15,683    15,587    15,655    15,558
Diluted
   15,683    15,652    15,655    15,640
Net (loss) earnings per share:

Basic
   $ (0.32 ) $ 0.49    $ (0.61 ) $ 1.57
Diluted
   $ (0.32 ) $ 0.49    $ (0.61 ) $ 1.57



	Quarter Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Operating revenues, net	$	146,424		$	167,136		$	281,042		$	331,152
Expenses:
Direct expenses	126,951			152,417			263,464			304,971
Selling, general and administrative expenses	14,247			11,778			27,290			23,451
Total operating expenses	141,198			164,195			290,754			328,422
Loss (gain) on disposal of assets	7			(4,298		)	7			(3,939		)
Equity in loss of unconsolidated affiliates, net	991			76			1,994			76
Operating income (loss)	4,228			7,163			(11,713		)	6,593
Interest expense	8,083			7,540			16,278			15,073
Other income – net	(705		)	(494		)	(1,768		)	(1,109		)
	7,378			7,046			14,510			13,964
(Loss) earnings before income taxes	(3,150		)	117			(26,223		)	(7,371		)
Income tax expense (benefit)	123			(4,160		)	(7,702		)	(2,716		)
Net (loss) earnings	$	(3,273	)	$	4,277		$	(18,521	)	$	(4,655	)
Weighted average shares outstanding:
Basic	15,716			15,677			15,716			15,650
Diluted	15,716			15,718			15,716			15,650
Net (loss) earnings per share:
Basic	$	(0.21	)	$	0.27		$	(1.18	)	$	(0.30	)
Diluted	$	(0.21	)	$	0.27		$	(1.18	)	$	(0.30	)

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

   Quarter Ended Nine Months Ended
   September 30, September 30,
   2016 2015 2016 2015
Net (loss) earnings
   $ (4,967 ) $ 7,669    $ (9,622 ) $ 24,486
Unrealized (loss) gain on short-term investments
   (494 ) 12    523    (7 )
Other unrealized gain
   —      —      —      24
Changes in pension plan assets and benefit obligations
   1    4    3    4
Tax effect of adjustments
   178    (6 ) (229 ) 3


Total comprehensive (loss) income
   $ (5,282 ) $ 7,679    $ (9,325 ) $ 24,510



	Quarter Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net (loss) earnings	$	(3,273	)	$	4,277		$	(18,521	)	$	(4,655	)
Unrealized gain on short-term investments	167			210			329			1,017
Changes in pension plan assets and benefit obligations	23			1			22			2
Tax effect of the above-listed adjustments	(68		)	(75		)	(127		)	(407		)
Total comprehensive (loss) income	$	(3,151	)	$	4,413		$	(18,297	)	$	(4,043	)

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Thousands of dollars and shares)

(Unaudited)

Accumulated Total
Voting Non-Voting Additional Other Com- Share-
Common Stock Common Stock Paid-in Treasury prehensive Retained Holders’
Shares Amount Shares Amount Capital Stock Income (Loss) Earnings Equity
Balance at December 31, 2014
2,906    $ 291    12,576    $ 1,258    $ 301,533    $ —      $ (211 ) $ 294,197    $ 597,068
Net earnings
—      —      —      —      —      —      —      24,486    24,486
Unrealized loss on short-term investments
—      —      —      —      —      —      (3 ) —      (3 )
Changes in pension plan assets and benefit obligations
—      —      —      —      —      —      2    —      2
Amortization of unearned stock- based compensation
—      —      —      —      5,059    —      —      —      5,059
Issuance of non-voting common stock (upon vesting of restricted stock units)
—      —      177    18    —      —      —      —      18
Cancellation of restricted non- voting stock units for tax withholdings on vested shares
—      —      (69 ) (7 ) (2,200 ) —      —      —      (2,207 )
Purchase of treasury stock
—      —      —      —      —      (252 ) —      —      (252 )
Other
—      —      —      —      —      —      24    —      24

Balance at September 30, 2015
2,906    $ 291    12,684    $ 1,269    $ 304,392    $ (252 ) $ (188 ) $ 318,683    $ 624,195

Accumulated Total
Voting Non-Voting Additional Other Com- Share-
Common Stock Common Stock Paid-in prehensive Retained Holders’
Shares Amount Shares Amount Capital Income (Loss) Earnings Equity
Balance at December 31, 2015
2,906    $ 291    12,685    $ 1,269    $ 304,884    $ (567 ) $ 321,121    $ 626,998
Net loss
—      —      —      —      —      —      (9,622 ) (9,622 )
Unrealized gain on short-term investments
—      —      —      —      —      294    —      294
Changes in pension plan assets and benefit obligations
—      —      —      —      —      2    —      2
Amortization of unearned stock-based compensation
—      —      —      —      4,334    —      —      4,334
Issuance of non-voting common stock (upon vesting of restricted stock units)
—      —      128    12    —      —      —      12
Cancellation of restricted non-voting stock units for tax withholdings on vested shares
—      —      (28 ) (3 ) (528 ) —      —      (531 )
Retirement of treasury stock
—      —      (8 ) —      —      —      —      —

Balance at September 30, 2016
2,906    $ 291    12,777    $ 1,278    $ 308,690    $ (271 ) $ 311,499    $ 621,487



	Voting Common Stock			Non-Voting Common Stock					Additional Paid-in Capital			Accumulated Other Com-prehensive (Loss) Income
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Other Com-prehensive (Loss) Income			Retained Earnings			ShareHolders' Equity
Balance at December 31, 2015	2,906	$	291	12,685		$	1,269		$	304,884		$	(567	)	$	321,121		$	626,998
Net loss	—	—		—		—			—			—			(4,655		)	(4,655		)
Unrealized gain on short-term investments	—	—		—		—			—			611			—			611
Changes in pension plan assets and benefit obligations	—	—		—		—			—			1			—			1
Amortization of unearned stock-based compensation	—	—		—		—			2,882			—			—			2,882
Issuance of non-voting common stock (upon vesting of restricted stock units)	—	—		121		12			—			—			—			12
Cancellation of restricted non-voting stock units for tax withholdings on vested shares	—	—		(27	)	(3		)	(500		)	—			—			(503		)
Retirement of treasury stock	—	—		(8	)	—			—			—			—			—
Balance at June 30, 2016	2,906	$	291	12,771		$	1,278		$	307,266		$	45		$	316,466		$	625,346

	Voting Common Stock			Non-Voting Common Stock					Additional Paid-in Capital			Accumulated Other Com-prehensive (Loss) Income
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Other Com-prehensive (Loss) Income			Retained Earnings			ShareHolders' Equity
Balance at December 31, 2016	2,906	$	291	12,779		$	1,278		$	304,246		$	(478	)	$	294,441		$	599,778
Net loss	—	—		—		—			—			—			(18,521		)	(18,521		)
Unrealized gain on short-term investments	—	—		—		—			—			210			—			210
Changes in pension plan assets and benefit obligations	—	—		—		—			—			14			—			14
Amortization of unearned stock-based compensation	—	—		—		—			1,816			—			—			1,816
Issuance of non-voting common stock (upon vesting of restricted stock units)	—	—		134		13			—			—			—			13
Cancellation of restricted non-voting stock units for tax withholdings on vested shares	—	—		(21	)	(2		)	(275		)	—			—			(277		)
Cumulative effect adjustment of unrecognized tax benefits	—	—		—		—			—			—			1,028			1,028
Balance at June 30, 2017	2,906	$	291	12,892		$	1,289		$	305,787		$	(254	)	$	276,948		$	584,061

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)

   Nine Months Ended
   September 30,
   2016 2015
Operating activities:

Net (loss) earnings
   $ (9,622 ) $ 24,486
Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization
   53,054    54,312
Deferred income taxes
   (6,775 ) 15,983
Gain on asset dispositions
   (3,854 ) (238 )
Equity in loss of unconsolidated affiliate
   274    249
Inventory valuation reserves
   3,766    1,576
Changes in operating assets and liabilities
   (43,991 ) 11,787


Net cash (used in) provided by operating activities
   (7,148 ) 108,155


Investing activities:

Purchase of property and equipment
   (74,950 ) (48,244 )
Proceeds from asset dispositions
   13,233    3,469
Purchase of short-term investments
   (263,204 ) (560,148 )
Proceeds from sale of short-term investments
   259,322    458,468
Refund of deposits on aircraft
   —      6,010
Payment of deposits on aircraft
   (197 ) (1,207 )
Loan to unconsolidated affiliate
   (1,200 ) —


Net cash used in investing activities
   (66,996 ) (141,652 )


Financing activities:

Proceeds from line of credit
   213,900    206,660
Payments on line of credit
   (139,000 ) (171,440 )
Repurchase of common stock
   (524 ) (2,441 )


Net cash provided by financing activities
   74,376    32,779


Increase (decrease) in cash
   232    (718 )
Cash, beginning of period
   2,407    6,270


Cash, end of period
   $ 2,639    $ 5,552


Supplemental Disclosures Cash Flow Information

Cash paid during the period for:

Interest
   $ 28,258    $ 27,161


Income taxes
   $ 2,856    $ 3,061


Noncash investing activities:

Other current liabilities and accrued payables related to purchase of property and equipment
   $ 3,717    $ 45



	Six Months Ended June 30,
	2017			2016
Operating activities:
Net loss	$	(18,521	)	$	(4,655	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	34,011			34,761
Deferred income taxes	(7,791		)	(3,572		)
Loss (gain) on asset dispositions	7			(3,939		)
Equity in loss of unconsolidated affiliate, net	1,994			76
Inventory valuation reserves	2,214			2,613
Changes in operating assets and liabilities	(19,863		)	(24,485		)
Net cash (used in) provided by operating activities	(7,949		)	799
Investing activities:
Purchase of property and equipment	(43,892		)	(39,908		)
Proceeds from asset dispositions	17			10,998
Purchase of short-term investments	(134,518		)	(151,436		)
Proceeds from sale of short-term investments	187,217			148,838
Payment of deposits on aircraft	(110		)	(131		)
Net cash provided by (used in) investing activities	8,714			(31,639		)
Financing activities:
Proceeds from line of credit	66,525			150,800
Payments on line of credit	(67,300		)	(113,300		)
Repurchase of common stock	(263		)	(500		)
Net cash (used in) provided by financing activities	(1,038		)	37,000
(Decrease) increase in cash	(273		)	6,160
Cash, beginning of period	2,596			2,407
Cash, end of period	$	2,323		$	8,567
Supplemental Disclosures Cash Flow Information
Cash paid during the period for:
Interest	$	15,250		$	14,329
Income taxes	$	1,131		$	1,879
Noncash investing activities:
Other current liabilities and accrued payables related to purchase of property and equipment	$	15		$	64

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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, ~~2015 and the accompanying notes.~~

2016.

Our financial results, particularly as they relate to our Oil and Gas segment, are influenced by seasonal fluctuations as discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. 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.

~~New~~

Recently Adopted Accounting ~~Pronouncements—~~~~In May 2014,~~Pronouncements -Effective January 1, 2017, we adopted Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which was issued by the Financial Accounting Standards Board (“FASB”) in March 2016. This new standard requires that excess tax benefits and deficiencies resulting from stock-based compensation awards vesting and exercises be recognized in the income statement. Previously, these amounts were recognized in additional paid-in capital. As a result, during the first quarter of 2017 we recorded a cumulative-effect adjustment of $1.0 million increasing retained earnings and decreasing deferred tax liability on our balance sheet dated June 30, 2017. Accordingly, we recorded income tax expense of $1.5 million in our consolidated statement of income for the six months ended June 30, 2017, in recognition of excess tax deficiencies related to equity compensation. Under this new standard, the corresponding cash flows are now reflected in cash provided by operating activities instead of financing activities, as was previously required.

ASU 2016-09 also allows an employer with a statutory income tax withholding obligation to withhold shares with a fair value up to the amount of tax owed using the maximum statutory tax rate in the employee’s applicable jurisdiction. We have elected to continue to withhold the minimum statutory withholding obligation for outstanding awards. We have also elected to continue to estimate equity award forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period.

New Accounting Pronouncements - In May 2014, the FASB issued Accounting Standards Update ~~(“ASU”)~~ASU 2014-09,Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with ~~customers and will supersede most current revenue recognition guidance. In mid-2015~~customers. Entities can transition to the ~~FASB deferred~~standard either retrospectively or as a cumulative effect adjustment as of the ~~effective~~ date of ASU 2014-09 by one year until annual and interim periods beginning after December 15, 2017. Early adoption will be permitted as of January 1, 2017; however we have not yet determined if we will adopt this ASU prior to the effective date.adoption. The ~~effects of this~~new standard ~~on our financial position, results of operations and cash flows are not yet known.~~

~~In August 2014, the FASB issued ASU 2014-15~~~~Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern~~~~. ASU 2014-15 requires management to assess the entity’s ability to continue as a going concern and to provide related disclosures in certain circumstances. ASU 2014-15~~ is effective for ~~annual periods~~the Company beginning ~~after December 15, 2016,~~on January 1, 2018. Revenues from our Oil and ~~annual~~Gas segment and ~~interim periods thereafter. Early adoption is permitted.~~Air Medical segment hospital contracts are primarily comprised of a fixed monthly fee for a particular model of aircraft, plus a variable component based on flight time. Under the independent provider programs of our Air Medical segment, our revenues are based on a flat rate plus a variable charge per patient-loaded mile, and are recorded net of contractual allowances. We ~~do not believe that the impact of the implementation of this new guidance~~also generate revenue on a cost-plus basis in our Technical Services segment. Based on our ~~consolidated financial statements and disclosures will be significant.~~

~~In November 2015,~~initial assessment, the ~~FASB issued ASU 2015-17,~~~~Balance Sheet Classification of Deferred Taxes~~, which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. ASU 2015-17 is effective for annual periods beginning after December 15, 2016, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively. We doCompany does not expect the adoption of this ASU to have a material impact on ~~our~~its condensed consolidated financial statements.

Remaining implementation matters include establishing new policies, procedures, and controls and quantifying any adoption date adjustments. The Company will adopt this standard on January 1, 2018 utilizing the modified retrospective method.

In February 2016, the FASB issued ASU 2016-02,Leases, which replaces the existing guidance on leasing transactions in ASC 840 to require recognition of the assets and liabilities for the rights and obligations created by those leases on the balance sheet. We are ~~required to adopt this ASU for fiscal years after December 31, 2018, with early adoption permitted. The~~currently evaluating the effects of this standard, ~~on our financial position, results of operations,~~ and ~~cash flows are not yet known.~~

~~In March 2016,~~expect the ~~FASB issued ASU 2016-09,~~~~Compensation – Stock Compensation (Topic 718); Improvements to Employee Share-Based Payment Accounting.~~ The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The effectsadoption of this standard will result in a material change to our consolidated assets and liabilities based on our ~~financial position, results~~lease portfolio as of ~~operations, and cash flows are not yet known.~~

June 30, 2017. We plan to adopt this standard no later than January 1, 2019.

In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ~~The~~ ASU 2016-16 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The effects of this standard on our financial position, results of operations, and cash flows are not yet known.

We plan to adopt this standard beginning January 1, 2018.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard is expected to result in fewer acquisitions of properties qualifying as acquisitions of businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted. The effects of this standard on our financial position, results of operations, and cash flows are not yet known. We plan to adopt this standard beginning January 1, 2018.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the current two-step goodwill impairment test by eliminating the second step of the test. The new standard requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. This standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect this ASU to have a material impact on our consolidated financial statements.

2. 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 ~~gain (loss),~~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 ~~September~~June 30, ~~2016:~~

   Cost Basis    Unrealized
Gains    Unrealized
Losses    Fair Value
   (Thousands of dollars)
Investments:

Money market mutual funds
   $ 17,608       $ —         $ —         $ 17,608
Commercial paper
   32,820       —         (75 )    32,745
U.S. Government agencies
   16,296       5       (3 )    16,298
Corporate bonds and notes
   236,215       33       (355 )    235,893








Subtotal
   302,939       38       (433 )    302,544
Deferred compensation plan assets included in other assets
   2,392       —         —         2,392








Total
   $ 305,331       $ 38       $ (433 )    $ 304,936

2017:



	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	18,079	$	—	$	—		$	18,079
Commercial paper	17,008		—		(10		)	16,998
U.S. Government agencies	15,301		—		(19		)	15,282
Corporate bonds and notes	199,772		1		(318		)	199,455
Subtotal	250,160		1		(347		)	249,814
Deferred compensation plan assets included in other assets	2,562		—		—			2,562
Total	$	252,722	$	1	$	(347	)	$	252,376

Investments consisted of the following as of December 31, ~~2015:~~

   Cost Basis    Unrealized
Gains    Unrealized
Losses    Fair Value
   (Thousands of dollars)
Investments:

Money market mutual funds
   $ 18,181       $ —         $ —         $ 18,181
Commercial paper
   5,986       —         (5 )    5,981
U.S. Government agencies
   11,499       —         (30 )    11,469
Corporate bonds and notes
   265,069       —         (841 )    264,228








Subtotal
   300,735       —         (876 )    299,859
Deferred compensation plan assets included in other assets
   2,294       —         —         2,294








Total
   $ 303,029       $ —         $ (876 )    $ 302,153

2016:



	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	18,118	$	—	$	—		$	18,118
Commercial paper	27,906		—		(39		)	27,867
U.S. government agencies	13,295		—		(32		)	13,263
Corporate bonds and notes	244,202		2		(622		)	243,582
Subtotal	303,521		2		(693		)	302,830
Deferred compensation plan assets included in other assets	2,394		—		—			2,394
Total	$	305,915	$	2	$	(693	)	$	305,224

At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, we classified $12.4 million and $13.0 million ~~and $15.3 million~~respectively, 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 and a bond relating to foreign operations.

The following table presents the cost and fair value of our debt investments based on maturities as of:

   September 30, 2016    December 31, 2015
   Amortized    Fair    Amortized    Fair
   Costs    Value    Costs    Value
   (Thousands of dollars)
Due in one year or less
   $ 171,336       $ 171,152       $ 152,444       $ 152,212
Due within two years
   113,995       113,784       130,110       129,466








Total
   $ 285,331       $ 284,936       $ 282,554       $ 281,678



	June 30, 2017				December 31, 2016
	Amortized Costs		Fair Value		Amortized Costs		Fair Value
	(Thousands of dollars)
Due in one year or less	$	175,910	$	175,682	$	184,587	$	184,334
Due within two years	56,171		56,053		100,816		100,378
Total	$	232,081	$	231,735	$	285,403	$	284,712

The following table presents the average coupon rate percentage and the average days to maturity of our debt investments as of:

   September 30, 2016    December 31, 2015
   Average    Average    Average    Average
   Coupon    Days To    Coupon    Days To
   Rate (%)    Maturity    Rate (%)    Maturity
Commercial paper
   0.978       253       0.553       154
U.S. Government agencies
   0.979       512       0.865       599
Corporate bonds and notes
   1.643       330       1.757       331



	June 30, 2017		December 31, 2016
	Average Coupon Rate (%)	Average Days To Maturity	Average Coupon Rate (%)	Average Days To Maturity
Commercial paper	0.985	83	1.001	184
U.S. Government agencies	1.056	264	0.970	400
Corporate bonds and notes	1.720	246	1.745	318

The following table presents the fair value and unrealized losses related to our investments that have been in a continuous unrealized loss position for less than twelve months as of:

   September 30, 2016    December 31, 2015
      Unrealized       Unrealized
   Fair Value    Losses    Fair Value    Losses
   (Thousands of dollars)
Commercial paper
   $ 31,753       $ (75 )    $ 5,981       $ (5 )
U.S. Government agencies
   7,001       (2 )    8,969       (30 )
Corporate bonds and notes
   169,833       (320 )    232,347       (793 )








Total
   $ 208,587       $ (397 )    $ 247,297       $ (828 )



	June 30, 2017					December 31, 2016
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Thousands of dollars)
Commercial paper	$	16,998	$	(10	)	$	27,867	$	(39	)
U.S. Government agencies	13,287		(15		)	13,263		(32		)
Corporate bonds and notes	172,179		(286		)	210,836		(602		)
Total	$	202,464	$	(311	)	$	251,966	$	(673	)

The following table presents the fair value and unrealized losses related to our investments that have been in a continuous unrealized loss position for more than twelve months as of:

   September 30, 2016    December 31, 2015
      Unrealized       Unrealized
   Fair Value    Losses    Fair Value    Losses
   (Thousands of dollars)
Corporate bonds and notes
   $ 34,002       $ (36 )    $ 28,866       $ (48 )








Total
   $ 34,002       $ (36 )    $ 28,866       $ (48 )



	June 30, 2017					December 31, 2016
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Thousands of dollars)
U.S. Government agencies	$	1,996	$	(4	)	$	—	$	—
Corporate bonds and notes	19,064		(32		)	24,196		(20		)
Total	$	21,060	$	(36	)	$	24,196	$	(20	)

From time to time over the periods covered in our financial statements included herein (and as illustrated in the foregoing tables), our investments have experienced net unrealized losses. We consider these declines in market value to be due to customary market fluctuations, and we do not plan to sell these investments prior to maturity. For these reasons, we do not consider any of our investments to be other than temporarily impaired at ~~September~~June 30, ~~2016~~2017 or December 31, ~~2015.~~2016. We have also determined that we did not have any other than temporary impairments relating to credit losses on debt securities for the quarter ended ~~September~~June 30, ~~2016.~~2017. For additional information regarding our criteria for making these assessments, see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~

2016.

3. REVENUE RECOGNITION AND 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 ~~$5.4~~$6.0 million at ~~September~~June 30, ~~2016,~~2017, and ~~$5.2 million at~~ December 31, ~~2015.~~

2016.

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 ~~$119.7~~$110.9 million and ~~$103.6~~$111.9 million as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The allowance for uncompensated care was ~~$35.6~~$46.2 million and ~~$41.9~~$46.3 million as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, 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 $2.0 million and $2.2 million for the quarters ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. The value of these services was ~~$6.9~~$4.4 million and ~~$7.0~~$4.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. The estimated cost of providing charity services was ~~$0.5 million and~~ $0.4 million for the ~~quarters~~quarter ended ~~September~~June 30, ~~2016~~2017 and ~~2015, respectively.~~$0.5 million for the quarter ended June 30, 2016. The estimated cost of providing charity services was ~~$1.8~~$1.0 million and ~~$1.5~~$1.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, 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:

   As of
   September 30,
2016 December 31,
2015
Allowance for Contractual Discounts
   60 % 56 %
Allowance for Uncompensated Care
   18 % 23 %

Under a three-year contract that commenced on September 29, 2012, our Air Medical affiliate provided multiple services to a customer in the Middle East, including helicopter leasing, emergency medical helicopter flight services, aircraft maintenance, provision of spare parts, insurance coverage for the customer-owned aircraft, training services, and base construction. Each of the major services mentioned above qualified as separate units of accounting under the accounting guidance for such arrangements. The selling price for each specific service was determined based upon third-party evidence and estimates. As discussed in greater detail ~~elsewhere herein,~~in our Form 10-K for year ended December 2016, this contract, after being extended one year, lapsed on September 30, 2016.

We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were ~~$17.1~~$17.7 million and ~~$15.4~~$17.3 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

4. 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:

      September 30, 2016
   Total    (Level 1)    (Level 2)
      (Thousands of dollars)
Investments:

Money market mutual funds
   $ 17,608       $ 17,608       $ —
Commercial paper
   32,745       —         32,745
U.S. Government agencies
   16,298       —         16,298
Corporate bonds and notes
   235,893       —         235,893






   302,544       17,608       284,936
Deferred compensation plan assets
   2,392       2,392       —






Total
   $ 304,936       $ 20,000       $ 284,936

      December 31, 2015
   Total    (Level 1)    (Level 2)
      (Thousands of dollars)
Investments:

Money market mutual funds
   $ 18,181       $ 18,181       $ —
Commercial paper
   5,981       —         5,981
U.S. Government agencies
   11,469       —         11,469
Corporate bonds and notes
   264,228       —         264,228






   299,859       18,181       281,678
Deferred compensation plan assets
   2,294       2,294       —






Total
   $ 302,153       $ 20,475       $ 281,678



			June 30, 2017
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	18,079	$	18,079	$	—
Commercial paper	16,998		—		16,998
U.S. Government agencies	15,282		—		15,282
Corporate bonds and notes	199,455		—		199,455
	249,814		18,079		231,735
Deferred compensation plan assets	2,562		2,562		—
Total	$	252,376	$	20,641	$	231,735

			December 31, 2016
	Total		(Level 1)		(Level 2)
	(Thousands of dollars)
Investments:
Money market mutual funds	$	18,118	$	18,118	$	—
Commercial paper	27,867		—		27,867
U.S. government agencies	13,263		—		13,263
Corporate bonds and notes	243,582		—		243,582
	302,830		18,118		284,712
Deferred compensation plan assets	2,394		2,394		—
Total	$	305,224	$	20,512	$	284,712

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 ~~shares of~~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 3 investments. Investments reflected on our balance sheets as Other assets, which we hold to fund liabilities under our Officers’ Deferred Compensation Plan, consist mainly of multiple investment funds that are highly liquid and diversified.

Cash, accounts receivable, accounts payable and accrued liabilities, and our revolving credit facility debt all had fair values approximating their carrying amounts at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015.~~2016. Our determination of the estimated fair value of our 5.25% Senior Notes due 2019 and our revolving credit facility debt is derived 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 ~~$485.6~~$463.0 million and ~~$403.1~~$474.4 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

5. LONG-TERM DEBT

The components of long-term debt as of the dates indicated below were as follows:

   September 30, 2016    December 31, 2015
   Principal    Unamortized
Debt
Issuance
Debt Cost    Principal    Unamortized
Debt
Issuance
Debt Cost
   (Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, maturing March 15, 2019
   $ 500,000       $ 3,064       $ 500,000       $ 3,999
Revolving Credit Facility due October 1, 2017 with a group of commercial banks, interest payable at variable rates
   132,400       —         57,500       —








Total long-term debt
   $ 632,400       $ 3,064       $ 557,500       $ 3,999

~~In April 2015, the FASB issued ASU No. 2015-03,~~~~Simplifying the Presentation of Debt Issuance Costs~~, which changes the presentation of debt issuance costs in the financial statements. These costs are now presented as a direct deduction from the debt liability, rather than as an asset. We adopted the new standard effective January 1, 2016. As a result, we reclassified unamortized debt issuances cost in the amount of $3.1 million and $4.0 million as of September 30, 2016 and December 31, 2015, respectively, and reduced the carrying value of long-term debt by the same amounts.



	June 30, 2017				December 31, 2016
	Principal		Unamortized Debt Issuance Debt Cost		Principal		Unamortized Debt Issuance Debt Cost
	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, maturing March 15, 2019	$	500,000	$	2,129	$	500,000	$	2,753
Revolving Credit Facility due October 1, 2018 with a group of commercial banks, interest payable at variable rates	133,225		—		134,000		—
Total long-term debt	$	633,225	$	2,129	$	634,000	$	2,753

Our 5.25% Senior Notes (the “2019 Notes”) will mature on March 15, 2019, are unconditionally guaranteed on a senior basis by each of ~~PHI’s~~PHI, Inc’s wholly-owned domestic subsidiaries, and are the general, unsecured obligations of PHI, Inc. and the guarantors. Interest is payable semi-annually on March 15 and September 15 of each year. PHI has the option to redeem some or all of the 2019 Notes at any time on or after March 15, 2016 at specified redemption prices. The indenture governing the 2019 Notes (the “2019 Indenture”) contains, among other things, certain restrictive covenants, including limitations on incurring indebtedness, creating liens, selling assets and entering into certain transactions with affiliates. The covenants also limit PHI’s ability to, among other things, pay cash dividends on common stock, repurchase or redeem common or preferred equity, prepay subordinated debt and make certain investments. Upon the occurrence of a “Change in Control Repurchase Event” (as defined in the 2019 Indenture), PHI will be required, unless it has previously elected to redeem the 2019 Notes as described above, to make an offer to purchase the 2019 Notes for a cash price equal to 101% of their principal amount.

Revolving Credit ~~Facility–~~~~On September 30, 2016, we~~Facility – We have an amended ~~our~~and restated revolving credit facility ~~to, among other things, (a) extend the maturity date to~~(our “credit facility”) that matures on October 1, ~~2018, and (b) modify the fixed charge coverage ratio such that it shall only be tested when the total of our Short Term Investments are less than $150.0 million at the end of any fiscal quarter.~~2018. Under this facility, we can borrow up to $150.0 million at floating interest rates based on either the London Interbank Offered Rate plus 225 basis points or the prime rate (each as defined in our ~~amended and restated revolving~~ credit facility), at our option. Our ~~revolving~~ credit facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the credit facility is conditioned upon our continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in certain other transactions or activities and (ii) financial covenants that stipulate that PHI will maintain a consolidated working capital ratio of at least 2 to 1, a net funded debt to consolidated net worth ratio not greater than 1.5 to 1, a fixed charge coverage ratio of at least 1.1 to 1 if our short term investments fall below $150.0 million, and consolidated net worth of at least $450.0 million (with all such terms or amounts as defined in or determined under ~~the amended and restated revolving~~our credit facility). As of ~~September~~June 30, ~~2016,~~2017, we believe we were in compliance with these covenants.

Cash paid to fund interest expense was ~~$13.9~~$1.2 million for the quarter ended ~~September~~June 30, ~~2016~~2017 and ~~$13.5~~$0.6 million for the quarter ended ~~September~~June 30, ~~2015.~~2016. Cash paid to fund interest expense was ~~$28.3~~$15.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~$27.2~~$14.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~

2016.

Letter of Credit ~~Facility—~~Facility -We maintain a separate letter of credit facility that had ~~$13.0~~$12.4 million and ~~$15.3~~$13.0 million in letters of credit outstanding at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016 respectively. We have letters of credit securing our workers compensation policies, ~~and~~ a traditional provider ~~contract.~~

contract, and a bond relating to foreign operations.

We also have outstanding a letter of credit for $7.6 million issued under our $150.0 million credit facility that reduces the amount we can borrow under that facility. The letter of credit was issued to guaranty our performance under an international contract that was awarded in late 2016.

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 generally accepted accounting principles, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets. For additional information, see Note 13.

6. EARNINGS PER SHARE

The components of basic and diluted earnings per share for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:

   Quarter Ended
September 30,    Nine Months Ended
September 30,
   2016    2015    2016    2015
   (Thousands of dollars)
Weighted average outstanding shares of common stock, basic
   15,683       15,587       15,655       15,558
Dilutive effect of unvested restricted stock units
   —         65       —         82








Weighted average outstanding shares of common stock, diluted⁽¹⁾
   15,683       15,652       15,655       15,640



	Quarter Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
	(Thousands of dollars)
Weighted average outstanding shares of common stock, basic	15,716	15,677	15,716	15,650
Dilutive effect of unvested restricted stock units	—	41	—	—
Weighted average outstanding shares of common stock, diluted ⁽¹⁾	15,716	15,718	15,716	15,650

⁽¹⁾

(1)

For the ~~three~~six months ended ~~September~~June 30, 2017, and 2016, ~~52,126~~438,812 and 3,180 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, as they were anti-dilutive to earnings per share. For the nine months ended September 30, 2016, 22,221 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.

7. 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 ~~nine~~six months and ~~quarters~~quarter ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~

   Quarter Ended
September 30,    Nine Months Ended
September 30,
   2016    2015    2016    2015
   (Thousands of dollars)
Stock-based compensation expense:

Time-based restricted stock units
   $ 631       $ 619       $ 1,847       $ 1,827
Performance-based restricted stock units
   823       1,081       2,502       3,232








Total stock-based compensation expense
   $ 1,454       $ 1,700       $ 4,349       $ 5,059

2016.



	Quarter Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(Thousands of dollars)
Stock-based compensation expense:
Time-based restricted stock units	$	556	$	597	$	1,111	$	1,216
Performance-based restricted stock units	705		809		705		1,680
Total stock-based compensation expense	$	1,261	$	1,406	$	1,816	$	2,896

During the quarter and ~~nine~~six months ended ~~September~~June 30, 2017, 417,266 and 447,477 time-based restricted units, respectively, were awarded to managerial employees and 365,539 performance-based restricted units were awarded to managerial employees.

During the quarter and six months ended June 30, 2016, ~~10,992 and 25,280~~14,288 time-based restricted ~~stock~~ units were awarded to managerial employees ~~respectively.~~

~~During the quarter~~ and ~~nine months ended September 30, 2016, 2,318~~5,102 and ~~310,481~~308,163 performance-based restricted ~~stock~~ units were awarded to managerial employees, respectively.

~~During the quarter and nine months ended September 30, 2015, 13,545 and 33,593 time-based restricted stock units were awarded to managerial employees, respectively.~~

~~During the quarter and nine months ended September 30, 2015, 765 and 152,331 performance-based restricted stock units were awarded to managerial employees, respectively.~~

8. ASSET DISPOSALS

There were no sales or disposals of aircraft during the first quarter of 2017. During the ~~third~~second quarter of 2017, we disposed five medium aircraft and related parts inventory utilized in the Oil and Gas segment. These aircraft no longer met our strategic needs.

During the first quarter of 2016, we sold ~~four~~one light aircraft previously utilized in the Oil and Gas segment. Cash proceeds totaled ~~$2.2~~$0.9 million, resulting in athe loss ~~of $0.1 million~~ on the sale of ~~these assets. These aircraft no longer met our strategic needs. In~~this asset of $0.4 million. During the ~~first two quarters~~second quarter of 2016, we sold ~~five~~four light and three medium aircraft and related parts inventory utilized in the Oil and Gas segment. Cash proceeds totaled ~~$11.0~~$10.1 million, resulting in a gain on the sale of these assets of ~~$3.9~~$4.3 million. These aircraft no longer met our strategic needs.

During the third quarter of 2015, we sold or disposed of six light aircraft previously utilized in the Oil and Gas segment. Cash proceeds totaled $2.3 million, resulting in a gain on the sale of these assets of $0.2 million. These aircraft no longer met our strategic needs.

9. COMMITMENTS AND CONTINGENCIES

Commitments– ~~In 2014, we exercised an option to~~ We currently have no aircraft purchase six additional heavy aircraft for delivery in 2015 and 2016. In 2015, we executed an amendment to terminate the purchase of four of the heavy aircraft for delivery in 2016. We took delivery of one aircraft in 2015 and delivery of the final aircraft in January 2016.

commitments.

Total aircraft deposits of ~~$2.8~~$0.5 million were included in Other ~~assets~~Assets as of ~~September~~June 30, ~~2016.~~2017. This amount represents ~~deposits paid by us under aircraft leases which~~a deposit on a future lease buyout option. In the event we do not exercise the buyout option, the deposit will be applied ~~either to the future purchase of the aircraft or the final~~against lease ~~payments depending upon whether or not we elect to purchase the aircraft when that option under the lease becomes available to us.~~

payments.

As of ~~September~~June 30, ~~2016,~~2017, we had options to purchase ~~various~~ aircraft ~~that we currently operate~~ under ~~lease agreements~~leases, with ~~the aircraft owners. These~~such purchase options ~~will become~~becoming exercisable ~~at various dates~~in 2017 through 2020. The aggregate option purchase prices are ~~$50.3 million in 2016, $55.7~~$18.5 million in 2017, $127.0 million in 2018, ~~$150.4~~$129.0 million in 2019, and $22.7 million in 2020. ~~Whether we exercise these options will depend upon several factors, including market conditions and our available cash at~~In the respective exercise dates; however, we currently do not anticipate exercising the buyout options during 2016. During the quarter ended September 30, 2016, we declined the early buyout option on one aircraft.

~~During the third~~second quarter of ~~2016,~~2017, we purchased one heavy aircraft ~~previously leased by us~~from a lessor for ~~$26.7~~$17.0 million. ~~This aircraft~~Under current conditions, we believe it is unlikely that we will exercise the remaining 2017 purchase was made available for sale by the lessor prior to its early buy out option date and is not one of the above-mentioned aircraft available for purchase in 2016. We intend to use this aircraft in our international operations.

Subsequent to September 30, 2016, we entered into a contract to purchase two medium aircraft for use in our Oil and Gas segment. We expect to take delivery of the aircraft in the first quarter of 2017. The total purchase commitment is $19.9 million.

options, unless opportunistic conditions arise.

Environmental Matters –~~We have~~ PHI has recorded an ~~aggregate~~ estimated ~~probable~~ liability of ~~$0.2~~$0.15 million as of ~~September~~June 30, ~~2016~~2017 for environmental response costs. ~~We have~~Previously, PHI conducted environmental surveys of ~~our~~its former Lafayette ~~facility~~Facility located at the Lafayette Regional Airport, which we vacated in 2001, ~~and have~~PHI has determined that limited soil and groundwater contamination ~~exists~~exist at two parcels of land at the former facility. ~~We submitted an assessment report~~An Assessment Report for both ~~sites~~parcels was submitted in 2003 (and updated it in ~~2006, and received approvals of our remediation plan from~~2006) to the Louisiana Department of Environmental Quality ~~(“LDEQ”)~~(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 ~~such~~that time, ~~we have installed~~PHI has performed groundwater ~~monitoring wells~~sampling of the required groundwater monitor well installations at both parcels and submitted these ~~sites and furnished periodic~~sampling reports ~~on contamination levels~~ to the LDEQ. Pursuant to ~~our~~an agreement with the LDEQ, ~~we are providing samples annually~~PHI provided groundwater sample results semi-annually to the LDEQ for both ~~sites.~~parcels from 2005 to 2015. LDEQ approved a reduction in the sampling program from semi-annual to annual groundwater monitoring in 2015. Based ~~upon our~~on PHI’s working relationship and agreements with the LDEQ, and the results of ~~our~~ ongoing ~~site~~former facility parcel monitoring, ~~we believe, based on current circumstances,~~PHI believes that ~~our~~ ultimate remediation costs for ~~these sites~~the subject parcels will not be material to ~~our~~PHI’s consolidated financial position, ~~results of~~ 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, ~~various~~ tax issues, grievance hearings before labor regulatory agencies, and miscellaneous third party tort actions. The outcome of these proceedings is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of 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.

Operating Leases– 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. All aircraft leases contain purchase options exercisable by us at certain dates in the lease agreements.

At ~~September~~June 30, ~~2016,~~2017, we had approximately ~~$239.0~~$205.2 million in aggregate commitments under operating leases of which approximately ~~$12.0~~$21.6 million is payable through ~~December 31, 2016.~~the second half of 2017. The total lease commitments include ~~$226.2~~$191.4 million for aircraft and ~~$12.8~~$13.8 million for facility lease commitments.

10. 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.

~~Each~~

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~~A portion of our total selling, general and administrative expenses ~~that~~ is charged directly to ~~the~~each segment, and a small portion ~~that~~ is allocated to that segment. 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 ~~direct expenses~~costs as a percentage of total ~~direct expenses. Unallocated overhead consists primarily of corporate selling, general and administrative expenses that we do not allocate to the reportable segments.~~

In January 2016, we offered a Voluntary Employee Retirement Package (“VERP”) to all pilots who had attained age 64. Fifteen employees accepted this VERP, resulting in severance costs of $1.6 million recorded in the first quarter of 2016. At September 30, 2016, the severance costs from these offerings had been paid.

~~During the quarter ended March 31, 2016, we also offered a voluntary furlough program to our~~ operating costs.

Oil and Gas pilots whereby pilots who elect to participate in the program will receive severance pay and may continue medical coverage at their current employee-paid premiums. Twenty-six pilots accepted the offer with a total severance cost of $0.4 million. Under the terms of the furlough agreement, we must, no later than twelve months from the date of furlough, offer each furloughed employee a right to return to work.

~~Oil and Gas Segment.~~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. Our customers include Shell Oil Company, BP America Production Company, ExxonMobil Production Company, and ConocoPhillips Company, with whom we have worked for 30 or more years, and ENI Petroleum, with whom we have worked for more than 15 years. At ~~September~~June 30, ~~2016,~~2017, we had available for use ~~139~~128 aircraft in this segment.

Operating revenue from our Oil and Gas segment is derived mainly from contracts that include a fixed monthly rate for a particular model of aircraft, plus a variable ~~rate for~~payments based on the amount of flight time. ~~A small portion of our Oil and Gas segment revenue is derived from providing services on an “ad hoc” basis.~~ Operating costs for ~~our~~the Oil and Gas segment are primarily aircraft ~~operations~~operation costs, including costs for pilots and maintenance personnel. ~~Total fuel cost is included in direct expense and any reimbursement of~~We typically operate under fixed-term contracts with our customers, a substantial portion of ~~these costs above a contracted per-gallon amount is included~~which are competitively bid.

Our fixed-term contracts have terms of one to seven years (subject to provisions permitting early termination by the customers), with payment in ~~revenue.~~U.S. dollars. For the quarters ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, approximately ~~49%~~51% and ~~56%~~52% of our total operating revenues were generated by our Oil and Gas ~~segment. Our~~segment, with approximately 88% and 92% of these revenues from fixed-term customer contracts. For the six months ended June 30, 2017 and 2016, respectively, approximately 52% of our total operating revenues were generated by our Oil and Gas segment, ~~generated~~with approximately ~~51%~~88% and ~~57%~~92% of ~~our total operating revenue~~these revenues from fixed-term customer contracts. The remaining 12% and 8% of these revenues were attributable to work in the spot market and ad hoc flights for ~~the nine months ended September 30, 2016 and 2015, respectively.~~

contracted customers.

Air Medical ~~Segment.~~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.

~~As of September 30, 2016, 104 aircraft were available for use by our~~

We provide Air Medical ~~segment. At such date, we operated approximately 97 aircraft domestically, providing air medical~~ transportation services for hospitals and emergency service agencies throughout the U.S. As of June 30, 2017, our Air Medical segment operated approximately 104 aircraft in 18 states at 72 separate locations. Through September 30, 2016, we also provided air medical transportation services for a customer overseas. For our overseas program, we deployed eight customer-owned aircraft at three locations, with four aircraft generating revenues during the quarter and nine months ended September 30, 2016.

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~~quarter ended ~~September~~June 30, 2017 and 2016, approximately 46% and ~~2015, approximately 47% and 40%~~45% of our total operating revenues were generated by our Air Medical segment, respectively. For the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ approximately ~~45% and 37%~~44% of our total operating revenues were generated by our Air Medical ~~segment, respectively.~~

segment.

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. As further described in Note 3, revenues are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care at the time the services are provided. Contractual allowances and uncompensated care are estimated based on historical collection experience by payor category (consisting mainly of insurance, Medicaid, Medicare, and self-pay). 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:

   Revenue
   Quarter Ended Nine Months Ended
   September 30, September 30,
   2016 2015 2016 2015
Provision for contractual discounts
   65 % 63 % 67 % 65 %
Provision for uncompensated care
   9 % 11 % 6 % 9 %



	Quarter Ended June 30,				Quarter Ended June 30,
	2017		2016		2017		2016
Provision for contractual discounts	63	%	65	%	66	%	69	%
Provision for uncompensated care	10	%	7	%	7	%	4	%

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:

   Quarter Ended Nine Months Ended
   September 30, September 30,
   2016 2015 2016 2015
Insurance
   75 % 74 % 72 % 74 %
Medicare
   17 % 17 % 18 % 17 %
Medicaid
   8 % 8 % 9 % 8 %
Self-Pay
   0 % 1 % 1 % 1 %



	Quarter Ended June 30,				Quarter Ended June 30,
	2017		2016		2017		2016
Insurance	72	%	69	%	71	%	70	%
Medicare	18	%	18	%	18	%	18	%
Medicaid	8	%	9	%	9	%	10	%
Self-Pay	2	%	4	%	2	%	2	%

We also have ~~several traditional provider~~a limited number of contracts with hospitals under which we receive a fixed ~~monthly rate~~fee component for aircraft availability and ~~an hourly rate~~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 ~~27%~~18% and ~~34%~~29% of the segment’s revenues for the quarters ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, these contracts generated approximately ~~29% and 37%~~30% of the ~~segment’s revenues, respectively.~~

segment's revenues.

Technical Services ~~Segment.~~Segment -Our Technical Services segment provides ~~maintenance~~helicopter repair and ~~repairs~~overhaul services for ~~our existing~~flight operations customers that own their aircraft. ~~These~~Costs associated with these services are primarily labor, and customers are generally ~~labor intensive with higher operating margins as compared~~billed at a percentage above our service costs. We also periodically provide flight services to ~~other segments. Depending on when we commence and complete special projects for~~governmental customers ~~our results for~~under this segment, ~~can vary significantly from period~~including our agreement to ~~period, although these variances typically have a limited impact on our consolidated operating results. The Technical Services segment also conducts flight operations~~operate six aircraft for the National Science Foundation in Antarctica, ~~which are~~ typically ~~conducted~~ in the first and fourth

quarters each year. Also included in this segment ~~are the results of~~is our proprietary Helipass operations, which provides software as a service to certain of our Oil and Gas customers for the purpose of passenger check-in and compliance verification.

~~Approximately 4%~~

For the quarters ended June 30, 2017 and 2016, approximately 3% and 5%, respectively, of our total operating revenues were generated by our Technical Services ~~segment during each~~segment. For the six month period ended June 30, 2017 and 2016, approximately 4%, respectively, of ~~the three and nine-month periods ended September 30, 2016 and 2015.~~

our total operating revenues were generated by our Technical Services segment.

Summarized financial information concerning our reportable operating segments for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 is as follows:

   Quarter Ended    Nine Months Ended
   September 30,    September 30,
   2016    2015    2016    2015
   (Thousands of dollars)    (Thousands of dollars)
Segment operating revenues, net

Oil and Gas
   $ 77,551       $ 121,190       $ 249,173       $ 354,425
Air Medical
   74,482       85,516       220,089       239,543
Technical Services
   6,060       8,027       19,983       23,509








Total operating revenues, net
   158,093       214,733       489,245       617,477








Segment direct expenses⁽¹⁾

Oil and Gas⁽²⁾
   82,832       109,500       262,148       310,093
Air Medical
   56,562       65,474       172,603       189,089
Technical Services
   5,742       7,165       15,432       21,166








Total direct expenses
   145,136       182,139       450,183       520,348








Segment selling, general and administrative expenses

Oil and Gas
   1,705       1,397       4,838       3,831
Air Medical
   3,056       2,302       8,293       7,458
Technical Services
   266       230       763       552








Total segment selling, general and administrative expenses
   5,027       3,929       13,894       11,841








Total segment expenses
   150,163       186,068       464,077       532,189








Net segment (loss) profit

Oil and Gas
   (6,986 )    10,293       (17,813 )    40,501
Air Medical
   14,864       17,740       39,193       42,996
Technical Services
   52       632       3,788       1,791








Total
   7,930       28,665       25,168       85,288








Other, net⁽³⁾
   377       637       5,425       1,739
Unallocated selling, general and administrative costs⁽¹⁾
   (8,354 )    (7,646 )    (22,938 )    (23,018 )
Interest expense
   (7,719 )    (7,366 )    (22,792 )    (21,691 )








(Loss) earnings before income taxes
   $ (7,766 )    $ 14,290       $ (15,137 )    $ 42,318



	Quarter Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	74,668		$	83,185		$	146,399		$	171,622
Air Medical	67,222			75,547			122,559			145,607
Technical Services	4,534			8,404			12,084			13,923
Total operating revenues, net	146,424			167,136			281,042			331,152
Segment direct expenses ⁽¹⁾
Oil and Gas ⁽²⁾	73,681			87,400			155,410			179,316
Air Medical	50,402			58,997			101,243			116,041
Technical Services	3,858			6,096			8,804			9,690
Total segment direct expenses	127,941			152,493			265,457			305,047
Segment selling, general and administrative expenses
Oil and Gas	1,635			1,605			3,354			3,132
Air Medical	3,263			2,642			6,144			5,237
Technical Services	356			273			694			497
Total segment selling, general and administrative expenses	5,254			4,520			10,192			8,866
Total segment expenses	133,195			157,013			275,649			313,913
Net segment (loss) profit
Oil and Gas	(648		)	(5,820		)	(12,365		)	(10,826		)
Air Medical	13,557			13,908			15,172			24,329
Technical Services	320			2,035			2,586			3,736
Total net segment profit	13,229			10,123			5,393			17,239

Other, net ⁽³⁾	697			4,792			1,761			5,048
Unallocated selling, general and administrative costs ⁽¹⁾	(8,993		)	(7,258		)	(17,099		)	(14,585		)
Interest expense	(8,083		)	(7,540		)	(16,278		)	(15,073		)
(Loss) earnings before income taxes	$	(3,150	)	$	117		$	(26,223	)	$	(7,371	)


(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    Nine Months Ended
   September 30,    September 30,
   2016    2015    2016    2015
Segment Direct Expense:

Oil and Gas
   $ 10,616       $ 11,194       $ 30,558       $ 32,797
Air Medical
   5,267       4,100       14,654       12,948
Technical Services
   141       130       426       390








Total
   $ 16,024       $ 15,424       $ 45,638       $ 46,135








Unallocated SG&A
   $ 2,269       $ 2,376       $ 7,416       $ 8,177



	Depreciation and Amortization Expense
	Quarter Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(Thousands of dollars)
Segment Direct Expense:
Oil and Gas	$	9,824	$	10,024	$	19,686	$	19,942
Air Medical	5,219		5,132		10,696		9,387
Technical Services	148		157		294		285
Total	$	15,191	$	15,313	$	30,676	$	29,614
Unallocated SG&A	$	622	$	2,476	$	3,335	$	5,147


(2)	Includes Equity in loss of unconsolidated ~~affiliate.~~affiliates, net.


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

11. INVESTMENT IN VARIABLE INTEREST ENTITY

AND OTHER INVESTMENTS AND AFFILIATES

PHI Century Limited -We account for our investment in our West African operations 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 ~~September~~June 30, ~~2016,~~2017, we had a 49% investment in the common stock of PHI Century Limited (“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 ~~September~~June 30, 2017, we recorded income in equity of this unconsolidated affiliate of $0.1 million relative to our 49% equity ownership. For the six months ended June 30, 2017 and 2016, we recorded a loss in equity of this unconsolidated affiliate of ~~$0.2~~$0.9 million ~~compared to a loss of~~and $0.1 million ~~for the quarter ended September 30, 2015,~~ relative to our 49% equity ownership. For the nine months ended September 30, 2016, we recorded a loss in equity of unconsolidated affiliate of $0.3 million, compared to a loss of $0.2 million for the nine months ended September 30, 2015, relative to our 49% equity ownership. ownership, respectively.We had $0$2.4 million and $2.0 million of trade receivables as of ~~September~~June 30, ~~2016 from PHIC. At~~2017 and December 31, ~~2015, we recorded an allowance for bad debts against this trade receivable of $1.5 million, as we do not anticipate that we will be able to recover them.~~2016, respectively, from PHIC. Our investment in the common stock of PHIC is included in Other assets on our Condensed Consolidated Balance Sheets and was ~~$0.9~~$0.4 million and $0$0.2 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

PHI-HNZ Australia Ltd -In the fourth quarter of 2016, the Company and HNZ Group, Inc. (HHNZ) jointly formed PHI-HNZ Australia Pty Ltd., a legal entity held 50% by PHI, Inc. and 50% by HNZ Group, Inc. (“HNZ”), to provide helicopter transportation services in support of a gas development project offshore of western Australia. PHI-HNZ Australia Pty, Ltd began operations in April, 2017. For the quarter and six months ended June 30, 2017, we recorded a loss in equity of unconsolidated affiliate of $1.1 million, primarily related to startup costs associated with the contract.

12. 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.

13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed further in Note 5, on March 17, 2014, PHI, Inc. issued $500.0 million aggregate principal amount of 5.25% Senior Notes due 2019 that are fully and unconditionally guaranteed on a joint and several, senior basis by all of ~~our~~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”) ~~and~~ the guarantor subsidiaries and the non-guarantor subsidiaries, each under separate ~~headings.~~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~~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 have begun 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, 2016
   Parent
   Company Guarantor
   Only (issuer) Subsidiaries ⁽¹⁾ Eliminations Consolidated
ASSETS
Current Assets:

Cash
   $ 36    $ 2,603    $ —      $ 2,639
Short-term investments
   289,520    —      —      289,520
Accounts receivable – net
   64,564    77,911    —      142,475
Intercompany receivable
   —      41,796    (41,796 ) —
Inventories of spare parts – net
   60,416    8,993    —      69,409
Prepaid expenses
   4,412    2,564    —      6,976
Deferred income taxes
   10,379    —      —      10,379
Income taxes receivable
   950    (87 ) —      863


Total current assets
   430,277    133,780    (41,796 ) 522,261
Investment in subsidiaries
   351,440    —      (351,440 ) —
Property and equipment – net
   602,296    314,264    —      916,560
Restricted cash and investments
   13,023    15    —      13,038
Other assets
   6,181    1,153    —      7,334


Total assets
   $ 1,403,217    $ 449,212    $ (393,236 ) $ 1,459,193


LIABILITIES AND
SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable
   $ 17,232    $ 3,611    $ —      $ 20,843
Accrued and other current liabilities
   21,894    10,284    —      32,178
Intercompany payable
   41,796    —      (41,796 ) —


Total current liabilities
   80,922    13,895    (41,796 ) 53,021
Long-term debt:

Revolving credit facility
   132,400    —      —      132,400
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,064
   496,936    —      —      496,936
Deferred income taxes and other long-term liabilities
   71,472    83,877    —      155,349
Shareholders’ Equity:

Common stock and paid-in capital
   310,259    79,191    (79,191 ) 310,259
Accumulated other comprehensive income
   (271 ) —      —      (271 )
Retained earnings
   311,499    272,249    (272,249 ) 311,499


Total shareholders’ equity
   621,487    351,440    (351,440 ) 621,487


Total liabilities and shareholders’ equity
   $ 1,403,217    $ 449,212    $ (393,236 ) $ 1,459,193



	June 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	48		$	1,328		$	947		$	—		$	2,323
Short-term investments	237,433			—			—			—			237,433
Accounts receivable – net	78,334			63,020			8,969			(2,819		)	147,504
Intercompany receivable	—			105,938			—			(105,938		)	—
Inventories of spare parts – net	67,148			9,007			—			—			76,155
Prepaid expenses	10,554			2,394			183			—			13,131
Deferred income taxes	10,798			—			—			—			10,798
Income taxes receivable	418			(4		)	—			—			414
Total current assets	404,733			181,683			10,099			(108,757		)	487,758

Investment in subsidiaries	376,032			—			—			(376,032		)	—
Property and equipment – net	626,402			291,118			614			—			918,134
Restricted cash and investments	12,382			—			14			—			12,396
Other assets	9,168			1,004			—			—			10,172
Total assets	$	1,428,717		$	473,805		$	10,727		$	(484,789	)	$	1,428,460

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	24,177		$	3,200		$	3,233		$	(2,819	)	$	27,791
Accrued and other current liabilities	24,508			7,836			1,040			—			33,384
Intercompany payable	97,739			—			8,199			(105,938		)	—
Total current liabilities	146,424			11,036			12,472			(108,757		)	61,175

Long-term debt	631,096			—			—			—			631,096
Deferred income taxes and other long-term liabilities	67,136			83,926			1,066			—			152,128
Shareholders’ Equity:
Common stock and paid-in capital	307,367			77,951			1,375			(79,326		)	307,367
Accumulated other comprehensive loss	(254		)	—			—			—			(254		)
Retained earnings	276,948			300,892			(4,186		)	(296,706		)	276,948
Total shareholders’ equity	584,061			378,843			(2,811		)	(376,032		)	584,061
Total liabilities and shareholders’ equity	$	1,428,717		$	473,805		$	10,727		$	(484,789	)	$	1,428,460

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)



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

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

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

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


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING ~~BALANCE SHEETS~~

STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

   December 31, 2015
   Parent
   Company Guarantor
   Only (issuer) Subsidiaries ⁽¹⁾ Eliminations Consolidated
ASSETS
Current Assets:

Cash
   $ 46    $ 2,361    $ —      $ 2,407
Short-term investments
   284,523    —      —      284,523
Accounts receivable – net
   70,336    74,442    —      144,778
Intercompany receivable
   —      90,943    (90,943 ) —
Inventories of spare parts – net
   60,060    9,431    —      69,491
Prepaid expenses
   7,162    1,789    —      8,951
Deferred income taxes
   10,379    —      —      10,379
Income taxes receivable
   1,002    (241 ) —      761


Total current assets
   433,508    178,725    (90,943 ) 521,290
Investment in subsidiaries
   330,848    —      (330,848 ) —
Property and equipment – net
   632,759    250,770    —      883,529
Restricted investments
   15,336    —      —      15,336
Other assets
   5,975    203    —      6,178


Total assets
   $ 1,418,426    $ 429,698    $ (421,791 ) $ 1,426,333


LIABILITIES AND
SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable
   $ 25,512    $ 5,861    $ —      $ 31,373
Accrued liabilities
   29,138    15,621    —      44,759
Intercompany payable
   90,943    —      (90,943 ) —


Total current liabilities
   145,593    21,482    (90,943 ) 76,132
Long-term debt:

Revolving credit facility
   57,500    —      —      57,500
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,999
   496,001    —      —      496,001
Deferred income taxes and other long-term liabilities
   92,334    77,368    —      169,702
Shareholders’ Equity:

Common stock and paid-in capital
   306,444    79,061    (79,061 ) 306,444
Accumulated other comprehensive loss
   (567 ) —      —      (567 )
Retained earnings
   321,121    251,787    (251,787 ) 321,121


Total shareholders’ equity
   626,998    330,848    (330,848 ) 626,998


Total liabilities and shareholders’ equity
   $ 1,418,426    $ 429,698    $ (421,791 ) $ 1,426,333



	For the quarter ended June 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	75,045		$	68,857		$	5,341		$	(2,819	)	$	146,424
Expenses:
Direct expenses	72,598			51,806			5,366			(2,819		)	126,951
Selling, general and administrative expenses	10,916			3,269			66			(4		)	14,247
Total operating expenses	83,514			55,075			5,432			(2,823		)	141,198
Loss (gain) on disposal of assets, net	8			(1		)	—			—			7
Equity in (income) loss of unconsolidated affiliates, net	(75		)	—			1,066			—			991
Operating (loss) income	(8,402		)	13,783			(1,157		)	4			4,228
Equity in net income of consolidated subsidiaries	(14,613		)	—			—			14,613			—
Interest expense	8,082			1			—			—			8,083
Other income, net	(708		)	(1		)	—			4			(705		)
	(7,239		)	—			—			14,617			7,378
(Loss) earnings before income taxes	(1,163		)	13,783			(1,157		)	(14,613		)	(3,150		)
Income tax expense (benefit)	2,110			(1,987		)	—			—			123
Net (loss) earnings	$	(3,273	)	$	15,770		$	(1,157	)	$	(14,613	)	$	(3,273	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)



	For the quarter ended June 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Operating revenues, net	$	89,365		$	77,771	$	—		$	167,136
Expenses:
Direct expenses	89,535			62,882		—			152,417
Selling, general and administrative expenses	9,232			2,871		(325		)	11,778
Total operating expenses	98,767			65,753		(325		)	164,195
Gain on disposal of assets, net	(4,298		)	—		—			(4,298		)
Equity in loss of consolidated affiliates, net	76			—		—			76
Operating (loss) income	(5,180		)	12,018		325			7,163
Equity in net income of consolidated subsidiaries	(7,035		)	—		7,035			—
Interest expense	7,534			6		—			7,540
Other income, net	(819		)	—		325			(494		)
	(320		)	6		7,360			7,046
(Loss) earnings before income taxes	(4,860		)	12,012		(7,035		)	117
Income tax (benefit) expense	(9,137		)	4,977		—			(4,160		)
Net earnings	$	4,277		$	7,035	$	(7,035	)	$	4,277


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

~~PHI, INC. AND SUBSIDIARIES~~

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)

(Unaudited)

   For the quarter ended September 30, 2016
   Parent
   Company Guarantor
   Only (issuer) 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 unconsolidated affiliate
   198    —      —      198


Operating 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 )


   For the quarter ended September 30, 2015
   Parent
   Company Guarantor
   Only (issuer) Subsidiaries⁽¹⁾ Eliminations Consolidated
Operating revenues, net
   $ 124,505    $ 90,228    $ —      $ 214,733
Expenses:

Direct expenses
   111,876    70,192    (4 ) 182,064
Selling, general and administrative expenses
   9,219    2,356    —      11,575


Total operating expenses
   121,095    72,548    (4 ) 193,639
Gain on disposal of assets, net
   (165 ) —      —      (165 )
Equity in loss of unconsolidated affiliate
   75    —      —      75


Operating income
   3,500    17,680    4    21,184
Equity in net income of consolidated subsidiaries
   (10,682 ) —      10,682    —
Interest expense
   7,274    92    —      7,366
Other income, net
   (474 ) (2 ) 4    (472 )


   (3,882 ) 90    10,686    6,894


Earnings before income taxes
   7,382    17,590    (10,682 ) 14,290
Income tax (benefit) expense
   (287 ) 6,908    —      6,621


Net earnings
   $ 7,669    $ 10,682    $ (10,682 ) $ 7,669



	For the six months ended June 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues, net	$	149,329		$	126,330		$	8,202		$	(2,819	)	$	281,042
Expenses:
Direct expenses	154,942			104,187			7,154			(2,819		)	263,464
Selling, general and administrative expenses	21,024			6,155			120			(9		)	27,290
Total operating expenses	175,966			110,342			7,274			(2,828		)	290,754
Loss (gain) on disposal of assets, net	8			(1		)	—			—			7
Equity in loss (income) of unconsolidated affiliates, net	928			—			1,066			—			1,994
Operating income (loss)	(27,573		)	15,989			(138		)	9			(11,713		)
Equity in net income of consolidated subsidiaries	(17,243		)	—			—			17,243			—
Interest expense	16,256			22			—			—			16,278
Other income, net	(1,776		)	(1		)	—			9			(1,768		)
	(2,763		)	21			—			17,252			14,510
(Loss) earnings before income taxes	(24,810		)	15,968			(138		)	(17,243		)	(26,223		)
Income tax (benefit) expense	(6,289		)	(1,413		)	—			—			(7,702		)
Net (loss) earnings	$	(18,521	)	$	17,381		$	(138	)	$	(17,243	)	$	(18,521	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)



	For the six months ended June 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	181,234		$	149,918		$	—		$	331,152
Expenses:
Direct expenses	181,572			123,399			—			304,971
Selling, general and administrative expenses	18,275			5,674			(498		)	23,451
Total operating expenses	199,847			129,073			(498		)	328,422
Gain on disposal of assets, net	(3,939		)	—			—			(3,939		)
Equity in loss of unconsolidated affiliate	76			—			—			76
Operating (loss) income	(14,750		)	20,845			498			6,593
Equity in net income of consolidated subsidiaries	(12,090		)	—			12,090			—
Interest expense	15,047			26			—			15,073
Other income, net	(1,603		)	(4		)	498			(1,109		)
	1,354			22			12,588			13,964
(Loss) earnings before income taxes	(16,104		)	20,823			(12,090		)	(7,371		)
Income tax (benefit) expense	(11,449		)	8,733			—			(2,716		)
Net (loss) earnings	$	(4,655	)	$	12,090		$	(12,090	)	$	(4,655	)


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF ~~OPERATIONS~~

COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)

   For the nine months ended September 30, 2016
   Parent
   Company    Guarantor
   Only (issuer)    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 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 )








   For the nine months ended September 30, 2015
   Parent
   Company    Guarantor
   Only (issuer)    Subsidiaries⁽¹⁾    Eliminations    Consolidated
Operating revenues, net
   $ 368,202       $ 249,275       $ —         $ 617,477
Expenses:

Direct expenses
   321,841       198,271       (13 )    520,099
Selling, general and administrative expenses
   27,198       7,661       —         34,859








Total operating expenses
   349,039       205,932       (13 )    554,958
Gain on disposal of assets, net
   (238 )    —         —         (238 )
Equity in loss of unconsolidated affiliate
   249       —         —         249








Operating income
   19,152       43,343       13       62,508
Equity in net income of consolidated subsidiaries
   (26,044 )    —         26,044       —
Interest expense
   21,599       92       —         21,691
Other income, net
   (1,508 )    (6 )    13       (1,501 )








   (5,953 )    86       26,057       20,190








Earnings before income taxes
   25,105       43,257       (26,044 )    42,318
Income tax expense
   619       17,213       —         17,832








Net earnings
   $ 24,486       $ 26,044       $ (26,044 )    $ 24,486



	For the quarter ended June 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(3,273	)	$	15,770	$	(1,157	)	$	(14,613	)	$	(3,273	)
Unrealized gain on short-term investments	167			—		—			—			167
Changes in pension plan asset and benefit obligation	23			—		—			—			23
Tax effect of the above-listed adjustments	(68		)	—		—			—			(68		)
Total comprehensive (loss) income	$	(3,151	)	$	15,770	$	(1,157	)	$	(14,613	)	$	(3,151	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)



	For the quarter ended June 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	4,277		$	7,035	$	(7,035	)	$	4,277
Unrealized gain on short-term investments	210			—		—			210
Changes in pension plan asset and benefit obligations	1			—		—			1
Tax effect of the above-listed adjustments	(75		)	—		—			(75		)
Total comprehensive (loss) income	$	4,413		$	7,035	$	(7,035	)	$	4,413


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(LOSS)

(Thousands of dollars)

(Unaudited)

   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 loss on short-term investments
   (494 ) —         —      (494 )
Changes in pension plan assets and benefit obligations
   1    —         —      1
Tax effect
   178    —         —      178




Total comprehensive (loss) income
   $ (5,282 ) $ 8,372       $ (8,372 ) $ (5,282 )




   For the quarter ended September 30, 2015
   Parent
Company
Only (issuer) Guarantor
Subsidiaries⁽¹⁾    Eliminations Consolidated
Net earnings
   $ 7,669    $ 10,682       $ (10,682 ) $ 7,669
Unrealized gain on short-term investments
   12    —         —      12
Changes in pension plan assets and benefit obligations
   4    —         —      4
Tax effect
   (6 ) —         —      (6 )




Total comprehensive income
   $ 7,679    $ 10,682       $ (10,682 ) $ 7,679



	For the six months ended June 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) earnings	$	(18,521	)	$	17,381	$	(138	)	$	(17,243	)	$	(18,521	)
Unrealized gain on short-term investments	329			—		—			—			329
Changes in pension plan asset and benefit obligation	22			—		—			—			22
Tax effect of the above-listed adjustments	(127		)	—		—			—			(127		)
Total comprehensive (loss) income	$	(18,297	)	$	17,381	$	(138	)	$	(17,243	)	$	(18,297	)

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)



	For the six months ended June 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net (loss) earnings	$	(4,655	)	$	12,090	$	(12,090	)	$	(4,655	)
Unrealized gain on short-term investments	1,017			—		—			1,017
Changes in pension plan asset and benefit obligations	2			—		—			2
Tax effect of the above-listed adjustments	(407		)	—		—			(407		)
Total comprehensive (loss) income	$	(4,043	)	$	12,090	$	(12,090	)	$	(4,043	)


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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF ~~COMPREHENSIVE INCOME (LOSS)~~

CASH FLOWS

(Thousands of dollars)

(Unaudited)

   For the nine months ended September 30, 2016
   Parent
   Company Guarantor
   Only (issuer) 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 assets and benefit obligations
   3    —         —      3
Tax effect
   (229 ) —         —      (229 )




Total comprehensive (loss) income
   $ (9,325 ) $ 20,462       $ (20,462 ) $ (9,325 )




   For the nine months ended September 30, 2015
   Parent
   Company Guarantor
   Only (issuer) Subsidiaries⁽¹⁾    Eliminations Consolidated
Net earnings
   $ 24,486    $ 26,044       $ (26,044 ) $ 24,486
Unrealized loss on short-term investments
   (7 ) —         —      (7 )
Unrealized realized gain
   24    —         —      24
Changes in pension plan assets and benefit obligations
   4    —         —      4
Tax effect
   3    —         —      3




Total comprehensive income
   $ 24,510    $ 26,044       $ (26,044 ) $ 24,510



	For the six months ended June 30, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(34,236	)	$	18,916		$	7,371		$	—	$	(7,949	)
Investing activities:
Purchase of property and equipment	(43,892		)	—			—			—		(43,892		)
Proceeds from asset dispositions	17			—			—			—		17
Purchase of short-term investments	(134,518		)	—			—			—		(134,518		)
Proceeds from sale of short-term investments	187,217			—			—			—		187,217
Payments of deposits on aircraft	(110		)	—			—			—		(110		)
Net cash provided by (used in) investing activities	8,714			—			—			—		8,714
Financing activities:
Proceeds from line of credit	66,525			—			—			—		66,525
Payments on line of credit	(67,300		)	—			—			—		(67,300		)
Repurchase of common stock	(263		)	—			—			—		(263		)
Due to/from affiliate, net	26,572			(19,688		)	(6,884		)	—		—
Net cash provided by (used in) financing activities	25,534			(19,688		)	(6,884		)	—		(1,038		)
Increase (decrease) in cash	12			(772		)	487			—		(273		)
Cash, beginning of period	36			2,100			460			—		2,596
Cash, end of period	$	48		$	1,328		$	947		$	—	$	2,323

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)



	For the six months ended June 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(12,954	)	$	13,753		$	—	$	799
Investing activities:
Purchase of property and equipment	(39,535		)	(373		)	—		(39,908		)
Proceeds from asset dispositions	10,998			—			—		10,998
Purchase of short-term investments	(151,436		)	—			—		(151,436		)
Proceeds from sale of short-term investments	148,838			—			—		148,838
Payments of deposits on aircraft	(131		)	—			—		(131		)
Net cash used in investing activities	(31,266		)	(373		)	—		(31,639		)
Financing activities:
Proceeds from line of credit	150,800			—			—		150,800
Payments on line of credit	(113,300		)	—			—		(113,300		)
Repurchase of common stock	(500		)	—			—		(500		)
Due to/from affiliate, net	7,214			(7,214		)	—		—
Net cash provided by (used in) financing activities	44,214			(7,214		)	—		37,000
(Decrease) increase in cash	(6		)	6,166			—		6,160
Cash, beginning of period	46			2,361			—		2,407
Cash, end of period	$	40		$	8,527		$	—	$	8,567


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

~~PHI, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS~~

~~(Thousands of dollars)~~

~~(Unaudited)~~

   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 guarantor subsidiaries’ amounts.~~

~~PHI, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS~~

~~(Thousands of dollars)~~

~~(Unaudited)~~

   For the nine months ended September 30, 2015
   Parent
Company
Only (issuer) Guarantor
Subsidiaries ⁽¹⁾ Eliminations    Consolidated
Net cash provided by operating activities
   $ 39,490    $ 68,665    $ —         $ 108,155
Investing activities:

Purchase of property and equipment
   (48,244 ) —      —         (48,244 )
Proceeds from asset dispositions
   3,469    —      —         3,469
Purchase of short-term investments
   (560,148 ) —      —         (560,148 )
Proceeds from sale of short-term investments
   458,468    —      —         458,468
Refund of deposits on aircraft
   6,010    —      —         6,010
Payments of deposits on aircraft
   (1,207 ) —      —         (1,207 )




Net cash used in investing activities
   (141,652 ) —      —         (141,652 )




Financing activities:

Proceeds from line of credit
   206,660    —      —         206,660
Payments on line of credit
   (171,440 ) —      —         (171,440 )
Repurchase of common stock for payroll tax withholding requirements
   (2,441 ) —      —         (2,441 )
Due to/from affiliate, net
   70,792    (70,792 ) —         —




Net cash provided by (used in) financing activities
   103,571    (70,792 ) —         32,779




Increase (decrease) in cash
   1,409    (2,127 ) —         (718 )
Cash, beginning of period
   51    6,219    —         6,270




Cash, end of period
   $ 1,460    $ 4,092    $ —         $ 5,552

~~(1)~~

~~Foreign subsidiaries represent minor subsidiaries and are included in the guarantor subsidiaries’ amounts.~~

~~Item 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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, ~~2015,~~2016, including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein.

Special Note Regarding Forward-Looking Statements

All statements other than statements of historical fact contained in this Form 10-Q and other periodic reports filed by PHI, Inc. (“PHI” or the “Company” or “we,” “us” or “our”) under the Securities Exchange Act of 1934, 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,” “goals,” “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 about future developments and 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 risks, uncertainties, and other factors that may cause our actual results to differ materially from the expectations, beliefs, and estimates expressed or implied in such forward-looking statements. Factors that could cause our results to differ materially from the expectations expressed or implied in such forward-looking statements include but are not limited to the following: ~~changes~~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; any failure to maintain our strong safety record; our ability to secure ~~and retain~~ favorable customer contracts or otherwise remain able to profitably deploy our existing fleet of aircraft; 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; the availability of adequate insurance; adverse changes in the value of our aircraft or our ability to sell them in the secondary markets; weather conditions and seasonal factors, including tropical storms and hurricanes; the effects of competition and changes in technology; the adverse impact of customers electing to terminate or reduce our services; 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; the special risks of our air medical operations, including collections risks and potential medical malpractice claims; political, economic, payment, regulatory and other risks and uncertainties associated with our international operations; our substantial indebtedness and operating lease commitments; 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 develop and implement successful business strategies; changes in fuel prices; the risk of work stoppages and other labor problems; changes in our future cash requirements; 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 this and other annual, quarterly or current reports filed by us with the SEC. All of our above-described forward-looking statements are expressly qualified in their entirety by the cautionary statements in this paragraph and the Risk Factors disclosures in our SEC filings. Additional factors or risks that we currently deem immaterial, that are not presently known to us or that arise in the future 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. PHI undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Further, we may ~~make changes to~~change 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.

Overview

As described further in Note 10, we are primarily a provider of helicopter transport services and derive most of our revenue from providing ~~helicopter transport~~these services to the energy and medical industries. Our consolidated results of operations are principally driven by the following factors:

•

~~The level of offshore oil and gas exploration and production activities in the areas in which we operate, primarily in the Gulf of Mexico.~~ Operating revenues from our Oil and Gas segment relate substantially to operations in the Gulf of Mexico. 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. 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 70%, 65%, 61% and 61% of our Air Medical segment revenues for the nine months ended September 30, 2016, and the years ended December 31, 2015, 2014 and 2013, respectively, 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. 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.

The level of offshore oil and gas exploration and production activities in the areas in which we operate, primarily in the Gulf of Mexico. Operating revenues from our Oil and Gas segment relate substantially to operations in the Gulf of Mexico. 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 81%, 74%, 65% and 61% of our Air Medical segment revenues for the six months ended June 30, 2017, and the years ended December 31, 2016, 2015 and 2014, respectively, 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 this and other of 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.

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, ~~2015.~~2016. 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 have 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. As explained further below, these changes have 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. We believe that we may receive additional such requests in the ~~future, notwithstanding a recent stabilization in commodity~~

~~prices.~~future. Although we can neither control nor predict with any reasonable degree of certainty the length or impact of current weak market in conditions, we currently expect further reductions in the operating revenues and net profit of our Oil and Gas segment in ~~future periods~~2017, as compared to ~~amounts previously reported.~~2016. These reductions could be quite substantial. For information on the impact of the market downturn on our liquidity, see “- Liquidity and Capital Resources ~~– Historical Cash and~~- Cash Flow ~~Information –~~- Liquidity” below.

For ~~a discussion of recent developments expected to impact the future performance of~~several years our Air Medical ~~segment,~~affiliate received substantive benefits under its three-year service contract with a Middle East customer dated September 29, 2012. Pursuant to contact extensions, our Air Medical affiliate continued providing services at reduced levels for another year through September 30, 2016, when the contract expired. Consequently, since September 30, 2016, our overseas air medical revenues and operating costs have declined significantly as compared to prior periods. For additional information, see ~~“- Other Matters” below.~~

Note 3.

Results of Operations

The following ~~table presents~~tables present operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the quarter and six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~

   Quarter Ended    Favorable
   September 30,    (Unfavorable)
   2016    2015
   (Thousands of dollars, except flight hours,
patient transports, and aircraft)
Segment operating revenues, net

Oil and Gas
   $ 77,551       $ 121,190       $ (43,639 )
Air Medical
   74,482       85,516       (11,034 )
Technical Services
   6,060       8,027       (1,967 )






Total operating revenues, net
   158,093       214,733       (56,640 )
Segment direct expenses

Oil and Gas⁽¹⁾
   82,832       109,500       26,668
Air Medical
   56,562       65,474       8,912
Technical Services
   5,742       7,165       1,423






Total segment direct expenses
   145,136       182,139       37,003
Segment selling, general and administrative expenses

Oil and Gas
   1,705       1,397       (308 )
Air Medical
   3,056       2,302       (754 )
Technical Services
   266       230       (36 )






Total segment selling, general and administrative expenses
   5,027       3,929       (1,098 )






Total segment expenses
   150,163       186,068       35,905






Net segment (loss) profit

Oil and Gas
   (6,986 )    10,293       (17,279 )
Air Medical
   14,864       17,740       (2,876 )
Technical Services
   52       632       (580 )






Total net segment profit⁽²⁾
   7,930       28,665       (20,735 )
Other, net⁽³⁾
   377       637       (260 )
Unallocated selling, general and administrative costs⁽⁴⁾
   (8,354 )    (7,646 )    (708 )
Interest expense
   (7,719 )    (7,366 )    (353 )






(Loss) earnings before income taxes
   (7,766 )    14,290       (22,056 )
Income tax (benefit) expense
   (2,799 )    6,621       9,420






Net (loss) earnings
   $ (4,967 )    $ 7,669       $ (12,636 )






Flight hours:

Oil and Gas
   19,583       25,985       (6,402 )
Air Medical⁽⁵⁾
   9,681       10,261       (580 )
Technical Services
   14       50       (36 )






Total
   29,278       36,296       (7,018 )






Air Medical Transports⁽⁶⁾
   5,156       5,440       (284 )

2016.



	Quarter Ended June 30,						Favorable (Unfavorable)
	2017			2016
	(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues
Oil and Gas	$	74,668		$	83,185		$	(8,517	)
Air Medical	67,222			75,547			(8,325		)
Technical Services	4,534			8,404			(3,870		)
Total operating revenues	146,424			167,136			(20,712		)
Segment direct expenses
Oil and Gas ⁽¹⁾	73,681			87,400			13,719
Air Medical	50,402			58,997			8,595
Technical Services	3,858			6,096			2,238
Total segment direct expenses	127,941			152,493			24,552
Segment selling, general and administrative expenses
Oil and Gas	1,635			1,605			(30		)
Air Medical	3,263			2,642			(621		)
Technical Services	356			273			(83		)
Total segment selling, general and administrative expenses	5,254			4,520			(734		)
Total segment expenses	133,195			157,013			23,818
Net segment (loss) profit
Oil and Gas	(648		)	(5,820		)	5,172
Air Medical	13,557			13,908			(351		)
Technical Services	320			2,035			(1,715		)
Total net segment profit ⁽²⁾	13,229			10,123			3,106

Other, net ⁽³⁾	697			4,792			(4,095		)
Unallocated selling, general and administrative costs ⁽⁴⁾	(8,993		)	(7,258		)	(1,735		)
Interest expense	(8,083		)	(7,540		)	(543		)
(Loss) earnings before income taxes	(3,150		)	117			(3,267		)
Income tax expense (benefit)	123			(4,160		)	(4,283		)
Net (loss) earnings	$	(3,273	)	$	4,277		$	(7,550	)

Flight hours:
Oil and Gas	19,683			20,724			(1,041		)
Air Medical ⁽⁵⁾	9,652			9,519			133
Technical Services	—			9			(9		)
Total	29,335			30,252			(917		)

Air Medical Transports ⁽⁶⁾	5,121			4,823			298


(1)	Includes Equity in loss of unconsolidated ~~affiliate.~~affiliates, net.

(2)

~~Total net segment profit has~~These financial measures have not been prepared in accordance with generally accepted accounting principles (“GAAP”). and have not been audited or reviewed by our independent registered public accounting firm. These financial measures are therefore considered non-GAAP financial measures. Management believes ~~this~~these non-GAAP financial ~~measure provides~~measures provide meaningful supplemental information regarding our results of operations. A description of the adjustments to and reconciliations of ~~total net segment profit~~these non-GAAP financial measures to the most comparable GAAP financial ~~measure~~measures is as follows:

   Quarter Ended
September 30,
   2016    2015
Total net segment profit
   $ 7,930       $ 28,665
Other, net
   377       637
Unallocated selling, general and administrative costs
   (8,354 )    (7,646 )
Interest expense
   (7,719 )    (7,366 )




Earnings before income taxes
   $ (7,766 )    $ 14,290



	Quarter Ended June 30,
	2017			2016
Total net segment profit	$	13,229		$	10,123
Other, net	697			4,792
Unallocated selling, general and administrative costs	(8,993		)	(7,258		)
Interest expense	(8,083		)	(7,540		)
(Loss) earnings before income taxes	$	(3,150	)	$	117


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


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


(5)	Flight hours include ~~2,550~~2,298 flight hours associated with traditional provider contracts during the ~~third~~second quarter of ~~2016,~~2017, compared to ~~2,799~~2,452 flight hours in the prior year quarter.


(6)	Represents individual patient transports for the period.

~~The following table presents operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the nine months ended September 30, 2016 and 2015.~~

   Nine Months Ended    Favorable
   September 30,    (Unfavorable)
   2016    2015
   (Thousands of dollars, except flight hours,
patient transports, and aircraft)
Segment operating revenues, net

Oil and Gas
   $ 249,173       $ 354,425       $ (105,252 )
Air Medical
   220,089       239,543       (19,454 )
Technical Services
   19,983       23,509       (3,526 )






Total operating revenues, net
   489,245       617,477       (128,232 )
Segment direct expenses

Oil and Gas⁽¹⁾
   262,148       310,093       47,945
Air Medical
   172,603       189,089       16,486
Technical Services
   15,432       21,166       5,734






Total segment direct expenses
   450,183       520,348       70,165
Segment selling, general and administrative expenses

Oil and Gas
   4,838       3,831       (1,007 )
Air Medical
   8,293       7,458       (835 )
Technical Services
   763       552       (211 )






Total segment selling, general and administrative expenses
   13,894       11,841       (2,053 )






Total segment expenses
   464,077       532,189       68,112






Net segment (loss) profit

Oil and Gas
   (17,813 )    40,501       (58,314 )
Air Medical
   39,193       42,996       (3,803 )
Technical Services
   3,788       1,791       1,997






Total net segment profit⁽²⁾
   25,168       85,288       (60,120 )
Other, net⁽³⁾
   5,425       1,739       3,686
Unallocated selling, general and administrative costs⁽⁴⁾
   (22,938 )    (23,018 )    80
Interest expense
   (22,792 )    (21,691 )    (1,101 )






(Loss) earnings before income taxes
   (15,137 )    42,318       (57,455 )
Income tax (benefit) expense
   (5,515 )    17,832       23,347






Net (loss) earnings
   $ (9,622 )    $ 24,486       $ (34,108 )






Flight hours:

Oil and Gas
   61,043       76,864       (15,821 )
Air Medical⁽⁵⁾
   27,889       27,081       808
Technical Services
   546       529       17






Total
   89,478       104,474       (14,996 )






Air Medical Transports⁽⁶⁾
   14,482       14,142       340






Aircraft operated at period end:⁽⁷⁾

Oil and Gas⁽⁸⁾
   139       161
Air Medical ⁽⁹⁾
   104       106
Technical Services
   6       6





Total
   249       273



	Six Months Ended June 30,						Favorable (Unfavorable)
	2017			2016
	(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues
Oil and Gas	$	146,399		$	171,622		$	(25,223	)
Air Medical	122,559			145,607			(23,048		)
Technical Services	12,084			13,923			(1,839		)
Total operating revenues	281,042			331,152			(50,110		)
Segment direct expenses
Oil and Gas ⁽¹⁾	155,410			179,316			23,906
Air Medical	101,243			116,041			14,798
Technical Services	8,804			9,690			886
Total segment direct expenses	265,457			305,047			39,590
Segment selling, general and administrative expenses
Oil and Gas	3,354			3,132			(222		)
Air Medical	6,144			5,237			(907		)
Technical Services	694			497			(197		)
Total segment selling, general and administrative expenses	10,192			8,866			(1,326		)
Total segment expenses	275,649			313,913			38,264
Net segment (loss) profit
Oil and Gas	(12,365		)	(10,826		)	(1,539		)
Air Medical	15,172			24,329			(9,157		)
Technical Services	2,586			3,736			(1,150		)
Total net segment profit ⁽²⁾	5,393			17,239			(11,846		)

Other, net ⁽³⁾	1,761			5,048			(3,287		)
Unallocated selling, general and administrative costs ⁽⁴⁾	(17,099		)	(14,585		)	(2,514		)
Interest expense	(16,278		)	(15,073		)	(1,205		)
Loss before income taxes	(26,223		)	(7,371		)	(18,852		)
Income tax benefit	(7,702		)	(2,716		)	4,986
Net loss	$	(18,521	)	$	(4,655	)	$	(13,866	)

Flight hours:
Oil and Gas	37,157			41,461			(4,304		)
Air Medical ⁽⁵⁾	18,045			18,208			(163		)
Technical Services	511			532			(21		)
Total	55,713			60,201			(4,488		)

Air Medical Transports ⁽⁶⁾	9,418			9,326			92

Aircraft operated at period end: ⁽⁷⁾
Oil and Gas	128			145
Air Medical ⁽⁸⁾	104			105
Technical Services	6			6
Total	238			256


(1)	Includes Equity in loss of unconsolidated ~~affiliate.~~affiliates, net.

(2)

~~Total net segment profit has~~These financial measures have not been prepared in accordance with ~~GAAP.~~generally accepted accounting principles (“GAAP”) and have not been audited or reviewed by our independent registered public accounting firm. These financial measures are therefore considered non-GAAP financial measures. Management believes ~~this~~these non-GAAP financial ~~measure provides~~measures provide meaningful supplemental information regarding our results of operations. A description of the adjustments to and ~~reconciliation~~reconciliations of ~~total net segment profit~~these non-GAAP financial measures to the most comparable GAAP financial ~~measure~~measures is as follows:

   Nine Months Ended
September 30,
   2016    2015
Total net segment profit
   $ 25,168       $ 85,288
Other, net
   5,425       1,739
Unallocated selling, general and administrative costs
   (22,938 )    (23,018 )
Interest expense
   (22,792 )    (21,691 )




(Loss) earnings before income taxes
   $ (15,137 )    $ 42,318



	Six Months Ended June 30,
	2017			2016
Total net segment profit	$	5,393		$	17,239
Other, net	1,761			5,048
Unallocated selling, general and administrative costs	(17,099		)	(14,585		)
Interest expense	(16,278		)	(15,073		)
Loss before income taxes	$	(26,223	)	$	(7,371	)


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


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


(5)	Flight hours include ~~7,279~~4,594 flight hours associated with traditional provider contracts for the ~~nine months ended September 30, 2016,~~first half of 2017, compared to ~~7,514~~4,729 flight hours ~~for~~in the ~~same period~~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.


(8)	Includes ~~eight~~6 aircraft as of ~~September~~June 30, ~~2015~~2017 that were owned or leased by customers but operated by us.

~~(9)~~

~~Includes six aircraft as of September 30, 2016 that were owned or leased by customers but operated by us, compared to 13 aircraft as of September 30, 2015.~~

Quarter Ended ~~September~~June 30, ~~2016~~2017 compared with Quarter Ended ~~September~~June 30, ~~2015~~

2016

Combined Operations

Operating Revenues— -Operating revenues for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 were ~~$158.1~~$146.4 million, compared to ~~$214.7~~$167.1 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$56.6~~$20.7 million. Oil and Gas segment operating revenues decreased ~~$43.6~~$8.5 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, related primarily to decreased aircraft flight revenues for ~~all~~heavy and medium model types resulting predominately from fewer aircraft on contract and decreased flight hours. Air Medical segment operating revenues decreased ~~$11.0~~$8.3 million due principally to decreased traditional provider program revenues resulting from ~~reduced~~the termination of our overseas ~~operations.~~operations in late 2016. Technical Services segment operating revenues decreased ~~$2.0~~$3.9 million due primarily to a decrease in technical services provided to a third party customer.

Total flight hours for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 were ~~29,278~~29,335 compared to ~~36,296~~30,252 for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. Oil and Gas segment flight hours decreased ~~6,402~~1,041 hours, due to decreases in flight hours for ~~all~~heavy and medium model types. Air Medical segment flight hours ~~decreased 580~~increased 133 hours ~~from~~for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016, due to ~~decreased~~increased flight hours in our ~~traditional provider and~~ independent provider operations. ~~Individual~~As discussed further below, individual patient transports in the Air Medical segment were ~~5,156~~5,121 for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to transports of ~~5,440~~4,823 for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~

2016.

Direct Expenses – -Direct operating expense was ~~$145.1~~$127.9 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$182.1~~$152.5 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$37.0~~$24.6 million, or ~~20%~~16.1%. Employee compensation expense decreased ~~$18.1~~$7.4 million primarily due to a reduction in employees in our Oil and Gas segment ~~resulting from implementation of voluntary early retirement programs (“VERPs”) in the second half of 2015 and the first quarter of 2016,~~ and a reduction in the number of employees in our Air Medical segment’s Middle East operations. Employee compensation expense represented approximately ~~46%~~48% and 45% of total direct expense for the quarters ended ~~September~~June 30, 2017 and 2016, ~~and 2015.~~respectively. We also experienced ~~decreases~~a decrease in ~~aircraft fuel of $2.8 million, aircraft insurance of $0.9 million, and~~ aircraft warranty costs of ~~$2.5~~$10.5 million ~~(which expenses represent 3%, 1%, and 6% of total direct expense, respectively)~~ as a result of the ~~reduction in~~cancellation of a warranty program on some of our fleet of medium aircraft and decreased flight hours. ~~Aircraft parts expense decreased $0.5~~The cancellation of the warranty program resulted in a non-recurring credit of $9.8 million ~~and component~~from the warranty provider, which is attributable to unused accumulated warranty payments for repair ~~expense decreased $4.0 million. Other decreases included contract~~ services ~~expense of $2.8 million, pilot training expense of $1.0 million, travel expenses of $0.6 million, and cost~~that will not be utilized in the future. Costs of goods sold decreased $5.2 million due to the termination of ~~$3.2 million.~~our above-referenced contract in the Middle East and due to reduction in services for a third party technical services customer. Aircraft lease expense and aircraft repairs decreased $1.5 million and $1.2 million, respectively. Other ~~direct costs~~items increased ~~$0.6~~$1.2 million, ~~on a net basis.~~

net.

Selling, General and Administrative Expenses – -Selling, general and administrative expenses were ~~$13.4~~$14.2 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$11.6~~$11.8 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. The ~~$1.8~~$2.4 million increase was primarily attributable to $1.3 million of severance costs ~~associated with the final lease settlement for two aircraft returned~~related to ~~the lessor,~~a reductions in force and $0.7 million of legal and consulting fees related to a special project. Other items increased ~~fees for contract services in our Oil and Gas segment, and higher promotional and rent expense in our Air Medical segment.~~

$0.4 million, net.

Loss/Gain on Disposal of Assets, ~~net~~ ~~– Loss~~Net -The loss on asset dispositions ~~was $0.1 million~~ for the ~~quarter~~three months ended ~~September~~June 30, 2017 was less than $0.1 million. For the three months ended June 30, 2016, ~~compared to~~we recorded a gain of ~~$0.2~~$4.3 million ~~for~~resulting from the ~~quarter ended September 30, 2015. This decrease was primarily due to the~~ sale ~~or disposition~~ of four light ~~aircraft that no longer met our strategic needs.~~and three medium aircraft. See Note 8.

Equity in Loss of Unconsolidated Affiliate – -Equity in the ~~loss~~gain of our unconsolidated affiliate attributable to our ~~mid-2011~~ investment in a Ghanaian entity was ~~$0.2~~$0.1 million ~~for~~and equity in the ~~quarter ended September 30, 2016, compared to~~loss of $0.1 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015, resulting from increases expenses~~2017 and 2016, respectively. See Note 11. We also had equity in the loss of our unconsolidated Australian affiliate of $1.1 million for the three months ended June 30, 2017, related to ~~increased production activity~~the startup of operations which commenced in ~~the region. See Note 11.~~

April, 2017.

Interest Expense – -Interest expense was ~~$7.7~~$8.1 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 and ~~$7.4~~$7.5 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016. The $0.6 million increase is principally due to higher average outstanding debt balances.

Other Income, ~~net~~ – Net -Other income was $0.7 million for the three months ended June 30, 2017 compared to $0.5 million for the ~~quarters ended September 30,~~same period in 2016, ~~and September 30, 2015,~~ and represents primarily interest income.

Income Taxes – - Income tax ~~benefit~~expense for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 was ~~$2.8~~$0.1 million compared to income tax ~~expense~~benefit of ~~$6.6~~$4.2 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. Our ~~$2.8~~$0.1 million income tax expense for the three months ended June 30, 2017 includes a non-cash $1.2 million income tax deficit related to the permanent difference resulting from the difference between the book and tax deductions for equity-based compensation. The $4.2 million income tax benefit ~~for~~recorded in the ~~quarter~~three months ended ~~September~~June 30, 2016 ~~is attributable~~reflects a $4.2 million tax benefit related to ~~our net loss from operations~~the impact of ~~$7.8 million. Our~~a change in Louisiana tax law which amends the manner in which profits are apportioned to the state of Louisiana for income tax reporting purposes. Excluding these discrete adjustments, our effective tax rate was ~~36%~~35.0% and ~~46%~~10% for the ~~quarter~~three months ended ~~September~~June 30, 2017 and June 30, 2016, ~~and September 30, 2015,~~ respectively. The ~~higher~~10% effective rate for the quarter ended ~~September~~June 30, ~~2015~~2016 reflects a cumulative year to date true up of the effective tax rate from 36.2% to 36.0%. The impact of ~~recording during that quarter a one-time increase in the valuation allowance on our foreign tax credits.~~

this adjustment was less than $0.1 million.

Net (Loss) Earnings– -Net loss for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 was ~~$5.0~~$3.3 million compared to net earnings of ~~$7.7~~$4.3 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. Loss before income taxes for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 was ~~$7.8~~$3.2 million compared to earnings before income ~~tax~~taxes of ~~$14.3~~$0.1 million for the same period in ~~2015. Losses~~2016. Loss per diluted share ~~were $0.32~~was $0.21 for the ~~third~~current quarter ~~of 2016~~ compared to earnings per diluted share of ~~$0.49~~$0.27 for the prior year quarter. The ~~decrease~~increase in ~~earnings~~loss before taxes for the quarter ended ~~September~~June 30, ~~2016~~2017 is attributable principally to higher corporate overhead expense and an unfavorable comparison to the ~~decreased profits in all segments.~~second quarter of 2016, when we recognized a $4.3 million gain on the disposal of assets. We had 15.7 ~~and 15.6~~ million weighted average diluted common shares outstanding during the quarter ended ~~September~~June 30, ~~2016~~2017 and ~~2015, respectively.~~

2016.

Segment Discussion

Oil and Gas– -Oil and Gas segment revenues were ~~$77.6~~$74.7 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$121.2~~$83.2 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$43.6~~$8.5 million. Our Oil and Gas segment revenues are primarily driven by the amount of contracted aircraft and flight hours. 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 ~~19,583~~19,683 for the most recent quarter compared to ~~25,985~~20,724 for the same quarter in the prior year, a decrease of ~~6,402~~1,041 flight hours. The decline in revenues and flight hours is attributable to fewer aircraft on contract and lower utilization rates for ~~all~~heavy and medium model types due to reduced oil and gas exploration and production activities in response to lower prevailing ~~oil~~commodity prices.

Partially offsetting the decrease in revenue and flight hours from our heavy and medium model types were increased revenues and flight hours from our light model types due to increased activity in the shallow waters of the Gulf of Mexico.

The number of aircraft available for use in the segment was ~~139~~128 at ~~September~~June 30, ~~2016,~~2017, compared to ~~161~~145 at ~~September~~June 30, ~~2015. We added one new heavy aircraft to our Oil and Gas segment since September 30, 2015.~~2016. We have sold or disposed of ~~ten~~seven light and ~~eight~~nine medium aircraft in the Oil and Gas segment since ~~September~~June 30, ~~2015. Changes~~2016. We also purchased two light aircraft in ~~customer-owned aircraft~~the Oil and ~~transfers~~Gas segment since June 30, 2016. Transfers between segments account for the remainder.

Direct expense in our Oil and Gas segment was ~~$82.8~~$73.7 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$109.5~~$87.4 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$26.7~~$13.7 million. Employee compensation expense decreased ~~$14.2~~$4.4 million due to a reduction in ~~employees resulting from implementation of our VERPs. See Note 10.~~employees. There ~~were also decreases~~was a decrease in ~~aircraft fuel expenses of $2.5 million,~~ aircraft warranty costs of ~~$2.4~~$9.5 million, ~~and aircraft insurance of $0.7 million, each~~primarily due to a credit related to the cancellation a warranty program on some our medium aircraft fleet, and due to a reduction in flight hours. ~~Other decreases included contract~~The cancellation of the warranty program resulted in a non-recurring credit of $8.9 million from the warranty provider, which is attributable to unused accumulated warranty payments for repair services that will not be utilized in the future. Aircraft lease expense decreased $1.2 million due to fewer aircraft on lease. Losses in the equity of ~~$2.5~~our unconsolidated affiliates increased $0.9 million ~~pilot training expense of $0.8 million, travel expense of $0.4 million, and property taxes of $1.1 million.~~for the reasons discussed above. Other items ~~decreased $2.1~~increased $0.5 million, ~~on a net basis.~~

net.

Selling, general and administrative segment expenses were ~~$1.7~~$1.6 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016~~2017 and ~~$1.4~~$1.6 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015. The $0.3 million increase is primarily attributable to increased fees for contract services of $0.3 million.~~

2016.

Oil and Gas segment loss was ~~$7.0~~$0.6 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~segment profit~~a loss of ~~$10.3~~$5.8 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. The decrease in segment ~~profit was~~loss is primarily due to ~~decreased revenues,~~the warranty credit discussed above, which ~~were only~~was partially offset by decreased ~~expenses attributable to the above-described factors.~~

revenues discussed above.

Air Medical– -Air Medical segment revenues were ~~$74.5~~$67.2 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$85.5~~$75.5 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. This decrease of ~~$11.0~~$8.3 million is primarily attributable to decreased traditional provider program revenues resulting from the ~~reduction in the scope~~termination of our overseas operations (as discussed further ~~below under “- Other Matters”)~~below). ~~We also experienced decreased revenues from our independent provider programs primarily resulting from decreased patient transports.~~ Patient transports were ~~5,156~~5,121 for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~5,440~~4,823 for the same period in the prior year.

The number of aircraft available for use in the segment at ~~September~~June 30, ~~2016~~2017 was 104 compared to ~~106~~105 at ~~September~~June 30, ~~2015.~~2016. Since ~~September~~June 30, ~~2015,~~2016, we added ~~three~~two light aircraft to our Air Medical ~~segment. We have sold~~segment, which were offset by our sale or ~~disposed~~disposition of ~~one light and~~ two medium aircraft in the Air Medical segment since ~~September 30, 2015. Transfers~~such date. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Air Medical segment was ~~$56.6~~$50.4 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$65.5~~$59.0 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$8.9~~$8.6 million. Employee compensation costs decreased ~~$3.7~~$3.4 million due to a reduction in personnel primarily relating to the termination of our 2012 Middle East ~~project.~~contract. Component repair costs also decreased ~~$3.3~~$1.1 million as a result of a reduction in scheduled maintenance for certain aircraft. Cost of goods sold decreased ~~$2.0~~$2.6 million related to certain items that were previously billed on a cost plus basis onunder our former Middle East ~~project.~~contract. There was a decrease in aircraft warranty costs of $1.1 million, primarily due to a credit related to the above-described cancellation of the

warranty program on some our medium aircraft fleet. The cancellation of this warranty program resulted in a credit of $1.0 million from the warranty provider, which is attributable to unused accumulated warranty payments for repair services that will not be utilized in the future. Other items ~~increased, net $0.1 million.~~

decreased $0.4 million, net.

Selling, general and administrative segment expenses were ~~$3.1~~$3.3 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$2.3~~$2.6 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. The ~~$0.8~~$0.7 million increase is primarily due to increased ~~promotional and rent expense.~~

employee incentive compensation costs.

Air Medical segment profit was ~~$14.9~~$13.6 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to a segment profit of ~~$17.7~~$13.9 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. The ~~$2.8~~$0.3 million decrease in profit is attributable to the decreased operating revenues described above, partially offset by decreased expenses.

For several years our Air Medical affiliate received substantial benefits under its three-year service contract with a Middle East customer dated September 29, 2012. Pursuant to contract extensions, our Air Medical affiliate continued providing services at reduced levels for another year through September 30, 2016, when the contract expired. Consequently, since September 30, 2016, the overseas revenues and operating results of our Air Medical segment have declined significantly as compared to prior periods. For additional information, see Note 3.

Technical Services– -Technical Services segment revenues were ~~$6.1~~$4.5 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$8.0~~$8.4 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~2016. The decrease in revenue is due primarily to a decrease of technical services provided to a third party customer whose service requirements typically vary from period to period. ~~We currently have one ongoing project for this customer, which is expected to be completed in the fourth quarter of 2016. At this time, we have no future projects booked for this customer~~ Direct expenses decreased ~~$1.4~~$2.2 million compared to the prior year ~~quarter,~~three months, principally due to the decreased operations. Technical Services segment earnings ~~was less than $0.1~~were $0.3 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2016,~~2017, compared to segment profit of ~~$0.6~~$2.0 million for the ~~quarter~~three months ended ~~September~~June 30, ~~2015.~~

2016.

For additional information on our segments, see Note 10.

~~Nine~~

Six Months Ended ~~September~~June 30, ~~2016~~2017 compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~

2016

Combined Operations

Operating Revenues— -Operating revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were ~~$489.2~~$281.0 million, compared to ~~$617.5~~$331.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$128.3~~$50.1 million. Oil and Gas segment operating revenues decreased ~~$105.3~~$25.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, related primarily to decreased aircraft flight revenues for all model types resulting predominately from fewer aircraft on contract and decreased flight hours for these aircraft. Air Medical segment operating revenues decreased ~~$19.5~~$23.0 million due principally to decreased traditional provider program revenues resulting from reduced overseas ~~operations.~~operations and reduced revenues from our independent provider programs. This decrease was partially offset by increased revenues attributable to our ~~independent~~U.S.-based traditional provider ~~programs, driven principally by increased transports.~~programs. Technical Services segment operating revenues decreased ~~$3.5~~$1.8 million due to ~~fewer~~variations in the level of services provided to a third party customer under projects discussed further below.

Total flight hours for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were ~~89,478~~55,713 compared to ~~104,474~~60,201 for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Oil and Gas segment flight hours decreased ~~15,821~~4,304 hours, due to decreases in flight hours for all model types. Air Medical segment flight hours ~~increased 808~~decreased 163 hours from the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, due to ~~increased~~decreased flight hours in our ~~independent~~overseas traditional provider ~~programs.~~program. Individual patient transports in the Air Medical segment were ~~14,482~~9,418 for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~14,142~~9,326 transports for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~

2016.

Direct Expenses – -Direct operating expense was ~~$450.2~~$265.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$520.3~~$305.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$70.2~~$39.6 million, or ~~13.5%~~13.0%. Employee compensation expense decreased ~~$33.7~~$16.4 million due to a reduction in employees in our Oil and Gas ~~segment resulting from implementation of voluntary early retirement programs (“VERPs”) in the second half of 2015~~ and ~~the first quarter of 2016.~~Air Medical segments . Employee compensation expense represented approximately ~~46%~~47% of total direct expense for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~46% for the six months ended June 30, 2016. In addition, we experienced decreases in aircraft ~~fuel expenses of $6.7 million, aircraft~~ warranty costs of ~~$5.7~~$11.7 million ~~aircraft insurance~~primarily due to a credit received for the cancellation of ~~$2.5~~a warranty program on some of the medium fleet, and decreased flight hours. The cancellation of the warranty program resulted in a non-recurring credit of $9.8 million ~~component~~from the warranty provider, which is attributable to unused accumulated warranty payments for repair ~~costs~~services that will not be utilized in the future. We also had decreases in cost of ~~$4.5~~goods sold of $7.2 million, repair cost of $2.5 million and aircraft parts costs of ~~$1.8~~$2.6 million (representing ~~3%, 7%, 1%~~2%, 6% and 4% of total direct expense, respectively), as a result of the reduction in flight hours. ~~Other decreases include contract services expense of $5.6 million, pilot training expense of $2.6 million, travel expenses of $1.0 million, and property taxes of $1.4 million.~~ Costs of goods sold decreased ~~$7.1 million,~~ due to ~~decreased~~fewer services provided to an external customer by our Technical Services segment, and a decrease in certain items that are billed on a cost plus basis in our Air Medical segment. Other ~~direct costs~~ items increased ~~$2.5~~$0.8 million, net.

Selling, General and Administrative Expenses – -Selling, general and administrative expenses were ~~$36.8~~$27.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$34.9~~$23.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015. The $1.9~~2016, an increase of $3.8 million. We incurred $2.9 million ~~increase was primarily attributable~~of severance costs related to ~~costs associated with the final lease settlement for two aircraft returned~~reductions in force and $1.3 million of legal and consulting fees related to ~~the lessor,~~a special project. Partially offsetting these increases were decreases in equity-based compensation of $1.0 million. Other items increased ~~fees for contract services in our Oil and Gas segment, and higher promotional and rent expense in our Air Medical segment.~~

$0.6 million, net.

Loss/Gain on Disposal of Assets, ~~net~~ ~~– Gain~~Net -Loss on asset dispositions was ~~$3.9~~less than $0.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to a gain of ~~$0.2~~$3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015. During~~2016. In the ~~nine months~~first half of 2017, we disposed of five medium aircraft and related parts inventory utilized in the Oil and Gas segment that no longer met our strategic needs. In the first half of 2016, we sold ~~nine~~five light and three medium aircraft, along with spare parts inventory that no longer met our strategic needs. See Note 8.

Equity in Loss of Unconsolidated Affiliate – -Equity in the loss of our unconsolidated affiliate attributable to our ~~mid-2011~~ investment in a Ghanaian entity was ~~$0.3~~$0.9 million and ~~$0.2~~$0.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. See Note 11.

We also had equity in the loss of our unconsolidated Australian affiliate of $1.1 million for the six months ended June 30, 2017 related to the startup of operations on a contract which began in April 2017.

Interest Expense – -Interest expense was ~~$22.8~~$16.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$21.7~~$15.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, principally due to higher average outstanding debt balances.

Other Income, ~~net~~ – Net -Other income was ~~$1.6~~$1.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 compared to ~~$1.5~~$1.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and represents primarily interest income. The ~~$0.1~~$0.7 million increase is primarily attributable to an increase in the amount and rate of return of our short-term investments.

Income Taxes – -Income tax benefit for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$5.5~~$7.7 million compared to income tax ~~expense~~benefit of ~~$17.8~~$2.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Our effective tax rate was ~~36%~~29.4% and ~~41%~~36.8% for the ~~nine~~six months ended ~~September~~June 30, 2017 and June 30, 2016, ~~and September 30, 2015,~~ respectively. The ~~$5.5~~$7.7 million income tax benefit recorded in the ~~nine~~six months ended ~~September~~June 30, 2017 includes a non-cash $1.4 million income tax deficit related to the permanent difference resulting from the difference between the book and tax deductions for equity-based compensation. The $2.7 million tax benefit recorded during the six months ended June 30, 2016 is comprised of a valuation allowance on certain state tax benefits related to net operating loss carryforwards of $4.1 million, a $4.2 million tax benefit related to the impact of a change in Louisiana tax law which amends the manner in which profits are apportioned to the state of Louisiana for income tax reporting purposes, and a ~~$5.4~~$2.6 million tax benefit on our loss before income ~~taxes, which were partially offset by recording a valuation allowance on certain state~~taxes. Absent these discrete adjustments, our effective tax ~~benefits related to net operating loss carryforwards of $4.1 million. The valuation allowance recorded~~rate was ~~solely attributable to a change in the Louisiana tax law which limits our ability to fully realize the tax benefit of our existing net operating loss carryforwards in this state. The higher rate~~34.9% and 36% for the ~~nine~~six months ended ~~September~~June 30, ~~2015 reflects the impact of recording during that period a one-time increase in the valuation allowance on our foreign tax credits.~~

2017 and June 30, 2016, respectively.

Net ~~(Loss) Earnings~~ – Loss -Net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$9.6~~$18.5 million compared to net ~~earnings~~loss of ~~$24.5~~$4.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Loss before income taxes for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$15.1~~$26.2 million compared to ~~earnings~~a loss before income ~~tax~~taxes of ~~$42.3~~$7.4 million for the same period in ~~2015.~~2016. Loss per diluted share was ~~$0.61~~$1.18 for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 compared to ~~earnings~~a loss per diluted share of ~~$1.57~~$0.30 for the prior year ~~nine~~six months. The decrease in earnings before taxes for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 is principally attributable to the decreased profits in all of our ~~Oil and Gas and Air Medical segments, partially offset by a small increase in the profits from our Technical Services segment.~~segments. We had 15.7 ~~and 15.5~~ million weighted average diluted common shares outstanding during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015, respectively.~~

2016.

Segment Discussion

Oil and Gas– -Oil and Gas segment revenues were ~~$249.2~~$146.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$354.4~~$171.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$105.2~~$25.2 million. Our Oil and Gas segment revenues are primarily driven by the amount of contracted aircraft and flight hours. 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 ~~61,043~~37,157 for the past ~~nine~~six months compared to ~~76,864~~41,461 for the same ~~nine~~six months in the prior year, a decrease of ~~15,821~~4,304 flight hours. The decline in ~~revenues and~~ flight hours is attributable to fewer aircraft on contract and lower utilization rates for all model types due to reduced oil and gas exploration and production activities in response to lower prevailing oil prices.

The number of aircraft available for use in the segment was ~~139~~128 at ~~September~~June 30, ~~2016,~~2017, compared to ~~161~~145 at ~~September~~June 30, ~~2015. We added one new heavy aircraft to our Oil and Gas segment since September 30, 2015.~~2016. We have sold or disposed of ~~ten~~seven light and ~~eight~~nine medium aircraft in the Oil and Gas segment since ~~September~~June 30, ~~2015. Changes~~2016. We also purchased two medium aircraft in ~~customer-owned aircraft~~the Oil and ~~transfers~~Gas segment since June 30, 2016. Transfers between segments ~~account~~accounted for the remainder.

Direct expense in our Oil and Gas segment was ~~$262.1~~$155.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$310.1~~$179.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$48.0~~$23.9 million. Employee compensation expenses decreased ~~$25.1~~$10.8 million

due to a reduction in ~~employees primarily resulting from implementation of our VERPs. See Note 10.~~employees. There were also decreases in ~~aircraft fuel expenses of $6.6 million, aircraft insurance of $1.8 million,~~ aircraft warranty costs of ~~$5.7~~$10.7 million ~~and aircraft parts costs of $1.8 million, each~~related to the credit due to the cancellation of a warranty program on some our medium aircraft fleet and reduction in flight hours. ~~Other decreases included contract~~The cancellation of this warranty program resulted in a non-recurring credit of $8.9 million from the warranty provider, which is attributable to unused accumulated warranty payments for repair services that will not be utilized in the future. Aircraft lease expense decreased $2.1 million due to fewer leased aircraft and spare parts decreased $2.5 million. Partially offsetting these decreased were increases in the losses from our unconsolidated affiliates of ~~$4.7~~$1.9 million and ~~pilot training expense of $2.4 million. Other~~other items ~~increased $0.1~~increase $0.3 million, net.

Selling, general and administrative segment expenses were ~~$4.8~~$3.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~$3.8~~$3.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The ~~$1.0~~$0.3 million increase was primarily due to increased ~~legal fees~~employee compensation costs associated with newly-added positions and ~~bad debt expense.~~

bonus accruals.

Oil and Gas segment loss was ~~$17.8~~$12.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to segment ~~profit~~loss of ~~$40.5~~$10.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The decrease in segment profit was due to the decreased revenues detailed above, which were only partially offset by decreased ~~expenses.~~

warranty and other costs discussed above.

Air Medical– -Air Medical segment revenues were ~~$220.1~~$122.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$239.5~~$145.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$19.4~~$23.0 million. Operating revenues in our traditional provider programs decreased ~~$24.8~~$21.4 million due to a reduction in ~~the scope of~~ our overseas operations, ~~(as discussed further below under “- Other Matters”). Operating~~partially offset by a $2.4 million increase in revenues infrom our U.S.-based traditional provider programs. Revenues from our independent provider programs ~~increased $2.9~~decreased $1.6 million primarily due to ~~an increase in patient~~a less favorable payor mix, partially offset by increased transports. Patient transports were ~~14,482~~9,418 for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~14,142~~9,326 for the same period in the prior year. ~~Other segment revenue increased $2.5 million.~~

The number of aircraft available for use in the segment at ~~September~~June 30, ~~2016~~2017 was 104 compared to ~~106~~105 at ~~September~~June 30, ~~2015.~~2016. Since ~~September~~June 30, ~~2015,~~2016, we added ~~three~~two light aircraft to our Air Medical ~~segment. We have sold~~segment, which were offset by our sale or ~~disposed~~disposition of ~~one light and five~~two medium aircraft in the Air ~~Medical~~Medial segment since ~~September 30, 2015.~~

such date. Change in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Air Medical segment was ~~$172.6~~$101.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$189.1~~$116.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, a decrease of ~~$16.5~~$14.8 million. Employee compensation expenses decreased ~~$8.3~~$5.7 million due to a reduction in personnel. There were also decreases in ~~spare parts and~~ component repair costs of ~~$0.1~~$2.1 million ~~and $6.3 million, respectively,~~ due to a decrease in scheduled maintenance for certain model ~~types. Cost~~types, and a decrease of $5.8 million in cost of goods sold ~~decreased $4.0 million due~~related to ~~a decrease in~~ certain items that were previously billed ~~to our Middle East customer~~ on a cost plus ~~basis. Aircraft depreciation increased $1.3~~basis under our former Middle East contract. There was a decrease in aircraft warranty costs of $1.1 million, primarily due to ~~an increase~~a credit related to the cancellation of the above-described warranty program on some our medium aircraft fleet. The cancellation of this warranty program resulted in a credit of $1.0 million from the warranty provider, which is attributable to unused accumulated warranty payments for repair services that will not be utilized in the ~~number of owned aircraft.~~future. Other ~~direct expense~~ items ~~increased by a net of $0.9 million.~~

decreased $0.1 million, net.

Selling, general and administrative segment expenses were ~~$8.3~~$6.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016, compared to $7.5~~2017 and $5.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The $0.8 million increase is primarily ~~attributable~~related to ~~increased expenses for contract services.~~

higher employee incentive compensation costs.

Air Medical segment profit was ~~$39.2~~$15.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to a segment profit of ~~$43.0~~$24.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The decrease in profit is primarily attributable to the decreased revenues described above, ~~which were only~~ partially offset by the decreased aircraft operating expenses described above.

Technical Services– -Technical Services segment revenues were ~~$20.0~~$12.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$23.5~~$13.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016, a decrease of $1.8 million. Direct expense decreased ~~$5.8~~$0.9 million compared to the prior year ~~nine-month period.~~six months. The decrease in revenue is due primarily to a decrease of technical services provided to a third party ~~customer whose service requirements typically vary from period to period.~~customer. Technical Services segment profit was ~~$3.8~~$2.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$1.8~~$3.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~

2016.

For additional information on our segments, see Note 10.

~~Other Matters~~

For several years our Air Medical affiliate received substantial benefits under its three-year service contract with a Middle East customer dated September 29, 2012. Following the expiration of the initial agreement with this customer in late September 2015, we extended the service relationship three times for three-, six- and three-month periods, respectively, on terms that caused our overseas air medical revenues and operating costs to decline significantly compared to prior periods. Our service relationship with this customer reached its contractual end date on September 30, 2016, which will place a commensurate reduction on our Air Medical segment revenues and profit in future periods. We believe that we have remained in good standing with this customer and are in discussions regarding future work. Even if we are ultimately successful in obtaining additional work from this customer, we currently do not expect the arrangement to be effective until 2017.

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. Our principal sources of liquidity historically have been net cash provided by our operations, borrowings under our revolving credit facility, and proceeds from periodic senior note offerings. To the extent we do not use cash, short-term investments or borrowings to finance our aircraft acquisitions, we frequently enter into sale-leaseback transactions to fund these acquisitions.

Historical Cash and Cash Flow Information

Liquidity-Our cash position was ~~$2.6~~$2.3 million at ~~September~~June 30, ~~2016,~~2017, compared to ~~$2.4~~$2.6 million at December 31, ~~2015.~~2016. Short-term investments were ~~$289.5~~$237.4 million at ~~September~~June 30, ~~2016,~~2017, compared to ~~$284.5~~$289.8 million at December 31, ~~2015.~~2016. We also had ~~$13.0~~$12.4 million and ~~$15.3~~$13.0 million in restricted investments at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, securing outstanding letters of credit and a bond for foreign operations.

As noted in greater detail above, current weakness in the oil and gas industry has negatively impacted our offshore operations since the first quarter of 2015, and we expect further reductions in the operating revenues and net profit of our Oil and Gas segment in future ~~periods. Through September 30, 2016, these negative variances did not materially impact~~periods as compared to 2016. These reductions have caused us to use a portion of our ~~financial position reported~~short-term investments to fund operations, including an 18% decrease in our ~~consolidated balance sheets, as described in~~short-term investments over the first six months of 2017. Nonetheless, we continue to hold substantial short-term investments and have no debt coming due within one year. For these reasons, we expect to be able to fund operations beyond next year even if the oil and gas industry remains challenged over that period. We further ~~detail below. Nonetheless,~~expect, however, that our liquidity may ultimately be negatively impacted if the current weakness of the ~~energy~~oil and gas industry persists ~~we expect that it will ultimately have~~for a ~~negative impact on our consolidated operating cash flow and liquidity.~~

prolonged period.

Operating ~~activities~~—Activities -Net cash used in operating activities was ~~$7.1~~$7.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to net cash provided of ~~$108.2~~$0.8 million for the same period in ~~2015,~~2016, a decrease of ~~$115.3~~$8.7 million. Cash receipts from customers were down ~~$152.7~~$49.8 million ~~primarily~~when compared to the first six months of last year. This decrease in cash receipts was due to a ~~$105.2~~$24.1 million decrease in revenues from our Oil and Gas segment ~~revenues, related~~due to the downturn in the ~~industry. We had~~industry, and a ~~$57.3~~$25.2 million decrease in ~~collections related~~revenues from our Air Medical segment due to ~~our~~the termination of the Middle East contract ~~due~~ in ~~part to timing of payments and in part to a~~late 2016. The decrease in ~~revenue. This~~cash receipts was partially offset by a ~~$14.3 million decrease in cash required for net payroll, primarily due to a~~ reduction ~~in bonuses paid and staffing levels. The remaining offset was due to a decrease~~ in payments to vendors of $41.3 million, due to the decreased scope of ~~our~~ operations.

Investing ~~activities~~—Activities -Net cash ~~used in~~provided by investing activities was ~~$67.0~~$8.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$141.6~~cash used of $31.6 million for the same period in ~~2015.~~2016. Net ~~purchases~~sales of short-term investments ~~used $3.9~~provided $52.7 million of cash during the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$101.7~~$2.6 million used in the comparable prior year period. Gross proceeds from asset dispositions were less than $0.1 million during the ~~nine~~six months of ~~2016 were $13.2 million,~~2017, compared to ~~$3.5~~$11.0 million for the same period in ~~2015.~~2016. Capital expenditures were ~~$75.0~~$43.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$48.2~~$39.9 million for the same period in ~~2015.~~2016. Capital expenditures for aircraft and aircraft improvements accounted for ~~$72.4~~$42.8 million and ~~$45.5~~$38.1 million of these totals for the ~~nine~~six months ended ~~2016~~2017 and ~~2015,~~2016, respectively. During the ~~first~~second quarter of 2017, we purchased a heavy aircraft from a lessor and two medium aircraft. During the same period of 2016, we took delivery of one heavy aircraft that we purchased in the second quarter with borrowings under our revolving credit line. During the third quarter of 2016, we purchased a heavy aircraft pursuant to a lease purchase option, purchased one light aircraft, and took delivery of one light aircraft to be purchased in the fourth quarter. During the first nine months of 2015, we (i) exercised a purchase option on one heavy aircraft, (ii) took delivery of another heavy aircraft that we paid for in the third quarter of 2015, and then completed a sale/leaseback following the purchase, and (iii) purchased six light aircraft.

Financing ~~activities~~– Activities -Financing activities during the ~~nine~~six months of 2017 included net payments of $0.8 million on our revolving credit facility and $0.3 million used to repurchase shares of our non-voting common stock to satisfy withholding tax obligations of employees. Financing activities during the first half of 2016 included net borrowings of ~~$74.9~~$30.2 million on our revolving credit facility and $0.5 million used to repurchase shares of our non-voting common stock to satisfy withholding tax obligations of employees.

~~Financing activities during the first nine months of 2015 included net borrowings of $35.2 million~~

For additional information on our ~~revolving credit facility and $2.5 million used to repurchase shares~~cash flows, see our condensed consolidated statements of ~~our non-voting common stock to satisfy withholding tax obligations~~cash flows included in Item 1 of ~~employees.~~

Part I of this report.

Long-Term Debt

As of ~~September~~June 30, ~~2016,~~2017, we owed ~~$632.4~~$633.2 million under our total long-term debt, consisting of $500.0 million principal amount of 5.25% Senior Notes due 2019 (excluding debt issuance costs) and ~~$132.4~~$133.2 million borrowed under our revolving credit facility.

Revolving Credit Facility~~– On September 30, 2016, we~~ -We have an amended ~~our~~and restated revolving credit facility ~~to, among other things, (a) extend the maturity date to~~(our “credit facility”) that matures on October 1, ~~2018 and (b) modify the fixed charge coverage ratio such that it will only be tested when the total of~~2018. Under our ~~short term investments are less than $150.0 million at the end of any fiscal quarter. Under this~~credit facility, we can borrow up to $150.0 million at floating interest rates based on either the London

Interbank Offered Rate plus 225 basis points or the prime rate (each as defined in our ~~amended and restated revolving~~ credit facility), at our option. Our ~~revolving~~ credit facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the credit facility is conditioned upon our continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in certain other transactions or activities and (ii) financial covenants that stipulate that PHI will maintain a consolidated working capital ratio of at least 2 to 1, a net funded debt to consolidated net worth ratio not greater than 1.5 to 1, a fixed charge coverage ratio of at least 1.1 to 1 if our short-term investments fall below $150.0 million, and consolidated net worth of at least $450.0 million (with all such terms or amounts as defined in or determined under ~~the amended and restated revolving~~our credit facility).

At ~~September~~June 30, ~~2016,~~2017, we had ~~$132.4~~$133.2 million in borrowings under our credit facility. At the same date in ~~2015,~~2016, we had ~~$78.2~~$95.0 million in borrowings under our credit facility.

We also have outstanding a letter of credit for $7.6 million issued under our $150.0 million credit facility that reduces the amount we can borrow under that facility.

Other– -We maintain a separate letter of credit facility described in Note 5 that had $12.4 million and $13.0 million letters of credit outstanding at ~~September~~June 30, ~~2016.~~

2017 and December 31, 2016, respectively.

For additional information on our long-term debt and letters of credit, see Note 5.

Contractual Obligations

The table below sets out our contractual obligations as of ~~September~~June 30, ~~2016,~~2017, related to our aircraft and other operating lease obligations, revolving credit facility, and 5.25% Senior Notes due 2019. Our obligations under the operating leases are not recorded as liabilities on our balance ~~sheet.~~sheets included in this report. 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. We believe we were in compliance with the covenants applicable to these contractual obligations as of ~~September~~June 30, ~~2016.~~2017. As of ~~September~~June 30, ~~2016,~~2017, we leased 2519 aircraft included in the lease obligations below.

      Payment Due by Year
                     Beyond
   Total    2016⁽¹⁾    2017    2018    2019    2020    2020
      (Thousands of dollars)
Aircraft lease obligations
   $ 226,242       $ 10,607       $ 40,560       $ 36,879       $ 30,226       $ 26,387       $ 81,583
Other lease obligations
   12,842       1,396       3,917       2,863       2,288       1,595       783
Long-term debt⁽²⁾
   632,400       —         —         132,400       500,000       —         —
Senior notes interest⁽²⁾
   65,625       —         26,250       26,250       13,125       —         —














   $ 937,109       $ 12,003       $ 70,727       $ 198,392       $ 545,639       $ 27,982       $ 82,366



			Payment Due by Year
	Total		2017⁽¹⁾		2018		2019		2020		2021		Beyond 2021
			(Thousands of dollars)
Aircraft lease obligations	$	191,401	$	18,500	$	34,705	$	30,226	$	26,387	$	26,253	$	55,330
Other lease obligations	13,788		3,144		4,129		3,088		2,189		1,181		57
Long-term debt ⁽²⁾	633,225		—		133,225		500,000		—		—		—
Senior notes interest ⁽²⁾	52,500		13,125		26,250		13,125		—		—		—
	$	890,914	$	34,769	$	198,309	$	546,439	$	28,576	$	27,434	$	55,387


(1)	Payments due during the last ~~three~~six months of ~~2016~~2017 only.

(2)

“Long-term debt” reflects the principal amount of debt due under our outstanding senior notes and our revolving credit facility, whereas “senior notes interest” reflects interest accrued under our 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.

The table above reflects only contractual obligations as of ~~September~~June 30, ~~2016~~2017 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, ~~and~~ (v) open purchase ~~orders.~~

orders and (vi) other long-term liabilities, such as accruals for litigation or taxes, that are not contractual in nature.

As of ~~September~~June 30, ~~2016,~~2017, we had options to purchase ~~various~~ aircraft ~~that we currently operate~~ under ~~lease agreements with the aircraft owners. These options will become~~leases becoming exercisable ~~at various dates~~in 2017 through 2020. The aggregate option purchase prices are ~~$50.3 million in 2016, $55.7~~$18.5 million in 2017, $127.0 million in 2018, ~~$150.4~~$129.0 million in 2019, and $22.7 million in 2020. ~~Whether~~In the second quarter of 2017, we ~~exercise these options will depend upon several factors, including market conditions and our available cash at the respective exercise dates.~~

~~On January 15, 2016, we took initial delivery of~~purchased one heavy ~~aircraft. We funded~~aircraft from a lessor for $17.0 million. Under current conditions, we believe it is unlikely that we will exercise the ~~payment for this aircraft with borrowing from our credit facility in June 2016.~~

remaining 2017 purchase options, unless opportunistic conditions arise.

We intend to fund the above-described contractual obligations and any exercised purchase options through a combination of cash on hand, cash flow from operations, borrowings under our credit facility, refinancing transactions or sale-leaseback transactions.

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, ~~2015.~~

2016.

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~~

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.

Our earnings are subject to changes in short-term interest rates due to the variable interest rate payable under our credit facility debt. Based on the ~~$88.3~~$137.6 million weighted average loan balance during the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, a 10% increase ~~(0.272%~~(0.3474%) in interest rates would have reduced our annual pre-tax earnings approximately ~~$0.2~~$0.5 million, but would not have changed the fair market value of this debt.

Our $500.0 million principal amount of outstanding 5.25% Senior Notes due 2019 bear 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, the remaining maturity of the notes, and our creditworthiness. At ~~September~~June 30, ~~2016,~~2017, the market value of the notes was approximately ~~$485.6~~$463.0 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, U.S. Government agencies debt, commercial paper, and corporate bonds and notes are subject to the risk of declines in general market interest rates.

See Note 4 for additional information.

~~Item 4.~~

~~CONTROLS AND PROCEDURES~~

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.

PART II – OTHER INFORMATION

~~Item 1.~~

~~LEGAL PROCEEDINGS~~

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~~

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 Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~

2016.

~~Item 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

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

During the ~~third~~second quarter of ~~2016,~~2017, we withheld from employees and canceled ~~1,031~~12,151 shares of our non-voting common stock in connection with the vesting of their stock-based awards to satisfy the related minimum tax withholding obligation. The following table provides additional information about these transactions.

   Total Number of    Average Price
Period
   Shares Purchased    Paid per Share
August 1, 2016 – August 31, 2016
   1,031       $ 19.22



Period	Total Number of Shares Purchased	Average Price Paid per Share
April 1, 2017 – June 30, 2017	12,151	$	10.28

~~Item 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~Item 4.~~

~~MINE SAFETY DISCLOSURES~~

Item 4. MINE SAFETY DISCLOSURES

None.

~~Item 5.~~

~~OTHER INFORMATION~~

Item 5. OTHER INFORMATION

None.

~~Item 6.~~

~~EXHIBITS~~

Item 6. EXHIBITS

(a)Exhibits



~~(a)~~	~~Exhibits~~

	3.1	(i)	Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit ~~3.1~~3(i) to PHI’s Report on Form 10-Q for the quarterly period ended March 31, ~~2015,~~2017, filed on May ~~7, 2015)~~9, 2017).


	(ii)	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3(ii) to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2015, filed November 6, 2015).


4.1	Second Amended and Restated Loan Agreement dated as of September 18, 2013, by and among PHI, Inc., PHI Air Medical, L.L.C, successor to Air Evac Services, Inc., PHI Tech Services, Inc. (formerly Evangeline Airmotive, Inc.), International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.1 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2013, filed on November 8, 2013).


4.2	First Amendment to Second Amended and Restated Loan Agreement, dated as of March 5, 2014, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.1 to PHI’s Report on Form 8-K filed March 6, 2014).


4.3	Second Amendment to Second Amended and Restated Loan Agreement, dated as of September 26, 2014, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.3 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2014, filed November 7, 2014).


4.4	Third Amendment to Second Amended and Restated Loan Agreement, dated as of September 25, 2015, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.4 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2015, filed November 6, 2015).

	4.5*4.5	Fourth Amendment to Second Amended and Restated Loan Agreement, dated as of September 30, 2016, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank. (incorporated by reference to Exhibit 4.5 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2016, filed November 7, 2016).


4.6	Indenture, dated as of March 17, 2014, by and among PHI, Inc., the subsidiary guarantors and U.S. Bank National Association, relating to the issuance by PHI, Inc. of its 5.25% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 to PHI’s Report on Form 8-K filed March 17, 2014).


4.7	Form of 5.25% Senior Note due 2019 (incorporated by reference to Exhibit 4.2 to PHI’s Report on Form 8-K filed on March 6, 2014).


10.1†	Second Amended and Restated PHI Inc. Long-Term Incentive Plan (incorporated by reference to Appendix BA to PHI’s Information Statement on Schedule 14C filed April ~~13, 2015)~~12, 2017).



		~~10.2†~~		Form of Indemnity Agreement between the Company and each of its directors, as adopted on November 5, 2015 (incorporated by reference to Exhibit 10.2 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2015, filed November 6, 2015).

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~~

†	~~Indicates management contract or compensatory plan or arrangement~~

* Filed herewith

† Indicates management contract or compensatory plan or arrangement

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.~~

~~November 7, 2016~~		~~By:~~
	PHI, Inc.

August 4, 2017	By:	/s/ Al A. Gonsoulin
		Al A. Gonsoulin
		Chairman and Chief Executive Officer

~~November 7, 2016~~
August 4, 2017	By:		/s/ Trudy P. McConnaughhay
		Trudy P. McConnaughhay
		Chief Financial Officer


	September 30,			December 31,
	2016			2015
ASSETS
Current Assets:
Cash	$	2,639		$	2,407
Short-term investments		289,520			284,523
Accounts receivable – net
Trade		131,295			138,309
Other		11,180			6,469
Inventories of spare parts – net		69,409			69,491
Prepaid expenses		6,976			8,951
Deferred income taxes		10,379			10,379
Income taxes receivable		863			761

Total current assets		522,261			521,290
Property and equipment – net		916,560			883,529
Restricted cash and investments		13,038			15,336
Other assets		7,334			6,178

Total assets	$	1,459,193		$	1,426,333

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	20,843		$	31,373
Accrued and other current liabilities		32,178			44,759

Total current liabilities		53,021			76,132
Long-term debt:
Revolving credit facility		132,400			57,500
Senior Notes issued March 17, 2014, net of debt issuance costs of $3,064 and $3,999, respectively		496,936			496,001
Deferred income taxes		147,058			153,645
Other long-term liabilities		8,291			16,057
Commitments and contingencies (Note 9)
Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding		291			291
Non-voting common stock – par value of $0.10; 25,000,000 shares authorized, 12,777,358 and 12,685,725 issued and outstanding at September 30, 2016 and December 31, 2015, respectively		1,278			1,269
Additional paid-in capital		308,690			304,884
Accumulated other comprehensive loss		(271	)		(567	)
Retained earnings		311,499			321,121

Total shareholders’ equity		621,487			626,998

Total liabilities and shareholders’ equity	$	1,459,193		$	1,426,333


	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Operating revenues, net	$	158,093		$	214,733		$	489,245		$	617,477
Expenses:
Direct expenses		144,938			182,064			449,909			520,099
Selling, general and administrative expenses		13,381			11,575			36,832			34,859

Total operating expenses		158,319			193,639			486,741			554,958
Loss (gain) on disposal of assets		85			(165	)		(3,854	)		(238	)
Equity in loss of unconsolidated affiliate		198			75			274			249

Operating (loss) income		(509	)		21,184			6,084			62,508
Interest expense		7,719			7,366			22,792			21,691
Other income, net		(462	)		(472	)		(1,571	)		(1,501	)

		7,257			6,894			21,221			20,190

(Loss) earnings before income taxes		(7,766	)		14,290			(15,137	)		42,318
Income tax (benefit) expense		(2,799	)		6,621			(5,515	)		17,832

Net (loss) earnings	$	(4,967	)	$	7,669		$	(9,622	)	$	24,486

Weighted average shares outstanding:
Basic		15,683			15,587			15,655			15,558
Diluted		15,683			15,652			15,655			15,640
Net (loss) earnings per share:
Basic	$	(0.32	)	$	0.49		$	(0.61	)	$	1.57
Diluted	$	(0.32	)	$	0.49		$	(0.61	)	$	1.57


																	Accumulated					Total
	Voting				Non-Voting						Additional						Other Com-					Share-
	Common Stock				Common Stock						Paid-in			Treasury			prehensive			Retained		Holders’
	Shares		Amount		Shares			Amount			Capital			Stock			Income (Loss)			Earnings		Equity
Balance at December 31, 2014		2,906	$	291		12,576		$	1,258		$	301,533		$	—		$	(211	)	$	294,197	$	597,068
Net earnings		—		—		—			—			—			—			—			24,486		24,486
Unrealized loss on short-term investments		—		—		—			—			—			—			(3	)		—		(3	)
Changes in pension plan assets and benefit obligations		—		—		—			—			—			—			2			—		2
Amortization of unearned stock- based compensation		—		—		—			—			5,059			—			—			—		5,059
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		177			18			—			—			—			—		18
Cancellation of restricted non- voting stock units for tax withholdings on vested shares		—		—		(69	)		(7	)		(2,200	)		—			—			—		(2,207	)
Purchase of treasury stock		—		—		—			—			—			(252	)		—			—		(252	)
Other		—		—		—			—			—			—			24			—		24

Balance at September 30, 2015		2,906	$	291		12,684		$	1,269		$	304,392		$	(252	)	$	(188	)	$	318,683	$	624,195


	September 30, 2016				December 31, 2015
	Amortized		Fair		Amortized		Fair
	Costs		Value		Costs		Value
	(Thousands of dollars)
Due in one year or less	$	171,336	$	171,152	$	152,444	$	152,212
Due within two years		113,995		113,784		130,110		129,466

Total	$	285,331	$	284,936	$	282,554	$	281,678


	September 30, 2016				December 31, 2015
	Average		Average		Average		Average
	Coupon		Days To		Coupon		Days To
	Rate (%)		Maturity		Rate (%)		Maturity
Commercial paper		0.978		253		0.553		154
U.S. Government agencies		0.979		512		0.865		599
Corporate bonds and notes		1.643		330		1.757		331


	September 30, 2016					December 31, 2015
			Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses
	(Thousands of dollars)
Commercial paper	$	31,753	$	(75	)	$	5,981	$	(5	)
U.S. Government agencies		7,001		(2	)		8,969		(30	)
Corporate bonds and notes		169,833		(320	)		232,347		(793	)

Total	$	208,587	$	(397	)	$	247,297	$	(828	)


	As of
	September 30, 2016			December 31, 2015
Allowance for Contractual Discounts		60	%		56	%
Allowance for Uncompensated Care		18	%		23	%


	Quarter Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,683		15,587		15,655		15,558
Dilutive effect of unvested restricted stock units		—		65		—		82

Weighted average outstanding shares of common stock, diluted⁽¹⁾		15,683		15,652		15,655		15,640


	Revenue
	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Provision for contractual discounts		65	%		63	%		67	%		65	%
Provision for uncompensated care		9	%		11	%		6	%		9	%


	September 30, 2016
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	36		$	2,603		$	—		$	2,639
Short-term investments		289,520			—			—			289,520
Accounts receivable – net		64,564			77,911			—			142,475
Intercompany receivable		—			41,796			(41,796	)		—
Inventories of spare parts – net		60,416			8,993			—			69,409
Prepaid expenses		4,412			2,564			—			6,976
Deferred income taxes		10,379			—			—			10,379
Income taxes receivable		950			(87	)		—			863

Total current assets		430,277			133,780			(41,796	)		522,261
Investment in subsidiaries		351,440			—			(351,440	)		—
Property and equipment – net		602,296			314,264			—			916,560
Restricted cash and investments		13,023			15			—			13,038
Other assets		6,181			1,153			—			7,334

Total assets	$	1,403,217		$	449,212		$	(393,236	)	$	1,459,193

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	17,232		$	3,611		$	—		$	20,843
Accrued and other current liabilities		21,894			10,284			—			32,178
Intercompany payable		41,796			—			(41,796	)		—

Total current liabilities		80,922			13,895			(41,796	)		53,021
Long-term debt:
Revolving credit facility		132,400			—			—			132,400
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,064		496,936			—			—			496,936
Deferred income taxes and other long-term liabilities		71,472			83,877			—			155,349
Shareholders’ Equity:
Common stock and paid-in capital		310,259			79,191			(79,191	)		310,259
Accumulated other comprehensive income		(271	)		—			—			(271	)
Retained earnings		311,499			272,249			(272,249	)		311,499

Total shareholders’ equity		621,487			351,440			(351,440	)		621,487

Total liabilities and shareholders’ equity	$	1,403,217		$	449,212		$	(393,236	)	$	1,459,193


	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


	Quarter Ended						Favorable
	September 30,						(Unfavorable)
	2016			2015
	(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues, net
Oil and Gas	$	77,551		$	121,190		$	(43,639	)
Air Medical		74,482			85,516			(11,034	)
Technical Services		6,060			8,027			(1,967	)

Total operating revenues, net		158,093			214,733			(56,640	)
Segment direct expenses
Oil and Gas⁽¹⁾		82,832			109,500			26,668
Air Medical		56,562			65,474			8,912
Technical Services		5,742			7,165			1,423

Total segment direct expenses		145,136			182,139			37,003
Segment selling, general and administrative expenses
Oil and Gas		1,705			1,397			(308	)
Air Medical		3,056			2,302			(754	)
Technical Services		266			230			(36	)

Total segment selling, general and administrative expenses		5,027			3,929			(1,098	)

Total segment expenses		150,163			186,068			35,905

Net segment (loss) profit
Oil and Gas		(6,986	)		10,293			(17,279	)
Air Medical		14,864			17,740			(2,876	)
Technical Services		52			632			(580	)

Total net segment profit⁽²⁾		7,930			28,665			(20,735	)
Other, net⁽³⁾		377			637			(260	)
Unallocated selling, general and administrative costs⁽⁴⁾		(8,354	)		(7,646	)		(708	)
Interest expense		(7,719	)		(7,366	)		(353	)

(Loss) earnings before income taxes		(7,766	)		14,290			(22,056	)
Income tax (benefit) expense		(2,799	)		6,621			9,420

Net (loss) earnings	$	(4,967	)	$	7,669		$	(12,636	)

Flight hours:
Oil and Gas		19,583			25,985			(6,402	)
Air Medical⁽⁵⁾		9,681			10,261			(580	)
Technical Services		14			50			(36	)

Total		29,278			36,296			(7,018	)

Air Medical Transports⁽⁶⁾		5,156			5,440			(284	)


			Payment Due by Year
													Beyond
	Total		2016⁽¹⁾		2017		2018		2019		2020		2020
			(Thousands of dollars)
Aircraft lease obligations	$	226,242	$	10,607	$	40,560	$	36,879	$	30,226	$	26,387	$	81,583
Other lease obligations		12,842		1,396		3,917		2,863		2,288		1,595		783
Long-term debt⁽²⁾		632,400		—		—		132,400		500,000		—		—
Senior notes interest⁽²⁾		65,625		—		26,250		26,250		13,125		—		—

	$	937,109	$	12,003	$	70,727	$	198,392	$	545,639	$	27,982	$	82,366


	Total Number of		Average Price
Period	Shares Purchased		Paid per Share
August 1, 2016 – August 31, 2016		1,031	$	19.22


	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

June 30, 2017

December 31, 2016

Allowance for Contractual Discounts

Allowance for Uncompensated Care