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PHI, Inc. Announces Results for the Third Quarter Ended September 30, 2014

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PHI, Inc. (The Nasdaq Global Market: PHII (voting) PHIIK (non-voting)) today reported financial results for the quarter ended September 30, 2014.

Consolidated operating revenues for the three months ended September 30, 2014 were $216.3 million, compared to $200.8 million for the three months ended September 30, 2013, an increase of $15.5 million. Oil and Gas operating revenues were $133.8 million for the three months ended September 30, 2014, compared to $126.0 million for the three months ended September 30, 2013, an increase of $7.8 million. The increase in this segment’s operating revenues is primarily due to increased heavy aircraft flight revenues resulting predominately from increased flight hours for these aircraft as well as incremental rate increases implemented over the past year. Operating revenues in the Air Medical segment were $79.1 million for the three months ended September 30, 2014, compared to $73.2 million for the three months ended September 30, 2013, an increase of $5.9 million. The increase in this segment’s operating revenues is primarily attributable to an expansion of our traditional provider operations, as well as increased revenues from our independent provider programs driven principally by rate increases over the past year. Technical Services revenues were $3.5 million for the three months ended September 30, 2014, compared to $1.6 million for the three months ended September 30, 2013. The increase in the segment’s operating revenues was driven by an expansion of technical services provided to a government customer under a project that we expect to complete by the end of 2014.

Oil and Gas segment profit was $27.5 million for the quarter ended September 30, 2014, compared to segment profit of $25.0 million for the quarter ended September 30, 2013. The increase in segment profit was due to increased revenues, which were only partially offset by increased segment expenses. These revenue increases are attributable primarily to the above-described increase in heavy aircraft flight revenues.

Air Medical segment profit was $15.7 million for the quarter ended September 30, 2014, compared to a segment profit of $11.8 million for the quarter ended September 30, 2013. The increase in profit is primarily attributable to the increased revenues described above, which were partially offset by the increased aircraft operating expenses.

Technical Services segment had a net loss of $0.3 million for the three months ended September 30, 2014, compared to a net loss of less than $0.1 million for the three months ended September 30, 2013.

Consolidated net earnings for the three months ended September 30, 2014 was $17.2 million, compared to net earnings of $13.8 million for the three months ended September 30, 2013. The increase in net earnings for the quarter ended September 30, 2014 is attributable to the increased profits in the Oil and Gas and Air Medical segments and a $0.6 million reduction in interest expense, partially offset by a reduction in gains on asset dispositions.

For additional information, please see (i) the attachments hereto, including a reconciliation statement which provides supplemental information reconciling our GAAP net earnings to net earnings before non-recurring items and (ii) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 that we filed today with the U.S. Securities and Exchange Commission.

PHI provides helicopter transportation and related services to a broad range of customers including the oil and gas and air medical industries, and also provides third-party maintenance services to select customers. PHI Voting Common Stock and Non-Voting Common Stock are traded on The NASDAQ Global Market (symbols PHII and PHIIK).

PHI, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Thousands of dollars and shares, except per share data)

Quarter Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Operating revenues, net $ 216,294 $ 200,762 $ 625,510 $ 575,273
Expenses:
Direct expenses 170,531 160,731 499,541 468,428

Selling, general and administrative expenses

10,903 9,785 31,891 28,075
Total operating expenses 181,434 170,516 531,432 496,503
Loss (gain) on disposal of assets 56 (1,399 ) 1,371 (16,075 )
Impairment of assets 421

Equity in (income) loss of unconsolidated affiliate

(319 ) (172 ) (213 ) 911
Operating income 35,123 31,817 92,920 93,513
Interest expense 7,084 7,768 22,121 22,434
Loss on debt extinguishment 29,833
Other income, net (238 ) (163 ) (498 ) (388 )
6,846 7,605 51,456 22,046
Earnings before income taxes 28,277 24,212 41,464 71,467
Income tax expense 11,028 10,435 16,168 29,336
Net earnings $ 17,249 $ 13,777 $ 25,296 $ 42,131

Weighted average shares outstanding:

Basic 15,483 15,474 15,483 15,474
Diluted 15,727 15,639 15,646 15,617
Net earnings per share:
Basic $ 1.11 $ 0.89 $ 1.63 $ 2.72
Diluted $ 1.10 $ 0.88 $ 1.62 $ 2.70

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Summarized financial information concerning our reportable operating segments for the quarters and nine months ended September 30, 2014 and 2013 is as follows:

Quarter Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
(Thousands of dollars) (Thousands of dollars)
Segment operating revenues
Oil and Gas $ 133,763 $ 125,931 $ 387,782 $ 359,732
Air Medical 79,080 73,188 226,459 209,434
Technical Services 3,451 1,643 11,269 6,107
Total operating revenues, net 216,294 200,762 625,510 575,273
Segment direct expenses
Oil and Gas 105,252 99,919 306,076 290,616
Air Medical 61,215 58,924 183,320 173,296
Technical Services 3,745 1,716 9,932 5,427
Total direct expenses 170,212 160,559 499,328 469,339
Segment selling, general and administrative expenses
Oil and Gas 1,047 1,036 3,570 2,976
Air Medical 2,212 2,461 7,301 6,210
Technical Services 3
Total segment selling, general and administrative expenses 3,259 3,497 10,874 9,186
Total segment expenses 173,471 164,056 510,202 478,525
Net segment profit (loss)
Oil and Gas 27,464 24,976 78,136 66,140
Air Medical 15,653 11,803 35,838 29,928
Technical Services (294 ) (73 ) 1,334 680
Total 42,823 36,706 115,308 96,748
Other, net 182 1,561 (873 ) 16,041
Unallocated selling, general and administrative costs (7,644 ) (6,424 ) (21,017 ) (19,025 )
Interest expense (7,084 ) (7,631 ) (22,121 ) (22,297 )
Loss on debt extinguishment (29,833 )
Earnings before income taxes $ 28,277 $ 24,212 $ 41,464 $ 71,467

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PHI, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Thousands of dollars)

Quarter Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Net earnings, as reported $ 17,249 $ 13,777 $ 25,296 $ 42,131
Add back: Loss on debt extinguishment, net of tax 18,200
Loss on asset disposals, net of tax 34 836
Impairment of assets, net of tax 248
Less: Gain on asset disposals, net of tax (796 ) (9,476 )
Net earnings, as adjusted $ 17,283 $ 12,981 $ 44,332 $ 32,903
Net earnings per share, as adjusted:
Basic $ 1.12 $ 0.84 $ 2.86 $ 2.13
Diluted $ 1.10 $ 0.83 $ 2.83 $ 2.11

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