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PHI, Inc. Announces Results for the Year Ended December 31, 2014

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PHI, Inc. (The Nasdaq Global Market: PHII (voting) PHIIK (non-voting)) today reported financial results for the year ended December 31, 2014.

Consolidated operating revenues for the year ended December 31, 2014 decreased $20.2 million compared to the year ended December 31, 2013. Oil and Gas segment revenues increased $27.8 million primarily as a result of higher Gulf of Mexico deepwater drilling activity, which drove higher utilization of our heavy aircraft. Operating revenues in the Air Medical segment increased $22.3 million, primarily due to an expansion of our traditional provider programs, as well as increased revenues from our independent provider programs, driven by an improvement in our payor mix and rate increases implemented over the past year. Technical Services segment revenues decreased $70.4 million primarily due to the sale of seven aircraft for use by a customer in one of Air Medical’s traditional provider programs in the prior year, which did not recur in the current year.

Oil and Gas segment profit was $100.6 million for 2014, compared to segment profit of $91.7 million for 2013. The increase in segment profit was due to increased revenues, which were only partially offset by increased direct expenses. These revenue increases resulted from increases in heavy and light aircraft flight hours and incremental rate increases across all aircraft models implemented over the past year.

Air Medical segment profit was $46.8 million for 2014, compared to segment profit of $37.1 million for 2013. The increase in profit is primarily attributable to increased profits from our independent provider programs due to increased revenues resulting from rate increases and a favorable payor mix. Profits from our traditional provider programs increased due to expansion of our overseas operations.

Technical Services segment’s profit increased by $2.8 million, from $1.3 million for 2013 to $4.1 million for 2014, due to an expansion of technical services provided to a third party customer under a project we expect to complete in the third quarter of 2015.

Consolidated net earnings for the year ended December 31, 2014 was $32.7 million, compared to net earnings of $58.9 million for the year ended December 31, 2013. The decrease of $26.2 million is primarily attributable to the after-tax charge of $18.2 million related to the early retirement of our 8.625% Senior Notes and the net after-tax decrease of $16.3 million in gain/losses and impairments on assets in 2014. These decreases were partially offset by increased profits in each of our segments. Exclusive of the loss on debt extinguishment and the net decrease in asset gains/losses and impairments, our net earnings for 2014 and 2013 would have been $57.8 million and $49.2 million, respectively, which represents an $8.6 million increase.

Also, during the fourth quarter of 2014, we received a five year and a seven year contract extension from two major oil and gas customers.

Al Gonsoulin commented, “We are quite pleased with the 2014 results as we experienced growth in revenues in our Oil and Gas and Air Medical segments and increased profits in all three segments. The decrease in revenue in our Technical Services segment can be attributed to the 2013 non-recurring sale of seven aircraft for use by a customer in one of Air Medical’s traditional provider programs. Also, favorable market conditions in early 2014 enabled us to replace our $300 million 8.625% Senior Notes with new $500 million 5.25% Senior Notes with an extended maturity date and less restrictive covenants, positioning our company for long-term future growth opportunities.”

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 Annual Report on Form 10-K for the year ended December 31, 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)

Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2014 2013 2012
Operating revenues, net $ 836,270 $ 856,500 $ 646,686
Expenses:
Direct expenses 670,007 713,090 543,524

Selling, general and administrative expenses

43,171 38,820 39,051
Total operating expenses 713,178 751,910 582,575
(Gain) loss on disposition of assets, net 848 (16,604 ) 317
Impairments of assets 10,508 1,648
Equity in loss of unconsolidated affiliate 96 262 863
Operating income 111,640 119,284 62,931
Interest expense 29,510 29,756 29,533
Loss on debt extinguishment 29,833
Other income expense, net (818 ) (613 ) (651 )
58,525 29,143 28,882
Earnings before income taxes 53,115 90,141 34,049
Income tax expense 20,427 31,185 15,992
Net earnings $ 32,688 $ 58,956 $ 18,057
Earnings per share:
Basic $ 2.11 $ 3.81 $ 1.17
Diluted $ 2.08 $ 3.77 $ 1.17
Weighted average shares outstanding:
Basic 15,483 15,474 15,418
Diluted 15,685 15,639 15,488

A-1

Summarized financial information concerning the Company’s reportable operating segments for the years ended December 31, 2014, 2013, and 2012:

Year Ended
December 31,
2014 2013 2012
(Thousands of dollars)
Segment operating revenues
Oil and Gas $ 516,909 $ 489,055 $ 424,514
Air Medical 300,212 277,884 211,148
Technical Services 19,149 89,561 11,024
Total operating revenues 836,270 856,500 646,686
Segment direct expenses
Oil and Gas 411,679 393,251 360,400
Air Medical 243,573 231,880 175,944
Technical Services 14,851 88,221 8,043
Total segment direct expenses 670,103 713,352 544,387
Segment selling, general and administrative expenses
Oil and Gas 4,615 4,059 3,736
Air Medical 9,801 8,875 7,300
Technical Services 157 1
Total segment selling, general and administrative expenses 14,573 12,935 11,036
Total segment expenses 684,676 726,287 555,423
Net segment profit
Oil and Gas 100,615 91,745 60,378
Air Medical 46,838 37,129 27,904
Technical Services 4,141 1,339 2,981
Total 151,594 130,213 91,263
Other, net (10,539 ) 15,569 334
Unallocated selling, general and administrative expenses (28,597 ) (26,207 ) (28,015 )
Interest expense (29,510 ) (29,434 ) (29,533 )
Loss on debt extinguishment (29,833 )
Earnings before income taxes $ 53,115 $ 90,141 $ 34,049

A-2

PHI, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures

(Thousands of dollars)

Year Ended
December 31,
2014 2013
Net earnings, as reported $ 32,688 $ 58,956
Add back: Loss on debt extinguishment, net of tax 18,200
Loss on asset disposals, net of tax 517
Impairment of assets, net of tax 6,409 1,078
Less: Gain on asset disposals, net of tax (10,860 )
Net earnings, as adjusted $ 57,814 $ 49,174
Net earnings per share, as adjusted:
Basic $ 3.73 $ 3.18
Diluted $ 3.69 $ 3.14

A-3

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